IN THE COUNTY COURT OF VICTORIA
AT Melbourne
COMMERCIAL DIVISION	Revised
Not Restricted
Suitable for Publication	
General List

Case No. CI-19-04005

Stanowitsch International Pty Ltd	Plaintiff	
		
v		
		
Steven Drake	Defendant	

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JUDGE:	Her Honour Judge Brimer	
WHERE HELD:	Melbourne	
DATE OF HEARING:	24, 25 and 30 March 2021	
DATE OF JUDGMENT:	20 April 2021	
CASE MAY BE CITED AS:	Stanowitsch International Pty Ltd v Drake	
MEDIUM NEUTRAL CITATION:	[2021] VCC 436		

REASONS FOR JUDGMENT
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Subject:	MISLEADING OR DECEPTIVE CONDUCT
Catchwords: 	Australian Consumer Law — Misleading or deceptive conduct — Trade or commerce — Investment scheme — Fake artworks or paintings provided as security — Encouraging investments made with a third party — Limitation periods
Legislation Cited:	Australian Consumer Law ss 18, 236; Limitation of Actions Act 1958 (Vic) s 5
Cases Cited:	Blackman v Gant [2010] VSC 229; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; Hawkins v Clayton (1988) 164 CLR 539; Henville v Walker (2001) 206 CLR 495; Houghton v Arms (2006) 225 CLR 553; Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	Mr A Anderson	Coterminous Legal	
			
For the Defendant	No appearance	—	

HER HONOUR:

Summary of claim and outcome
1	This is a claim for damages for misleading or deceptive conduct arising from representations alleged to have been made by Steven Drake (the defendant) to Alexander Stanowitsch, director of the plaintiff company, Stanowitsch International Pty Ltd.
2	The plaintiff claims that the representations made by Mr Drake induced Mr Stanowitsch to make payments between 2011 and 2012 to a now notorious art dealer, Peter Gant, who provided several artworks as “security” for the investment. The representations, including that the artworks were suitable security for the investments, were misleading or deceptive contrary to section 18 of the Australian Consumer Law (ACL).
3	For the reasons below, I am satisfied that Mr Drake made the representations alleged, that he did so in trade and commerce, that the representations were misleading or deceptive and that the plaintiff relied on the representations in advancing a total of $450,000 at the direction of Mr Gant. I will therefore give judgment for the plaintiff, together with interest and costs.
The trial
4	The trial was undefended. Mr Stanowitsch’s evidence as to Mr Drake’s conduct, including what was said by him at relevant times, was unchallenged.
5	Mr Anderson for the plaintiff put the substance of Mr Drake’s Defence to Mr Stanowitsch during evidence. To the extent that the Defence was inconsistent with Mr Stanowitsch’s evidence, it was rejected by him.
6	I accept Mr Stanowitsch’s evidence, including as to what was said by Mr Drake at relevant times.
Background
7	In 2008, Mr Stanowitsch and his partner met Mr Drake and his wife at a party. The couples became friends and attended dinners and events together. Mr Stanowitsch and Mr Drake shared a number of interests, including prestige cars. Mr Stanowitsch considered Mr Drake to be a knowledgeable art collector who displayed prominently, his artwork at home.
Conversation in August 2011
8	In August 2011, Mr Stanowitsch told Mr Drake that he had $300,000 in savings. Mr Drake said to Mr Stanowitsch that he should invest money with Questco Pty Ltd (Questco), through an art dealer named Peter Gant. Mr Drake said to Mr Stanowitsch:
“Oh, I’m investing with Questco and I’m making 20 per cent per year… you should invest with Questco, I’ll help you out… I’ve been doing this for five years and I’ve returned my million dollars, my money… it’s done through Peter Gant… we should catch up and meet Peter Gant and I can organise that and then we’ll go through it.”
Mr Stanowitsch agreed to a meeting with Mr Drake and Mr Gant.
