SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 2040 of 2001

Appellants
CCP AUSTRALIAN AIRSHIPS LTD
(ACN 085 645 478) & ORS

v.

PRIMUS TELECOMMUNICATIONS PTY LTD Respondent

(ACN 071 191 396)

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JUDGES: BATT, VINCENT and NETTLE, JJ.A.

WHERE HELD: MELBOURNE
DATE OF HEARING: 7 December 2004
DATE OF JUDGMENT: 9 December 2004
MEDIUM NEUTRAL CITATION: [2004] VSCA 232
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CONTRACT – Construction – “Non-refundable deposit” – Agreement to make airship

available for use at Sydney Olympic Games - Whether “non-refundable deposit”
recoverable upon a total failure of consideration – Breach - Damages – Wasted expenditure
– Reliance damages – Whether innocent party may recover “non-refundable deposit” as
reliance damages for wasted expenditure.
TRADE AND COMMERCE – Trade practices – Misleading and deceptive conduct – Pre-
contractual negotiations – Whether reasonable grounds to believe that airship could be
supplied for use at the Sydney Olympic Games – Whether reasonable grounds for believing
that airship could not be supplied within specified period - Accessorial liability – Damages
- Trade Practices Act 1974, ss. 4(2)(c), 51A, 52, 58, 75B, 82.
WORDS AND PHRASES – “Non-refundable deposit”.
---

APPEARANCES: Counsel Solicitors

For the Appellants Mr P.N. Vickery, Q.C. with Cahills

Mr J.A. Arthur

For the Respondent Mr R.M. Garratt, Q.C. with Browne & Co.
Mr A.A. Nolan

VICTORIAN GOVERNMENT REPORTING SERVICE 9603 2404

2nd Floor, 565 Lonsdale Street, Melbourne
1-1
BATT, J.A.:

I invite Nettle, J.A. to give the first judgment in this appeal.

NETTLE, J.A.:

This is an appeal from the judgment and orders of a judge of the Commercial and Equity

Division (Commercial List) given on 9 May 2003. The respondent ("Primus") was the

plaintiff and the appellants ("CCP", "Palmer", "Cahill" and "Walsh") were the

appellants. Primus' claim was for relief in respect of an Exclusive Licence for Airship

for Advertising and Promotional Purposes agreement into which it entered with

CCP on or about 7 March 2000. Primus alleged that CCP later repudiated the

agreement by failing to supply the airship in accordance with the agreement, or at

all, and that Primus accepted the repudiation by no later than 22 December 2000,

thereby bringing the agreement to an end. It claimed the return of a deposit of

$400,000 paid pursuant to the agreement or damages in the same amount. Primus

further alleged as an alternative basis of recovery that CCP had engaged in

misleading and deceptive conduct in connection with the agreement and that

Palmer, Cahill and Walsh had aided, abetted, counselled or procured that conduct,

and on that basis that Primus was entitled to damages as against each of the

respondents pursuant to s.82 of the Trade Practices Act 1974. The judge upheld all of

those claims and gave judgment for Primus against each of the appellants in the sum

of $400,000 together with damages in the nature of interest and costs.

Grounds of appeal

As originally constituted the grounds of appeal were numerous and to a considerable

extent repetitious. I do not state them all. Suffice it to say instead that, stripped of

repetition they appeared to amount to this:

(a) That the judge erred in the construction of the agreement in holding

that the events which had occurred the deposit of $400,000 was

CCP v. Primus 2 NETTLE, J.A.

 recoverable notwithstanding that clause 4.1 of the agreement provided

CCP v. Primus 3 NETTLE, J.A.

 that it was a "non-refundable" deposit;

(b) That the judge erred in the construction of the agreement in holding

that it imposed on CCP an obligation to supply the airship of which

time was of the essence or which at least allowed of only very short

delay;

(c) That the judge erred in holding that there had been a total failure of

consideration;

(d) That the judge erred in holding or finding that CCP made an

unqualified representation as to the delivery of the airship as opposed

to a representation to use best endeavours to procure its delivery;

(e) That the judge erred in holding or finding that Primus suffered any

loss or damage by reason of acting in reliance upon any

misrepresentation; and

(f) That the judge erred in holding or finding that Palmer, Cahill and

Walsh aided abetted counselled or procured any misleading or

deceptive conduct in which CCP may have engaged in connection with

the licence agreement.

Later the appellants abandoned the contention that the judge erred in holding that there

had been a total failure of consideration and it was also conceded that non-provision

of the airship by 22 December 2000 constituted a repudiation of the agreement, and

that Primus accepted the repudiation by letter of 22 December 2000. Consequently,

it became unnecessary to consider whether the judge was correct in holding that

time was of the essence of the agreement, even in the special sense in which his

Honour used that expression.1 In effect the basis of the appeal on the contractual

aspect of the matter was confined to a proposition that because the $400,000 deposit

was truly "non-refundable", Primus was precluded from recovering the amount of

deposit in restitution and Primus did not suffer any compensable loss or damage by

reason of the repudiation. Contrastingly, all of the misleading and deceptive

1
cf. Stickney v. Keeble [1915] AC 386 at 415; [1914] All ER Rep 73; Foran v. Wight (1989) 168
C.L.R. 385 at 420-421; Laurinda Pty. Ltd. v. Capalaba Park Shopping Centre Pty. Ltd. (1989) 166
C.L.R. 623 at 643.

CCP v. Primus 4 NETTLE, J.A.

 conduct aspects of the matter were dealt with in argument.

The contractual claim

It is convenient to begin with the contractual aspect of the matter. The nub of it is clause 4.1

of the agreement, which provided that:

"A non-refundable deposit of $400,000 shall be paid upon the signing

of this agreement. These monies ("deposit") shall be offset against the
monthly payments during the months of May, June, July and August
2001."

The appellants contend that "non-refundable" means what it says and that means

non-refundable in all circumstances.

The judge rejected that contention. His Honour held that the words "non-refundable

deposit" meant only that the deposit was non-refundable if Primus changed its mind

and decided not to proceed with the proposal to use the airship for advertising

purposes. In his Honour's opinion the deposit was recoverable in the event that CCP

repudiated the agreement. As his Honour put it:

"153. In my opinion, the meaning of the words 'non-refundable

deposit' in clause 4.1 is clear, although perhaps slightly
tautological. The $400,000 was non-refundable in the sense that
Primus could not recover this sum if it changed its mind and
decided not to proceed with the proposal to use the airship for
advertising purposes. It was a sufficiently large sum to indicate
to CCP, and to give CCP confidence, that Primus was committed
to the airship project. If Primus defaulted, then CCP could keep
the $400,000 whether or not it suffered any loss. Secondly, the
$400,000 was a deposit in the sense that, not only was it an
earnest of performance, it was also to be treated as part of the
contract price under the Licence Agreement by being 'offset
against the monthly payments during the months of May, June,
July and August 2001' (see the second sentence of clause 4.1). It
is another thing entirely, in my opinion, to construe a non-
refundable deposit as something which could never be
recovered by Primus even as part of the quantification of its
damages, but could be retained by CCP even if CCP were in
flagrant breach of the Licence Agreement. I therefore reject
CCP's submission that the $400,000 was not recoverable by
Primus even though CCP was in breach of the Licence
Agreement."

