Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd - [2003] WASC 53

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53

CORAM: ROBERTS-SMITH J

HEARD: 4-8 & 11-14 NOVEMBER 2002

DELIVERED : 24 MARCH 2003

FILE NO/S: CIV 1208 of 1998

BETWEEN: ALPINE HOLDINGS PTY LTD (ACN 009 471 907)
First Plaintiff
EGON KONIG
Second Plaintiff
SHELLEY KONIG
Third Plaintiff
AND
WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)
First Defendant
WESTGEM HOLDINGS PTY LTD (ACN 050 218 954)
Second Defendant
ROBERT STEELE
Third Defendant
BRIAN McCUBBING
Fourth Defendant
(BY ORIGINAL ACTION)
WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)
Plaintiff
AND
ALPINE HOLDINGS PTY LTD (ACN 009 471 907)
First Defendant
EGON KONIG
SHELLEY KONIG
Second Defendants
(BY COUNTERCLAIM)

Catchwords:

Trade practices - Misleading or deceptive conduct - Lease for coffee-shop tenancy in cinema complex - Whether lessee induced to enter lease by representations as to other tenancies and "spin-off" sales - Exclusive right to sell certain products

Trade practices - Causation - Whether plaintiffs induced by misrepresentations of defendants - Assessment of damages under Trade Practices Act 1974 (Cth), s 82

Legislation:

Trade Practices Act 1974 (Cth), s 52, s 75B, s 82

Result:

Plaintiffs' claim allowed
First defendant's counterclaim dismissed

Category: A

Representation:

Original Action

Counsel:

First Plaintiff                :     Mr N W McKerracher QC & Mr R M J Lombardi
Second Plaintiff            :     Mr N W McKerracher QC & Mr R M J Lombardi
Third Plaintiff               :     Mr N W McKerracher QC & Mr R M J Lombardi
First Defendant             :     Mr N D C Dillon
Second Defendant         :     Mr N D C Dillon
Third Defendant           :     In person
Fourth Defendant          :     In person

Solicitors:

First Plaintiff                :     Feinauer & Associates
Second Plaintiff            :     Feinauer & Associates
Third Plaintiff               :     Feinauer & Associates
First Defendant             :     Williams & Hughes
Second Defendant         :     Williams & Hughes
Third Defendant           :     In person
Fourth Defendant          :     In person

Counterclaim

Counsel:

Plaintiff:     Mr N D C Dillon
First Defendant             :     Mr N W McKerracher QC & Mr R M J Lombardi
Second Defendants       :     Mr N W McKerracher QC & Mr R M J Lombardi

Solicitors:

Plaintiff:     Williams & Hughes
First Defendant             :     Feinauer & Associates
Second Defendants       :     Feinauer & Associates

Case(s) referred to in judgment(s):

Australian Shipbuilding Industries (WA) Pty Ltd v Packer (1993) 9 WAR 375
Famel Pty Ltd v Burswood Management Ltd (1989) ATPR 40‑962
Gurr v Forbes & Dakar Nominees Pty Ltd (1998) ATPR 41‑491
Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd(1988) 79 ALR 83
Henville v Walker (2001) 206 CLR 459
IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40‑490
Wheeler Grace Pierucci Pty Ltd v Wright (1989) ATPR 40‑940
Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97
Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445

Case(s) also cited:

Amann Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527
Consolidated Bearing Company (SA) Pty Ltd v Molnar Engineering Pty Ltd (1994) ATPR (Digest) 46122
Edgar v Farrow Mortgage Finance Pty Ltd (In Liq) (1992) ATPR (Digest) 40096
Esso Petroleum Co Ltd v Mardon [1976] 1 QB 801
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 55 ALR 25
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre (1978) 140 CLR 216
Hubbards Pty Ltd v Simpson Ltd (1982) 41 ALR 509
James v ANZ Banking Group Ltd (1986) 64 ALR 347
Kaze Constructions Pty Ltd v Housing Indemnity Australia Pty Ltd (1990) ATPR 41017
McMahon v Pomeray Pty Ltd (1991) ATPR 41125
Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23
Morgan Corporate Ltd v GWG Leving Pty Ltd (1995) ATPR 41414
Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

