Re Giorgio Bellperio and Maria Belperio v Munchies Management Pty Ltd and Larry Manno [1988] FCA 189 (9 June 1988)

FEDERAL COURT OF AUSTRALIA

Re: GIORGIO BELLPERIO and MARIA BELPERIO
And: MUNCHIES MANAGEMENT PTY LTD and LARRY MANNO
No. G71 of 1987
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Forster J.(1)

CATCHWORDS

Trade Practices (consumer protection) - misleading and deceptive conduct - common law deceit - sale of restaurant business - misrepresentation of profitability - credibility of witnesses - remedies - rescission purported by applicants - rescission becoming unavilable post-hearing and pre-judgment - calculation of damages.

Trade Practices Act 1974, ss. 52, 82, 87

Misrepresentation Act (SA) 1971

Yorke v. Ross Lucas [1982] FCA 180; (1982) 45 ALR 299

Brown v. Jam Factory Pty Ltd (1981) 35 ALR 79

Toteff v. Antonas [1952] HCA 16; (1952) 87 CLR 647

Mister Figgins v. Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23

HEARING

ADELAIDE
9:6:1988

Counsel for the applicants: Mr D.N. Angel Q.C. with Mr L. Carbone

Solicitors for the applicants: Carbone, Polvere & Co.

Counsel for the respondents: Miss E.F. Nelson Q.C. with Mr M.G. Pickhaver

Solicitors for the respondents: Wallmans

ORDER

Judgment be entered for the applicants against the respondents in the sum of $285,000.

The second respondent indemnify the applicants against any claim by Elizabeth Town Centre with respect to rent and other payments due by the applicants to Elizabeth Town Centre pursuant to indenture of assignment dated 22 November 1987.

The respondents pay the applicants' costs to be taxed.

Note: Settlement and entry of orders is dealt with in Order 36
of the Federal Court Rules.

DECISION

The applicant Belperio was a successful and hard working market gardener specialising in celery. He and his wife, the applicants, bought from the first respondent a restaurant, bar, and cafeteria business known as the Palm Terrace Restaurant and situated in the Elizabeth City Centre. The whole complex is hereinafter referred to simply as "the Palm Terrace". The venture has proved disastrous for the applicants who now claim that they were induced to enter into the transaction by relying on misrepresentations made on behalf of the first respondent by the second respondent.

2. It is alleged in the statement of claim that the first respondent by its servant or agent the second respondent, in order to induce the applicants to make and complete the contract for the sale of the business, warranted and represented :

"(a) that during those weeks when customers
received pension cheques the gross turnover of
the said business was $14,000.00;

(b) that on off weeks the gross turnover of the
said business was $10,000.00;

(c) that for the four month period from 1st March
1986 to 30th June 1986 the said business had a
gross turnover of $167,960.00;

(d) that for the five month period from 1st July
1986 to 30th November 1986 the said business
had a gross turnover of $240,891.00."

3. It is alleged that the representations were untrue and were made fraudulently or negligently, alternatively if not fraudulently or not negligently then in breach of the Misrepresentation Act (S.A.). In the further alternative it was pleaded that the representations constituted misleading and deceptive conduct contrary to the provisions of s.52 of the Trade Practices Act.

4. In the statement of claim the applicants claim :

(1) rescission of the contract

(2) damages

(3) return of the purchase price paid

(4) interest

(5) such further or other relief as seems fit and proper

(6) costs.

As will be seen when I come to discuss the question of remedies events have overtaken the parties so that rescission is no longer possible so that the applicants remedies are restricted to damages, interest and costs.