The appellants submit that his Honour's analysis is flawed. They contend that it runs

CCP v. Primus 5 NETTLE, J.A.

 counter to Bowen, L.J.'s imperative2 that "persons may make exactly what bargain

they please as to what is to be done with the money deposited" (and counter to

similar observations in Chillingworth v. Esche3 and Gribbon v. Lutton4). They also say

that it ignores the precept, noted by Lord Donaldson, M.R. In The World Symphony5,

that the expression which parties give to their bargain must be read against a

background of general law and accepted principles. In the appellants' submission it

is trite that a deposit strictly so-called is usually irrecoverable at law except upon a

total failure of consideration.6 Thus they say that if the words "non-refundable" in

clause 4.1 were confined to cases in which a deposit is ordinarily irrecoverable at law

they would add nothing at all. In the appellants' submission it cannot be supposed

that the words "non-refundable" were intended as mere surplusage. The appellants

further contend that the construction of "non-refundable" as meaning irrecoverable

in all circumstance accords with what is said to be the clear rationale for the payment

of the deposit in the particular circumstances of the case. Their argument is that the

project involved CCP in committing itself to the costs of manufacture of a

customised "one off" flying machine of considerable engineering complexity, with

attendant risks of non-performance for CCP. Thus it is to be expected, they say, that

Primus would have agreed that the deposit would not be recoverable in any event.

I am not persuaded by those arguments. The judge considered most of the authorities to

which the appellants referred and his Honour demonstrated that they do not imply

the construction of clause 4.1 for which the appellants contend. As his Honour

explained:

"154. The cases to which I was referred by counsel for the defendants
did not, in my opinion, assist this submission. Howe v. Smith,
Chillingworth v. Esche and the unreported decision of the Court
of Appeal in Gribbon v. Lutton were all concerned with the
2
Howe v. Smith (1889) 27 Ch D 89 at 97.
3
[1924] 1 Ch. 97 at p.108.
4
[2002] 2 Q.B. 902 at 914 [32] and 921 [62] and 926 [82].
5
[1992] 2 Lloyd's Rep. 115 at 117.
6
Blackburn v. Smith (1849) 2 Ex 783 [154 ER 707]; Sinclair v. Brougham [1914] A.C. 398 at 454-455;
Foran v. Wight (1989) 168 C.L.R. 385 at 455, per Dawson, J.; Baltic Shipping Co. v. Dillon (1993)
176 C.L.R. 344 at 378-9.

CCP v. Primus 6 NETTLE, J.A.

 question of whether a defaulting party can recover the deposit it
has paid to the innocent party and not with the proposition that
a 'non-refundable deposit' cannot ever be recovered by an
innocent party. Counsel relied on the observation by Bowen LJ
in Howe v. Smith that 'persons may make exactly what bargain
they please as to what is to be done with the money deposited'
and that one has to 'look to the documents to see what bargain
was made'. I have attempted to follow that approach in
concluding that clause 4.1 did not mean that Primus could not
recover its deposit if CCP repudiated the Licence Agreement.
The bargain CCP and Primus made was that Primus would lose
its deposit if it decided not to go ahead with the proposed use of
the airship for advertising purposes or otherwise breached the
Licence Agreement."7

I agree, with respect, with his Honour's analysis. It makes evident sense that the deposit

should have been irrecoverable in the event that Primus refused to proceed or

otherwise defaulted in the performance of its obligations. As the appellants point

out, CCP had to commit itself contractually and financially to a third party for the

manufacture of the airship, and in those circumstances it is only to be expected that

CCP would require the security of a deposit strictly so-called to guard against the

possibility of Primus defaulting. But contrastingly it would make little sense if the

deposit were not recoverable in the event of a total failure of consideration caused by

CCP. Upon the appellants' analysis, CCP would have been entitled to keep the

deposit even if CCP had thrown up the agreement the instant after signing it or, to

be less dramatic, if after a week of reflection CCP had decided that it could make

more money by repudiating the agreement, keeping the deposit and entering into an

agreement with other parties to make the airship available to them. But logically it

cannot be supposed that the parties intended CCP to keep the deposit in those

circumstances, or indeed in any other circumstances resulting in a total failure of

consideration due to CCP's breach of contract. Authority makes plain that elliptical

expressions in mercantile contracts are to be read in no narrow spirit of construction

but as the Court would suppose two honest business men would understand the

words they have actually used with reference to their subject matter and the

surrounding circumstances.8 One is thus to approach the crucial issue of

7
[2003] VSC 120 at [153]-[154], citations omitted.
8
Cohen & Co. v. Ockerby & Co. (1917) 24 C.L.R. 288 at 300; Schenker & Co. (Aust.) Pty. Ltd. v.

CCP v. Primus 7 NETTLE, J.A.

 construction by making the inquiry as to what reasonable business people in the

position of the parties would have intended the clause to mean. 9 In my opinion it

would fly in the face of honest dealing and common sense to construe clause 4.1 in

the manner suggested by the appellants.

There is too a further reason to reject the appellants' argument. It arises out of the juridical

distinction between an action in quasi-contract or restitution for the recovery of a

deposit as such and an action in damages assessed in the same amount. That

distinction is clear. In the past it was conceived of as a distinction between an

implied or imputed promise to repay money and compensation for a promise that

was breached. Now it is thought of in terms of restitution. As Deane, J. explained in

Foran v. Wight10 the return of a deposit in the event of rescission is not founded on

the rescinded contract. Nor does it represent a claim for damages for the vendor's

breach of its terms. It is rather a claim founded in the equitable notions of fair

dealing and good conscience which require restitution of a benefit received as, or as

part of, the quid pro quo for a consideration which has failed. 11 An action in

damages, even if quantified in the same amount, is something of a different kind.12

As has already been noticed, the appellants now concede that CCP repudiated the

agreement and thus that Primus was entitled to recover damages for breach of the

agreement. Accordingly, and whether or not clause 4.1 precluded recovery of the

deposit in restitution upon a total failure of consideration, I should agree with the

judge that the respondents would be entitled to recover the amount of the deposit as

damages consequent upon the repudiation of the agreement.

I accept that the award of damages for breach of contract is ordinarily calculated in order to

protect a plaintiff's expectation of receiving the defendant's performance. That

Maplas Equipment [1990] V.R. 834 at 840-845.

9
Di Dio Nominees Pty. Ltd. v. Brian Mark Real Estate Pty. Ltd. [1992] 2 V.R. 732 at 741-742.
10
(1989) 168 C.L.R. 385 at 438
11
See too per Brennan, J. at 432 and per Dawson, J. at 455.
12
cf Californian Oil Products Ltd. (in Liq) v. Federal Commissioner of Taxation (1934) 52 C.L.R. 28 at
46.

CCP v. Primus 8 NETTLE, J.A.

 expectation arises out of or is created by the contract. Hence, damages for breach of

contract are often described as "expectation damages" or as damages for loss of

profits. But as the High Court explained in Commonwealth v. Amann Aviation Pty Ltd
13
:

"26. The expression 'damages for loss of profits' should not be

understood as carrying with it the implication that no damages
are recoverable either in the case of a contract in which no net
profit would have been generated or in the case of a contract in
which the amount of profit cannot be demonstrated. It would
be an invitation to the repudiation of contractual obligations if
the law were to deny to an innocent plaintiff the right to
recoupment by an award of damages of expenditure justifiably
incurred for the purpose of discharging contractual obligations
simply on the ground that the contract breached would not have
been or could not be shown to have been profitable. If the
performance of a contract would have resulted in a plaintiff,
while not making a profit, nevertheless recovering costs
incurred in the course of performing contractual obligations,
then that plaintiff is entitled to recover damages in an amount
equal to those costs in accordance with Robinson v. Harman, as
those costs would have been recovered had the contract been
fully performed. Similarly, where it is not possible for a plaintiff to
demonstrate whether or to what extent the performance of a contract
would have resulted in a profit for the plaintiff, it will be open to a
plaintiff to seek to recoup expenses incurred, damages in such a case
being described as reliance damages or damages for wasted
expenditure. [Emphasis added]."

