Hinds v Ross [2006] FCA 41 (6 February 2006)

TRADE PRACTICES – appeal – misleading or deceptive conduct – purchase of lunch bar - misrepresentation of turnover – finding that misrepresentation corrected before conclusion of sale – finding of no reliance – no inadequacy in reasons of Federal Magistrate – no error in credibility findings – no material errors in evidentiary rulings and findings – no basis for appellate court to reach a different conclusion

Trade Practices Act 1974 (Cth) s 52

Partnership Act 1895 (WA) s 7, 23

Federal Court Rules O 80 r 4

Browne v Dunn (1893) 6 R 67
Collier v Electrum Acceptance Pty Ltd (1986) 66 ALR 613
Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No 2) [2002] VSCA 189; (2002) 6 VR 1
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Halge v George [2004] WASCA 141
Holmes v QBE Insurance Ltd [2004] NSWCA 432
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134
McMahon v Pomeray Pty Ltd (1991) ATPR 41-125
Mifsud v Campbell (1991) 21 NSWLR 725
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449
Ricochet Pty Ltd v Equity Trustees Executor & Agency Company Ltd (1993) 41 FCR 229
Sun Alliance Insurance Ltd v Massoud [1989] VR 8
Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531

PAUL MAXWELL HINDS and KAREN LYNN HINDS v DAVID ADAM ROSS and LYNN MAREE ROSS and GEOFF INGLIS & ASSOCIATES
WAD 139 of 2005

NICHOLSON J
6 FEBRUARY 2006
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 139 OF 2005

BETWEEN:	PAUL MAXWELL HINDS KAREN LYNN HINDS APPELLANTS
AND:	DAVID ADAM ROSS LYNN MAREE ROSS FIRST RESPONDENTS GEOFF INGLIS & ASSOCIATES SECOND RESPONDENT
JUDGE:	NICHOLSON J
DATE OF ORDER:	6 FEBRUARY 2006
WHERE MADE:	PERTH

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

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 139 OF 2005

BETWEEN:	PAUL MAXWELL HINDS KAREN LYNN HINDS APPELLANTS
AND:	DAVID ADAM ROSS LYNN MAREE ROSS FIRST RESPONDENTS GEOFF INGLIS & ASSOCIATES SECOND RESPONDENT

JUDGE:	NICHOLSON J
DATE:	6 FEBRUARY 2006
PLACE:	PERTH

1 The appellants appeal from a judgment of the Federal Magistrates Court delivered on 20 May 2005. In his judgment, the Federal Magistrate (Walter FM) dismissed an application of the appellants brought on the ground of an alleged breach of the Trade Practices Act 1974 (Cth) as a consequence of misleading or deceptive conduct or conduct likely to mislead or deceive on the part of the first and second respondents. The orders sought by the appellants include a declaration that the whole of a contract in writing dated 10 January 2004 between the appellants and the first respondents be void ab initio and further that the first and second respondents refund to the appellants the sum of $51 000. Additionally orders are sought in terms of damages against each of the respondents, interest and other appropriate relief.

2 By direction of the Chief Justice dated 1 August 2005, the appeal was assigned to be heard by a single judge.

3 The issues in dispute arose as the consequence of the purchase by the appellants of a lunch bar (‘the business’) from the first respondents. The second respondent was the first respondents’ selling agent. The second respondent’s consultant Mr Featherston had the responsibility for the relevant dealings for it with the appellants.

4 There was no issue before the Federal Magistrate that on 7 August 2003 the first named first respondent (‘Mr Ross’) told the second respondent that the average weekly turnover of the business was ‘approximately $4000’ and the second respondent had represented to the appellants, via an internet advertisement, that the weekly turnover was ‘around $4000’. There was no issue that the actual turnover was in the order of $2000 to $2500 per week; that is, 50 to 62.5 per cent of the represented turnover.

5 A meeting took place between the appellants, the first respondents and Mr Featherston on 8 January 2004 (‘the Meeting’). The issue in the hearing of the application was whether, at the Meeting, Mr Ross falsely perpetuated the initial misrepresentation as to the turnover figure, or whether he corrected it in such a way as to remove the misleading or deceptive effect of the earlier misrepresentation.