5. The making of the representations set out in paras. (c) and (d) above is admitted in the defence as also is the fact that the applicants relied on the trading figures mentioned in paras. (c) and (d) in entering into the said contract. The fact is, as will be seen, that these representations were made after the contract was signed but before settlement. The pleading in the statement of claim that the applicants relied on them in entering into the contract was conceded to be mistaken and was obviously so. The respondents' admission that the applicants relied on these representations in entering into the contract must be taken to be a nullity. Admission of the truth of a fact which is demonstrably untrue cannot, in my opinion, be relied on. It was pleaded in the statement of claim that the applicants "made and completed" the contract acting on the faith and truth of the representations; that the contract was completed relying on the representations is possibly denied in para. 4 of the defence and is certainly not specifically admitted. The respondents deny fraud and negligence and deny that the applicants are entitled to rely on the provisions of the Misrepresentation Act and deny that they made representations which were misleading or deceptive pursuant to s.52 of the Trade Practices Act.

6. So far as concerns the question of liability it will be seen that this depends first on whether or not the representations as to the gross turnover of the business being $14,000 in pension weeks and $10,000 in non-pension weeks were made, whether they were false, and whether the applicants relied upon them when entering into the contract to purchase the business. Second it depends on whether or not the representations as to gross turnover in paras. (c) and (d) were false and whethere or not the applicants relied upon them in completing the contract.

7. Although the hearing of this case occupied some nine days in the end the question as to whether the representations as to turnover were made is a fairly narrow one depending very largely upon the respective credibility of the male applicant and the second respondent. It is appropriate therefore that I express my views of the credibility of these two people.

8. The male applicant impressed me as being an unsophisticated agricultural worker entirely inexperienced in any business except the market gardening business. In my view his uncertainty and lack of knowledge of business generally and the cafe/restaurant business in particular led him to decide to buy the Palm Terrace when he really did not have much information about the profitability of the business. In some matters he was mistaken, for instance the matter of the cash floats in the three tills, but I am satisfied that on matters of importance he told the truth.

9. Manno on the other hand impressed me as being more sophisticated and experienced in business with some of the less attractive qualities of some salesmen. On some matters he was mistaken and on some matters I am satisfied that he was deliberately untruthful. His son-in-law Pio Vottaro was also in some matters undoubtedly deliberately untruthful and I could place no reliance upon him. Where the evidence of Belperio and Manno conflict I prefer the evidence of Belperio.

10. Manno had known Belperio for a number of years. He was a partner in a fruit and vegetable business and went to the east end market on three days a week to buy supplies. Later Manno was a sole trader and later still his fruit and vegetable business was, I think, carried on by a company although this is not entirely clear. The position in 1986 was that the first respondent ran the Palm Terrace through Pio Vottaro and the fruit and vegetable shop was run by Manno or by a company acting through Manno.

11. Belperio, as I have said, was a market gardener specialising in growing celery which he sold at the East End Market. Manno frequently bought goods from him and the two were on cordial if not very familiar terms. For some time prior to the occurrence of the events in question Belperio who, apart from his vegetable growing land, also owned a house and some flats had been considering giving up the hard work of gardening and going into a cafe or snack bar or some such business. His observations had led him and his wife to think that the proprietors of such businesses had a much easier life than that of a market gardener. Mrs Belperio worked in the garden also. Belperio had looked at a number of businesses and was to some extent involved in the purchase of a business at Unley when he had a critical conversation with Manno.

12. The date of his meeting with Manno is in dispute. Belperio says it was on Friday 7 November 1986 and Manno says that it was Monday 10 November. I do not think that it matters very much. Both were market days when both men would be expected to be at the East End Market. I think it was probably Friday the 7th. Without being led Mrs Belperio said that it was on a Friday that her husband came back from the market and later took her to look at the Palm Terrace.

13. Whichever day it was Belperio and Manno were chatting at the market early in the morning and Belperio mentioned that he was thinking of purchasing a particular cafe business for $300,000. Not very long before this conversation Manno had decided that the company would sell the Palm Terrace. His reasons for so doing are not of critical importance but it is my view on the probabilities that he decided that the company should sell because the business was not making enough money. Manno mentioned to Belperio that he had a business in Elizabeth City Centre which was for sale. The two went to a nearby coffee lounge to have a cup of coffee and further to discuss the possible sale to Belperio.

