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casetreasury

Alati v Kruger (1955) 94 CLR 216

Facts: Alati, the defendant (D), sold a business (fruit shop on leased premises) to Kruger, the plaintiff (P), for £700 who took possession of the leased premises. The contract stated that the average weekly earnings of the business were £100. At trial, this statement was found to be fraudulent misrepresentation (the weekly earnings were no greater than £40, as Alati knew). Kruger commenced an action to rescind the contract. After trial but before the judgement was handed down, the business deteriorated. Kruger was willing to return the premises, but Alati was not receptive. Kruger eventually closed the business.


Issue: Was rescission valid (whether restitutio in integrum was possible at the commencement of the action)?


Held: The High Court held that yes, restitutio in integrum was possible. Substantial restoration was possible (based on equity). Restoring the parties to their substantial positions was achieved by Alati, the seller, refunding the purchase price with interest and Kruger, the buyer, giving back the business and the fruits that were in the shop and reassigning the lease.


Kruger did not lose his right by discontinuing the business and leaving the premises before the judgement was given. The deterioration of the business was not due to the fault of Kruger.


If Kruger had acted unconsciously, the Court might refuse relief, but this did not happen. It was Alati who hadn’t done anything to cooperate (by taking the property back etc.) even though it was clear facts were against him in the trial. Kruger was not under a duty to go on indefinitely, working for nothing and incurring losses.


Held (Dixon CJ, Webb, Kitto and Taylor JJ): ‘... if the respondent had acted unconscientiously during the pendency of the action, as by causing the loss of a valuable leasehold and goodwill by discontinuing the business and abandoning the premises without giving the appellant a reasonable opportunity to take them back, no doubt the court might refuse relief ... But it is impossible to convict the respondent of any unfairness in the circumstances’: at 225.

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