Faced with that hurdle, the appellants contended that the effect of clause 4.1 of the

agreement was not only to render the deposit irrecoverable in restitution but also to

exempt CCP or hold it safe from liability for contractual damages in respect of the

amount of the deposit. As they would have it the clause operated as a sort of a

contractual exception clause designed to ensure that Primus could not recover

through the back door of damages what it was said to be prohibited from recovering

through the front door of restitution. Reference was made to the rule that generally

there is no basis in restitution, as opposed to contract, for the charterer of a ship to

recover overpaid hire from the ship owner in restitution. 14 In turn that was said to

13
(1991) 174 C.L.R. 64 at 80-86; see also at 98-108 per Brennan, J.; at 116-128 per Deane, J.; per
Toohey, J. at 134-5; per Gaudron, J. at 148-156; and at 161-173 per McHugh, J.
14
Bank of Boston Connecticut v. European Grain & Shipping Ltd [1989] A.C. 1056 at 1100; Pan Ocean
Shipping Co. Ltd. v. Creditcorp Ltd. ("The Trident Beauty") [1994] 1 W.L.R. 161 at 164.

CCP v. Primus 9 NETTLE, J.A.

 show that where parties to a contract have legislated for an event in respect of which

a claim in restitution might otherwise go, it will not go, and presumably by

implication, although it was not said, that where parties legislate so as to exclude a

claim in restitution, the exclusion should be taken so as to include any comparable

remedy.

But whatever appeal there might be in the ingenuity of that argument, I do not think it

convincing. In the first place, the authorities cited in support of it stand for no such

proposition as was contended. In the second place, and even allowing that

exemption clauses are now to be construed according to their natural and ordinary

meaning when read in light of the contract as a whole 15 and thus allowing for the

possibility of so construing a clause which makes clear that there shall be no

recovery in any event, clause 4.1 does not make that clear. The ambiguity is still to

be resolved contra proferentem 16

and in my opinion the consequences of that exercise

are ineluctable. Whatever the effect of clause 4.1, it does not restrict the recovery of

damages for breach of contract and, coincidentally, the fact that it does not do so is

logically a further reason to conclude that the deposit is recoverable in restitution.

Misleading and deceptive conduct

I turn to the misleading and deceptive conduct aspects of the matter. The judge found that

CCP made two representations, which his Honour called the third and fourth

representations, and that it engaged in conduct constituted of remaining silent, and

that the representations and the conduct were misleading or deceptive and relied

upon by Primus when entering into the agreement. The third representation, which

the judge found to have been made at a meeting on 16 February 2000, was that the

airship would be available to be used by Primus for promotional purposes during

the Sydney Olympic Games. The fourth representation, which his Honour found to

have been made in a letter dated 1 March 2000, was to the effect that if Primus paid

15
Darlington Futures Ltd. v. Delco Australia Pty. Ltd. (1986) 161 C.L.R. 500 at 510.
16
Nissho Iwai Australia Ltd v. Malaysian International Shipping Corp, Berhad (1989) 167 C.L.R. 219
at 230-231; and see Johnson v. American Home Assurance Co. (1998) 192 C.L.R. 266 at 272-276;
McCann v. Switzerland Insurance Australia Limited (2000) 203 C.L.R. 579 at 600 [74].

CCP v. Primus 10 NETTLE, J.A.

 the deposit by 8 March 2000, CCP was able to guarantee the delivery of the airship

for the Sydney Olympics. I say that the fourth representation was to that effect

because the words actually used in the letter were that unless the deposit were paid

by 3 March 2000 "our client will not be able to guarantee the production of the

airship for the Sydney Olympics". The judge considered that that negative

stipulation implied a positive representation that if the events occurred by the

specified date CCP was able to guarantee delivery for the Olympics. The misleading

conduct constituted of remaining silent was said to be that in the period between 16

February and 7 March 2000, CCP refrained from telling Primus that CCP did not

have available funds to pay the deposit for, or otherwise to pay the purchase price

of, the airship and CCP had no commitments in place or resources for any such

funding. Thus Primus was induced to enter into the agreement and to pay to CCP

the $400,000 deposit.

The third representation

The appellants contend that the judge erred in his findings concerning the third

representation, by failing to take into account or give adequate weight to the terms of

clauses 3.0 and 3.1 of the agreement. Those clauses provide that:

"3.0 This agreement commences on the date when it is executed. The

licence granted under this agreement shall commence on 1
September 2000 and subject to this agreement shall continue for
12 calendar months. In addition the Advertiser shall be entitled
to a two week test period prior to commencement of the licence
in which to rest all functions and operations of the Airship.
3.1 Without limiting clause 7, if for any reason the Airship does not
commence operation by 1 September 2000 CCP shall credit the
Advertiser the amount of the licence fees due for the period
during which the Airship is not in operation (the 'Delay Period')
and extend the licence period by a period being the Delay
Period."

The appellants submit that the fact that clauses 3.0 and 3.1 did not set a date for the

time of delivery and that they envisaged that service might not begin by 1 September

2000 are indicative that Primus was not acting under any illusions as to when the

airship might be made available and indeed that the clauses were diametrically

CCP v. Primus 11 NETTLE, J.A.

 opposed to the existence of any such expectation.

That submission is not persuasive. Nor is it accurate. The judge did direct attention to

clauses 3.0 and 3.1 of the agreement and his Honour gave detailed and, in my

opinion, compelling reasons for concluding that Primus did have expectations about

the time of delivery and that they were the product of Primus' reliance upon the

representations. As the judge put it:

"130. ...There is no doubt in my mind that the commercial purpose of

the Licence Agreement was to have the airship available to be
flown over Sydney during the Olympics. Right from the earliest
of the communications between Palmer and Olma [of US-LTA,
the airship manufacturers] this was expressed to be the aim of
CCP because of the opportunity it provided to attract an
advertiser. Such a use was highlighted in Palmer's initial
approach to Primus in June 1999 and was repeated by Stefanou
in his discussions in January 2000. Further, Primus' interest in
the proposal was squarely based on the prospect of flying the
airship over Sydney during the Olympics. That is clear from the
evidence of Barbagallo and Nicholls referred to above. Thus, the
genesis of the transaction, the background, the context and the
market in which the parties were operating all point to the fact
that having the airship available to be flown over Sydney during
the Olympics was the clear commercial purpose of the Licence
Agreement.
131. Indeed, this proposition was not really disputed by the
defendants. As has been seen, much of their case was devoted
to establishing that the Primus representatives were told two
things. First, that they were told that the timeframe was tight,
which can only mean the timeframe for delivery by the Olympic
Games was tight, and I refer in that context to Cahill's letter to
Primus of 1 March 2000. Second, that they were told that whilst
CCP would use its best endeavours to have the airship delivered
in time for the Olympic Games, there was no guarantee that this
would be achieved.
132. The central role of the availability of the airship for use during
the Olympics is also to be found in references, in the Licence
Agreement itself, to the airship flying at the Olympics. Clause
3.3, one of the 'conditions of this agreement', was expressed as
follows:
'During the months September and October 2000 prior to and
after the Olympic and Para Olympic games it is proposed to fly
in Sydney.'
This partly explains why clause 3.2 of the Licence Agreement
contemplated greater flying time in the months of August, September
and October 2000. See also the reference in clause 8.3 to the possibility

CCP v. Primus 12 NETTLE, J.A.

