COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.

CWDS
  Trade Practices - Misleading conduct - Sale of restaurant business -
Assertion in negotiations that lease held - Factual position that lessee's
claim that lease had been renewed was subject to litigation - Subsequent
contract for purchase of business - Whether payments made by purchaser were
induced by misrepresentation - Purported termination of contract by purchaser
- Forfeiture of deposit by vendor - Whether purchaser entitled to terminate
for breach - Validity of forfeiture of deposit - Recoverability of expenses
incurred by purchaser upon being let into possession pending completion -
Whether second respondent involved in breach of Trade Practices Act.
  Trade Practices Act 1974, ss.52, 53A, 75B.
  McDonald v Dennys Lascelles Limited (1933) 48 CLR 457, Bentsen v Taylor,
Sons & Co (1893) 2 QB 274, L Schuler A G v Wickman Machine Tool Sales Ltd
(1974) AC 235, Cehave N V v Bremer Handelsgesellschaft (1976) QB 44, Hongkong
Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962) 2 QB 26, Bunge
Corporation v Tradax Export S A (1981) 1 WLR 711, Yorke v Lucas (1985) 59 ALJR
776 referred to.

HRNG
SYDNEY
#DATE 22:10:1986
  Counsel for the Applicant and Cross-Defendant: Mr W Carney
  Solicitors for the Applicant and Cross-Defendant: Yee & Company
  Counsel for the Respondents and Cross-Claimant: Mr V R W Gray
  Solicitors for the Respondent and Cross-Claimant: Benjafield, Coyle &
Shanahan

ORDER
  Judgment be entered in favour of the applicant against each of the
respondents for damages in the sum of twelve thousand one hundred and
sixty-two dollars seventy-five cents ($12,162.75).
  The respondents and each of them give all such directions and sign all such
authorities as may be necessary to effect repayment to the applicant of the
sum of three thousand dollars ($3,000.00) paid by him as deposit pursuant to
the agreement made between the applicant and the first respondent dated 27
April 1984.
  The Cross-claim be dismissed.
  The respondents pay to the applicant his costs of the proceedings.

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

JUDGE1
  Prior to April 1984 Roymancorp (Australasia) Pty Limited, the first
respondent, conducted the business of a Chinese restaurant, under the style
"Red Leaf Restaurant", in premises situated in the Sydney suburb of Roseville.
The premises were owned by one Rocco Maurici.  They had been leased by him to
Roymancorp for a term of three years expiring on 3 December 1983 but that
lease conferred upon the lessee an option to take a renewed lease of the
premises for a further period of three years from that date.  A dispute had
arisen between Mr Maurici and Roymancorp as to whether or not that option had
been effectively exercised.  After the purported exercise of the option
Roymancorp had remained in possession of the premises but, on 23 January 1984,
Mr Maurici had commenced ejectment proceedings in the Supreme Court of New
South Wales.  At some time prior to 27 April there had been a hearing of the
question whether the option had been validly exercised, judgment upon which
had been reserved.
2.  Early in April 1984 the applicant, Sau Wai Lau, became interested in
purchasing the business.  He had several conversations with Kevin Ping-yu Ip,
the second respondent. Mr Ip was at all material times a director of
Roymancorp and, so far as the evidence reveals, the sole controller of its
affairs.  Mr Ip provided certain information about the business and invited Mr
and Mrs Lau to visit the restaurant during trading hours.  They did so.  They
had a lengthy conversation, in the Cantonese language, with Mr Ip regarding
various aspects of the business.  Mr Lau enquired about the lease.  It is
admitted on the pleadings that Mr Ip informed Mr Lau that Roymancorp "held a
lease of the premises which had approximately two years and nine months to
run".  As is also admitted, Mr Ip showed Mr and Mrs Lau the lease granted in
December 1981 and stated that Roymancorp was lessee under this lease.
According to Mr Ip he made reference to the option to renew.  Mr Lau
understood that it would be necessary to obtain the consent of the lessor to a
transfer of the lease, but Mr Ip told him that he would guarantee that the
lessor would concur.  Mr Lau expressed a wish to contact the lessor but Mr Ip
informed him that this would not be necessary, that he would obtain the
consent.  Mr Lau accepted this assurance and agreed to purchase the business
for the sum of $40,000, he indicating a desire to settle the transaction as
soon as possible because he was not currently employed.
3.  Each of the parties then instructed a solicitor to act in the transaction.
The vendor's solicitors prepared a contract for the sale of the business,
showing a consideration of $40,000 and making settlement dependent upon the
execution by Mr Maurici of a new lease for a four year term commencing on 4
December 1983 and expiring on 3 December 1987 and upon the assignment of that
new lease to the purchaser.  The agreement envisaged the payment by the
purchaser of a deposit of $4,000 to be held by the vendor's solicitors as
stakeholders pending completion.  The agreement included other provisions
usual in an agreement for the sale of a business, including for the transfer
of the liquor licence relating to the business.  Clause 9, which was headed
"Vendor's Warranties", was as follows:

        "9(a) The Vendor will remain in possession of
              the Business and the Premises and will
              manage the same as a going concern until
              completion and shall sign and execute all
              documents and do all acts and things
              reasonably required for putting the
              Purchaser in full possession and
              enjoyment of the Business and the
              Premises and for otherwise performing
              this Agreement.

          (b) The Vendor warrants and it is a condition
              of this Agreement that at the date of
              Completion the Plant, goodwill and
              stock-in-trade hereby agreed to be sold
              shall be the sole and unencumbered
              property of the Vendor and that no other
              person shall have any claim adverse to
              the Vendor in respect thereof.

          (c) The Vendor warrants that all statutory
              requirements relating to the Business
              hereby sold shall have been complied with
              up to the date of completion."

4.  Unfortunately, Mr Lau and Mr Ip were not content to allow the solicitors
to conduct the matter on their behalf. Instead, they had a number of
conversations in which they made arrangements which were at variance with the
terms of the draft agreement and which they did not fully disclose to their
solicitors.  Mr Lau was keen to go into possession of the business as soon as
possible.  Mr Ip appears to have been anxious to obtain at least a substantial
part of the purchase moneys as soon as he could.  On 20 April 1984, which was
about the day upon which the vendor's solicitors sent the draft agreement to
the purchaser's solicitors, Mr Lau paid $500 directly to Mr Ip.  Shortly after
that day Mr Ip suggested to Mr Lau that he, Mr Lau, pay $10,000 in cash
directly to Mr Ip and that the consideration shown on the written agreement be
reduced to $30,000.  Mr Lau agreed to this;  he says that he did so only
because Mr Ip threatened that he would otherwise not proceed with the sale to
him.  He paid $3,500 on 25 April 1984 and, on or about 27 April, a further
$6,000.  On 27 April 1984 contracts were exchanged, the draft having been
amended so as to show a total consideration of $30,000 and a required deposit
of $3,000.  This latter sum was paid to the solicitors for the vendor on
exchange and, I am informed by counsel, continues to be held by them in their
trust account.
5.  On the evening of Saturday 28 April 1984, at the request of Mr Ip, Mr and
Mrs Lau visited the restaurant, the business of which was still being
conducted by Mr Ip on behalf of Roymancorp.  They discussed with Mr Ip the
matter of possession.  According to Mr Lau, Mr Ip told him that he could take
over the business immediately he paid the balance of the purchase price and
that he did not have to wait for the issue of the new lease envisaged by the
written agreement. He says that Mrs Lau wrote out and handed to Mr Ip four
cheques:  one for the $27,000 balance of purchase money, two for the value of
the stock used in the business and one for the rent for May 1984.  In his
evidence Mr Ip accepts this account save that he disputes that a cheque for
$27,000 was handed over that night. In the events which have occurred it does
not matter, but it is fair to say that Mr Ip's position seems to be supported
by the reference to $27,000 in a document which Mrs Lau wrote out at the
request of Mr Lau and Mr Ip, as a record of the agreement for delivery which
had been made.  The original of this document is in Cantonese, but the parties
agree upon the accuracy of the following translation:

        "This is to certify that as at 1984 April 30th
         we have offical (sic) taken over Red Leaf
         Chinese Restaurant at 108 Pacific Highway,
         Roseville.  Balance of 27,000 dollars will be
         paid at settlement.  Also from 1984 April 30th
         all rental, Electricity, gas, Telephone and
         all other expenses to be responsible by us.
         This to certify to Roymancorp (Australasia)
         Pty Ltd."

The document was signed by Mr Lau.

6.  Following this discussion, Mr Ip forthwith ceased to operate the
restaurant and he gave possession to Mr Lau. During the next few days Mr and
Mrs Lau worked to clean and paint the building.  They ordered new menus and
chopsticks. They purchased a new refrigerator.  On 1 May 1984, whilst they
were working at the premises, Mr Maurici called in.  This was the first
contact which they had had with him.  Little was said, apparently because of
language difficulties, but, as Mr Lau put it in his affidavit, "he seemed
unhappy about our being there working on the place".
7.  Upon the following day, Mr Ip contacted Mr Lau and informed him that he
must leave the premises.  After obtaining legal advice, Mr Lau did so.  It was
on that day that Mr Lau learned, for the first time, of the dispute between Mr
Maurici and Mr Ip regarding the renewal of the lease.  Mrs Lau stopped payment
of the cheques which had been delivered on the previous Saturday, so that they
were dishonoured on presentation to the bank.
8.  Between 2 May and 22 May 1984 the restaurant remained closed.  Mr Lau
retained new solicitors.  On 22 May they wrote to the vendor's solicitors a
letter in which they purported to terminate the contract because of the
failure of the vendor to manage the business as a going concern since the
exchange of contracts, in breach of cl.9(a) of the agreement.  They demanded
re-payment of the $13,000 which had been paid by Mr Lau.
9.  The solicitors for Roymancorp responded on 24 May 1984.  They denied Mr
Lau's right to terminate the contract, but went on to treat the purported
termination as an act of repudiation, to accept that repudiation and thereby
to terminate the contract and to forfeit the deposit.  No part of the $13,000
which had been paid by Mr Lau was refunded to him.
10.  By his Application, the applicant claimed that Roymancorp has contravened
ss.52 and 53A of the Trade Practices Act 1974 and that Mr Ip was knowingly
concerned in those contraventions.  He claimed damages against each
respondent.  The applicant further claimed that he had lawfully terminated the
agreement of 27 April 1984 and sought an order that Roymancorp give all such
directions, authorities and orders as might be necessary to effect repayment
to the applicant of his deposit of $3,000.  Roymancorp has filed a
Cross-claim, seeking damages for various alleged breaches of contract, the
most significant of which is the alleged repudiation occasioned by the notice
of 22 May 1984.
11.  The applicant has not pressed his claim under s.53A of the Trade
Practices Act.  Consequently it is not necessary for me to consider whether
the representations made by Mr Ip were made in connection with the sale of an
"interest in land", as that term is defined by s.53A(3).  The applicant's case
depends upon the application of s.52 of the Act, the first question being
whether Roymancorp has, in trade or commerce, engaged in conduct that is
misleading or deceptive or is likely to mislead or deceive.
12.  There is no doubt that what was done by Mr Ip was done on behalf of
Roymancorp and in the course of trade or commerce.  Further, the respondents
admit that, at the time of the oral agreement for the sale of the business, Mr
Ip produced the original lease, referred to the option to renew and stated
that Roymancorp "had a lease" of the premises for a further two years and nine
months.  Their counsel accepts that Mr Ip said nothing to Mr Lau about the
dispute with Mr Maurici concerning the exercise of the option to renew or