Meeting in August 2011
9	In August 2011, Mr Stanowitsch met with Mr Drake and Mr Gant at a café / wine bar in Spring Street, Melbourne.
10	Mr Stanowitsch told Mr Gant that he didn’t know anything about art.
11	Mr Drake told Mr Stanowitsch that:
(a)	he was invested with Robert Le Tet and Questco and was receiving 20 per cent return per year; and
(b)	he would protect Mr Stanowitsch. Mr Stanowitsch would need security if he was going to invest $300,000. He would need paintings valued at more than his investment if anything went wrong.
12	At the conclusion of the meeting, Mr Stanowitsch said that he would speak to his partner about the investment.
13	A couple of days later, Mr Stanowitsch called Mr Drake to say that he would like to go ahead with the investment. He said “With the 20 per cent, receiving 20 per cent and receiving security, if you’re doing it, I’m happy to do it”.
First investment
14	On 29 August 2011, Mr Stanowitsch met with Mr Drake and Mr Gant at a café in Lygon Street, Carlton. Mr Gant arrived with three bound copies of a document titled ‘Investment Schedule 1’. The Schedule records:
“Funds invested with Pegasus Gallery Pty Ltd $300,000
Return $2,250 cash per fortnight
Principal redeemable on two months notice
Investment return guaranteed for twelve months
Funds secured by Art works as per attached schedule
Art works to be held by S Drake or A Stanowitsch
First payment due Tue. 13th September 2011”
15	The schedule also records that the investment was to be secured by three paintings described as:
(a)	Russell Drysdale Study for “outback couple” C1959 oil on canvas 75.5 x 101.5 cm $150,000;
(b)	Albert Tucker “Faun being attacked by parrots” C1968 oil on board 56 x 70 cm $80,000; and
(c)	Flemish School “Crucifixion” 15th C oil on copper 35 x 25 cm $120,000.
16	The investment schedule included a document titled ‘Valuation’ apparently signed by Richard Grace, Grace Fine Art, ‘valuing’ the artworks at $200,000, $75,000 and $100–150,000 respectively.
17	During the meeting, Mr Drake said to Mr Stanowitsch that:
(a)	Mr Stanowitsch would invest $300,000 and be paid $2,250 fortnightly in cash;
(b)	it was a better deal than Mr Drake’s deal with Questco because he (Mr Drake) was receiving monthly payments, 50 per cent by direct deposit and 50 per cent by cash; and
(c)	Mr Stanowitsch would receive paintings as security and he referred to the schedule. Mr Drake said “Don’t worry, I’ll go over that”.
18	The Schedule was signed by Mr Stanowitsch, Mr Drake and Mr Gant.
19	Mr Stanowitsch gave Mr Gant a cheque for $300,000 made out to Pegasus Gallery. Mr Stanowitsch was told to pay Pegasus Gallery because it was providing the security, but the money would be invested with Questco. Mr Drake said to Mr Stanowitsch that he “had a really good investment, excellent investment” and could invest more at any time he wanted to.
20	Mr Stanowitsch and Mr Drake collected the three paintings from Mr Gant’s car. Mr Drake examined the three paintings and said to Mr Stanowitsch that they were “really good paintings”.
21	On 30 August 2011, the cheque for $300,000 was drawn from the Stanowitsch International’s Macquarie account and deposited into the Pegasus Gallery’s Bendigo Bank account.
22	Following 30 August 2011, Mr Gant paid $2,250 in cash to Mr Stanowitsch at fortnightly lunches held at 48 Grattan Street, Carlton. Mr Drake attended some of the fortnightly lunches. Mr Drake asked Mr Stanowitsch if he was happy and Mr Stanowitsch said he was.
23	At one of the lunches in October, Mr Stanowitsch raised the idea of investing more funds. Mr Drake said he would organise the security for him again.