 of carrying SOCOG security staff 'during the Sydney 2000 Olympic
Games'.
133. I have, therefore, concluded that clause 3.1 should not be read as
indicating that the parties placed no importance on the specified
start date of 1 September 2000 and that it meant that the airship
could be delivered months later. Rather, my reading of clauses
3.0 and 3.1 is that they were making time of the essence in the
sense that it was critical to have the airship available to be flown
in Sydney during the Olympics. If, however, there was a slight
delay in delivery so that the airship had not completed its two
week testing period before 1 September 2000 and therefore that
its actual operations did not commence until, say, 8 September
2000, then this delay period of one week could be added on at
the end of the 12 month licence period. Thus, clause 3.1 is only
concerned with short delays in the period leading up to the
Olympic Games. Any longer delay in making the airship
available, beyond the time of the Olympic Games, was dealt
with by clause 7 and could lead to termination of the Licence
Agreement by Primus.
…

Causation
200. CCP pleaded that even if the representations were made or the
conduct was engaged in, it denied that Primus relied on the
representations or conduct, or that it was reasonable for Primus
to do so, in entering into the Licence Agreement and paying the
$400,000 deposit. CCP further pleaded that Primus entered into
the Licence Agreement and paid the deposit in reliance on its
own advisers, after making its own inquiries and for its own
commercial purpose. Alternatively, Primus entered into the
Licence Agreement and paid the deposit without taking
reasonable care to look after its own interests.
201. It seems to me to be obvious that Primus relied upon the
representations by CCP that the airship would be available for
the Olympic Games and that it assumed from CCP's silence on
the issue that CCP had the necessary funds or the ability
immediately to raise the funds to pay for the construction of the
airship. Without the representations and the conduct, Primus
would have walked away from the negotiations. In the light of
my findings on the facts, I consider that it was reasonable for
Primus to rely on the representations and the conduct."

The appellants further contend that the judge erred in holding that CCP had not discharged

the onus of adducing evidence that it had reasonable grounds for making the third

representation.17 They argue that his Honour failed to take into account a substantial

17
See s.51A of the Trade Practices Act 1974 and Murdaca v. Maisano [2004] VSCA 123 at [1] per
Callaway, J.A.

CCP v. Primus 13 NETTLE, J.A.

 body of evidence that as at 16 February 2000 when the alleged representation was

made, and up until at least 7 March 2000 when the agreement was entered into, there

were reasonable grounds for the belief that the airship could have been completed,

delivered and operational during at least some portion of the Olympics. They rely in

particular on the evidence of expert financial witnesses Jones and Messenger, which

they submit was hardly touched upon in cross-examination, and upon the

importance which it is said that the financial advisers attributed to the agreement

with Primus as a basis for obtaining funding from investors.

Those contentions are equally unpersuasive, and again not a little inaccurate. The judge

gave the so-called substantial body of evidence detailed consideration and his

Honour gave detailed reasons as to why it did not satisfy him that CCP had

established reasonable grounds. Space and time preclude reference to all of it, but

the following extracts from the judge's reasons may serve to convey the force of his

Honour's conclusions:

"187. What I find the Primus representatives were not told at the
meeting on 16 February 200 was that the tight timeframe for
constructing the airship and delivering it to Australia in time for
the Olympic Games was almost certain not to be met because of
CCP's lack of the required funds in hand or its inability to raise
such funds within an appropriately short period of time. Olma
[of US-LTA], the airship manufacturers] had advised Palmer on
8 February that US-LTA would not 'commit to the critical major
components' until CCP had made its financial commitment 'in
whole or in part' (paragraph 30 above). This meant that CCP
had to come up with about US$3 million or a significant part of
that amount in a short space of time if there was going to be any
chance of having the airship available for the Olympics. Despite
over a year's efforts, CCP had only managed to obtain one
investment of $20,000 from a friend of Palmer. Yet nothing was
said to Nicholls or Barbagallo [of Primus] to indicate that there
were these considerable difficulties facing CCP and no
qualification was put on the promise that the airship would be
available for the Olympics. I have no doubt that if Nicholls and
Barbagallo had been fully informed of these financial problems
they would not have agreed to pay the $400,000 deposit.
188. Because the third representation related to a future event, the
flying of the airship over Sydney during the Olympic Games, it
is also taken to be misleading if CCP did not have reasonable
grounds for making the representation (s.51A(1) of the TPA).

CCP v. Primus 14 NETTLE, J.A.

 The onus is on CCP to adduce evidence that it did have
reasonable grounds (s.51A(2)). In my opinion, CCP has not
discharged that onus.
189. The directors of CCP said that they relied on their brokers'
assurances that the money could be raised, particularly if an
advertising contract was secured with a company such as
Primus. In the circumstances, I do not consider that the
directors had reasonable grounds for believing that they could
successfully raise the required funds or that they could do so as
quickly as they were needed if the Olympics target was going to
be met. I cannot accept the directors' evidence that because
Jones and Messenger [the financial advisers] were positive and
enthusiastic about the project and its funding, they considered
that raising the money would not be a problem. The history of
the attempts to date should have warned them of the difficulties.
Apart from anything else, the directors should have understood
that Primus had only indicated interest in a year's contract and
had rejected any longer terms. This was a real flaw in the
viability of the project. Thus, while Messenger said that he
regarded the fact that CCP had obtained an advertising contract
with Primus as a 'quantum leap' in the CCP's ability to raise
finance for the project, he also said that an investor would want
to see that the advertising contract was for 'at least a couple of
years'. Further, he was unaware of Primus' prior rejection of a
longer term commitment. Jones' positive view was clearly based
on raising the funds by a public listing and as the directors
should have known, if they were listening to his advice, this step
was at least three and more likely six months down the track.
Even three months would have made the Olympics an
impossible achievement.
190. The faint hope that an investor would write a cheque for the
required funds on the spot was also simply not credible. Apart
from the time that an investor would want to investigate the
project and its finances, there was also the critical and
unresolved question of what equity the directors were prepared
to offer in return for the investment. Various figures had been
given in the business plans and there was clearly no fixed
position. It would all be a matter for negotiation between the
directors and the investor, which would also take time. Yet
none of these problems were explained to Primus. The very real
risk that the promise that the airship would be available for the
Olympics would not be fulfilled because of CCP's lack of funds
was not disclosed. I therefore find that the third representation
was made by CCP and that it was misleading and deceptive
because CCP did not have reasonable grounds for making
representation. As Heerey, J. said in Bowler v. Hilda Pty Ltd:18
'It is the objective nature of the alleged contravener's conduct
that is ultimately determinative of liability and not his or her

18
(1998) 80 FCR 191 at 206.

CCP v. Primus 15 NETTLE, J.A.

 state of mind ... '”

I add that in my opinion each of his Honour's conclusions was more than adequately based

in the evidence. It is not disputed that the contract between CCP and US-LTA

required that CCP pay a deposit of US$1.6 million before work would start and then

four monthly payments and a final payment of US$275,000 (which at the time

approximated to monthly payments AUD$500,000). Yet as the judge so clearly

found, despite efforts for 18 months to stimulate investor interest, CCP had failed

altogether to attract any substantial investors; CCP did not have the funds itself; and

the $400,000 deposit to be paid by Primus was not enough even to get the project

started. In order to have any chance of completing the machine in readiness for the

Games, work had to begin at latest in February 2000 and continue thereafter

uninterrupted (which is to say fully funded) until completion. Yet even if CCP were

to be floated, and the judge rightly thought that to be a forlorn hope as matters

stood, it would have taken at least three months before any funding began to flow in

from the proceeds. The payments to be made by Primus under its one year

agreement would not go near to paying for the purchase and operation of the airship

and to top it off, substantial investor support was unlikely to be forthcoming unless

CCP could obtain an advertising contract at the Primus' rates with a term of at least

two years duration of which, upon the evidence, there was no hope.