(v) the appellants did not rely on any of the representations made by Mr Featherston.

7 On 10 January 2004 Mr Featherston on behalf of the first respondents negotiated the purchase price of $51 000 with the appellants. This was contained in an Agreement for Sale of Business (‘Sale Agreement’) concluded in writing on that date.

8 It is not in dispute that neither the first respondents or the second respondent did anything to document the correction of the turnover figure given on 8 January 2004. It was not noted on the Sale Agreement.

9 The appellants’ case at trial was essentially that at the Meeting Mr Ross had given them handwritten figures that showed a daily turnover of between $750 and $800. Mr Ross retained those papers. The appellants were satisfied that those figures substantially confirmed the represented turnover of $4000 per week.

10 The first respondents, who were self-represented, claimed that on or about the day before the Meeting, Mr Ross had discovered for the first time that the represented turnover figure was wrong and that the true turnover was only in the order of $2000 to $2500 per week. Mr Ross’s evidence was that at the Meeting he had shown Mr Hinds some handwritten figures informing him of the true turnover.

11 The affidavit evidence for the first respondents was given by Mr Ross. His evidence was that he and his wife had purchased the business in November 2002 for $47 000. His affidavit did not include any explanation for the previous misrepresentation of turnover to Mr Featherston, made on 7 August 2003. In cross-examination Mr Ross said he and his wife decided to run the business for 12 months without concerning themselves with the day-to-day financial aspects of the business. Nevertheless, in August 2003 the first respondents decided to sell the business. Mr Ross testified that he told Mr Featherston the turnover was $4000 per week on the basis of the financial accounts the previous owner had given to him.

12 The cross-examination of Mr Ross on these issues ran as follows. He testified that he had told Mr Featherston he was not aware of any circumstances likely to adversely affect the profitability of the business. Although he and his wife had operated the business for eight or nine months, they were not aware they were making a loss. He was not aware that they were not achieving sales or turnover of $200 000 per annum or $4000 per week or daily takings of $800 a day required to sustain the figures of $4000 per week. They were drawing on their savings to live. The reason they had bought the business was that they were looking forward to retirement. They both had medical problems. Mrs Ross was in remission from cancer. They had received medical advice to avoid stress. They made the decision to only go into the business if they could borrow enough money to set themselves up for 12 months operation without the worry of day-to-day financial problems. Provided the money was in the bank to pay the creditors and the bills, they were not going to concern themselves with the financial day-to-day running of things. At the end of the 12 months they had planned to have the accountant draw up their profit and loss and, from that, make certain decisions concerning the future trading of the business or their future direction. It was therefore always their intention to divorce themselves from the day-to-day financial requirements, other than paying bills, provided the moneys were in the bank to cover their debts.

13 Mr Ross’ evidence was that they drew on savings or moneys in the bank to pay their day-to-day expenses. The business operated a separate trading account. They had other accounts, mainly from the disability pension which gave them another source of income in a separate account. They were not living off the profits of the business. He did not know at the time it was not making a profit. There were no drawings made from the business for the first 12 months as originally planned. It was not until Mr Hinds had requested the current daily takings that Mr Ross learned the business was not making a profit. He denied having said to Mr Featherston that there had been no change, knowing it was making a loss or not caring whether his answer was true or false.

14 In relation to the second respondent, his Honour accepted that in the circumstances before him, the proprietor (Mr Inglis), was liable for the conduct of Mr Featherston. His Honour found that neither Mr Inglis nor Mr Featherston were simply passing on information supplied to them by Mr Ross and were not ‘mere conduits’. He also found that they were not merely passing on the information concerning the gross takings of the business ‘for what it is worth’, disclaimers not having been present in the sales brochure prepared by them or in their internet advertisement.

15 It will be convenient to further refer to the findings and reasoning of his Honour in connection with the grounds of appeal.