about the litigation in the Supreme Court and that he assured Mr Lau that it
was unnecessary for him to approach the lessor because he, Mr Ip, would do so,
and that the lessor would agree. Nonetheless he contends that Mr Ip did not
misrepresent the position regarding the lease.  Roymancorp had, he says, an
equitable interest in the premises pursuant to the valid exercise of its
option to renew.  The word "lease" he says, is not to be construed as being
limited to a grant of the legal interest in the land;  the parties, being
practical men, were concerned with the entitlement to enforce a right of
occupancy.
13.  The issue between Mr Maurici and Roymancorp regarding the exercise of the
option was never determined in the Supreme Court.  Whilst judgment remained
reserved on that question, the Supreme Court proceedings were settled between
the parties and consent orders were made.  There is no material before this
Court to enable resolution of the matter.  However, even assuming that
Roymancorp had properly exercised its option to renew -- or, looking at the
matter in terms of onus of proof, holding that Mr Lau has not proved that
Roymancorp did not properly exercise the option -- the statement made by Mr Ip
clearly constitutes misleading conduct.  There may be circumstances under
which a description by a non-lawyer as a "lease" of an entitlement to procure
the legal demise of land, combined with a present right of occupation, may not
be misleading.  Such a case may arise where a lessor concedes that an option
for renewal has been validly exercised by his lessee and stands willing to
grant a fresh lease to that lessee, conceding a right of occupation in the
meantime.  It would not be unnatural for a layman, in such circumstances, to
describe the prospective grantee as having "a lease".  As there would be no
question about the availability of a legal interest, in practical terms, the
difference would not matter. But such a statement, without explanation or
qualification, could not accurately be made in a case where, as here, the
lessor was in active dispute with his lessee as to whether the option had been
exercised and was currently prosecuting ejectment proceedings against the
lessee.  In practical terms the difference might be critical.  The demise may
never be made, or only after delay and expense.  In the present case, any
accurate statement as to the lease position must necessarily have included a
revelation of the position taken by Mr Maurici and of the litigation
concerning the exercise of the option.  To claim the possession of a lease
without disclosing these matters was to mislead.  Not only were these matters
not revealed;  Mr Ip actively suggested that there was no problem concerning
the lessor and, by dissuading Mr Lau from contacting Mr Maurici, ensured that
he would not himself learn otherwise.
14.  Counsel for the respondents submits that, even if the statement made by
Mr Ip constituted misleading conduct, it did not occasion any loss to Mr Lau.
Firstly, it is submitted that the payment of the $10,000 was made in
consideration of the agreement of Roymancorp to enter into the written
contract of 27 April 1984 and not by way of part payment of the purchase
moneys for the restaurant.  Roymancorp having entered into that contract, the
applicant, it is said, achieved the benefit of his expenditure;  he lost
nothing.
15.  There are, I think, two answers to this contention. The first is that Mr
Lau gave oral evidence that, if he had known "that Mr Ip and the owner have
some dispute in the court", he "would not have signed that contract".  There
is no reason to doubt that evidence.  He was not engaged in any speculative
venture.  He was, apparently, a skilled chef and he wished to procure a
restaurant in order to conduct it as such.  Security of tenure was important
to him.  Moreover, he was currently unemployed.  He was anxious to start up
his own business -- his first business venture -- as soon as possible. It is
not likely that he would have been interested in proceeding further with any
