Case: Henville v Walker [2001] HCA 52 ; (2001) 206 CLR 459
Outcome: applied
Similarly, Mr Scotts' claim that by June 2004 the problems with the roof structure had affected the hotel trade to such an extent that they took priority over any expansion plans is also not to the point. As McHugh J noted in Henville v Walker [2001] HCA 52 ; (2001) 206 CLR 459 at 502, in the context of a discussion about damages under the Trade Practices Act : ' ... the wrong which s 52 of the Act prohibits is the making of, not the failure to honour, the false representation.' 129 Mr Lewarne admitted that the plan to go next door was 'swamped' by the problems with the building, and in particular the scaffolding which was erected to repair the building. Accepting for present purposes that when Mr Scotts made the representations he could not have foreseen this drop in trade and its effect on the working capital of the business it does not bear on whether Mr Scotts had reasonable grounds for making the representations at the time they were made. The obstacles described above were such that I am satisfied that neither Mr Scotts nor Momentum had reasonable grounds for making representations two and four and that they were therefore misleading. 130 Even though the legal obstacles described above may have prevented the plans to extend the hotel next door for the purpose of operating poker machines, it is, however, not immediately clear whether they would have been obstacles to the pursuit of the plan described in representation five (which does not expressly refer to the adjoining premises). The fifth representation relates only to the operation of poker machines and in particular to the procurement of a further five gaming machines. Mr Lewarne claimed that there was simply no room for a further five poker machines in the hotel unless the adjoining wall was knocked down and the adjoining premises used to house the poker machines. This was particularly the case because the wall enclosing the existing poker machine room (the internal wall) needed to be removed as a precursor to extending into the adjoining premises, a move which required the removal of at least four of the existing 10 poker machines from the premises. Mr Lewarne, in cross-examination said that he agreed to store the five poker machines at the premises of one of his other businesses: 'Mr Lewarne: Because we had already demolished the existing poker machine room and there was nowhere to put them and Richard informed me that the situation is that you have got to mask or prevent people at the bar or in the bar area looking in at the machines. Richard informed me of all the clocks on the walls and things like that. There was nowhere to put them so we put them at the AWN [sic] premises and then what we were going to do was once the hole was punched through the wall and the room finished, replace them. Mr Sahade: You agreed with that decision? Mr Lewarne: To place them at our factory? Well there was nowhere else. There really wasn't anywhere else to put them.' 131 Mr Lee submitted that, at the time that the representation was made it would have been clear that unless it was possible to extend the space available for poker machines into the adjoining premises it would not be able to operate the existing 10 poker machines, let alone procure and operate a further 5 poker machines. 132 Mr Scotts gave evidence that the five additional poker machines would initially be installed on the stairwell landing of the hotel premises and that once the gaming room had been created in the adjoining premises that the poker machines would be moved into it. Mr Lee, in cross-examining Mr Scotts, referred to the Magin report's reference to the cost of the additional poker machines being $20,000 - $30,000. Mr Lee suggested that, given Mr Scotts intended to lease the poker machines, this figure undermined his evidence that he intended to sit the extra poker machines on the stairwell, since there was no capital expenditure associated with sitting them on the stairwell. Accordingly, Mr Lee suggested that the Magin report anticipated that the additional poker machines would be installed and operated from the gaming room next door. While it is clear that the Magin report assumed that the new poker machines would be placed in the adjoining building it does nor follow from this assumption that the adjoining building was the only place that these poker machines could have been stored. 155 Accordingly, Mr Lewarne will be limited to damages for losses he incurred that, as a matter of common sense and experience, would not have been incurred but for Mr Scotts' misleading or deceptive representations. See also Henville v Walker [2001] HCA 52 ; (2001) 206 CLR 459 at 508 per Hayne J and 496 per McHugh J. In Wardley at 525, the High Court indicated that reliance upon a misleading representation is a sufficient causal link: Here we are concerned with contraventions of s 52(1) in the form of misleading conduct constituted by misrepresentations. In this situation, as at common law, acts done by the representee in reliance upon the misrepresentation constitute a sufficient connexion to satisfy the concept of causation. And, if those acts result in economic loss...that economic loss will ordinarily be recoverable under s 82(1)... 156 There is no doubt in my mind that Mr Lewarne was careless of his own interests in relying on Mr Scotts. Indeed, in cross-examination of Mr Lewarne it seems that, at least in part, the respondents were attempting to defend themselves on this basis. Carelessness of the representee, however, is not a basis for excluding relief under the Trade Practices Act or the Fair Trading Act , nor is it necessary for the misleading conduct to be the sole cause of the loss, as the comments of Gleeson CJ in Henville v Walker [2001] HCA 52 ; (2001) 206 CLR 459 at 468-9 make clear: It will commonly be the case that a person who is induced by a misleading or deceptive representation to undertake a course of action will have acted carelessly, or will have been otherwise at fault, in responding to the inducement. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage. ... For there to be the necessary causal relationship between a contravention of s 52 , and loss or damage, so as to satisfy the requirements of s 82(1) , it is not essential that the contravention be the sole cause of the loss or damage. 157 See also the similar view expressed at 505 by McHugh J, with whom Gummow and Hayne JJ agreed. 158 Mr Lewarne repeatedly said that each and every one of the representations was influential in his decision to invest money in the partnership. This claim of reliance was not seriously challenged and I am satisfied that, to a greater or less extent, the representations that were made were factors in Mr Lewarne's decision to invest his money in the East Village Hotel business. I have discussed the question of reliance in relation to the first and ninth representations above at [99]-[103] and [106] respectively.