AAF Enterprises Pty Ltd v Hiken Group Pty Ltd - [2009] NSWSC 418

No judgment structure available for this case.

CITATION: AAF Enterprises Pty Ltd v Hiken Group Pty Ltd [2009] NSWSC 418

HEARING DATE(S): 23 – 25 February 2009

JUDGMENT DATE :
1 June 2009

JURISDICTION: Equity

JUDGMENT OF: Bryson AJ at 1

DECISION: 1. I give judgment for the plaintiff for $73,789 with interest $21,103.65 from 29 June 2005 to the date of judgment, a total of $94,892.65 and with costs of the plaintiff’s claim.
2. I order that each party bear its own costs of the cross-claim.
3. I order that the defendant deliver up all documents held by it as guarantee or term deposit of $23,375.00 given in accordance with clause 25 and item 11 of the Lease: with liberty to apply as to the enforcement of this order.

CATCHWORDS: LESSOR and LESSEE - Commercial premises - halal butchery shop in Auburn Centre - on the facts, the plaintiff did not establish rights under Trade Practices Act s 52 - damages assessed for breaches of landlord's covenants relating to obstruction and disturbance from continuing building work.

LEGISLATION CITED: Conveyancing Act 1919 (NSW)
Retail Leases Act 1994 (NSW)
Trade Practices Act 1974 (Cth)

CATEGORY: Principal judgment

PARTIES: AAF Enterprises Pty Ltd (Plaintiff)
Hiken Group Pty Ltd (Defendant)

FILE NUMBER(S): SC 4543/05

COUNSEL: Desmond Fagan SC (Plaintiff)
J. F. Donohoe (Defendant) (On 23 & 24/2/09)
P Taylor SC (Defendant) (On 25/2/09)

SOLICITORS: Holman Webb (Plaintiff)
Advance Legal (Defendant)

- 24 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

MONDAY 1 JUNE 2009

4543/2005 AAF Enterprises Pty Ltd v Hiken Group Pty Ltd

JUDGMENT

1 HIS HONOUR: The plaintiff AAF Enterprises claims remedies relating to an agreement by the defendant Hiken Group to lease shop Q17 in the Auburn Central Shopping Centre, Queen Street Auburn to the plaintiff. Auburn Central Shopping Centre is a large development containing Woolworths and Big W stores and many smaller retail stores, and was constructed by Hiken Group in 2003 and 2004; work continued into 2005. Above the Shopping Centre is a residential development containing over 400 home units.

2 The parties entered into a written agreement for lease when the Shopping Centre was still under construction, providing for a lease to be granted when occupation of the shop could be given. At first occupation in January 2004 was contemplated. There were several delays, but eventually AAF Enterprises was allowed to go into occupation in April 2004 to conduct its fit-out, an Opening Ceremony for the Centre was conducted on 22 June 2004 and at the conclusion of the Opening Ceremony some retail shops, including the plaintiff’s halal butchery business, began to operate. The lease was treated as coming into effect on that day. The lease was for a term of five years, but as the lease was not ever registered, the leasehold interest in fact created arose under s 127 of the Conveyancing Act 1919, a tenancy at will on such of the terms as of the agreement for lease as were applicable in the circumstances, terminable on one month’s notice. Provisions of the Retail Leases Act also applied to the parties’ relationship. From an early point AAF Enterprises did not comply with its obligation to pay rent; it paid only two months’ rent, and did not for a long time pay costs and stamp duty, so as to be entitled to have the lease registered. Mr Nedjat, the director of AAF Enterprises who gave evidence, said in evidence that at some time (obviously after a long delay) he did pay the stamp duty, but so far as appears the document was never stamped.

3 It is hard to follow the issues from the pleadings. The Statement of Claim was filed on 17 August 2005 and the Defence was filed on 19 October 2005. An amended Statement of Claim was filed on 25 August 2006 and the Defence to that was filed on 12 October 2006. A Further Amended Statement of Claim (FASC) was filed on 2 July 2007 but the defendant did not file a Defence to that document, so that the new claim introduced by the further amendment was not answered. Hiken Group filed a Cross-claim for rent on 14 November 2007. The cross defendants were AAF Enterprises and also Mr Nedjat and Mr Fuat, directors of AAF Enterprises and guarantors of obligations in the lease.

4 Mr Nedjat and Mr Fuat are now the directors of AAF Enterprises. In September 2003 Mr Nedjat was the only director. Mr Fuat became a director on 12 January 2004. Mr Fuat is a long-term friend and business associate of Mr Nedjat. He speaks very limited English and understands only a limited amount of English. Mr Nedjat's evidence shows that Mr Fuat and Mr Ali functioned as co-directors with him before their formal appointments. However Mr Nedjat was always the leading figure in relevant events. A third director who was appointed on 26 July 2004 Mr Ali Kalic had no relevant involvement in the events. There have been other directors but they have no relevant involvement in the events.