16 There are 12 separate grounds of appeal with substantial overlap between them. As summarised in submissions for the first respondents, they raise the following issues:

(b) issues of credibility as raised directly or indirectly through various grounds;

17 The first ground raises the issue of whether his Honour erred in fact and in law in failing to give adequate reasons for preferring the evidence of Mr Ross to that of the appellants concerning what occurred at the Meeting. The ground particularises this by reference to a failure to refer to material inconsistencies in Mr Ross’ evidence; a failure to consider a number of factors relevant to the relationship of the turnover with the purchase price; and the inadequacy of reasons generally.

18 The ground is supported by reference to the duty of a court to give adequate reasons as extrapolated in Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (No 2) [2002] VSCA 189; (2002) 6 VR 1 at 43, at [157] and at 44, at [164]; Mifsud v Campbell (1991) 21 NSWLR 725 at 728; Halge v George [2004] WASCA 141, at [38]-[40]; Holmes v QBE Insurance Ltd [2004] NSWCA 432 at [36]- [40]. The adequacy of reasons will depend on whether the appeal court is unable to ascertain the reasoning upon which the decision is based or justice is not seen to have been done: Sun Alliance Insurance Ltd v Massoud [1989] VR 8 at 18.

20 Critical to an understanding of these paragraphs is the finding previously made by his Honour of the evidence of Mr Ross concerning the manner in which he and his wife approached the management of the business, expressed in the following paragraph:

22 In my opinion, read in this context and in the light of the case law on the judicial duty to give reasons, there are not material inconsistencies in [88] and [89] or between them and other evidence of such character as would properly lead to a conclusion of inadequacy of reasoning.

23 There are four sub-particularisations to this sub-ground. In the first and second it is said his Honour failed to consider the unchallenged evidence of the appellants that they had looked at other lunch bars for sale and the price of $51 000 was based on a turnover of $4000 per week based on their comparisons of asking prices to turnover of other lunch bars. Under cross-examination by counsel for the second respondent, Mr Hinds testified that if the turnover was in the order of $2500 per week he would expect the price to be around $25 000 to $30 000; Mrs Hinds considered that with turnover at $4000 a week it was fair enough to make an offer at around $45 000.

24 His Honour found at [113] that ‘at the end of the day’ neither of the appellants had relied on any of the representations made by Mr Featherston. He continued:

Further, given his Honour’s findings that inaccurate turnover was corrected at the Meeting, any issues concerning price and turnover of other lunch bars was irrelevant.

25 The third and fourth sub-particularisations are that among the evidence not considered was that stating the first respondents purchased the business for $47 000 on the basis of turnover of $200 000 per annum, being approximately $4000 per week; and evidence that Mr Featherston had invited the appellants to make an offer of $58 000. Again, once his Honour had made the credibility finding in favour of the first respondents and their evidence of how they approached knowledge of the profitability of their business, these were irrelevant factors and the absence of reference to them does not establish any inadequacy in the reasons.

26 The general contention of inadequacy of reasons cannot, in the circumstances of the credibility finding and its import, assist the appellants. The acceptance of the first respondents’ account of how they approached their business was of profound importance for the application of the relevant law concerning misleading or deceptive conduct and for the resolution of the case and hence to the reasoning of his Honour. The credibility finding was one which his Honour was entitled to make and the absence of express reference by way of criticism of the evidence of the appellants is not a necessary pre-condition of the finding. Having found the appellants were not dishonest, his Honour nevertheless – taking into account the requirements of demeanour as considered by him in [79] – preferred the evidence of Mr Ross. By that, his Honour was saying that despite the unusual approach which the evidence of Mr Ross disclosed, he believed him and, importantly, did not consider such evidence a contrivance meriting disbelief. His reasons were completely adequate to convey that finding.

27 Ground two asserts that his Honour should have found that Mr Ross’ correction of the turnover on 8 January 2004 did not remove the effect of the earlier misrepresentation because neither the appellants or alternatively Mrs Hinds understood the true position concerning turnover after the Meeting. Ground three asserts that his Honour either failed to find whether the appellants understood the correct position concerning the turnover after the Meeting or to give adequate reasons for any implicit finding to that effect.