ROBERTS-SMITH J: This is a case about a small business which failed. The plaintiffs are the proprietors of that business. They say it failed because of their reliance upon misrepresentations made by the defendants who were the landlord and those acting on its behalf. The defendants on the other hand, say there were no misrepresentations and the business failed for unrelated commercial reasons for which they cannot be held responsible.
There is a cross‑claim by the landlord against the plaintiff company as tenant of the business premises and against the second and third plaintiffs as guarantors, for unpaid rent and the balance of moneys owing under the tenancy agreement.
It is necessary first to explain the persons and entities involved.
Egon Konig is a qualified chef and business proprietor. He formerly ran two small food businesses in Perth. Shelley Konig is his wife. They are the sole shareholders of Alpine Holdings Pty Ltd ("Alpine Holdings") which is the trustee for the E & S Konig Family Trust.
Norman Phillip Carey is the sole beneficial shareholder and Managing Director of Westpoint Corporation Pty Ltd ("Westpoint Corporation") and is also a beneficial shareholder and director of the majority of companies which form the Westpoint Group of Companies ("the Westpoint Group").
Westpoint Corporation, through related or associated companies, is the owner of the shares in Warwick Entertainment Centre Pty Ltd ("WEC"). Westpoint Corporation is also the ultimate holding company of Westgem Holdings Pty Ltd ("Westgem") which traded as Westpoint Realty.
Brian Henry McCubbing is a licensed valuer and real estate agent. At the relevant time he was a director of Westgem. That was done to enable his real estate licence to be used by Westgem to carry out its real estate business. He was not a shareholder of Westgem. McCubbing was employed as a contractor by Westgem to conduct business on behalf of Westpoint Realty.
Robert Steele was approached by McCubbing to work for Westpoint Realty as an employee.
In the late 1980s and early 1990s, Westpoint Corporation identified the opportunity of developing a site in Warwick, a Perth suburb, to build an entertainment centre and commercial complex ("the Entertainment Centre"). The site was adjacent to the Warwick Grove Shopping Centre ("the Shopping Centre") and formed part of the Warwick Regional Shopping Precinct.
As a first phase of the development, Westpoint Corporation purchased the land and raised finance for construction of the Entertainment Centre.
According to Carey's evidence, prior to undertaking the development, Westpoint Corporation commissioned and undertook general research in relation to the prospects of its success. That research identified the "Northern Corridor" of the Perth metropolitan area as representing a highly prospective area for the development of an entertainment centre at the time. The population catchment area was highly supportive of the development and the population bases for the northern corridor and the catchment area were predicted to increase.
Carey considered that the proposed Entertainment Centre was also supported by the fact the Shopping Centre was an established and successful one with major tenants such as K‑Mart, Coles and Woolworths as well as a number of other tenants which had resulted in a successful mixture, including general retail, newsagency, restaurants, coffee shops, boutiques and specialty stores.
His evidence was that the Shopping Centre attracts over 4.5 million customers a year.
When the Westpoint Group purchased the land to develop the Entertainment Centre, there was a general restrictive covenant registered against it. The covenant prevented the land being used purely for retail purposes. The Westpoint Group was eventually able to have the covenant modified to allow broader uses of the land, including for the purposes of restaurants, offices, video stores and a cinema complex.
Carey acknowledged the Entertainment Centre was developed entirely separately from the Shopping Centre. It was never proposed that the two would form one composite centre. They are physically quite separate.
The development site had previously been occupied by an hotel.
Marketing of the tenancies in the proposed new centre began in mid‑1992, even before the hotel was demolished and construction of the Entertainment Centre was commenced. Construction began in approximately July 1992 and was completed in approximately August 1993. The Entertainment Centre officially opened on 11 September 1993.
