In the recent decision of Haijing v Zhan & Ors [2013] VCC 1261, the plaintiff had invested $120,000 into a “Cake World” business at Elizabeth Street, Melbourne. The Court had to determine whether the plaintiff was entitled to damages against:

  • the first defendant for misleading or deceptive conduct in relation to representations about the business; and
  • the third defendant for breach of contract by failing to contribute his 60% share of the total investment for the business.

Misleading or deceptive conduct

The plaintiff claimed that first defendant represented that:

  • he had conducted specific market research over a three month period, which projected that annual sales of the Elizabeth Street shop would be approximately $2 million per annum; and
  • based on the market research, the plaintiff would get a return on her investment of $120,000 within the first year.

In this case, the Court found the plaintiff’s evidence to be straightforward and clear and preferred it over the defendants’ unreliable, unsatisfactory and demonstraby inaccurate evidence.

The Court determined that the first defendant made the profitability representations above and found that they were misleading or deceptive as the first defendant had no evidence that:

  • any market survey was conducted that could support a claim of an annual turnover of $2 million or indeed any substantive turnover;
  • there were reasonable grounds for the representation that there would be $2 million of annual sales in the first year; and
  • the plaintiff would get her investment back.

The Court found that the plaintiff relied on the representations when she entered into the joint venture agreement with the defendants and awarded damages against the first plaintiff of $120,000.

Breach of contract

The defendants accepted that they did not contribute 60% of the  total investment for the business and were short by $51,667.18. However, the defendants’ claimed that there was no obligation to make the 60% contribution given the termination of the agreement.

The Court determined that the agreement was ongoing and the plaintiff was entitled to judgment against the third defendant for $51,667.18 for breach of his oblgiation to provide the requisite investment monies (precluding any double recovery).

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