14. Belperio asked Manno how much he wanted for the business and Manno said that he wanted $300,000. Belperio asked him what the turnover of the business was and was told that it was "10 to 14. One week 10 one week 14. Depend on the pension week". Neither at this meeting nor at any subsequent meeting did Belperio ask what the gross profit of the business was or the wages or other expenses. The only outgoing he found out about was the rent which he ascertained from the administration of the Elizabeth City Centre.

15. I pause to discuss this rather simple unsophisticated approach to spending quite a large sum of money on a business of a type in which he was inexperienced and ignorant. Having observed Belperio closely when he explained this I am satisfied that he only wanted to know the gross takings because two friends or acquaintances of his had told him something of the economics of this sort of business and he considered that if he and his wife took $10,000 one week and $14,000 the next they would be able to make quite a handsome profit. It is somewhat difficult to accept that anyone would purchase a strange business with so little information. Belperio says he trusted Manno which was perhaps a mistake and in any event Manno denies that Belperio even asked him about the gross takings figures or was given them so that Manno's account is even less credible than Belperio's.

16. Belperio expressed interest in the Palm Terrace and went out to Elizabeth later on the same Friday to look at it, once with his wife and once with the witness De Ionno. After the inspection and a further discussion about price Belperio agreed with Manno that he and his wife would purchase the Palm Terrace for $300,000. Manno said that he would get a contract prepared by his solicitor.

17. Manno gave instructions to his solicitor Miss Collum on Monday 10 November and on Tuesday 11 November he and Pio Vottaro picked up the contract from Miss Collum's office in Adelaide and took it to the Belperio's house at Highbury. The length of time that Manno and Vottaro spent at the Belperio's house is in dispute. Manno and Vottaro say it was half to three quarters of an hour and Belperio and his wife say it was considerably longer. Belperio and Mrs Belperio and their son Frank who came home some time after Manno and Vottaro arrived all say in slightly different words that the matter of gross takings of Palm Terrace was raised and that Manno once more said the takings varied from $10,000 to $14,000, $10,000 in an off week and $14,000 in a good week, pension week. Manno and Vottaro say that figures were not discussed at all and they were hard put to it to say what was discussed. Indeed Vottaro gave a somewhat absurd answer when asked in cross-examination what was discussed. It is my view that the takings figures were discussed and that the slight embarrassment of Manno and Vottaro when giving evidence about the meeting with the Belperio's was because they untruthfully denied that figures were discussed and were unable to think of something plausible to fill the gap.

18. The contract delivered by Manno and Vottaro was an unconditional cash contract which did not suit Belperio because he wanted to borrow all the money from the Commonwealth Bank. Finally with the assistance of the witnesses De Ionno and Duncan a special condition was added to the contract making it subject to the agreement to the grant by the Commonwealth Bank Campbelltown of a loan of $300,000 within 14 days. The contract was signed on 14 November. There were some delays concerning obtaining the loan from the Commonwealth Bank and settlement occurred on 19 January 1987.

19. My finding that the representations as to takings which were alleged were in fact made received support from Di Sciscio a cousin of Belperio who says that Manno said to him that the takings varied between $10,000 minimum up to $14,000 when they were very busy maximum per week. Mercuri was a comparative stranger to the Belperios. Belperio had simply been a customer at a service station in which Mercuri was in partnership with Di Sciscio. Mercuri confirmed this conversation between Manno and Di Sciscio which took place in his presence. The Belperio's son Remo also gave evidence of Manno having made the representations as to takings in his presence. That the representations were made also received some slight confirmation from the evidence of Taylor the loans officer at the Belperio's bank. He said of Belperio - "He was saying that the business appeared to be very good and that on some weeks I think it was the alternate weeks depending on whether it was pension week or not there were better takings on one week than the other".