Second investment
24	On 8 November 2011, Mr Stanowitsch met Mr Gant at University Café in Carlton. Mr Gant arrived with three bound copies of a document titled ‘Investment Schedule No. 2’. The Schedule records:
“Funds invested with Pegasus Gallery Pty Ltd $100,000
Return $750.00 cash per fortnight
Principal redeemable on two months notice
Investment return guaranteed for twelve months
Art works to be held by S Drake or A Stanowitsch
First payment due Thu. 24th November 2011”
25	The Schedule also records that the investment was to be secured by three paintings described as:
(a)	Sidney Nolan “Ned Kelly” C1969 Mixed media on paper 64 x 45 cm Signed lower right $65,000;
(b)	John Brack “Ballroom Dancers” 1969 Ink on paper 42 x 70 cm Signed and dated lower right $65,000; and
(c)	Charles Blackman “Self Portrait” Charcoal on paper 62 x 53 cm Signed lower left $25,000.
26	The Schedule also contained a document which appears to be a Pegasus Gallery invoice for the “Ned Kelly” and “Ballroom Dancers”, and a ‘Valuation’ by Richard Grace ‘valuing’ the artworks at $65,000, $75,000 and $25,000 respectively.
27	Mr Stanowitsch and Mr Gant went through the Schedule while waiting for Mr Drake to arrive. Mr Stanowitsch called Mr Drake who said that the was running late, but he had organised the paintings for Mr Stanowitsch.
28	Whilst waiting for Mr Drake to arrive, Mr Stanowitsch gave Mr Gant three cheques. One cheque was made out to Questco for $20,000 and two cheques were made out to Pegasus Gallery for $30,000 and $50,000. Mr Gant took the cheques to the nearby ANZ Bank.
29	When Mr Gant returned, he was with Mr Drake. Mr Drake looked at the Schedule and told Mr Stanowitsch that all of his security was organised and “it’s got to be more valuable than your financial investment. In case payments stop, you can sell the paintings”. The Schedule was signed by Mr Stanowitsch, Mr Drake and Mr Gant.
30	Mr Stanowitsch and Mr Drake collected two paintings, “Ned Kelly” (Sidney Nolan) and “Self Portrait” (Charles Blackman), from Mr Gant’s car. Mr Drake examined the paintings and told Mr Stanowitsch that he liked the Nolan a lot and that he might hang it at his home after Mr Stanowitsch had shown it to his partner.
31	The third painting, “Ballroom Dancers” (John Brack), was already displayed at Mr Drake’s home with its matching pair. On 10 November 2011, Mr Drake and Mr Stanowitsch signed a letter confirming that Mr Drake was holding this painting as security on Mr Stanowitsch’s behalf.
32	On 8 November 2011, the three cheques were drawn from the plaintiff’s Macquarie account:
(a)	$30,000 deposited into the Pegasus Gallery’s Bendigo Bank account;
(b)	$50,000 deposited into Pegasus Gallery’s Bendigo Bank account; and
(c)	$20,000 deposited into Questco’s National Australia Bank account.
33	Following 8 November 2011, Mr Gant paid $3,000 in cash to Mr Stanowitsch at fortnightly lunches held at 48 Grattan Street, Carlton. Mr Drake attended some of the fortnightly lunches.
34	At one of the lunches after 8 November 2011, Mr Stanowitsch, Mr Drake and Mr Gant discussed Mr Stanowitsch making a further investment of $50,000. Mr Drake said Mr Stanowitsch could invest that as well to maximise his income and that “he would organise the security”.
Third investment
35	On the morning of 1 December 2011, Mr Stanowitsch attended Mr Drake’s home. Mr Drake showed Mr Stanowitsch two paintings:
(a)	Ballroom Dancers” (John Brack) (security for the second investment); and
(b)	“Tulips” (Howard Arkley) (security for the third investment).
36	Mr Stanowitsch gave “Ned Kelly” (Sidney Nolan) (security for the second investment) to Mr Drake so it could be displayed in his home.
37	On the same day, Mr Stanowitsch met Mr Drake and Mr Gant at University Café in Carlton. Mr Stanowitsch was provided with a copy of a document titled ‘Investment Schedule # 3’. The Schedule records:
“Funds invested with Pegasus Gallery Pty Ltd $50,000
Return $375.00 cash per fortnight.
Principle (sic) redeemable on two months notice.
Investment return guaranteed for twelve months.