5 AAF Enterprises’ claims include three main groups:

(1) damages under s 82 of the Trade Practices Act 1974 relating to pre-contractual representations made by Mr Douglas Stewart of Colliers International on behalf of Hiken Group, and also representations made by Mr Sarkis Nassif a director of Hiken Group to Mr Nedjat and Mr Fuat in September 2003 before the agreement for lease. AAF Enterprises relied on s 52 of the Trade Practices Act assisted by s 51A.

(2) damages for breach of covenants in the lease. These were Clause 29 relating to managing and operating the Centre in a professional and competent way, Clause 30 relating to obeying laws relating to conduct of the Centre, Clause 31 relating to keeping the Centre in a clean and tidy condition, Clause 32 relating to occupation without interruption or disturbance; and also the implied term against derogating from the grant.

6 On 15 August 2008 Macready AsJ gave judgment for AAF Enterprises for damages to be assessed on the claims for damages for breach of covenants, and struck out a passage in the Amended Defence which dealt with them. The reasons appear from his Honour’s judgments of 24 July 2008 and 15 August 2008, and he adhered to this decision when asked to reconsider it, for reasons stated on 2 October 2008. The reasons were stated fully and are not open to review by me, and were based on procedural defaults by Hiken Group. Macready ASJ also directed filing any Defence to the claim for return of the guarantee, and Hiken Group filed a Defence specifically to that part of the claim on 28 August 2008.

7 So the matters before me are AAF Enterprises’ claim for remedies under the Trade Practices Act, assessment of damages to which the plaintiff is entitled, the claim to set aside the guarantee and the cross-claim for rent.

8 In the claim under the Trade Practices Act the FASC alleges that there were express oral representations. In or about September 2003 Mr Nassif made these representations to Mr Nedjat and Mr Fuat in the course of an interview (para 6 of FASC):

(a) There would be a large passing trade;

(b) There would be plenty of parking;

(c) The bridge into the centre would be upgraded and traffic will be redirected

(d) The shopping centre will be busy

(e) Shop 17 will have very busy pedestrian passing traffic.

9 It is also alleged that in September 2003 Mr Douglas Stewart of Colliers International, made these representations:

(g) There would be regular clientele from the units above the shopping centre.

(h) The shopping centre would have 24 hour security patrols and security cameras will be placed to view all the shops and centre courtyard.

(i) Full occupancy of the first floor shops was expected by the time the centre was to be opened.

(j) Full occupancy of the units above the shopping centre was expected by the time the centre was to be opened.

10 Mr Nassif and Mr Stewart spoke English, but Mr Fuat and Mr Nassif also spoke to each other in Arabic, which Mr Nedjat does not understand. Mr Fuat did not give evidence before me and his not giving evidence was explained, insofar as it was explained, by reference to his poor command of English. Mr Stewart was not called by the defendant to give evidence. One effect of extensive procedural directions made by Macready AsJ was that the defendant was unable to call Mr Stewart because it had not complied with the times directed for filing an affidavit by him. There is a reference in the reasons given by Macready AsJ to an alleged difficulty of locating Mr Stewart, but no evidence about this was given before me, so his absence as a witness is unexplained. Mr Fuat and Mr Stewart were both witnesses whom in the ordinary course the respective parties would be expected to call.

11 Mr Nedjat was born in Cyprus in 1955. He first visited Australia in 1983, married and settled here and became an Australian citizen soon after. He attended high school in Cyprus and learnt English in high school, including a study course in England. He obtained a university degree in Istanbul in 1977 after four years of study in Radio and TV Journalism, and later studied Textiles for three years part-time at Heidelberg, Germany. He has a wide range of work experience including restaurants, textiles, glass manufacture and clothing production. By 2003 he had wide experience in business ownership and management. He had purchased his home, and had leased factory premises for business. From around 1991 he had experience in leasing shop premises and operating retail businesses through a company Nedjat Pty Ltd. He purchased a Turkish restaurant business and he took part in its management. From 1991 he also operated business as a Finance Originator, to do which he had certification from Australian Securities and Investments Commission.

12 By 2003 Mr Nedjat was a businessman with an unusually wide range of experience, and he was successfully established in business, including business as a Finance Originator. He must have entered into many contracts and business arrangements, oral and written, including several leases, and he must have known the importance of informing himself of the written provisions of documents he signed. In entering into the plaintiff's lease with Hiken Group Mr Nedjat had the advice of a solicitor, whom he consulted at every significant stage of the transaction and from whom he obtained explanations of documents.