The fourth representation

The appellants contend that the judge was in error in finding that the letter of 1 March 2000

contained a representation to the effect of the fourth representation. Relevantly, the

letter stated only that:

"Unless the contract is unconditional, and the deposit of $400,000 is

received at Cahills Trust Account on or before 2 p.m. on Friday
3 March, our client will not be able to guarantee the production of the
airship for the Sydney Olympics".

This part of the appellants' argument began with the proposition that the judge had

attributed a meaning to the letter which was not pleaded. But that proposition was

untenable, and it was later withdrawn. The fourth representation was pleaded in

CCP v. Primus 16 NETTLE, J.A.

 paragraph 11(a)(iv) of the respondents' Amended Statement of Claim 19as:

"(iv) that if Primus paid a deposit of $400,000 by 8 March 2000 CCP

was able to guarantee the delivery of the Airship for the Sydney
Olympics.

PARTICULARS
The representation is partly written and partly oral.
Insofar as the representation is written it is contained in letters from
Cahill Solicitors on behalf of CCP to Primus dated 1 March and 6
March 2000. Copies of the letters may be inspected at Primus'
solicitor's offices.
Insofar as the representation is oral it consists of discussions between
Cahill on behalf of CCP and Nicholls on behalf of Primus in March
2000, the substance of the discussions was that the existing agreement
dated 25 February 2000 would be amended and that if the deposit was
paid immediately the Airship would be available for the Sydney
Olympics."

It was alleged in paragraph 13(c) of the Amended Statement of Claim that the fourth

representation was misleading and deceptive, because:

“(c) CCP was unable and not likely to be able to deliver the Airship
for use by Primus in Australia at the Sydney Olympics or at all".

The judge referred to the fourth representation, as pleaded, in para.167 of the reasons

for judgment, and found, at para.191 of the reasons for judgment, that although the

fourth representation as pleaded was not contained in the letter of 6 March 2000 it

was implicit in the contents of the letter of 1 March 2000. As his Honour put it:

"191. The fourth representation is said by the [respondent] to be

found in Cahill's letters of 1 and 6 March 2000. There is nothing
to this effect in the second letter and I therefore put it to one
side. The [appellants] submitted that no such representation
could be spelt out from the contents of the first letter. What
Cahill actually said was that unless certain events occurred by a
specific date 'our client will not be able to guarantee the
production of the airship for the Sydney Olympics'. Despite the
[appellants'] argument, I consider that his negative statement
contained a positive assertion as pleaded by Primus, namely,
that if the events occurred by the specified date CCP was able to
guarantee the delivery of the airship for the Sydney Olympics.
Cahill was clearly acting on behalf of CCP when he made that
representation."

19
AB 006.

CCP v. Primus 17 NETTLE, J.A.

The appellants then submitted that the negative stipulation that CCP would "not be able to

guarantee the production of the airship for the Sydney Olympics", could not reasonably be

construed as amounting to a positive representation that "The production of the

airship for the Sydney Olympics" would be guaranteed, particularly when one had

regard to the draft and final forms of the agreement (which contained no such

guarantee), and with which it was submitted the letter must be read. The appellants

referred again to clauses 3.0 and 3.1 of the agreement and submitted that they were

indicative of an intention that there be no fixed time for delivery. They also relied

upon the fact that the letter of 1 March 2000 stipulated that the deposit had to be

paid on "Friday the 3rd of March", but that Friday 3 March came and went and the

deposit was not paid until after entry into the agreement on 7 March 2000. It

followed in the appellants' submission that even if there were a positive

representation as to performance implicit in the letter of 1 March 2000, the

representation lapsed or ceased to be misleading by the time of Primus' entry into

the agreement. The appellants further contended that the fact that Primus did not

insist on a performance warranty was evidence that Primus was under no illusions

as to the time of delivery and that it was consistent with the conclusion that Primus

was not misled. Additionally, the appellants submitted that because Primus knew

from 3 March 2000 that the conditions of the letter were not fulfilled, the conduct

constituted of CCP remaining silent about its financial position and inability to

deliver the airship on time cannot have been misleading.

I am not persuaded by any of those arguments. Perhaps they would find a place in support

of a construction summons. But the effect of misleading and deceptive conduct is

not ordinarily to be measured by hermeneutic analysis. Generally speaking one is

more concerned with common sense questions of fact and degree than precise

semasiology. And as often as not the problem is with whether words have had or

are likely to have had the purpose or effect of misleading or deceiving, despite rather

than because of any supposed literal meaning. The tool of textual analysis has a role

to play - logically it is the starting point of inquiry and practically it informs the

range of meanings liable to be considered - but the outcome of the analysis depends

CCP v. Primus 18 NETTLE, J.A.

 as much upon the subject matter, circumstances and the personalities of the dramatis

personae as upon a dictionary. Common experience, and consequent cynical

appreciation of the human capacity to shape meaning as much by what is not said as

by what is uttered allows for no other conclusion.

Additionally, and just as importantly, it is not necessarily to be assumed that the target of

misleading and deceptive representation will react dispassionately and logically to

its lure. Evidently it is the object of the representation to cause him or her to act in

other ways. So therefore while it may be assumed that a man or woman reflecting

dispassionately and rationally upon a commercial proposition will insist upon a

warranty of performance, the cases are too numerous to mention in which the

insidious effects of misleading and deceptive conduct have resulted in other

outcomes. The enthusiasm and false sense of security that misleading and deceptive

conduct is calculated to engender casts caution to the wind.

It is plain that the judge was alive to possibilities of that kind. His Honour's assessment

reflects it. As his Honour put it:

"191. The fourth representation is said by the plaintiff to be found in

Cahill's letters of 1 and 6 March 2000. There is nothing to this
effect in the second letter and I therefore put it to one side. The
defendants submitted that no such representation could be spelt
out form the contents of the first letter. What Cahill actually
said was that unless certain events occurred by a specified date
'our client will not be able to guarantee the production of the
airship for the Sydney Olympics'. Despite the defendants'
argument, I consider that this negative statement contained a
positive assertion as pleaded by Primus, namely, that if the
events occurred by the specified date CCP was able to guarantee
the delivery of the airship for the Sydney Olympics. Cahill was
clearly acting on behalf of CCP when he made that
representation.
192. The events in question were that the contract had to be
'unconditional', and the $400,000 deposit had to be paid, 'on or
before 2.00 p.m. on Friday the 3rd of March' (not 8 March 2000
as pleaded in the Amended Statement of Claim). The contract
could only become unconditional before the deadline of 2.00
p.m. on 3 March by the parties executing a new agreement
without any cooling off clause or agreeing that it no longer
applied. Neither of these events occurred before the deadline.
Nor was the deposit paid before 2.00 p.m. on 3 March 2000.

CCP v. Primus 19 NETTLE, J.A.

 However, it seems to me that it is irrelevant that the events in
question did not occur by the deadline. The issue is whether it
was misleading and deceptive conduct for Cahill to say that if
certain events occurred CCP was able to guarantee the delivery
of the airship for the Sydney Olympics. As discussed above,
because of the problems facing CCP in raising the funds to pay
for the construction of the airship, I find that CCP did not have
reasonable grounds to represent that it could have ever given
that guarantee. Nor did it ever intend to. The fourth
representation was, therefore, misleading and deceptive.
193. In my opinion, Primus did rely on the fourth representation,
even though the events did not occur before the stated deadline.
Shortly thereafter Primus did execute the Licence Agreement
and pay the deposit, no doubt encouraged by this further
representation that the airship would be available for the
Sydney Olympics."