transaction which would be susceptible to the delays and uncertainties of
litigation. Consequently, even upon the respondents' analysis of the
transaction, it remains true that the decision of the applicant to enter into
the written agreement, and to pay $10,000 for the privilege of being allowed
so to do, was induced only by the misleading information given to Mr Lau about
the existence of a lease and about the attitude of the lessor.
16.  However, and secondly, it is unreal to treat the $10,000 as being paid as
consideration for some collateral contract to enter into an agreement for sale
of the business. The parties negotiated a sale figure of $40,000.  The
original draft of the written agreement, prepared on Mr Ip's instructions,
specified such a figure.  Mr Lau and Mr Ip then decided, as between
themselves, that $10,000 should be paid directly in cash and the price stated
in the written agreement should be decreased accordingly.  The initiative came
from Mr Ip, for reasons which do not appear, but there is nothing to suggest
an agreement that there be a collateral contract.  The $10,000 was paid by way
of part payment of the agreed $40,000. The two payments constituting the
$10,000 were made by Mr Lau after the date upon which Mr Ip had misrepresented
to him the position regarding the lease and, if it matters, before he is shown
to have been aware of the actual terms of the written agreement.
17.  The second contention of the respondents is that, even if the payment of
the $10,000 was induced by the statement of Mr Ip and was a part payment, the
loss was a result, not of that statement, but of Mr Lau's breach of contract
in issuing the purported notice of termination.  It is said that, had he been
patient and abided by the contract, he would have had the opportunity,
notwithstanding any misrepresentation by Mr Ip, to acquire the business for a
total sum of $40,000.  His $10,000 would not have been thrown away.  The
argument concedes that Mr Maurici may not have agreed to a new lease, in which
case the agreement for sale would have become void, but it is said that any
loss which might have resulted from that situation is not recoverable in these
proceedings, that Mr Lau did not allow Roymancorp the period of 45 days fixed
by the contract for the obtaining of the lessor's consent to an assignment of
the fresh lease.  In the events which occurred, counsel says, the $10,000 was
lost because of Mr Lau's own breach of contract in repudiating the written
agreement.
18.  Two responses are offered to this argument.  The first is that, even if
it be held that the agreement was terminated by reason of repudiation by Mr
Lau, the payment of $10,000 would be recoverable.
19.  I accept this submission.  The written agreement provided for the payment
of $3,000 as a deposit, to be held by the vendor's solicitors as stakeholders
pending completion. That deposit was, by cl.3(c) of the agreement, to vest in
the vendor on completion.  The agreement did not expressly deal with the fate
of the deposit in the event of default by one of the parties but it may be
implied from the designation of the payment as a deposit that the parties
intended the usual position;  that is that, in the event of default by the
purchaser, the deposit should be forfeit to the vendor and, if the vendor
defaulted, the deposit should be refunded to the purchaser.  There was no such
arrangement in regard to the sum of $10,000.  As I have said, this must be
regarded as a part payment of the purchase price.  It follows that the vendor
would not be entitled to retain both this money and the business.  He would be
entitled to recover damages from the purchaser for any loss caused by his
default but he would not be entitled to forfeit the $10,000.  Subject to his
right to offset any damage he would be bound to repay that sum:  see McDonald
v Dennys Lascelles Limited (1933) 48 CLR 457 especially at pp.470 and 475-478.
In that case at p.478 Dixon J summarised the position in these words:

        "It is now beyond question that instalments
         already paid may be recovered by a defaulting
         purchaser when the vendor elects to discharge
         the contract ... Although the parties might by
         express agreement give the vendor an absolute
         right at law to retain the instalments in the
         event of the contract going off, yet in equity
         such a contract is considered to involve a
         forfeiture from which the purchaser is
         entitled to be relieved."

The position must be a fortiori where there is no express agreement for
retention of the instalments.
20.  The second answer made by counsel for the applicant is that the notice of
22 May did not constitute a repudiation by Mr Lau but, rather, a valid
rescission of the agreement; so that he became entitled to a refund of all
moneys paid pursuant to the agreement.  If what I have said in respect of the
first submission on behalf of the applicant is correct, it is unnecessary to
consider this question to determine the recoverability of the payment of
$10,000.  However, the issue must be decided in determining the recoverability
of the deposit of $3,000 and in connection with so much of the Cross-claim as
relies upon the alleged repudiation.
21.  Counsel for the respondents accepts that, after Mr Lau's forced
withdrawal from the premises on 2 May 1984, Roymancorp was obliged, pursuant
to cl.9(a) of the lease, to return to the premises and to manage the business
as a going concern until completion of the agreement.  It did not do so. But,
says counsel, this breach did not entitle Mr Lau to rescind the agreement;
cl.9(a) is a mere warranty, breach of which would give rise to a liability to
pay damages but would not entitle the innocent party to rescind.
22.  In support of his submission that cl.9(a) is a mere warranty, counsel
draws attention to the title to cl.9: "Vendor's Warranties".  Such a label is
an important indication of the intention of the parties;  but it is not
conclusive.  Determination of the question whether a particular provision is a
condition, a warranty or what has recently come to be called an innominate or
intermediate term depends upon the presumed intention of the parties as
deduced from the agreement as a whole, considered in the light of all
surrounding circumstances.  As Bowen LJ put the matter -- speaking only of the
distinction between a condition and a warranty -- in Bentsen v Taylor, Sons &
Co (1893) 2 QB 274 at p.281, the question is "whether the intention of the
parties, as gathered from the instrument itself, will best be carried out by
treating the promise as a warranty sounding only in damages, or as a condition
precedent by the failure to perform which the other party is relieved of his
liability".  Whilst the description applied by the parties themselves to a
particular term is a guide to their intention, it may appear from other
provisions and the circumstances of the case that the description does not
accurately indicate what they intend. Thus in L Schuler A G v Wickman Machine
Tool Sales Ltd (1974) AC 235, the House of Lords held that, notwithstanding
the description in a contract of a particular term as a "condition", a breach
of that term by the respondent did not necessarily entitle the appellant to
rescind the contract.  In answer to a submission that the mere description of
the term was enough to indicate an intention that the innocent party might
rescind Lord Reid said, at p.251:

        "No doubt some words used by lawyers do have a
         rigid inflexible meaning.  But we must
         remember that we are seeking to discover
         intention as disclosed by the contract as a
         whole.  Use of the word 'condition' is an
         indication -- even a strong indication -- of
         such an intention but it is by no means
         conclusive.

         The fact that a particular construction leads
         to a very unreasonable result must be a
         relevant consideration.  The more unreasonable
         the result the more unlikely it is that the
         parties can have intended it, and if they do
         intend it the more necessary it is that they
         shall make that intention abundantly clear."

See also per Lord Morris of Borth-y-Gest at pp.255-256.

23.  The task of the Court, in considering the effect of a particular breach,
was described in this way by Lord Denning MR in Cehave N V v Bremer
Handelsgesellschaft (1976) QB 44 at p.60:

        "First, see whether the stipulation, on its
         true construction, is a condition strictly so
         called, that is, a stipulation such that, for
         any breach of it, the other party is entitled
         to treat himself as discharged.  Second, if it
         is not such a condition, then look to the
         extent of the actual breach which has taken
         place.  If it is such as to go to the root of
         the contract, the other party is entitled to
         treat himself as discharged:  but, otherwise,
         not.  To this may be added an anticipatory
         breach.  If the one party, before the day on
         which he is due to perform his part, shows by
         his words or conduct that he will not perform
         it in a vital respect when the day comes, the
         other party is entitled to treat himself as
         discharged."

24.  Looking at cl.9(a) of the subject agreement, it cannot be inferred that
the parties intended that, for any breach, the other party might treat himself
as discharged. Not only were the covenants contained in that sub-paragraph
described as warranties;  depending upon the circumstances, a breach of any of
those covenants might have merely trivial consequences.  In determining
whether a particular breach by the vendor of one of those covenants would
entitle the purchaser to rescind, regard must be had to the nature of that
breach and to its foreseeable consequences.  As Upjohn LJ -- speaking of a
stipulation "which is not a condition strictly so called" -- said in Hongkong
Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962) 2 QB 26 at p.64:

        "Breaches of stipulation fall, naturally, into
         two classes.  First there is the case where
         the owner by his conduct indicates that he
         considers himself no longer bound to perform
         his part of the contract;  in that case, of
         course, the charterer may accept the
         repudiation and treat the contract as at an
         end.  The second class of case is, of course,
         the more usual one and that is where, due to
         misfortune such as the perils of the sea,
         engine failures, incompetence of the crew and
         so on, the owner is unable to perform a
         particular stipulation precisely in accordance
         with the terms of the contract try he never so
         hard to remedy it.  In that case the question
         to be answered is, does the breach of the
         stipulation go so much to the root of the
         contract that it makes further commercial
         performance of the contract impossible, or in
         other words is the whole contract frustrated?
         If yea, the innocent party may treat the
         contract as at an end.  If nay, his claim
         sounds in damages only."