28 The appellants’ case was that both appellants were at the Meeting when Mr Ross confirmed the turnover of approximately $4000 per week. His Honour found that at the time of Mr Featherston presenting the correcting information to Mr Hinds, Mrs Hinds was elsewhere engaged in the room. His Honour then stated at [94(f)] that he did not exclude the possibility that Mr Hinds failed to tell his wife about the true effect of the figures shown to him by Mr Ross at the Meeting. He also stated that little turned on the issue and went on to say that he had found Mr Ross dealt with Mr Hinds and accurately disclosed the relevant figures to him.

29 The appellants contend the issue was whether what occurred at the Meeting removed the misleading effect of the earlier misrepresentation. The submission is made that even if Mr Hinds knew the true position (which is disputed) his knowledge would not be imputed to Mrs Hinds: McMahon v Pomeray Pty Ltd (1991) ATPR 41-125 at 52,859; Collier v Electrum Acceptance Pty Ltd (1986) 66 ALR 613; C Lockhart, The Law of Misleading or Deceptive Conduct, 2^nd edn, LexisNexis Butterworths, Australia, 2003 at [10.20].

30 The second respondent submits that in the absence of a positive finding by his Honour that Mr Hinds did not advise Mrs Hinds of the corrected figures on turnover, his knowledge could be imputed to Mrs Hinds as joint purchaser of the business.

31 The Meeting occurred on 8 January 2004. The Sale Agreement was executed in writing by the appellants on 10 January 2004. In it the appellants covenanted to purchase the business: no words of severance were used, so that their purchase was as joint tenants.

32 The Sale Agreement did not expressly refer to the appellants intending to conduct the business as a partnership. Section 7 of the Partnership Act 1895 (WA) provides that a partnership arises where there is a relationship which subsists between persons carrying on a business in common with a view to profit. Section 23 provides that notice to any partner who habitually acts in the partnership business of any matter relating to partnership affairs operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner. Collier is authority that where the notice is given prior to the formal constitution of the partnership, it may not operate as notice to all partners.

33 As stated above his Honour found that little turned on the issue of whether Mr Hinds had failed to tell his wife about the true effect of the figures shown to him by Mr Ross at the Meeting. This was because Mr Ross dealt with Mr Hinds to whom he had accurately disclosed the relevant figures.

34 Even if his Honour implicitly and incorrectly reasoned that notice to Mr Hinds constituted notice to Mrs Hinds, he was not in error in reaching the view at [94(f)] that little turned on the issue. This is because his ultimate findings were to the effect that the appellants did not rely upon any of the representations. Depending on how his Honour’s words in the subparagraph are to be understood the ground is therefore either not made out or, if made out, cannot support the orders sought on the appeal.

35 Ground four asserts that his Honour erred in fact and in law in finding that the appellants did not rely on the representation that turnover was approximately $4000 per week.

37 In [113] his Honour recognised that the result of the proceeding would have been different if he had concluded that the appellants had relied, even to some extent, on Mr Featherston’s representations. In [114] he stated that even if it were not the case that the appellants had failed to take reasonable care of their interests, they had not demonstrated that they were induced (by anyone, or by any representations – true or false) to do anything giving rise to loss or damage on their part.

38 There is no essential illogicality in the finding that there was no reliance on earlier representations concerning turnover and the fact that the Meeting was called for the purpose of verifying turnover. His Honour found that at the Meeting the inaccuracy concerning turnover was corrected and consequently there was no reliance on the earlier representations.

39 Ground five asserts his Honour erred in fact and in law in finding the appellants had a ‘cavalier’ attitude to running the business and were ‘inept’ in their attempts to effectively do so. Ground four relies also on assertions that the finding of cavalier attitude had led to the inference of non-reliance that it was not reasonably open to do so.