13 As a lifelong Islamic believer Mr Nedjat is entirely familiar with halal principles for preparation and handling meats and smallgoods and with beliefs and practices of the general Muslim community. He was also familiar with Auburn, where he had resided for about 20 years. As is well-known, many Muslims live in and near Auburn, and the number of Muslims living there is growing. Mr Nedjat had in view establishing a meat and smallgoods processing plant to produce products in accordance with halal principles in a controlled, monitored environment, and marketing products through the butchery and delicatessen. He also contemplated export of products in the longer term. AAF Enterprises leased factory premises at George Street Granville from Mr Fuat for the purposes of establishing the processing plant. Mr Nedjat as a director of AAF Enterprises signed the lease for those premises, although he was unable to produce the document.

14 Mr Nedjat's decision to embark on production and sale of meat and smallgoods was based on reasoned consideration of prospective demand and the general prospects of the business, which he explained in evidence. His process of consideration included consulting and taking advice from a person who operated a very large business in meat and smallgoods, and introduced him to representatives of David Jones and Qantas. Mr Nedjat also considered the prospects of export business. By 2003 he had made wide enquiries and had given the prospects of the business full consideration; and he was in a position to make a well-informed judgement with the aid of his own business experience.

15 Auburn Central Shopping Centre occupies a large site including the block between Vales Lane and Queen Street Auburn. There was also development in the block between Vales Lane and South Parade, close to Auburn Railway Station. A passage or arcade leads between South Parade and Vales Lane and opens directly opposite the main corridor of Auburn Central Shopping Centre, giving ready access from Auburn Railway Station to the midst of the Shopping Centre and in particular to shop Q17. About mid 2003 Mr Nedjat noticed that work had commenced on the Auburn Central Shopping Centre, and saw billboards and advertising, which said that shops were available for lease and units for sale. He says: (Aff 130): "I decided the Centre was attractive to AAF for the premises of the butchery/delicatessen given its location and proximity to the large Muslim community in the Auburn Area." He discussed with Mr Fuat and Mr Ali locating the butchery and delicatessen there and they approved. Mr Fuat already knew something of the development from information from Mr John Nassif, the supervisor of a construction company, who is a brother of Mr Sarkis Nassif the developer. Mr Nedjat made enquiries at the Town Planning section of Auburn Council about the Centre to obtain information confirming statements by the developers about widening a road, improving a bridge over the railway and building a car park.

16 Following indications in the advertising billboards Mr Nedjat contacted Mr Douglas Stewart of Colliers International by telephone about June 2003. Mr Stewart told him that home units could be purchased but shops were available for lease and not for sale. After discussions with his co-directors Mr Nedjat obtained a contact telephone number and spoke to Mr Sarkis Nassif, told him that he and Mr Fuat were interested in leasing premises in the development and arranged a meeting, which took place about September or October 2003.

17 Mr Nedjat gave in evidence (affidavit [143]) a lengthy passage setting out what he said was the effect of what Mr Nassif said to him. In this passage he attributes to Mr Nassif statements which dealt with each of the subjects mentioned in paras 6(a) to 6(f) of FASC. The passage attributed to Mr Nassif is, in its terms, infused with optimism characteristic of developers, without any shade of qualification or contingency and describing what were, obviously from the terms are used, the best contemplated outcomes. For the most part, what was attributed to Mr Nassif should be reasonably understood, in my view, as a statement of the favourable outcome which the developer expected and hoped for, and only in a few places are words attributed to Mr Nassif capable of being understood as specific representations about what would be the future state of affairs, or as dealing with an ascertainable future time which could be fixed any more clearly than as the time when the whole development was complete. By way of example, the opening statement "There will be a large passing and regular trade as there will be plenty of parking for people" is not specific in any way and, as a reasonable hearer would understand, there are wide ranges of numbers of people and availability of parking which could be fulfilled by such a statement. In a similar way the statements attributed to Mr Nassif on each of the six subjects of alleged representations are not specific, and are capable of being fulfilled by facts and circumstances anywhere within wide ranges.

18 At only two points did the statements attributed to Mr Nassif descend to anything with particular reference to the prospects of Mr Nedjat and his company if they took a lease of a shop. These are:

19 The main burden of Mr Nedjat's complaints, as presented in his evidence and as I was able to understand them, is that representations made to him meant that when the Centre opened and his tenancy began all the shops would be occupied and there would be no continuing building works.

