Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd & Ors [1987] FCA 556

Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd & Ors [1987] FCA 556

The Court found the purchaser was misled as to the seating capacity, justifying avoidance of the contract and mortgage under s.87 of the Trade Practices Act. Only losses directly attributable to the misrepresentation, assessed at 10% of total trading losses, plus transaction costs, were recoverable. Other losses,...

Source-derived case information.

Parties
Applicant: Collins Marrickville Pty Limited; First Respondent: Henjo Investments Pty Limited; Second Respondent: Henry Saade; Third Respondent: Norman Peter George; Fourth Respondent: Saade Developments Pty Limited
Jurisdiction
Australia
Judgment Date
20 October 1987
Procedural Posture
Trade Practices (misleading Conduct) Civil Proceeding / Relief/damages After Finding of Liability
Outcome
The sale contract and mortgage were declared void ab initio; damages and costs awarded; indemnities and directions for registration and execution of legal documents ordered.
Legal Topics
Misleading Conduct, Rescission of Contract, Consequential Damages, Mortgage Avoidance, Indemnity, Assignment of Lease
Trade Practices Contract Law Misleading Conduct Rescission of Contract Consequential Damages Mortgage Avoidance Indemnity Assignment of Lease

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Parties

Collins Marrickville Pty Limited

Applicant

Henjo Investments Pty Limited

First Respondent

Henry Saade

Second Respondent

Norman Peter George

Third Respondent

Saade Developments Pty Limited

Fourth Respondent

Procedural Posture

Trade Practices (misleading Conduct) Civil Proceeding / Relief/damages After Finding of Liability

Legal Issues

  1. 1 What was the effect of the seating capacity restrictions on the operation, profitability, and value of the restaurant?
  2. 2 Is it appropriate and permissible to order that the purchase contract be declared void?
  3. 3 What order may be made regarding the mortgage, including as to indemnity?

Ratio Decidendi

The Court found the purchaser was misled as to the seating capacity, justifying avoidance of the contract and mortgage under s.87 of the Trade Practices Act. Only losses directly attributable to the misrepresentation, assessed at 10% of total trading losses, plus transaction costs, were recoverable. Other losses, resulting from management changes and external factors, were not recoverable. Indemnity orders relating to the lease and mortgage were appropriate given statutory powers and the parties' arrangements.

Court Disposition

The sale contract and mortgage were declared void ab initio; damages and costs awarded; indemnities and directions for registration and execution of legal documents ordered.

Orders

  • The contract dated 2 April 1985 between applicant and first respondent for the sale of 'New York Deli' restaurant be declared void ab initio.
  • Subject to redelivery of the business, first and second respondents to pay applicant $300,000 plus fair price of all current trading stock.