40 At [95]-[107] of his reasons, his Honour dealt with aspects of the appellants’ case which he considered to be of concern. His findings in [110] cited above followed from those considerations. At [98] his Honour stated that the evidence revealed that the appellants had their own idiosyncratic view of the likely profitability of the business, namely that profit should amount to approximately 25 per cent of gross takings. At [49]-[52] he gave reasons for the finding that the appellants had conducted the business ineptly. The reasons include reference to relevant evidence.

41 Whether or not the appellants were ‘cavalier’ and ‘inept’ in the running of the business bears no relation to the issue of reliance. This is because the appellants did not rely on the representation as it was corrected at the Meeting. Such findings can only have relevance to the issue of contributory negligence and/or damages.

42 As examination of the abovementioned paragraphs makes apparent, there clearly was evidence to support the finding of a cavalier attitude and ineptitude on the part of the appellants. In my view it was open on the evidence for his Honour to characterise the evidence on this issue as he did and not to find, as the appellants urge, that they dealt with the business in the exercise of legitimate commercial judgment and managerial prerogative.

43 Evidence of alleged ineptitude on the part of the first respondents or the views of the second respondent on how the business could be improved are irrelevancies to the ground as is the evidence of the actual results resulting from the appellants operation of the business.

44 On the third day after the appellants took over the business, Mrs Hinds complained to Mr Featherston that she could not understand how the takings, as represented by the first respondents, could be sustained on the customer activity which the appellants were experiencing. Mr Featherston immediately wrote to the first respondents asking whether they would be able to spend time with Mrs Hinds to explain this to her and telling them they had a responsibility to support the figures which they maintained were valid. In response Mr Ross visited the business. His evidence in cross-examination reproduced at [36] was that he had lengthy discussions with Mrs Hinds’ mother in relation to what food was being prepared and how it was being prepared. He testified he had not written to the appellants to correct any misapprehension about the figures because he did not want to get involved in any dispute between the appellants on the information that had passed between them (his earlier evidence being that at the Meeting Mrs Hinds was not present at the table when the figures were given to Mr Hinds of the current daily figures). There was no evidence from any party that there was any reference to turnover when Mr Ross attended at the premises.

45 The appellants submit that Mr Ross’ response to the letter and his failure to refute the allegation could only properly have been construed as a clear admission: Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134 at 143. The submission is that Mr Ross had not responded in a way consistent with the allegation put to him by Mr Featherston.

47 From this it is apparent that his Honour accepted the explanation of Mr Ross of what occurred in the circumstances. His explanation was therefore found to be acceptable so that there was no room for his conduct to constitute an admission on the basis of it being otherwise unexplained. Additionally, his explanation removed the possibility of inconsistency between the allegation and his conduct because it explained that he chose to avoid engagement in a dispute between each of the appellants on the conveyance of information previously provided to Mr Hinds.

49 Under this ground the appellants contend that there was no evidence either way on whether Mrs Hinds had pressed the issue of turnover. Additionally it is contended that there was an inconsistency between her having pressed the issue with Mr Featherston and not having pressed it with Mr Ross. Therefore it is submitted it was improper for his Honour to make the finding which he did when the issue had not been put to Mrs Hinds in cross-examination. Further, the absence of any evidence was explicable on the basis that evidence of out-of-court complaints of misrepresentation would have been inadmissible hearsay if led in chief: JD Heydon Cross on Evidence, 6^th edn, Butterworths, Australia, 2000. Even if Mrs Hinds did not make the complaint at the meeting at the business, it is submitted by the appellants that could not reasonably justify drawing a conclusion adverse to her credibility in circumstances where she had already made a complaint concerning the issue to Mr Featherston. The appellants therefore quarrel with his Honour’s use of the description ‘of equal significance’ in the circumstances.

50 The second respondent submits that in cross-examination by Mr Ross, Mrs Hinds testified that she could not recall everything he said to her so that her evidence could not therefore assist her on this issue.