20 To my mind there is a wide gulf between broad statements by a developer to a prospective tenant describing the state of affairs which the developer expects to exist when the development is completed, and an interpretation that a future state of facts was being represented which the hearer could rely on as a statement of how the facts would be if he decided to enter into the business under discussion. Even as narrated by Mr Nedjat in his evidence in chief on affidavit, before cross-examination had taken him to any examination of his position, I do not think that the interpretation that Mr Nassif engaged in misleading or deceptive conduct causing damage by describing how he saw the state of affairs in the future is reasonably available.

21 It was Mr Nedjat's evidence that at the meeting Mr Nassif showed Mr Nedjat and Mr Fuat plans of the Centre, and he produced a copy in evidence. These plans are not highly detailed.

22 In his affidavit evidence Mr Nassif accepted that there had been a conversation, but gave an account of what he had said which was much shorter than that given by Mr Nedjat. He dealt with some of the same subjects, the availability of parking and the proposed arcade from South Parade and the Railway Station; he denied saying that there would be a large passing trade, denied dealing with improvements to the bridge over the railway, denied saying that by the time construction of the shops was finished most of the residential units would be sold, and, to deal with the subject which requires most attention, denied saying " By the time the Centre opens all of the shops will be occupied." He also denied showing Mr Nedjat and Mr Fuat plans of the Centre. Mr Nassif says that he referred Mr Nedjat and Mr Fuat to Mr Douglas Stewart to deal with leasing.

23 Mr Nedjat gave evidence on affidavit of conversations with Mr Stewart; a first conversation the day after he spoke to Mr Nassif when arrangements were made to meet, and at a meeting at the engineers’ office (not at lunch) at the Centre several days later attended by Mr Fuat, when Mr Stewart made a number of statements relied on as representations in FASC [6] subparas (g) to (j).

24 Mr Stewart was not called to give evidence, and his absence was not explained by evidence; hence what Mr Nedjat says about his conversations with Mr Stewart has not been contradicted. Statements attributed to Mr Stewart include some general statements, but also a number more specifically relating to consideration of Mr Nedjat's company taking a lease to shop Q17. A significant passage is the following: (Affidavit Nedjat [153]):

"The Shop will also have very busy pedestrian traffic as there is going to be a passageway from the Centre straight to the Auburn Train Station. That means anyone getting on or off the train at Auburn will have the opportunity to walk through the Centre. Shop Q17 is located on that passageway so all those people commuting on the train would have to walk past your shop to get to and from the train."

25 The attributed statement about "very busy pedestrian traffic" was not specific in any way. There is an element of assessment in these words, but this passage was in no way in misleading and deceptive and was fulfilled; except that, according to the plaintiff's case, it was misleading or deceptive in that it was not fulfilled when the shop opened and the lease commenced, or for many months afterwards, because work continued in the passageway. As a statement about how affairs would be when all building work was completed it was not misleading or deceptive. In my opinion only a specific reference to that event would give the statement the meaning that it was a representation about the state of affairs at the commencement of a prospective lease. The statement deals with a condition of full development and normalcy, not specifically related to any particular time or any particular event in the plaintiff's affairs.

26 Another significant passage is the following:

In addition to the passageway and the passing trade, there is also going to be regular clientele as a result of the number of units above the Centre. These units are being pre-purchased and will be either leased or owner occupied. We have already sold 20% of the units about the Centre and we expect those sales to continue. We expect to have full occupancy by the time the Centre is open.

27 This statement, if made in the terms alleged, related to the time when the Centre would be open and the lease would commence, and related to a matter of high importance, that is, full occupancy of the residential units. Full occupancy of the units is obviously an important consideration for a prospective tenant of a halal butchery on the ground floor.

28 Statements are also attributed to Mr Stewart relating to road widening, consequent increase in traffic, access to the car park and a bridge over the railway. These statements were highly general in terms and did not incorporate any statement about the expected time of fulfilment. They did not have specific relationship to the prospects for the plaintiff’s butchery. There were also general statements about leasing retail premises including "I expect to have full occupancy of the ground floor by the time the Centre is open". This too is a matter relevant to what the plaintiff had under consideration.