Art works to be held by S. Drake or A. Stanowitsch
First payment due Thurs. 22nd Dec 2011.”
38	The Schedule also records that the investment was to be secured by two paintings described as:
(a)	Sidney Nolan “Ned Kelly wading through river” C1970 Mixed media on paper 64 x 45 cm Signed lower right $40,000; and
(b)	Howard Arkley “Tulips” 1987 Acrylic on canvas 175 x 135 cm Signed and dated lower right $100,000.
39	The Schedule also contained a document which appears to be a Pegasus Gallery invoice for the artworks, and a ‘Valuation’ by Grace Fine Art ‘valuing’ the paintings at $40,000 and $110,000 respectively.
40	The Schedule was signed by Mr Stanowitsch, Mr Drake and Mr Gant.
41	Mr Stanowitsch and Mr Drake collected “Ned Kelly wading through river” (Sidney Nolan) from Mr Gant’s car.
42	Mr Stanowitsch had already inspected “Tulips” (Howard Arkley), which would remain displayed at Mr Drake’s home.
43	On 5 December 2011, a cheque for $50,000 was drawn from the plaintiff’s Macquarie account and deposited into the Pegasus Gallery’s Bendigo Bank account.
44	Following 1 December 2011, Mr Gant paid $3,375 in cash to Mr Stanowitsch at fortnightly lunches held at University Café in Carlton. Mr Drake attended some of the fortnightly lunches.
May 2012 Investment
45	In May 2012, Mr Stanowitsch invested a further $100,000 with Mr Gant (the subject of ‘Investment Schedule Number 5’, which Mr Stanowitsch said should have been ‘Number 4’). The plaintiff does not claim that Mr Drake induced Mr Stanowitsch to make the fourth investment and the $100,000 is not the subject of this claim.
Payments ceased
46	On 27 August 2012, Mr Stanowitsch, Mr Drake and Mr Gant met at University Café in Carlton and all signed a letter recording Mr Stanowitch’s investments.
47	Mr Gant continued to provide fortnightly cash payments to Mr Stanowitsch up until 19 December 2013, when Mr Gant said to Mr Stanowitsch ‘I’ve got no payment’ and the payments ceased. Mr Stanowitsch called Mr Drake who said that he had not received his fortnightly payments either.
48	On 14 March 2014, Mr Stanowitsch, Mr Drake and Mr Gant met at University Café in Carlton and all signed a further letter recording Mr Stanowitch’s investments.
49	In March 2014, Mr Stanowitsch called Questco and made an appointment to see Mr Le Tet on 25 March 2014.
50	On 25 March 2014, Mr Stanowitsch attended Questco’s offices in South Melbourne. Mr Le Tet denied knowledge of any investments by Stanowitsch International in Questco and said to Mr Stanowitsch, “I think you’ve been had”.
51	On 4 April 2014, Mr Le Tet sent a letter to Mr Stanowitsch in which he said:
“You have apparently been deceived into believing that you had any relationship with Questco. It is obvious that you have been misinformed, and we cannot assist you any further.”
52	On 1 May 2014, Mr Stanowitsch sent a letter of demand to Pegasus Gallery.
53	In May 2014, Mr Stanowitsch attended Mr Drake’s home to collect the paintings Mr Drake was holding as security on his behalf:
(a)	“Ballroom Dancers” (John Brack) (security for the second investment);
(b)	“Ned Kelly” (Sidney Nolan) (security for the second investment); and
(c)	“Tulips” (Howard Arkley) (security for the third investment).
54	Mr Drake gave Mr Stanowitsch the matching pair to “Ballroom Dancers” (John Brack).
Attempts to sell the artworks
55	In May 2014, Mr Stanowitsch invited Mr Clark from Bonhams to look at the artworks with a view to selling them. About a week later, Mr Clark came back to Mr Stanowitsch and told him they were no good, they were fake and worthless.
56	Mr Stanowitsch took the following artworks to Leonard Joel Specialist Auctioneers & Valuers (Leonard Joel) in Malvern:
(a)	“Tulips” (Howard Arkley); and
(b)	“Self Portrait” (Charles Blackman).