Hongkong Fir was a charterparty case but the principle stated by Upjohn LJ has
been applied to contracts generally:  see Cehave and Bunge Corporation v
Tradax Export S A (1981) 1 WLR 711.
25.  The range of possible breaches by Roymancorp of the covenants contained
in cl.9(a) extends from the minor to the serious, the range of consequences
from the trivial to the devastating.  Thus, to take the instant covenant, any
failure to carry on the business, for however short a period, would be a
breach of the covenant to manage the business "as a going concern";  yet that
failure might have no significant consequences and no effect upon the value of
what was being acquired by the purchaser.  On the other hand a failure, over a
lengthy period, to carry on the business would almost certainly have the
effect of seriously diminishing the goodwill attached to the business and thus
the value of what was being purchased.  The question is whether the particular
failure goes so much to the root of the contract that it makes further
commercial performance of the contract impossible.
26.  In the present case, the restaurant ceased trading on the evening of 28
April 1984, when the purchaser was let into possession.  It remained closed
over the following three or four days whilst Mr and Mrs Lau carried out
improvements.  A short trading break is not unusual upon the transfer of a
business and it seems unlikely that a break of this length, in the case of a
restaurant, would significantly affect the value of the goodwill of the
business.  But, obviously, the larger the break the greater the adverse
effect.  There is little evidence as to the nature of the business but it
appears to be a typical suburban Chinese restaurant.  It is part of a small
shopping centre in a residential suburb;  and no doubt well known to local
residents.  The closure of such a business for a period of weeks would seem
likely to have a significant effect.  It may be expected that regular
customers would, within that period of time, discover the restaurant to be
closed and would take their patronage elsewhere.  Some may return promptly
after the restaurant re-opened, some more slowly, but others -- finding
satisfaction elsewhere -- may never return.  It may be that, in the course of
time, Mr Lau could have built a new goodwill but that would be the result of
his own efforts and not that which he had purchased.
27.  I do not doubt that the closure of the business for a sufficiently
lengthy period would represent a breach of the agreement going to the root of
the contract and entitling the purchaser to rescind.  In the present case the
period which elapsed between the cessation of trading and the notice of
rescission was 24 days.  Can it be said that closure for such a period made
further commercial performance of the contract impossible, so that the
purchaser would no longer be able to obtain that which he had contracted to
buy?
28.  This question is a difficult one, partly because it is one of degree,
partly because of the paucity of the evidence.  However, I am of the opinion
that, under the circumstances, Mr Lau was entitled to treat the breach as one
which went to the root of the contract and, therefore, to rescind.  The
goodwill of the business was a major component of the purchase price.  The
agreement, as originally drafted, apportioned $31,199 of the $40,000 purchase
price to the liquor licence and goodwill.  This figure was changed to $21,199
in the final version but nonetheless the licence and goodwill remained a
dominant component of what was being purchased.  A break in trading of 24
days, especially without any public indication as to whether, and if so when,
the business would re-open must have resulted in many customers being
frustrated and taking their patronage elsewhere. Moreover, there was nothing
to suggest an early resolution of the problem.  The litigation between
Roymancorp and Mr Maurici remained undetermined.  So far as the evidence
shows, no indication was available to Mr Lau as to when, if at all, it might
be possible to complete the matter.  I think that, under these circumstances,
it is reasonable to conclude that Mr Lau would have been unlikely, upon
settlement, to acquire that to which he was entitled.  Such goodwill as might
remain would be significantly different to that which existed when the
contract was signed.
29.  My conclusion that the agreement was validly rescinded means that Mr Lau,
upon rescission, became entitled to the refund of his $3,000 deposit.  I
propose to order that the respondents take all steps necessary to effect that
refund.
30.  In addition to the moneys paid to Mr Ip and to the vendor's solicitors Mr
Lau claims to recover certain costs incurred by him in connection with the
agreement for his going into possession.  These expenses were all incurred as
a result of Mr Lau's acceptance of Mr Ip's statement relating to the lease.
There is no difficulty about their recoverability, as a matter of principle.
There is a problem about the adequacy of the evidence of the various expenses
but I am satisfied in respect of the following items:

         Legal costs                         $312.75

         Refrigerator -
         cost less refund on return         $1300.00

         Chopsticks                           $50.00

                                            $1662.75

The applicant further claims $500 as the value of the work done by himself and
his wife in cleaning and painting the restaurant.  There is no detailed
evidence as to this work but, having regard to the fact that the two of them
worked for 3-4 days before they were ejected and that they incurred some
expense in the purchase of materials, this seems to me to be a reasonable
estimate of the value of their lost effort. Accordingly I propose to add a
total sum of $2162.75 to the damages of $10,000 already referred to.
31.  Counsel for the respondents contends that, even if Roymancorp be liable
in damages, Mr Ip is not personally liable.  The question, of course, is
whether he is shown on the evidence to have been "involved" in the
contravention by Roymancorp of s.52 of the Trade Practices Act, as that
concept is defined in s.75B of the Act.  There is no dispute that Mr Ip was
the person who, on behalf of Roymancorp, made the false representation to Mr
Lau regarding the lease but, as the High Court of Australia held in Yorke v
Lucas (1985) 59 ALJR 776, it is a condition of involvement, within the meaning
of s.75B, that the person making a representation have knowledge of its
falsity.  The contention is that Mr Ip is not proved to have known the true
facts regarding the lease, the attitude of Mr Maurici and the litigation in
the Supreme Court.
32.  I reject this submission.  It is apparent from the evidence of Mr D J
Crane, the solicitor acting for Roymancorp in the transaction, that Mr Ip was
the person from whom his firm took instructions and that Mr Ip was personally
familiar with the progress of the ejectment proceedings.  I have no doubt that
he was aware of the true position in regard to the lease when he misled Mr
Lau.
33.  I turn to the Cross-claim, the principal component of which, as I have
said, is a claim for damages consequent upon Mr Lau's alleged repudiation of
the agreement.  The evidence of the damage sustained is most unsatisfactory
but, having regard to my conclusion about the validity of the rescission, this
does not matter.  The claim must fail.
34.  The second element in the Cross-claim relates to the agreement between Mr
Lau and Mr Ip, on behalf of Roymancorp, for Mr Lau to take possession of the
restaurant on 28 April. It is claimed that Mr Lau took possession of the stock
in trade, valued at $4,500, but did not pay for it.  Further, it is said that
he took possession of certain assets of the restaurant, glasses, utensils and
menus, but did not pay for them.  As to this, the evidence is that Mr Lau and
Mr Ip agreed to value all stock in trade, apparently including glasses,
utensils and menus, at $4,500.  As mentioned, it is common ground that two
cheques totalling that sum were handed over on 28 April but payment was
stopped when Mr Lau was required to leave the premises.  The promise to take
and pay for these items was part of the agreement for possession.  The
obligation came to an end when Mr Lau was dispossessed. Furthermore, with the
exception of the menus, which were so old that Mr Lau put them in the garbage,
all of that which was agreed to be taken in consideration of the sum of $4,500
remained in the building for Mr Ip when Mr Lau vacated.
35.  In the result there will be judgment in favour of the applicant against
both respondents for damages in the sum of $12,162.75.  I will order the
respondent to take the steps necessary to procure the repayment of the $3,000
and will dismiss the Cross-claim.  The respondents must pay the costs of the
applicant.