29 When cross-examined Mr Nedjat accepted that Mr Nassif did not say to the effect that the work or any particular work would be finished by June 2004, or indeed by June 2005. He adhered to his evidence that Mr Nassif had said to the effect that all the shops would be occupied by the opening day. Mr Nedjat also agreed when cross-examined that Mr Stewart did not relate his statements to any particular times, to June 2004 or to June 2005. While he accepted that there were no dates mentioned at the meeting, he maintained when challenged that Mr Stewart said that the passage could be finished by June 2004 which I understand to mean that it would be finished by the time the lease commenced. Mr Nedjat maintained under cross examination that the representations made by Mr Nassif were among his reasons for entering into the lease and said to this effect (t89, l17): "If I had been told all the shops were not going to be open together, I would not get the lease". He also said that that was the only reason [he took the lease]. He said (t. 90) that the representations relied on were full occupancy at the date of possession. As to the others he said:

30 He agreed that he could see, when occupancy was taken for the fit-out, in or about April 2004, that not all the other shops in the Centre were going to be opened. He agreed that at the time of this conversation with Mr Stewart he could see that the units were still under construction, and and that at the time it was at the foundation stage: there was a lot more work to do. He adhered (t 97) to his evidence that Mr Stewart said: “We have already sold 20% of the Units about the Centre and we expect those sales to continue. We expect to have full occupancy by the time the Centre is open.” Mr Nedjat was expecting full occupation of the retail premises, not of the residential premises. He accepted that Mr Stewart did not refer to June 2004 or to a particular date.

31 Mr Nedjat understood (t.103/33) that Mr Stewart was talking about was an overall view about how the development would all end up when it was finished. He adhered to his affidavit evidence (t 103-104) that he asked Mr Stewart “Will the project be completed by March 2004 as planned” and Mr Stewart said: “Yes, hopefully it will go well and it will be ok.” And the reference to “the project” meant the shops. It was plain (t.104/9) that Mr Stewart was not going to guarantee that.

32 Of high significance in my appraisal of Mr Nedjat's evidence, of what was said to him and the influence of what was said to him on the decision to enter into the lease, are references and absence of references in communications between the parties and in their documents to whether any relevant representations had been made, or were relied on. It is to my mind significant that there is no reference to representations in the letter of 11 November 2003 (t.106-7) from the defendant which opened written commendations. At a number of places in documents relating to the agreement to lease and to the lease there are references to whether any representations had been made or relied on or related subjects. It was Mr Nedjat's evidence that he read the lease document with his solicitor and received the solicitor’s explanations.

33 However he maintained, for every reference to representations and disclosure statements in documents which he had signed, that although his solicitor had explained the documents to him, he had not been told about the presence of the references to representations. (see t.116, 117, 118). He said to the effect that the solicitor did not mention the disclosure statement, and that Mr Nedjat did not mention to the solicitor about representations made to him.

34 After a letter from Mr Stewart to Mr Nedjat opening the subject of lease terms and conditions dated 11 November 2003 (Ex A, p10) the defendant's solicitors sent Mr Hudson the plaintiff’s solicitor a form of Agreement to Lease with Lease and Disclosure Statement on 11 December 2003 (Ex A, pp 15-68). Mr Hudson took Mr Nedjat through the agreement to lease (t 108 and following). Mr Nedjat gave evidence that he did not know that leases have clauses regarding representations. When shown Pt K cl 24 Representations in the Agreement for Lease (Ex A, p25) Mr Nedjat said (t 110) that he first became aware that this clause was there a couple of days before giving evidence; but nobody mentioned it to him until a few days ago, and he was not aware of causes like that appearing in lease contracts. He said that the lease was explained by his solicitor, and in any event he himself was able to read. His solicitor was explaining all the leases to him over so many years but nobody mentioned this type of clause to him.

35 Clause 24 says:

24. Representations

agreement

36 Mr Nedjat’s evidence took a similar course with each of several other documents which he saw and in some cases signed, and contained references to representations. He dealt similarly with clause 58 of the Draft Lease relating to there being no representations (see t.113). A form of Lessor and Lessee Disclosure Statement was among the draft documents (Ex A, pp62-68). Mr Nedjat agreed that he had probably seen that at one time. Mr Nedjat agreed that he had probably seen that at one time. This included (p67) Advice to the Lessor.

5. In entering into the retail shop lease, the lessee has relied on the following statements or representations made by the lessor or the lessor’s agents

Note Matters such as agreements or representations relating to exclusivity or limitations on competing uses, sales or customer traffic should be detailed.

37 The draft lease contains clause 58 No Representations. This clause includes an acknowledgement that there had been an opportunity to record in the disclosure statement all representations which induced the lessor to enter into the lease. Mr Nedjat signed this document for himself and for the company. He said that he signed this too without having read it on the basis of what his solicitor told him. He said he did not remember seeing the Disclosure Statement but that he had probably seen that at some time. He signed a copy of a Disclosure Statement (Ex A, p127) without inserting anything at the place where he was invited to list other agreements or representations.