Leonard Joel returned the artworks and told Mr Stanowitsch that:
(a)	“Tulips” (Howard Arkley) was fake; and
(b)	“Self Portrait” (Charles Blackman) was considered ‘problematic’ by their valuer specialist.
Leonard Joel refused to put the artworks up for auction.
57	Mr Stanowitsch took the following artworks to Menzies Fine Art Auctioneers and Valuers (Menzies) in South Yarra:
(a)	“Ned Kelly” (Sidney Nolan);
(b)	“Ned Kelly wading through river” (Sidney Nolan);
(c)	“Ballroom Dancers” (John Brack) and its matching pair.
Menzies told Mr Stanowitsch that the paintings were fake.
58	Mr Stanowitsch also took artworks to Sotheby’s Australia (Sotheby’s) in Melbourne CBD. On 11 October 2014, Mr Stanowitsch received an email from Mr Smith at Sotheby’s, attaching an email from Geoffrey Smith of Bonhams & Godman to ‘John’ of Joel Fine Art dated 4 May 2007. The attached email states that the purported “Faun being attacked by parrots” (Albert Tucker) had been inspected by Barbara Tucker in 2007 and was considered to be inconsistent with Albert Tucker’s work. 
59	On 20 October 2014, Mr Stanowitsch received an email from Mr Abdallah at Menzies expressing his opinion that the purported matching pair of “Ballroom Dancers” (John Brack) were likely fake: 
“… It is understood that everything Brack did is listed in his records and therefore is in Grishin’s book.  If its not in the book, its not by John Brack. The two works you showed me were not in the book… A few years ago I encountered some drawings by John Brack which similarly, turned out to be fakes.”
60	The only artwork sold by Mr Stanowitsch was “Crucifixion” (Flemish School) for $2,755.45 at auction in London.
What representations were made?
61	Mr Anderson contended, and I find, that by Mr Drake’s conduct, he made the following representations:
(a)	that he (Mr Drake) had invested $1 million in Questco and was receiving an excellent return (the Questco representation);
(b)	that Mr Stanowitsch should invest on the terms set out in the investment schedules;
(c)	that the paintings were by the artists set out in the investment schedules; and
(d)	that the paintings were good security and worth more than the investment amounts.
(the representations)
62	In particular in relation to the representation in (d) above, I am satisfied that  the investment schedules contained written representations as to the value of each art work being greater than the amount invested, and implicitly represented that each art work was genuine and done by each artist. In Blackman v Gant [2010] VSC 229, Justice Vickery found that Mr Gant had engaged in misleading and deceptive conduct by valuing art works which turned out to be fake.  In respect of valuations, “…a valuation of an art work may, and often does, serve two purposes – the provision of evidence as to the assessed market value of the work and a certification as to its authenticity.  This is so because authentication is part of the process of valuing an art work…” at [113]-[118].
Were the representations made in trade or commerce?
63	I consider that the representations were made in trade or commerce.
64	In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, Mason CJ, Deane, Dawson and Gaudron JJ construed ‘in trade or commerce’ at 604 (emphasis added):
“What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those who interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public. In some areas, the dividing line between what is and what is not conduct “in trade or commerce” may be less clear and may require the identification of what imports a trading or commercial character to an activity which is not without more that character.”
65	Furthermore, Toohey J noted at 613:
“No doubt, in most cases the focus will be on the nature of the defendant's business but the section is not so limited. It does not, in terms, refer to the trade or commerce of the particular corporation.”
66	In Houghton v Arms (2006) 225 CLR 553, Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ agreed with the above statements from Concrete Constructions and held at [33]–[34]:
“… statements made by a person not himself or herself engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity.”
67	In Blackman v Gant, Vickery J held that representations as to the value of various paintings were made in trade or commerce because the valuations were “supplied directly in connection with the sale of that work to Mr Blanche’s company, and in fact induced him to proceed with the purchase”.