Views may differ as to whether one can and as to whether Primus did spell out of the letter
of 1 March 2000 the positive representation that if the deposit were paid at or about 3

March 2000 the airship would be available by the Games; less so perhaps over

whether the non fulfilment of the conditions expressed in the letter of 1 March 2000

could be taken as a retraction of the representation of 16 February 2000. But as I say,

the determination of those questions was as much dependent upon an assessment of

the subject matter, the circumstances and the personalities of the dramatis personae as

upon what may be supposed to be the proper construction of the letter. Plainly that

was a job for the judge based upon his assessment of all of the evidence, including

the extensive oral evidence which was given by those involved, and it is impossible

in the context of an appeal to replicate that process. Accordingly, this Court should

be slow to interfere with his Honour's assessment unless persuaded that it was not

open on the evidence or was otherwise infected with error or simply wrong. For to

adopt Lord Hoffmann's words on the subject in Biogen Inc v. Medeva plc 20

"The need for appellate caution in reversing the judge's evaluation of

the facts is based upon much more solid grounds than professional
courtesy. It is because specific findings of fact, even by the most
meticulous judge, are inherently an incomplete statement of the
impression which was made upon him by the primary evidence. His
expressed feelings are always surrounded by a penumbra of
imprecision as to emphasis, relative weight, minor qualification and
nuance (as Renan said, la verite est dans une nuance), of which time and

20
[1997] RPC 1; (1996) 36 IPR 438 at 45

CCP v. Primus 20 NETTLE, J.A.

 language do not permit an exact expression, but which play an
important part in the judge's overall evaluation."21

The appellants have not essayed the task of demonstrating that his Honour's conclusion

was not open on the evidence or was infected with error or unsupported by the

evidence or otherwise plainly wrong. And it would not avail them. In my opinion

the evidence is overwhelmingly in support of his Honour's conclusion.

The appellants contended that it was an objective question as to whether the letter and non-

fulfilment of its conditions resulted in the representation of 16 February 2000 ceasing

to be misleading. Thus they submitted that this Court was as well placed as the

judge below to decide that issue.22 But even if this Court were as well placed as the

judge to construe the letter, and were prepared to ignore that the meaning of the

letter may well have been affected by the circumstances of the reader 23, it is surely

not right that the letter of 1 March 2000 could purge the representation of 16

February 2000 of misleading content. The effects of history may be ameliorated, but

history cannot be changed. If misleading and deceptive conduct is engaged in upon

day one, it remains that it was engaged in on day one despite that the truth of the

position might be revealed on day two. Of course the revelation of the truth on day

two could mean that any action taken after that day would not be taken in reliance

upon the misleading and deceptive conduct committed on day one. For example, in

a case of a misleading representation made on day one, but thoroughly corrected on

day two, it would be very difficult - although in some limited circumstances not

impossible - for the representee to establish that the action which he or she took on

day three was taken in reliance on the misrepresentation made on day one. But that

would be a question of reliance or causation; not of whether the representation on

21
See also Abalos v. Australian Postal Commission (1990) 171 C.L.R. 167; Pledge v. Roads & Traffic
Authority (2004) 78 ALJR 572; (2004) 40 MVR 289; (2004) Aust. Torts Reports 81-734; [2004]
HCA 13 at [95]-[100]; Fox v. Percy (2003) 77 ALJR 989; Rennie v. The Commonwealth (1995) 61
FCR 351 at 354; Esso Australia Resources Ltd v. Commissioner of Taxation (Cth) (1998) 84 FCR 541
at 553-554; 98 ATC 4768 at 4779; cf S & I Publishing Pty. Ltd. v. Australian Surf Life Saver Pty.
Ltd. (1998) 88 FCR 354 at 360.
22
Warren v. Coombes (1979) 142 C.L.R. 531; Whisprun Pty. Ltd. v. Dixon (2003) 77 ALJR 1598;
(2003) Aust. Torts Reports 81-710; [2003] HCA 48 at [51] and [95]-[100].
23
Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 149 C.L.R. 191 at 199, per
Gibbs, C.J.

CCP v. Primus 21 NETTLE, J.A.

 day one had been misleading.

Perhaps recognising that that is so, the appellants sought leave to amend their notice of

appeal in order to contend in the alternative that if the representation of 16 February

2000 were misleading and remained so notwithstanding the letter of 1 March 2000,

the effect of the letter of 1 March 2000, coupled with the non-fulfilment of the

conditions of the letter, must have brought home to Primus that the representation of

16 February 2000 could no longer be relied upon, and hence that Primus was not

acting in reliance upon the representation of 16 February 2000 when it entered into

the agreement and paid the deposit on and after 7 March 2000. Leave was refused

for reasons given ex tempore (which centred upon the high probability that if the

question had been raised below there would have been additional evidence-in-chief

and cross-examination about it).24 But lest it be thought that the appellants were

thereby deprived of a legitimate chance of success, I note that Mr Nicholls of the

plaintiff gave unchallenged evidence below that:

"On 1 March 2000 Mr Cahill sent me a facsimile [the letter]. Mr Cahill

asserted in that facsimile that unless the contract was unconditional
and the deposit paid by 3 March, his client would not be able to
guarantee production of the airship for the Sydney Olympics. When I
read this facsimile I believed that CCP was able to provide an airship
for the Sydney 2000 Olympic Games. Had Mr Cahill told me that CCP
was unable to guarantee delivery of the airship in time for the Sydney
2000 Olympic Games I would have advised Primus not to proceed
with the Licence Agreement in its then current form."

In other words, if leave to amend had been granted, the point was bound to fail.

Misleading conduct by remaining silent

The appellants further contend that the judge erred in holding that CCP engaged in

misleading and deceptive conduct by deliberately refraining during the period

between 16 February 2000 and 7 March 2000 from telling Primus that CCP did not

have available funds to pay the deposit for, or otherwise to pay for the purchase

price of, the airship and that CCP had no commitments in place or resources for any

24
Coulton v. Holcombe (1986) 162 C.L.R. 1; Elliott v. Australian Securities and Investments
Commission (2004) 22 ACLC 458; [2004] VSCA 54; Geelong Building Society (in Liq) v. Encel
[1996] 1 VR 594.

CCP v. Primus 22 NETTLE, J.A.

 such funding as at 16 February 2000. The appellants accept as they must 25 that

misleading and deceptive conduct may inhere in silence as much as in

representation, but they submit that the authorities demonstrate a reluctance to

impose liability for contravention of s.52 based solely on silence in pre-contractual

negotiations. They argue that the general law has allowed parties to retain

confidentiality in the absence of a fiduciary duty (which in effect was found not to

exist in this case) and that the same sort of attitude carries through to and reflects in

the approach which is to be taken to the application of a s.52 to pre-contractual

negotiations. They rely in particular upon the observation of Burchett, J. in Poseidon

Ltd v. Adelaide Petroleum NL26, that it has never been suggested that s.52 strikes at the

traditional secretiveness and obliquity of the bargaining process, and they refer also

to coordinate dicta in Lam v. Ausintel Investments Australia Pty. Ltd. 27; Halton Pty. Ltd.

v. Stewart Bros Drilling Contractors Pty. Ltd.28; Diversified Mineral Resources NL v. CRA

Exploration Pty. Ltd.29; Australian Competition & Consumer Commission v. CC (N.S.W.)