20. I am satisfied that the representations as to the takings being $10,000 one week and $14,000 the next were made and the evidence of Belperio satisfies me that the contract was entered into in reliance on those representations and would not have been entered into if they had not been made.

21. Were these representations false, were they false to Manno's knowledge when they were made or did he make them recklessly or did he make them mistakenly?

22. As to the objective falsity this seems perfectly clear. In evidence both Manno and Vottaro, who was responsible for the day to day running of the Palm Terrace, said that the takings of the Palm Terrace were between $9,000 and $11,000 per week. Exhibits "C" and "D" to which I come shortly, which set out trading results for the periods 1.3.86 to 30.6.86 and 1.7.86 to 30.11.86 respectively, and which were prepared by accountants from Exhibit "R" (the daily takings book kept by Votarro) show that for the first period the average weekly takings were $9,636 and for the second period $11,019. If these figures are correct, and there is some doubt as to this since the figures come from the only book of account kept on behalf of the first respondent, then the average weekly takings are appreciably below the $12,000 effectively warranted.

23. The applicants' own results from when they started trading were markedly below the results in Exhibit "R" and were more markedly below the respondents' results as warranted. The gross takings from 19 January 1987 to 31 December 1987 as calculated by Belperio's accountant Pestana from the books kept by Frank Belperio were $321,204. From this in turn may be calculated average weekly gross takings of $6,503. Criticism has rightly been made of Frank Belperio's book-keeping. He impressed me as being an honest but bewildered young man given a job to do which was somewhat beyond his capacity without guidance. He really did fairly well in the circumstances with the book-keeping but admitted certain mistakes in cross-examination. Making a generous allowance for Frank's shortcomings as a book-keeper and making due allowance for the Belperio's inexperience in restaurant and cafe management and also those factors which influence takings after a change in management the takings after the Belperios took over were markedly down on what had been represented. So much down were they as to indicate that the representations were false, if any further indication other than the respondents' own evidence be needed.

24. A further criticism made of the Belperios was that as well as selling the same sorts of food as the previous management had they introduced a lot of other cheaper things and the people who came in to the complex would fairly naturally buy something cheaper if it was available. Thus, it is said, the takings were depressed. There was no expert evidence about this and I should have thought that if the Palm Terrace only sold more expensive items of food some customers coming in would turn round and go out again and go to one of the snack bars in the City Centre. However that may be, there is the evidence of Mr Wing, the marketing manager of the City Centre, who kept a very close eye on the Palm Terrace during both regimes, and who could not explain why it was not doing very well under the Belperios. In essence he said that the business had not changed after the Belperios took over. Similar evidence about a lack of change was given by Mrs Jacquier and Mrs Scott - employees under both regimes - but contradictory evidence was given by Miss O'Leary, another employee, who referred to the introduction of the cheaper foods and sweets. The preponderance of the evidence is that the Belperios were not by their conduct responsible for any significant drop in takings.

25. I come now to another feature of the evidence and that is the monthly statement of takings required by the City Centre management and supplied by Vottaro on behalf of Munchies. The City Centre required tenants to give figures of their gross takings month by month. During the period from March 1986 to November 1986 the only period for which there are figures in Exhibit "R" the daily takings book, the daily takings reported to the City Centre were over $78,000 less than the figures in Exhibit "R". Vottaro cheerfully admitted this and said that the figures reported to the Centre were random figures in the sense that they bore no relationship to reality except that he was always careful to ensure that they were below the actual figures in Exhibit "R". Vottaro said that he had done this because there was a strong rumour about that the Centre management was going to increase the rents of businesses which had a good turnover. He said this notwithstanding the fact that Munchies had a lease of the Palm Terrace until 30 June 1999 and the rent was fixed by the lease in the sense that it went up by a compounded ten per cent per year irrespective of trading results. The only circumstance in which trading results would become relevant is if the turnover exceeded $1,100,066 per year. Even the results revealed in Exhibit "R" would fall some $500,000 below that figure. Votarro is not a stupid man and must have known that the reason he gave for reporting figures well below actual takings was absurd. I consider that the real reason may be that the figures returned were the correct figures and that Exhibit "R" is concocted to show a better picture than reality would have revealed. Exhibit "R" gives the appearance of having been filled in at one time and not day by day. There is no expert evidence but in my capacity as a judge of fact I am, I think, entitled to take notice of the evidence of my own senses. Vottaro hotly denied that the document was concocted but I am disinclined to believe him and on balance I find that Exhibit "R" is, so far as takings are concerned, concocted and the figures in the book do not represent accurately the gross takings of the business.