68	In this case, the representations were made not to induce the plaintiff through Mr Stanowitsch to purchase the paintings, but rather to invest or to continue making investments through Mr Gant, secured by artworks from Pegasus Gallery. Mr Drake’s relationship with Mr Gant had a commercial aspect through the buying and selling of paintings and the making of a loan from Mr Drake to Mr Gant in the past.
69	I consider Mr Drake’s conduct in making the representations to be an aspect or element of transactions that bore a commercial character. They were designed to and did encourage Mr Stanowitsch to invest money through Mr Gant and to take art works as security for that investment.  As such, I find that the representations were made in trade or commerce.
Were the representations misleading or deceptive or likely to mislead or deceive?
70	In my judgment, Mr Drake’s conduct in making the representations was misleading or deceptive or likely to mislead or deceive.
71	Conduct is misleading or deceptive if there is a “real and not remote chance or possibility” that an ordinary and reasonable person in the position of the recipient of the information may be “led into error”. It is an objective test.
72	In applying the test when the conduct occurs between individuals, it is important that the conduct be viewed as a whole in the circumstances which might qualify its character. The approach was set out in the joint judgment of the majority in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37]:
“The plaintiff must establish a causal link between the impugned conduct and the loss that is claimed. That depends on analysing the conduct of the defendant in relation to the plaintiff alone. So here, it is necessary to consider the character of the particular conduct of [the defendant]’s in relation to [the plaintiff]’s, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known.”
73	I am satisfied that, viewing the conduct as a whole in the circumstances, an ordinary and reasonable person in Mr Stanowitsch’s position may have been “led into error”.
74	The representations were made in the following circumstances:
(a)	Mr Stanowitsch had a close, trusting relationship with Mr Drake. He felt very comfortable with Mr Drake and trusted him completely. Mr Drake had helped him out on other issues, including with his car, telling the Court “I saved $4,000 by listening to him so I trusted him”;
(b)	Mr Drake appeared knowledgeable about art, which was confirmed in Mr Stanowitsch’s mind during visits to Mr Drake’s home in which he displayed ‘expensive’ artworks on his walls. At the meetings with Mr Drake and Mr Gant, they talked a lot about art, about buying and selling art. Mr Stanowitsch knew nothing about art;
(c)	Mr Drake appeared to be successful, “sitting in Toorak with all his 10 cars and Rolls-Royces”;
(d)	Mr Stanowitsch was paid fortnightly by Mr Gant in cash as Mr Gant said he would, confirming that this was a good investment, as Mr Drake said it was;
(e)	When Mr Drake said to him “I’m going to protect you… You need paintings as security so if anything goes wrong you’ve got security but it has to be valued more than what your financial investment is”, it confirmed to Mr Stanowitsch that  Mr Drake was looking out for him by looking after the security for his investment; and
(f)	When Mr Drake signed the three schedules and ‘checked’ the artworks being handed to Mr Stanowitsch by Mr Gant, it confirmed to Mr Stanowitsch that Mr Drake was overseeing his investment as he said he would.
75	I find that the representations were false:
(a)	Mr Drake had not invested $1 million in Questco, contrary to the Questco representation; and
(b)	the paintings were not of the value represented to Mr Stanowitsch in the investment schedules.
76	Mr Warren Joel, art valuer, inspected the artworks the subject of the schedule and prepared a report for the purpose of this trial. He gave evidence that in his opinion, the purported:
(a)	“Outback couple” is not a painting by Russell Drysdale;
(b)	“Faun being attacked by parrots” is not a painting by Albert Tucker;
(c)	“Ned Kelly” is not a painting by Sidney Nolan; and
(d)	“Ballroom Dancers” and its matching pair are not paintings by John Brack.
77	In respect of the purported “Self Portrait”, Mr Joel noted that it is similar to a Charles Blackman offered for sale in 2017 and has the best potential to be ‘correct’. Given the presence of a gallery sticker on the back of the work, it may be possible to find a reference to the work in the gallery archives for the purpose of confirming whether it is a Charles Blackman. The gallery owner passed away about five years ago and Mr Joel did not go down the road of trying to find who, where or what happened to the gallery owner’s archives. The fact that an auction house put an initial valuation on the work and then refused to put it up for auction means that they did not like what they saw and commercially, they did not have time to trace the provenance.
