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Supreme Court 26 February 1999

RAMSAY v VOGLER

[1999] NSWSC 120

Fraud & dishonesty
TRADE PRACTICES FAIR TRADING ACT 1987 (NSW)

Citation: Ramsay v Vogler [1999] NSWSC 120
Court: Supreme Court of New South Wales (Equity Division)
Date: 26 February 1999
Judge(s): Bryson J

Background

The dispute arose from a March 1995 agreement under which a Queensland businesswoman sold the rights to operate a "Welcome Waggon" greeting and marketing business in New South Wales for $90,000. The purchaser under the written agreement was a NSW company of which the first and second plaintiffs, a husband and wife, were directors. That company had apparently been acquired specifically to enter into this transaction.

A business consultant acting under the seller's written authority had placed an advertisement in the Sydney Morning Herald in January 1995, describing the opportunity as having "high income potential" and requiring "no selling." He then conducted most of the pre-contractual communications with the husband plaintiff via telephone and post from Queensland.

After acquiring the rights and undergoing training, the plaintiffs became dissatisfied. They alleged that representations made before the contract were misleading or deceptive under the Fair Trading Act 1987 (NSW) and, separately, that the business consultant had committed fraud. The seller also brought a cross-claim against the purchasing company for an unpaid balance.

  • Whether the NSW Fair Trading Act 1987 applied to representations and conduct that originated in Queensland, consisting of telephone calls and postal communications sent to persons in NSW
  • Whether representations made by the business consultant could be attributed to the seller as his principal
  • Whether the representations made to the husband plaintiff amounted to common law fraud, and whether he personally suffered loss as a result
  • Whether the wife plaintiff and the purchasing company had independent claims based on the pre-contractual representations
  • Whether the cross-claim by the seller against the purchasing company for $20,000 was established

Decision

The NSW Fair Trading Act did not apply. Bryson J held that conduct consisting of telephone calls and postal messages sent from Queensland to NSW recipients occurred in Queensland, not in NSW. The conduct therefore fell outside the territorial reach of the Fair Trading Act 1987 (NSW). The plaintiffs' claims under that Act were dismissed on this basis.

Attribution of the consultant's representations to the seller was established. The seller had given the business consultant written authority to market the business using information she supplied. Bryson J held that any representation made by the consultant to the husband plaintiff was made within that general authority, making the seller responsible as principal under both tort law and section 70(4) of the Fair Trading Act. This finding mattered primarily to the fraud analysis.

The fraud claim succeeded for the husband plaintiff only. Bryson J found that certain representations made by the consultant, particularly regarding the business's success in other states and its income potential, amounted to fraud on which the husband plaintiff personally relied and suffered loss. Importantly, the claim was limited to the husband plaintiff personally. The wife plaintiff had no representations directed to her and was not a party to any relevant transaction. The purchasing company, similarly, could not establish that pre-contractual representations were directed to it or that it had relied on them, particularly given the contractual clause acknowledging independent investigation of the business.

The cross-claim succeeded. Bryson J gave judgment for the seller against the purchasing company for $20,000 on her cross-claim. The precise damages payable to the husband plaintiff were deferred, with an inquiry ordered before a Master to assess the amount.

Orders Made

  • Judgment for the first plaintiff (husband) against the second defendant (business consultant) for damages and interest, to be assessed
  • An inquiry before a Master to ascertain and certify the amounts of damages and interest, with judgment to be entered in accordance with the Master's certificate
  • Judgment for the defendants on all remaining claims by the plaintiffs
  • Judgment for the cross-claimant (seller) against the purchasing company for $20,000 on the cross-claim
  • Further consideration of interest on the cross-claim and all questions of costs reserved

Key Takeaways

  • The Supreme Court held that conduct consisting of telephone calls and postal communications sent from Queensland to recipients in NSW occurred in Queensland, placing it outside the territorial reach of the Fair Trading Act 1987 (NSW).
  • A corporate purchaser cannot rely on pre-contractual representations that were not directed to it and in respect of which it was shown to have had no involvement at the time the representations were made.
  • Where a contractual clause expressly acknowledges that the purchaser has independently investigated the business, that clause has contractual effect against the corporate purchaser, though not against third parties such as the individual directors who were not parties to the agreement.
  • Attribution of an agent's fraudulent representations to a principal follows from evidence of general written authority granted to that agent to market the business, both in tort and under the relevant statutory provision (section 70(4) of the Fair Trading Act 1987 (NSW)).
  • Damages for fraud are assessed by reference to the actual loss suffered by the specific plaintiff who relied on the representations, not by reference to losses claimed collectively across multiple plaintiffs with different legal positions.

Legislation and Cases Referenced

Legislation:
- Fair Trading Act 1987 (NSW), ss 42, 44(b), (e) and (j), 50, 62, 68, 70(4), 72, 73
- Trade Practices Act 1975 (Cth)
- Australia Act 1986 (Cth), s 2(1)
- Interpretation Act 1987 (NSW), s 31, ss 31(1), (2), (3)
- Fair Trading Act 1989 (Queensland)

Cases:
- Brownlie v State Pollution Control Commission (1992) 27 NSWLR 78
- Distillers Co v Thompson [1971] AC 458
- Port MacDonnell Professional Fishermen's Association Inc v South Australia (1989) 168 CLR 340
- Voth v Manildra Flour Mills Pty Limited & Anor (1990) 171 CLR 538