26. I come now to Exhibits "C" and "D" upon which the claims of warranties made set out in paras. 5(c) and (d) of the statement of claim are based.

27. Shortly after the signing of the contract on 14 November 1986 Belperio called to see the Commonwealth Bank at Campbelltown and asked the Bank for a loan of $300,000 and an overdraft of $80,000 for carry-on finance. He eventually saw Taylor the senior loans officer at the Campbelltown Branch of the Bank. Taylor told him that the Bank would need some trading figures of the business. Belperio spoke to Manno about this and in due course Manno handed to Belperio Exhibit "C" being a document headed "Trading results for the four months 1.3.86 to 30.6.86." This document was prepared by Manno's accountants Messrs Hudson and Associates. The figures of takings in the document were taken from Exhibit "R" and this document bears the usual accountant's disclaimer.

28. Taylor told Belperio that the Bank would need more up-to-date figures. Belperio told Manno this and Exhibit "D" was obtained by Manno for him from the accountants. This document is headed "Trading results for the five months 1.7.86 to 30.11.86". Once again so far as takings are concerned the figures in the document were the same as those in Exhibit "R" and the usual disclaimer is endorsed on the face of the document. The document was delivered to the Bank either by Belperio or by "the solicitor involved" whoever that may have been.

29. Belperio said in evidence on another topic that he could not read very well, if at all, in English. He said that both of these documents were delivered to the Bank without his having studied them or even reading them. Had Belperio studied the documents he could perhaps have worked out that the weekly takings in the period covered by Exhibit "C" were $9,636 and the weekly takings for the period covered by Exhibit "D" were $11,020, both figures being below the figures warranted it was said by Manno. I do not believe that Belperio made these calculations. In a strange sort of way I think that Belperio believed that these two documents were not much to do with him because they were documents which the Bank wanted. Taylor almost certainly discussed the documents with Belperio to some extent but Taylor is uncertain as to the extent to which the documents were discussed. I think it most probable that Taylor told Belperio who, as I have said, was not able to read English at all well, that the documents indicated that there would be sufficient profit in the business to enable Belperio to pay interest to the Bank and make a reasonable income.

30. Because I have found that Belperio did not study Exhibits "C" and "D" I am unable to find that the applicants in completing the contract were acting on the faith of the representations contained in these documents. I feel able to say this notwithstanding that the respondents have admitted that the representations were made and that the applicants relied on them in entering into the contract. In fact as I have said Belperio did not rely on the takings figures in Exhibits "C" and "D" because not having studied the documents he was not aware of them and Mrs Belperio is not shown by the evidence to have even seen the documents. It is true of course that Taylor studied the documents carefully as also no doubt did other officers of the Bank and officers of the Commonwealth Development Bank who eventually made the loan of $300,000, but in doing this Taylor and the other bank officers were not acting as the Belperio's agents. Unless the information as to takings was discussed or otherwise passed on by Taylor to Belperio, it cannot, I think, be said that the Belperios acted on the faith of the representations as to takings in Exhibits "C" and "D".