78	In relation to the purported “Tulips”, in his opinion, this artwork is not by Howard Arkley as described.
79	Mr Joel considered that the purported valuations by Richard Grace are likely not true valuations. True valuations for insurance purposes do not give a range of values. The so-called valuations contained in the investment schedules are not correct.
80	I accept the evidence of Mr Stanowitsch, based on his attempts to sell the artworks, that the only artwork he has been able to sell is “Crucifixion” (Flemish School) and at a value well below that which was represented in ‘Investment Schedule 1’. Mr Joel agreed that it is not unusual for an auction house that refuses to put paintings up for sale if they “don’t like it”, to decline to go into writing and provide a report to that effect.
Did the plaintiff rely on the representations?
81	I find that Mr Stanowitsch relied on the representations.
82	In relation to the Questco representation, Mr Stanowitsch told Mr Drake that:
“… “if you’re doing it, I’m happy to do it”. That’s why I was doing it, cause I was, I felt very comfortable with Spiro, I might add, and I trusted him completely.”
83	If Mr Drake had not told Mr Stanowitsch that he had invested in Questco, then, Mr Stanowitsch said, he would not have invested anything:
“Ah, he did say that. If he didn’t say that I wouldn’t be here. I wouldn’t have invested nothing. I wouldn’t have invested at all.”
84	In relation to the soundness of the value and authenticity of the art works, Mr Drake told Mr Stanowitsch that they were good security and they were worth more than his investment.  This was critical to his decision to invest:
“‘Now we need security for that and the way it's done’, and he referred to the schedule. I received the paintings as security, the three paintings as security. And he said, ‘Don't worry, I'll go over that, I'll’ — I relied on — I relied on Drake to oversee my investment, because that's what he said he would do, by way of ensuring that the security, the paintings I received as security, were of correct value — were the correct paintings.”
What loss and damage did the plaintiff suffer?
85	The plaintiff claims loss of the total investment amount of $450,000, less interest received on money invested (the repayments), recovery on sold artworks and current value of artworks.
86	Section 236 of the ACL entitles the court to award damages suffered ‘by the conduct of the person in contravention of’ section 18 of the ACL.
87	Section 236 requires the court to select a measure of damages that conforms to the remedial purpose of the statute and the justice and equity of the case:
“Indeed, general principles for assessing damages may have to give way all together in particular cases to solutions best adapted to give the injured claimant an amount which most fairly compensate for the wrong suffered.”
88	In respect of the value of the purported “Self Portrait” (Charles Blackman), Mr Anderson contended that no value should be attributed to that painting for the purpose of deduction from the assessment of damages, as the court can readily conclude that verifying its authenticity would be impossible or the cost greater than the value of the artwork. According to Warren Joel, the other artworks are fake and Mr Anderson submitted no value ought be ascribed to them.
89	I consider that Mr Joel’s evidence of the process involved in verifying the Blackman’s authenticity together with Mr Stanowitsch’s evidence of his failed efforts to sell the artworks supports Mr Anderson’s submission that no deduction be made as contended by him.
90	In respect of the recovery of sold artworks, the plaintiff accepts that the $2,755.45 recovered from the sale of “Crucifixion” (Flemish School) ought be accounted for.
91	In respect of the deduction of the repayments, an issue arises because:
(a)	the plaintiff invested $450,000 in reliance on the representations;
(b)	the plaintiff invested a further $100,000 in June 2012, without consulting the defendant and which is not the subject of this claim; and
(c)	the plaintiff was repaid the sum of $180,250 of which $156,750 was paid after the June 2012 investment and only $23,500 prior to the June 2012 investment.
92	The plaintiff’s primary submission is that it should be awarded the sum of $366,994.55 plus interest and costs as follows:
(a)	$450,000 investment;
(b)	less $23,500 paid prior to June 2012;
(c)	less $56,750 paid after June 2012, net of payment out of the further investment of $100,000; 
(d)	less $2,755.45 on sale of “Crucifixion” (Flemish School);
Total = $366,994.55.