51 Further the second respondent states that when Mr Ross attended the business it was subsequent to the Meeting and so subsequent to the correction of any inaccuracy in relation to turnover. Mr Ross would therefore have attended his meeting with Mrs Hinds on the understanding that Mr Hinds had the correct understanding and he did not want to get into a dispute between them on whether Mrs Hinds had been so informed.

52 The second respondent also submits that his Honour would have been entitled to draw an adverse inference from the fact that there is no evidence Mrs Hinds pressed the issue of turnover with Mr Ross.

53 In my opinion the ground is incapable of sustaining the appeal even if resolved in favour of the appellants. This is because it is directed to a limited fact which cannot effect the conclusion on causation.

54 In [37] of his Honour’s reasons it is recited that on 19 February 2004, some two and a half weeks after the appellants had taken over the business, they arranged for their solicitors to write to the first respondents stating, in part, that there had been a breach of the ‘Fair Trading Act’ and gross misrepresentations had been made to them in relation to ‘the profitability of the business, stock and the working order of plant’. It further advised that the appellants would therefore not be taking up the three year lease. At [38] his Honour found that the solicitor’s letter showed that the appellants did not allege at that early stage that misrepresentations had been made in relation to the turnover or gross takings of the business and that this was in contradistinction to their claims made in that Court.

55 Ground eight asserts there was no such inconsistency; it was not put to either of the appellants in cross-examination; the Federal Magistrate did not put the appellants’ counsel on notice of his intention to make a finding adverse to the appellants that issue (Browne v Dunn (1893) 6 R 67); and in any event Mrs Hinds had already complained to Mr Featherston on 4 February 2004 concerning the ‘takings’ of the business.

56 At [39] his Honour referred to a letter from the appellants’ solicitors to the agent of the landlord of the premises upon which the business was conducted. It advised that the appellants ‘do not intend at this stage to sign the assignment of lease’ and also stating they would be seeking to rescind the contract. It requested that the proposed lessors put on hold for two or three months the signing of the assignment ‘at this stage’. At [41] his Honour drew the inference that the appellants were not then closing their mind to the possibility of entering into the lease agreement at some time in the future.

57 Ground nine asserts the letter, properly construed, was an attempt by the appellants to preserve the status quo and the benefit of the lease for the first respondents consistent with the appellants’ rescission of the sale agreement to enable them to return the business to the first respondents. It also asserts that there was an absence of cross-examination on the issue and of notice of the intention to draw an adverse inference.

58 The appellants submit that the Court is in as good a position as his Honour to draw the appropriate conclusion concerning the letters: Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531 at 551; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 126-127, at [25].

59 Each of the letters the subject of these grounds was subsequent to the appellants’ decision to purchase the business. They are therefore redundant to the fundamental finding that there was no reliance on the representation concerning turnover. The inferences are not in their terms apparently adverse in any event.

60 At [83] his Honour referred to accountant’s financial statements received by Mr Ross revealing that the gross takings of the business were significantly less than $4000 per week. He then stated that the fact that Mr Ross did not call his accountant was of little significance. Mr Ross was self-represented. Further the existence of the statements had been known to the appellants’ solicitors for months before the trial so they could have arranged for the accountant to give evidence if they had thought the evidence may have assisted their case.

61 Ground 10 asserts that the fact of self-representation was not a proper basis for declining to draw an inference adverse to the first respondents by reason of their failure to call a material witness. It also asserts that the fact the appellants’ solicitors had been aware of the existence of the statements was irrelevant and the fact that the appellants could have taken steps to have the accountant appear was not a proper basis for declining to draw an adverse inference against the first respondents.

62 In my view this is not a case of self-representation being utilised to avoid the drawing of an adverse inference. Rather it is the case where there was no necessity for the witness to be called. The accountant could not give evidence as to whether the incorrect turnover figure had been corrected. I agree that if the accountant could have given evidence concerning the business plan of the first respondents, that could have gone to credibility but not to the fundamental issues before the Court.