38 Mr Hudson wrote a letter to the defendant’s solicitors on 16 January 2004, commenting on aspects of the draft documents including an aspect of the Disclosure Statement, but making no reference to any disclosure relied on. Mr Nedjat’s evidence took a similar course with each of several other documents which he saw and in some cases signed which contained references to representations. In several passages Mr Nedjat said to the effect that his solicitor did not tell him about the Disclosure Statement or the requirement for one; alternatively he said (t 127) that possibly he had been told by the solicitor about a disclosure statement but he could not recall, and he did not say it did not happen.

39 When taken to a further set of lease documents which the defendant’s solicitors forwarded about 4 March 2000 and to representations clauses in these documents (Ex A, p80) Mr Nedjat said (t.127-128) to the effect that he could not recall the disclosure document but that his solicitor possibly told Mr Nedjat about it.

40 When dealing with a document of 18 March 2004 Ex A, p.127, Mr Nedjat said (t131-132) that he did not read the whole page when he signed the document and that he signed it without considering the contents. He signed this document on 18 March 2004 (see t.136). I regard his evidence as extremely improbable in a man of Mr Nedjat’s business experience and ability.

41 There were further documents which put Mr Nedjat in similar difficulties. A striking example is Ex A, p129 where Mr Nedjat signed a disclosure statement immediately below the advice to the lessee containing the requirement to set out any representation, and p130 to a similar effect. Difficulties of this kind recur several times in relation to execution of the lease.

42 Before Mr Nedjat and his company entered into possession of the shop many documents had passed his eyes which contained statements indicating the importance of his declaring whether he was relying on any representations which were not recorded in documents in entering into the contractual obligation. I do not find his evidence credible, and I disbelieve that he did not see any of these statements and that his solicitor did not explain any of them. His evidence shows that his solicitor explained a great deal; it is not in my mind credible that a solicitor who did this should have omitted to deal with the references to representations. On Mr Nedjat's evidence after cross-examination, his case under s 52 comes down to reliance on representations, attributed both to Mr Nassif and to Mr Stewart, to the effect that all the shops would be occupied when the lease commenced. This would certainly be a material matter; no one wishes to conduct business in a half empty Shopping Centre. There is no contemporaneous note or record in any form that any such representation was made. If anything which Mr Nedjat regarded as significant or important had been said on the subject, it is extremely improbable that none of the attempts to get him to disclose representations would have brought it out. I disbelieve that anything significant was said to him about all the shops and dwellings being open at the time of commencement of its lease.

43 In my judgment the plaintiff's case under the Trade Practices Act fails.

44 Mr Nedjat gave evidence of the inconveniences and difficulties caused by the breaches of covenants. His evidence was tested in cross examination, but it was not answered by any countervailing evidence. The defendant must have been in a far better position than Mr Nedjat to give evidence of the dates, times and nature of the building operations as they continued towards completion of its development project, and this has assisted my conclusion that I should have confidence in what Mr Nedjat said.

45 Mr Nedjat’s evidence shows that at the time of the Opening Ceremony on 22 June 2004 construction work was still taking place in and around the Centre including:

46 There was dust all over the Centre and in particular all over shops due to construction works, and there were construction works in the access passageway between Vales Lane and the Railway. Scaffolding in front of the plaintiff’s shop which had been removed prior to the Opening Ceremony was replaced soon afterwards. There was poor lighting throughout the Centre, consistent with its not being open for business. There was scaffolding erected inside the Centre including associated with shops and the Food Court area. The main entrance was surrounded by scaffolding and construction equipment including cranes, fork lifts and cherry pickers. Construction work was being carried on in a number of shops on the ground floor of the Centre. Areas were barricaded off for construction safety. Part of the footpath in the courtyard was not tiled and was not available for passage; there were barricades. In the access passageway there were forklifts, cherry pickers, piles of sand, gravel, tiles and bricks just outside the back entrance. Construction in the access passageway had not been completed and the passageway was not open for access by the public. Mr Nedjat’s interpretation was that this gave the appearance that the shop was not open for business. Shops were progressively opened, and he identified seven which were opened after approximately 2 months; a chemist shop was opened approximately 6 months’ after the Ground Floor was opened. Of the approximately 10 or 12 shops on the First Floor, occupation began progressively from January 2005.

47 As trading continued from June 2004 to 2005 more and more of the vacant retail shops became occupied and in June 2005 about 80% of them were occupied. There were large businesses in occupation in June 2004; Mr Nedjat named Woolworths, Big W, Michelle's Patisserie and the Millers Clothing Shop.