93	Alternatively, should the court consider that a ‘pro rata’ approach should be applied, then of the 38 payments of $4,125 made after 12 June 2020, $3,125 relates to the investment payments the subject of this claim and ought be deducted.
94	The total deduction on this approach is $142,250 which leads to a damages award as follows:
(a)	$450,000 investment;
(b)	less $142,250;
(c)	less $2,755.45 recovery on “Crucifixion” (Flemish School);
Total = $304,994.55.
95	Mr Anderson contended that the first approach is the solution which “is best adapted to give the injured claimant an amount which will most fairly compensate for the wrong suffered”.   The fundamental purposes of the ACL, which include promoting fair trading and protecting consumers from contraventions, underlie the task of assessing damages under s236. The court should treat the July 2012 investment of $100,000 as re-paid and irrelevant to the issues in this proceeding, such that the loss is calculated in accordance with the first approach.
96	I disagree. I consider it appropriate to ‘allocate’ the proportion of the repayments attributable to each of the investment payments, rather than applying the full amount of each repayment after July 2012 towards the July 2012 investment and treating it as fully re-paid before deducting any of the repayments from the investment payments. There must be an established causal connection between the loss claimed and the contravening conduct. The July 2012 investment was made “without consulting the defendant” and is not part of the claim for misleading or deceptive conduct.
97	I consider that this approach most fairly compensates for the wrong suffered.
98	I have, however, been unable to reconcile the calculations in the paragraphs above with the payment schedule (Exhibit 8).  I deal with this below in paragraph 105.
Is the plaintiff’s claim statute barred? 
99	In his Defence, Mr Drake pleaded that the plaintiff’s cause of action is barred by section 236(2) of the Australian Consumer Law or, in the alternative, section 5 of the Limitation of Actions Act 1958 (Vic). Both provisions stipulate that a plaintiff must institute proceedings within 6 years from the time their cause of action accrued.
100	The plaintiff submitted that the cause of action arose only when it suffered actual loss or damage and proposed two dates when it could be said that it suffered actual loss or damage:
(a)	December 2013, when Mr Stanowitsch stopped receiving payments from Mr Gant; or
(b)	May 2014, when Mr Stanowitsch became aware that the art works which he had been provided as security were not as valuable as Mr Drake had represented.
101	To support its proposition, the plaintiff relied on a passage from the High Court decision of Wardley Australia Ltd v Western Australia, itself an extract of Gaudron J’s decision in Hawkins v Clayton (1988) 164 CLR 539. In Hawkins v Clayton, Gaudron J held that:
“If the interest infringed is an interest in recouping moneys advanced it may be appropriate to fix the time of accrual of the cause of action when recoupment becomes impossible rather than at the time when the antecedent right to recoup should have come into existence, for the actual loss is sustained only when recoupment becomes impossible.”
102	I consider that the cause of action crystallised at the latest in May 2014, when it became reasonably ascertainable that the paintings the plaintiff held as security for its investments were not as valuable as had been represented to him by Mr Drake, or at the earliest in December 2013, when Mr Stanowitsch stopped receiving payments from Mr Gant. The plaintiff instituted proceedings in August 2018, less than 6 years from both the earliest and the latest points that the cause of action could have accrued. Therefore, the plaintiff is not barred from bringing the action.
Conclusion
103	Accordingly I order that there is judgment for the plaintiff together with interest on that sum.
104	Subject to any matters that the parties bring to my attention on the question of costs, I propose to order that the defendant pay the plaintiff’s costs of the proceeding (including reserved costs) on the standard basis, in default of agreement.  
105	I invite the plaintiff to prepare draft orders to give effect to these reasons, including a schedule reconciling the calculations set out above with the payment schedule (Exhibit 8).
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Certificate
I certify that these 22 pages are a true copy of the judgment of Her Honour Judge Brimer delivered on 20 April 2021.
Dated: 20 April 2021

Taylah Stretton
Associate to Her Honour Judge Brimer