31. Of course as a matter of tactics it suited the respondents to admit that the applicants relied on these takings figures in entering into the contract because if they did so this would be inconsistent with their contention that they acted in reliance on Manno's representations as to the weekly takings being $10,000 and $14,000 week and week about. However that may be, the evidence does not satisfy me that the applicants relied on the representations in Exhibits "C" and "D" for any purpose and I exclude them from consideration notwithstanding the respondents' admissions.

32. I find that the second respondent on behalf of the first respondent represented that the weekly takings of the business were $10,000 and $14,000 week and week about. I am unable to find that Manno knew that these figures were false but I do find that they were false and that Manno made the representations recklessly not caring whether they were true or false and thus fraudulently. In my view Manno is liable in damages to the applicants in deceit and so also is the first respondent, since Manno was the agent of the first respondent acting within the scope of his authority. He purported so to act and there is no evidence that he did not.

33. No doubt there were also breaches of the Trade Practices Act and the Misrepresentation Act but I find it unnecessary to deal with these matters beyond finding that the first respondent was guilty of misleading and deceptive conduct and the second respondent was a person involved in that conduct. Damages may be regarded as being assessed under s.82 of the Trade Practices Act as well as in deceit.

34. There remains the question of remedies.

35. After this matter first came on for hearing by special arrangement during the Court vacation in January of this year, only five months after the application was issued, there have unfortunately been considerable delays. It was not possible to complete the hearing in January in the time available which, I may say, was three days longer than the parties estimated the hearing would take. Unfortunately the next time I had available to complete the hearing which was convenient to counsel was on 8 and 9 March 1988.

36. On Friday 18 March 1988 at a time when the writing of reasons for judgment had only just begun the head landlord Elizabeth City Centre Pty Ltd ("Elizabeth City Centre") re-entered the Palm Terrace and effectively ejected the applicants. During the following week counsel for the parties saw me in chambers and informed me of this development. This re-entry completely altered the proceedings, at least so far as the remedy of rescission was concerned because it would no longer be possible to restore the parties to their pre-sale position. I told counsel that I was minded to re-open the hearing so that this fresh development and its consequences could be proved and discussed and taken into account. I asked counsel for the applicants to consider how they would prove the re-entry and the consequences and I was informed that an affidavit would be filed before Easter. This was not able to be done but an affidavit was filed on 27 April 1988. A directions hearing took place on 4 May 1988 at which leave was given to both parties to file such affidavits as they might be advised and the matter was set down for further hearing on 30 May when a further affidavit was filed by the solicitor for the applicants.

37. In the meanwhile I had written reasons resolving the question of liability as appears above. I now deal with the question of damages. It is conceded that rescission is not now available to the applicants.

38. Settlement of the transaction between the applicants and the respondents occurred on 19 January 1987 and almost immediately it became apparent to Belperio that the takings were markedly below what had been represented to him by Manno. He complained to Vottaro and also to Manno. He received no satisfactory answer from either. The applicants carried on a little longer and then consulted their solicitors who wrote to Manno on 24 April 1987 in the following terms -

"We act for Mr. George Belperio and Mrs. Maria
Belperio both of 8 Valley View Drive, Highbury in
respect to their purchase from you of the business
known as "Palm Terrace Restaurant" conducted at
premises known and described as tenancies 106 and
107 Elizabeth City Centre, Elizabeth.

Our clients hereby give notice that they rescind
the Contract dated the 14th day of November 1986
for the purchase of the business known as Palm
Terrace Restaurant and that our clients merely
treat themselves as caretakers of the business and
that all losses which they are now incurring or
have incurred since settlement have been and will
be on your account.

Our clients rescission of the above Contract is
made on the basis of a clear misrepresentation of
takings by the business which were made by you.
The takings of the business which were reported to
our clients were clearly an inducement which
procured the agreement abovementioned.

Our instructions are to institute legal
proceedings pursuant to the Trade Practices Act
and legal proceedings will be served in due
course."

39. The respondents' solicitors replied on 30 April as follows -

"We act for Munchies Management Pty Ltd and for Mr
Larry Manno.