48 Unavailability of access through the passageway towards the Railway limited passing trade past the shop. This was particularly significant because the shop was not located in the central courtyard and use of the passageway influenced access to the shop. Mr Nedjat said that the shop had no passing trade at the opening of the Centre, and appeared as if it was not open for business because of the construction works and dust. There may be overstatement but I accept that passing trade was greatly limited by obstructed access through the passageway.

49 Construction work in the passageway continued through the whole of the plaintiff’s occupation until 29 June 2005; there was constant construction work in the passageway. At times it was open for half its width, sometimes for a few days, at other times it was blocked off again. When it was open it was partly obstructed and there was dirt and dust associated with the construction work which discouraged pedestrian passage. The passageway was completed at some time after the plaintiff vacated the shop.

50 The fruit shop adjacent to the plaintiff's shop was boarded up until some time late in August 2004. Mr Nedjat made attempts to have the defendant improve the lighting in passageways. Dust from construction work was a continual problem during the first three months the Centre was opened, and dust affected the plaintiff's shop and the food. In addition to the work on the passageway, construction work at various places in the Centre continued throughout the plaintiff’s occupation. Free passage through the passageway continued to be obstructed by work and the presence of items connected with building work. Mr Nedjat produced and put in evidence a number of photographs which, taken with his evidence, well illustrate the presence of obstructions associated with building work, of various kinds and at a number of times throughout the plaintiff’s occupation.

51 The plaintiff put in evidence (Ex B) a Small Business Profile for Butchers up to June 2006. This represented the results of a survey of butchers and the results of their businesses in financial years up to 30 June 2006, based on 33 businesses from most States across Australia. It is very difficult to apply any of the material or conclusions in this survey to the case of the plaintiff. The surveyed businesses were established and going concerns, and the survey information does not really bear on the prospects of success in establishing a new business. The survey does show that when established butcher’s businesses can be and usually are successful, sometimes highly successful. Success seems to depend on many factors including location and management skills. The actual experience of the plaintiff was that it did not establish a successful business, attempted to establish itself for 12 months and when the business was brought to an end there had been trading losses; there had not been profits. There is no reliable evidence which can establish what the trading losses relating to the butchery were because the accounts kept related to the whole of the company's business, including the factory for production of smallgoods, which operated only so far as was required to satisfy regulatory bodies and obtain approvals, and did not ever pass into commercial production. Commissioning and maintaining the factory in those circumstances must have made a large contribution to the company's overall loss.

52 Mr Izzard the company's external accountant gave evidence in which he sought to analyse out the elements in the accounts which related to the factory operation. With respect to him I must say that his analysis did not produce any clear understanding of what losses were incurred by the shop business.

53 In any event the losses incurred by operating the shop business are not a correct statement of an integer in the measure of damages. It would certainly be an error to identify the loss in trading and attribute it all to damages caused by interference with business resulting from the breaches of covenant. The correct integer is the amount by which the profit on trading was less or the loss on trading was greater than it would have been but for the breaches of covenant. As there was no experience of trading, successful or unsuccessful, in an earlier period, or anything which could establish what, for this business, was a normal state of trading uninfluenced by breaches of covenant, a fully reasoned demonstration of the quantum of damages cannot be available.

54 However it is plain and clear, and I find that there must have been a loss of this kind. Even if the business was doomed to fail, it must be the case that its failure was worse because of the injury to custom caused by the breaches of covenant I have referred to. This could not fail to be true. A butchery business conducted on a building site must do worse than a butchery business conducted in an environment where passage and access are not impeded by building work and its inevitable concomitant inconveniences. A building site is no place to display meat for sale. There must have been a loss of that kind. If there had not been the breaches of covenant complained of, it is on the whole likely that the business would have been profitable: the location seems, objectively, to be a very favourable one for a halal butchery and delicatessen shop.

55 It is for consideration for what period of trading the loss should be assessed. Although the lease according to its own terms was for a period of five years the plaintiff did not take necessary steps to obtain secure occupation. It left the lease unregistered because it delayed paying the lessor's costs and stamp duty. Further, the plaintiff did not pay rent apart from a short early period, leaving its right of occupation at the mercy of the lessor, who could bring occupation to an end by a short notice and re-entry after continuing failure to pay rent. It is surprising that it took as long as it did, until 29 June 2005, for the defendant to act, give notice and make it plain that it was about to re-enter. The plaintiff as lessee had no right to remain; to equip itself with that right it would have had to pay rent.

56 There are some inferences from circumstances which bear on damages. The plaintiff kept on trading throughout the whole period until threatened with re-entry. The plaintiff wished to go on trading, and made no move to take away its goods, including perishable goods, until the last hours before re-entry. One implication this has for assessment of damages is that, in July 2005, although there were trading losses, they were not intolerable; the plaintiff wished to continue trading, and was prepared to continue to incur the losses. This is a factor qualifying any view about the gravity of the inconveniences which by that time still existed; in my finding by then the interference with trading caused by the breaches of covenant had greatly diminished, compared with June 2004, but had not come to an end.