63 At [84] his Honour referred to the fact that Mrs Ross had not given evidence and stated that the rule in Jones v Dunkel did not assist the appellants. He stated at [85] that Mrs Ross did not give evidence because of her state of health (being in remission from cancer) and because Mr Ross was available to give evidence for both of them. In any event, said his Honour, she could not have given direct evidence on what the appellants’ counsel at trial had said was the central issue of fact, namely whether Mr Ross corrected the earlier misrepresentations at the Meeting. He therefore concluded there was a reasonable explanation for not calling Mrs Ross.

64 Ground 11 asserts that this reasoning was in error because there was no evidence that Mrs Ross had not given evidence because of the state of her health. Additionally, the availability of Mr Ross was not a proper basis for declining to draw an inference against the first respondents because of Mrs Ross’ failure to give evidence.

65 As his Honour said, Mrs Ross could not have given direct evidence concerning the discussions at the Meeting and so could not have assisted in determining the fundamental issue before the Court. No material adverse inference arises from the fact that she was not called.

66 Ground 12 asserts his Honour erred in fact and in law in preferring Mr Ross’ evidence to Mr Featherston’s as to the existence of other potential purchasers to whom Mr Ross showed figures of the business.

67 At [93] his Honour stated that the existence of the ‘other potential purchasers’ referred to by Mr Featherston and to whom Mr Ross allegedly showed figures, was not put to Mr Ross. He preferred Mr Ross’ evidence in relation to this issue to that of Mr Featherston.

68 Again the issue raised by the ground is not one which can touch the basic issue of whether the appellants relied on a representation concerning turnover.

69 Reference has been made throughout these reasons to the fundamental issue which was before the Court, namely the issue of reliance. Although each of the grounds of appeal has been addressed in detail, some of them, even if made out, could not assist the appellants because they do not assist in disclosing error in the fundamental findings relating to reliance. The fundamental issue as formulated to his Honour by counsel for the appellants was whether Mr Ross corrected the misrepresentation at the Meeting or whether he presented false figures consistent with the represented gross takings. At the risk of undue repetition, it was the finding of his Honour that on the balance of probabilities Mr Ross did not show Mr Hinds or the appellants jointly falsified figures at the Meeting. He further found that at the Meeting Mr Ross showed Mr Hinds certain documents and did correct the earlier errors or misrepresentations in relation to the gross weekly takings of the business. Not only did he find that the appellants had not discharged the onus of proof but he also found that the appellants conduct in all the circumstances revealed a failure by them to take reasonable care of their own interests such that the element of causation between the alleged misrepresentation and damage was severed by the intervention of the conduct of the appellants.

70 In finding that there was not relevant nexus between the conduct complained of and the alleged loss or damage suffered and in finding that there was no relevant reliance by the appellants, his Honour proceeded in accordance with the principles stated by the High Court in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449. He made the findings fully cognisant of the causative threshold necessary to attach liability for misleading and deceptive conduct under s 52 of the Trade Practices Act: Ricochet Pty Ltd v Equity Trustees Executor & Agency Company Ltd (1993) 41 FCR 229 at 235.

71 Examining the reasons of his Honour therefore in the light of both the particularity of the grounds of appeal and the fundamental issue which permeates many of the grounds and the reasons, I do not consider that reading the reasons in the context of the findings and conclusions involving elements of fact, degree, opinion and judgment, an appellate court would be warranted in reaching a different opinion from the court at first instance.

73 There should be as against the appellants an order to pay the respondents’ costs.

74 The first respondents were represented as the consequence of the issue of a certificate under O 80 r 4 of the Federal Court Rules. I consider that this is an appropriate case in which the costs order should expressly cover the costs and disbursements of counsel appearing pro bono pursuant to that Order.

I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson.

Counsel for the Appellants:	MD Cuerden

Solicitor for the Appellants:	Rattigan & Associates

Pro Bono Counsel for the First Respondents:	RJL McCormack

Counsel for the Second Respondent:	RJ Grayden

Solicitor for the Second Respondent:	Hammond Worthington

Date of Hearing:	17 November 2005

Date of Judgment:	6 February 2006

Federal Court of Australia

Hinds v Ross [2006] FCA 41 (6 February 2006)