We refer to your letters of 24th April, 1987,
address (sic.) to our clients purporting to
rescind the contract dated 14th day of November,
1986, for the purchase of Palm Terrace Restaurant
by Mr & Mrs Belperio.

Our clients do not accept your clients rescission
of the contract.

Furthermore our clients deny that any
misrepresentations as alleged or at all were made.

We have instructions to accept service of any
proceedings which you may care to issue."

40. Later on 11 June 1987 the applicants' solicitors wrote to the respondents' solicitors as follows -

"We refer to previous correspondence in this
matter.

We are instructed that in an attempt to avoid
further financial loss, our clients intend to
place the business of Palm Terrace Restaurant on
the market.

We are instructed to inform you that this action
is not to be treated as an affirmation of the
Contract of Purchase and Sale as between our
clients."

41. Nothing came of this attempt to sell the Palm Terrace. These proceedings were issued on 12 August 1987. In my opinion nothing which occurred after the applicants went into the Palm Terrace and after they were aware of the poor takings of the business amounted to an affirmation of the contract. The letters of 24 April and 11 June make the applicants' position perfectly clear. Until the proceedings were started and thereafter there was nothing in the conduct of the applicants which could be said to be "unequivocal conduct from which an election to affirm can be inferred" (see Cheshire and Fifoot : Law of Contracts 4th Australian Edition at p.294).

42. In this difficult matter I have found great assistance in the judgment of Fisher J. in Yorke v. Ross Lucas [1982] FCA 180; (1982) 45 ALR 299 which case bears some similarities to the present one.

43. After a helpful analysis of the cases dealing with the assessment of damages for breaches of s.52 of the Trade Practices Act his Honour said at p.316 -

"In the matter bfore me I take as the principle of
law which should guide me that stated by Fox J. in
Brown v Jam Factory, supra; namely to compare the
position which the applicants might have been in
if they had never entered into the contract
induced by Treasureway's representations with
their position when they left the business. I
must assess how much worse off the applicants are
than if they had not purchased the business."

44. I refer also to the judgment of Fox J. in Brown v. Jam Factory Pty Ltd (1981) 35 ALR 79 in which his Honour says at p 91 after making an assessment of damages -

"The foregoing references to figures should not be
taken as suggesting that the final award of
damages is capable of precise calculation. This
is largely a matter of estimation; it has been
said to be a 'jury question' (Doyle v Olby
(Ironmongers) Ltd (1969) 2 All ER 119; (1969) 2
QB 158 at 167 and 169)."

45. Whatever the position may be where an applicant has affirmed the contract as to which see Toteff v. Antonas [1952] HCA 16; (1952) 87 CLR 647 per Dixon J. at 650; Mister Figgins v. Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 per Northrop J. at 58, it seems clear that where, as in the present case, there is no adequate evidence of the value of the business actually purchased by the applicants and where the contract has been disaffirmed or rescinded the basic measure of damages is how much worse off the applicants are as a result of having been induced to purchase the business. What have they lost?

46. Before going to this I consider the effect of the purported rescission of 24 April 1987. The respondents did not accept this rescission and in their solicitors' letter rejecting it they do not mention the applicants' assertion in para. 2 of their solicitors' letter that they "merely treat themselves as caretakers of the business and that all losses which they are now incurring or have incurred since settlement have been and will be on your account." Whether or not it can be said that thereafter the applicants were caretaker trustees for the respondents of the assets of the business I am clearly of the opinion that the respondents must be responsible for the continuing losses of the applicants after the refusal of rescission as they were for the losses incurred prior to the offer. Of course if the applicants were caretaker trustees for the respondents any loss after the purported rescission should be regarded as the respondents' loss in the absence of any proved misconduct by the applicants and there is no such proved misconduct.