57 In my finding the loss of goods and stock which were abandoned, or lost their value when they had to be hurriedly removed on the last day of trading is not a loss which should be found to the caused by any breach of covenant by the defendant. The plaintiff's conduct in not recognizing in due time the force of the eviction notice and removing its perishable goods and securing their value while the eviction notice was running was unreasonable, and the losses occasioned were not caused by any breach of covenant by the defendant. As it did not pay the rent, the plaintiff had no right to be there and the defendant did not invade its rights by requiring vacant possession. The losses to perishable and other goods caused by hurried departure were not caused by the defendant’s breaches of covenants.

58 In my view it is clear that there was a significant loss in that trading would have been much better, losses would have been smaller and perhaps there would have been profits from carrying on the business during the period of occupancy if the defendant had not been in breach of covenant and had not in effect exposed the plaintiff to the large commercial disadvantage of attempting to carry on the butchery business in the midst of a building operation. I cannot disregard those damages, very little material for their assessment is available having regard to the nature of the loss, and I must make the best assessment I can. I can make some judgement about the scale of operations from the financial statement for the year in Mr Izzard's accounts, and there are also, in the most general way, guides of a kind to the scale of operations in Exhibit B the Business Survey. I must make an estimate; I cannot disregard the proved certainty that breach of covenant caused loss.

59 In my assessment the plaintiff’s damages are $155,000.00. That is, in my assessment, if there had not been breaches of covenant the plaintiff would have earnt enough money to pay the rent and make a greater profit, or a smaller loss, in the order of $75,000.00

60 AAF Enterprises filed a Defence to the cross claim for rent, very lengthy in its terms but in substance contending that AAF Enterprises’ entitlement to damages in some way extinguished the claim for rent. This Defence is plainly and simply groundless; the obligation of a lessee in occupation to pay rent is not interdependent with obligations of the lessor to pay damages to the lessee. It is plain that AAF Enterprises incurred liability for rent, which amounted to $81,211.00 when AAF Enterprises gave up possession on 29 June 2005. I will award this sum to the cross claimant. As the obligation to pay rent plainly existed, until the time of this judgment, and exceeds the amount of the guarantee, AAF Enterprises has not had any entitlement to return of the guarantee. However the liability for rent is discharged by the set-off in my judgment, and there is no longer any ground for the defendant to hold the guarantee.

61 I will set the damages recoverable on the plaintiff’s claim off against the rent recoverable on the defendant’s claim, and give the plaintiff judgment for the balance. I will award interest on that balance from 29 June 2005. I ask that counsel assist with a calculation of interest.

62 ORDERS:

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AAF Enterprises Pty Ltd v Hiken Group Pty Ltd [2009] NSWSC 418

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CITATION:	AAF Enterprises Pty Ltd v Hiken Group Pty Ltd [2009] NSWSC 418
HEARING DATE(S):	23 – 25 February 2009
JUDGMENT DATE :	1 June 2009
JURISDICTION:	Equity
JUDGMENT OF:	Bryson AJ at 1
DECISION:	1. I give judgment for the plaintiff for $73,789 with interest $21,103.65 from 29 June 2005 to the date of judgment, a total of $94,892.65 and with costs of the plaintiff’s claim. 2. I order that each party bear its own costs of the cross-claim. 3. I order that the defendant deliver up all documents held by it as guarantee or term deposit of $23,375.00 given in accordance with clause 25 and item 11 of the Lease: with liberty to apply as to the enforcement of this order.
CATCHWORDS:	LESSOR and LESSEE - Commercial premises - halal butchery shop in Auburn Centre - on the facts, the plaintiff did not establish rights under Trade Practices Act s 52 - damages assessed for breaches of landlord's covenants relating to obstruction and disturbance from continuing building work.
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) Retail Leases Act 1994 (NSW) Trade Practices Act 1974 (Cth)
CATEGORY:	Principal judgment
PARTIES:	AAF Enterprises Pty Ltd (Plaintiff) Hiken Group Pty Ltd (Defendant)
FILE NUMBER(S):	SC 4543/05
COUNSEL:	Desmond Fagan SC (Plaintiff) J. F. Donohoe (Defendant) (On 23 & 24/2/09) P Taylor SC (Defendant) (On 25/2/09)
SOLICITORS:	Holman Webb (Plaintiff) Advance Legal (Defendant)