Pty. Ltd. (No. 8)30 and Leda Holdings Pty. Ltd. v. Oraka Pty. Ltd. 31. On that basis they

say that CCP had no duty to divulge to Primus its financial position during the

course of pre-contractual negotiations. They add moreover that if Primus had really

wanted that sort of information, Primus had every opportunity as part of the “due

diligence process” to make the appropriate enquiries of CCP, and they say that the

fact that Primus did not ask for the information and thus that CCP did not provide it

demonstrates that this is not a case of active misrepresentation arising from a "half

truth" in respect of CCP's financial position, but rather one in which CCP advanced

no representation at all as to its financial position.

25
Demagogue v. Ramensky (1992) 39 FCR 31; Butcher v. Lachlan Elder Realty Pty. Ltd. [2004] HCA
60 at [99]-[110].
26
(1991) 105 ALR 25 at 26; [1992] ATPR 41-164 at 40,227.
27
(1989) 97 FLR 458, per Gleeson, J. at pp. 476 and 477.
28
[1992] ATPR 41-158.
29
[1995] ATPR 41-381.
30
(1999) 92 FCR 375.
31
[1998] ATPR 41-601.

CCP v. Primus 23 NETTLE, J.A.

In the alternative, the appellants contend that the judge erred in the application of s.4(2) of

the Trade Practices Act. Section 4(2)(b) provides that a reference to "conduct" when

used as a noun shall be read as including a reference to refusing doing an act and

paragraph 4(2)(c) provides that a reference to, "refusing to do an act", includes,

"refraining (otherwise than inadvertently) from doing [an] act ...". On that basis the

appellants contend that silence may not constitute actionable misleading and

deceptive conduct unless it is intentional and that, even if CCP did remain silent

about its financial position and the silence was such as to mislead Primus about

CCP's financial position, the evidence fell well short of demonstrating that CCP

knew as at 16 February 2000 or at any time in the lead up to the execution of the

agreement on 7 March 2000 that CCP lacked or was likely to lack the financial

capacity to carry the agreement into execution. Indeed, the appellants say, the

evidence tends to show that CCP, its directors and financial advisers were of the

belief that sufficient funding would be available, particularly given the significant

change of circumstances with Primus about to come on board as the CCP customer.

Particular emphasis is put upon the fact that as from about the middle of February

2000 CCP was able to present to financial markets with the possibility of CCP

entering into an agreement with Primus as a significant prospect of a serious major

high profile customer with consequent probability of a pre-determined income

stream. This, it was said, was a dramatic new development for CCP and its

prospects for funding, which the judge had failed to take into account. According to

the appellants, his Honour should also have realised that in as much as this new

development did not occur until mid February 2000 and there was therefore little or

no time before 7 March 2000 to test the validity of the new position for CCP and its

prospects for obtaining sufficient funding, it was simply not possible for the

directors of CCP to arrive at a positive belief that CCP could not obtain the necessary

funding, either on 16 February 2000 or at any time up to 7 March 2000.

It is sufficient to say of the first of those arguments that although s.52 may not strike at the

traditional secretiveness and obliquity of the bargaining process, one purpose of the

section, as Burchett, J. indeed observed in Poseidon, is to ensure that the bargaining

CCP v. Primus 24 NETTLE, J.A.

 process is not seen as a licence to deceive. Hence, as his Honour said, if the

bargainer has no intention of contracting on the terms discussed, his conduct in

seeming to bargain may accurately be stigmatised as misleading. I add, that just as

certainly, if a bargainer having no more capacity than a hope and a prayer of

providing goods or services conducts negotiations in a fashion calculated to create

the impression that he has the capacity to do so, and extracts payment on the faith of

that assumption, his conduct is liable to be stigmatised as misleading and deceptive.

The second argument is both wrong in law and contrary to the evidence and the findings

below. As to the law, the misleading and deceptive quality of remaining silent

inheres in the non-disclosure of information; not in any refusal to provide it.

Consequently, it does not follow from the fact that a failure to act must be intentional

in order to be actionable, that silence must be intentional in order to be actionable. It

is plain in principle and authority that it is not necessary that silence be intentional in

order that it may constitute misleading and deceptive conduct for the purposes of

s.52. As to the evidence below, the judge considered a very large body of

documentary evidence and oral testimony to which we were directed in the course

of submissions and on the basis of that evidence his Honour expressed the

conclusions in paragraphs 189 and 190 of the reasons for judgment, to which I have

already referred. It will be recalled that his Honour there dealt with and expressly

rejected as insignificant the suggestion that the agreement with Primus should be

seen as a "quantum leap" in CCP's ability to raise finances for the project. As his

Honour noted, the evidence was that an investor would want to see that the

advertising contract was for "at least a couple of years".

To that may be added the further conclusions expressed at paragraphs 195, 196 and 210 of

his Honour's reasons, that:

"195. Although it is not strictly necessary in the light of my findings

against CCP in respect of the third and fourth representations, I
turn to consider the allegation that in order to induce Primus to
enter into the Licence Agreement and to pay to CCP the
$400,000 deposit, in the period between 16 February and 7
March 2000, CCP refrained from telling Primus that CCP did not
have available funds to pay the deposit for, or otherwise to pay

CCP v. Primus 25 NETTLE, J.A.

 for the purchase price of, the airship and that CCP had no
commitments in place or resources for any such funding. This
involves examining the relationship between CCP and US-LTA
during this period, the financial position of CCP at that time and
the current prospects of CCP raising funds for payment of either
the deposit or the whole purchase price of the airship.
196. By 7 March 2000, Palmer knew that CCP was contractually
bound to pay US-LTA a US$1.6 million deposit or advance
payment before the latter was 'required to commence any
portion of the Agreement' (paragraph 60 above). He also knew
that as late as 1 March, Olma had written advising that 'we
cannot commit any work until deposit' and expressing concern
that Primus may wrongly understand that its order was 'already
active' (paragraph 68 above). I have also found that Palmer
deliberately withheld from Primus the fact that Olma would not
commit to CCP's order until the deposit was received and that
Olma was concerned about CCP's ability to fund the balance of
the purchase price. I do not accept Palmer's evidence that on the
basis of his telephone conversations with Olma he believed that
work would start on construction of the airship on payment by
CCP of as little as US$150,000 without the need for further
immediate payment as per the Purchase Agreement. For
example, in his facsimile to Olma dated 3 March 2000, Palmer
said:
'As soon as the Primus cheque is cleared we will forward a
holding deposit of US$100,000 the balance will be forwarded to
you shortly after.' [Emphasis added]. The US$100,000 was only
holding CCP's place in the production line and Palmer
acknowledged that the balance was required. I see no reason
not to conclude, as Olma said he expected, that the balance
referred to the remaining US$1.5 million of the US$1.6 million
deposit.
197. The financial position of CCP at about 7 March 2000 was
exceedingly poor. So much so, that instead of paying the whole
of Primus' $400,000 to US-LTA as originally envisaged, CCP
retained over $100,000 in order to pay Stefanou's fee of $70,000
and other smaller debts. Nor had the prospects of CCP
successfully raising the necessary funds improved by this time.
There were no reasonable grounds, in my opinion, for CCP to
believe that 'it would be able to quickly raise the necessary
funding for the project' (paragraph 82 above). Jones and
Messenger had still not produced any investors or funds and
although Palmer, in his evidence, placed reliance on Tauber's
willingness to be involved, the relevant evidence does not go as
far as justifying the conclusion that there were now reasonable
grounds for believing that the funds would quickly be raised. It
was still simply all blue sky."
…
210. ... Each of Palmer, Cahill and Walsh knew at the time of the