47. The applicants' losses should, in my view, be assessed on a conservative basis for two principal reasons. The first is that the book-keeping of the applicants was conceded to be less than precise and second that the applicants were clearly inexperienced in restaurant management and, notwithstanding the evidence of the centre manager and the cook, there must remain some doubt about the efficiency of the management of the restaurant by the applicants.

48. I approach the assessment of damages on the footing that there was a rescission of the contract in April 1987. On this basis the applicants are entitled to repayment of their outlay on purchase of the business being $307,077-09. They are also entitled to reimbursement of their trading losses incurred during the period during which they ran the business both before and after rescission until re-entry by the landlord. The trading losses are summarised by the witness Pestana, the applicants' accountant in the following way -

"Trading Loss Statement from 19/1/87
to 31/12/87 113,312.00

Trading Loss Statement from 1/1/88
to 18/3/88 35,359.00

Less Bank Charges, Interest, Borrowing
expenses included in the above 58,113.00

Plus Finance charges per Commonwealth
Bank confirmation 109,935.00

Plus outgoings and Rental -
April and May 28,990.00

Total Trading Loss $229,483.00"

49. I note that the respondents did not seek to attack or criticise these figures beyond arguing that the bank charges with respect to money borrowed by the applicants for the purchase should be disregarded (see Yorke v. Ross Lucas (supra) at p 321). It is argued by the applicants that the situation in that case was different to the present one in that Manno knew that the Belperios intended to borrow all the money needed for the purchase from the bank. Having considered the matter I have decided that the interest and other bank charges should be disregarded notwithstanding that knowledge but on the other hand I consider that the applicants are entitled to interest on what they paid to or on account of the respondents at settlement at the rate of 10% from 19 January 1987 to 30 May 1988. Taking the figure of $307,000 I calculate this interest at $41,718. The difference between this figure and $109,935 should be taken off Mr Pestana's figure for the purpose of calculation. This difference is $68,217. Taking this from $229,483 gives a result of $161,266.

50. The applicants were required to assume responsibility for the demolition and removal of some lavatories which had been installed by the respondents when they were tenants of the Palm Terrace. The cost of this demolition is proved to be $17,160.

51. The plant and stock which the applicants had at the time of re-entry was sold and the plant realised $46,289 and the stock realised $5,700.

52. I calculate damages on the following basis :

Purchase price $307,077
Trading Loss 161,266
Demolition 17,160
$485,503

From this is to be deducted -

Plant Realisation $46,289
Stock Realisation 5,700
$51,989 51,989
$433,514

53. During the hearing it emerged that Manno in effect gave a guarantee to Elizabeth City Centre for the payment of rent and certain other moneys due by the applicants to Elizabeth City Centre. I was informed at the second to last hearing that Elizabeth City Centre had made demand pursuant to this guarantee on Manno for payment of what was owing by the applicants to it. According to Exhibit "LC14" to Mr Carbone's affidavit of 29 May 1988 the sum claimed appears to be $128,224. This sum is included in the trading loss figures of the applicants of $161,266. Plainly the respondent Manno should not be liable to pay twice. After consulting counsel at the last hearing I have decided to deduct the amount owing to Elizabeth City Centre from the amount of damages to be awarded. The applicants are however still liable to Elizabeth City Centre and the respondent Manno should give the applicants an indemnity against any claim by Elizabeth City Centre. It seems to me that I may order such an indemity to be given pursuant to s.87 of the Trade Practices Act.

54. Deducting $128,224 from $433,514 gives a result of $305,290.

55. Bearing in mind the necessity to be conservative because of the factors I have mentioned and bearing in mind the remarks of Fox J. about the difficulty of being precise, I assess the applicants' damages at $285,000.

56. There will be judgment for the applicants in the sum of $285,000 and their costs to be taxed and pursuant to s.87 of the Trade Practices Act I order that the respondent Manno indemnify the applicants against any claim by Elizabeth Town Centre with respect to rent and other payments due by the applicants to Elizabeth Town Centre pursuant to indenture of assignment dated 22 November 1987.