CCP v. Primus 26 NETTLE, J.A.

 meeting [of 16 February 2000] That CCP did not have the funds
to pay for the construction of the airship. Each of them knew
that the airship would not be constructed unless CCP raised the
necessary funds and at the very least both Cahill and Walsh
knew in a general way that Primus' deposit of $400,000 was
required to be paid to US-LTA. Palmer obviously knew exactly
what the situation was with respect to Olma and it would be
surprising if he had not explained this to his fellow directors,
Cahill and Walsh. Nevertheless, it seems to me that both Palmer
and Cahill, for the reasons discussed above, knew that, despite
the brokers' enthusiasm for the project and their positive
indications that the funds could be raised, there was no
likelihood that this could be achieved in time to enable
construction of the airship to be completed in time for the
Olympics. Even thought Walsh did not speak to Jones and
Messenger himself, he would no doubt have been told what
they were saying. But even if he were not told or even if he
were told only the positive side of the brokers' advice, Walsh
knew from his own activities that many unsuccessful
approaches had already been made to potential investors. He
was involved in the preparation of the business plans and he
would, therefore, have also been aware that the question of what
equity the investors were to receive in return for their much
needed funds was still unresolved."

When asked to demonstrate why or in what way those findings were not supported by the

evidence or otherwise erroneous, counsel for the appellants submitted only that his

Honour had not given enough weight to factors that might be thought to favour the

appellant's version of events and for that reason that the findings were not open to
be made. I regard that contention as hopeless.

Accessorial liability

The appellants also argued that the judge erred in holding that three directors of CCP were

liable to Primus pursuant to ss.75B and 82 of the Trade Practices Act in respect of the

misrepresentations found to have been made at the meeting of 16 February 2000 and

that the appellant Cahill was liable to Primus pursuant to ss.75B and 82 in respect of

the misrepresentation made by CCP in the letter of 1 March 2000. They contend that

the validity of his Honour's conclusions about CCP was dependent upon proof of the

actual knowledge of the three directors as to the incapacity of CCP to raise funds to

undertake the project as at 16 February 2000 and that his Honour's conclusion about

CCP v. Primus 27 NETTLE, J.A.

 Cahill was dependent upon proof of actual knowledge of Cahill as to the incapacity

of CCP to raise funds to undertake the project as at 1 March 2000. The appellants

say, accordingly, that the judge fell into error in finding that the evidence disclosed

proof of knowledge to the degree of satisfaction necessary to impose liability upon

the directors. The only submission made in support of that contention, however,

was a repetition of the submissions already made that the judge had erred in holding

that the representation of 16 February 2000, the letter of 1 March 2000 and the period

of silence were misleading and deceptive. For the reasons already given, I reject that

argument. As the judge in effect concluded at paragraph 211 of the reasons for

judgment, the evidence to which his Honour had by then already referred permitted

of no other conclusion than that:

"211 ... each of Cahill, Palmer and Walsh knew that what was being
said to Primus' representatives at the meeting on 16 February
was misleading and deceptive because nothing was said about
CCP's lack of funds to pay for the airship or about the
unlikelihood that CCP could obtain those funds in the
immediate future ... [and] each of them refrained from
qualifying the representation that the airship would be available
for the Sydney Olympics because they knew that this could

CCP v. Primus 28 NETTLE, J.A.

 cause Primus to loose interest in the project or at least to defer
payment of the deposit. Each of Cahill, Palmer and Walsh aided
and abetted and/or was directly or indirectly knowingly
involved in or party to the contravention by CCP of s.52 of the
Trade Practices Act."

Section 58 of the Trade Practices Act

The appellants finally argued that the judge had erred in holding that CCP was liable in

damages for contravention of s.58 of the Trade Practices Act. They contended that his

Honour's determination necessitated a positive finding that on 16 February 2000, and

up to 8 March 2000, there were reasonable grounds, of which CCP was aware or

ought reasonably to have been aware, for believing that CCP would not be able to

supply the airship for use during the Olympic Games or within a reasonable time,
and the appellants submitted that there was not a proper basis in the evidence for a

finding of that kind.

I reject that submission for the reasons already given concerning the liability of CCP for

misleading and deceptive conduct under s.52. In my opinion, the evidence

encapsulated in paragraphs 187 to 211 of his Honour's reasons for judgment 32 was

overwhelming that there were reasonable grounds of which CCP ought to have been

aware for believing that CCP would not be able to supply the airship during the

Olympic Games and, moreover, that there were reasonable grounds of which the

directors of CCP were in fact aware for believing that the airship could not be

supplied in time. Either was sufficient to establish liability.

It follows, in my judgment, that the appeal should be dismissed.

BATT, J.A.:

I agree.

32
To which I have already referred.

NETTLE, J.A.
CCP v. Primus 29
BATT, J.A.
VINCENT, J.A.:

I agree that this appeal, which can with considerable kindness be described as optimistic,

should be dismissed.

BATT, J.A.:

The order of the Court is that the appeal is dismissed.

(Discussion ensued re costs.)

BATT, J.A. (FOR THE COURT):

After the oral judgments have been delivered Mr Garratt, for the respondent, sought

indemnity costs. He did so on two bases. That which he put first was that there had

been given before trial an offer of compromise which had not been accepted. The

matter has been debated with the Bench. The Court does not consider that in this

case it is in the interests of justice that an offer before trial that was not accepted

should be a ground for the grant of indemnity costs.

Mr Garratt also sought indemnity costs on the ground that the appeal was hopeless. The

Court is conscious that orders for party/party costs seem to be resulting in a

diminishing percentage recovery of the total costs incurred, but it is also of the view

that the appellants were entitled to exercise their right of appeal and that the clarity

with which the appeal can now be seen was not apparent until a considerable

amount of work had been done. Costs will follow the event but only on the ordinary

basis of party/party costs.

Mr Garratt then sought to be clear as to when the stay that had been granted on 3 October

2003 would cease to have effect. It was granted pending the hearing and

determination of the appeal or, amongst other things, further order and he sought

either a further order or a lifting or dissolving of the stay so that the stay would cease

VINCENT, J.A.
CCP v. Primus 30
ORDER
 today and there would not be a question whether one had to wait until our order

was authenticated. When asked to respond to that Mr Vickery sought a further stay

and that changed the ground. We do not need to deal, unless we

VINCENT, J.A.
CCP v. Primus 31
ORDER
 entirely reject Mr Vickery's application, with Mr Garratt's application.

The Court will grant a short stay. The amount of money is substantial, but having regard to

the long time during which the respondent has been out of the money to which two

courts have held it is entitled the stay will be limited to 14 days and will only be

made on the undertaking of Mr Cahill, which I will refer to in a moment in detail.

Being a solicitor he will know the consequences of a breach of undertaking.

The order of the court will be as follows: It will recite that upon the second appellant,

Douglass Wakley Cahill, undertaking to the Court by his counsel not to dispose of or

otherwise encumber or deal with any of the assets set out in Exhibit DWC3 to his

affidavit sworn on 17 September 2003 filed herein before 4 p.m. on 23 December

2004, or further order, the Court orders that:

(1) The appeal is dismissed with costs, including reserved costs;

(2) Execution on the judgment given by the Honourable Justice

Habersberger herein on 9 May 2003 is stayed until 4 p.m. on Thursday

23 December 2004 or further order.

BATT, J.A.:

Do you give that undertaking on behalf of Mr Cahill, Mr Vickery?

MR VICKERY:

Yes, we do, Your Honour.

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CCP v. Primus 32 ORDER