Initial marketing in mid‑1992 was done by placing full‑page advertising features in local newspapers.
An advertisement which appeared in the "Stirling Times" on 19 May 1992 was typical.
That included statements such as "it will provide the only major entertainment centre in the northern suburbs" and that the development provided "an opportunity with enormous potential", that "tavern, international food hall, restaurants, commercial and entertainment tenancies [were] available", "highly visible corner location", "direct access to major roads", there was a "present shopping centre pedestrian flow of 85,000 people per week" with "projected flow for cinemas in excess of 1 million people per year".
Carey said all of these representations were true; indeed, in the end no issue was taken about them.
Shelley Konig saw the full page advertisement in the Stirling Times of 19 May 1992 and gave it to her husband. At that time Mr Konig was operating two food hall outlets in Perth. Both were located in the Carillon Arcade in the city. One was named Egon's Coffee and Patisserie and the other was Carillon Beverages. He was looking for an opportunity to move from there and open a business in the northern suburbs. Mrs Konig thought the development being advertised was just what her husband had been looking for.
The contact details given in the advertisement were for Brian McCubbing and gave his telephone numbers. On telephoning, Egon Konig spoke to Steele. He told Steele he was interested in procuring a coffee shop in the international food hall. Steele told him there were "heaps of applications" but invited him to the Westpoint Realty office for an interview.
Mr Konig went to the office and had a meeting with Steele ("the first meeting"). Steele kept an office diary. The first entry in his diary in relation to the Konigs was one of a telephone call to Egon Konig on Tuesday 28 July 1992. Steele was unable to recall the purpose or content of that call. The next relevant entry is of a telephone call from him to Egon Konig on Monday 3 August 1992, but again Steele has no recollection of that. There is a diary entry for Thursday 6 August 1992 indicating a meeting between Steele and Egon Konig at 9 am. Steele has no particular recollection of that meeting either. Subsequent diary entries relate to a telephone call by Steele to Egon Konig on Friday 21 August, a meeting he had with Mr Konig at 10 am on Tuesday 25 August (the note says "Egon Konig re Warwick coffee lounge"), two diary entries for Thursday 10 September, the first being a telephone call from Steele to Egon Konig and a meeting with Mrs Konig at approximately 3 pm that afternoon. There is another diary entry of a meeting with Mrs Konig on Tuesday 15 September at 9.30 am and an entry for the same day in respect of a meeting with Mr and Mrs Konig at 6 pm at their residence at Carine. There is then an entry of a telephone call to Mr Konig on Wednesday 7 October and the final entry is one on 12 October 1992 indicating that Steele intended to ring Mr Konig on that date.
Egon Konig is unable to recall the date of the telephone conversation or the first meeting but says it was sometime in May 1992.
His evidence was that at the meeting he was given more information about the Entertainment Centre and was shown an artist's impression of it by Steele. It is common ground that this artist's impression was in the form of exhibit D6.
According to his own evidence, Egon Konig stressed that he wanted to be part of the Centre. He said that Steele told him that tenants had already been procured or were in negotiations. Such tenancies included Hungry Jacks, Pancake Parlour and Bistro, Kentucky Fried Chicken ("KFC"), HBF, banks and video store. He says he told Steele that he would sell Egon's Coffee and Patisserie in order to set up the new venture.
Egon's Coffee and Patisserie was sold on 30 November 1992 for $385,000.
The Konigs sold Carillon Beverages for $262,000 and ceased operating that business on 27 October 1993 - which was after they opened the Beverley Hills Café in the Entertainment Centre.
Also at the initial interview, Steele showed Egon Konig plans of both the lower and upper levels of the Centre, although at that stage Konigs' interest was in respect of the lower level.
Again, it is common ground that the plans initially shown to the Konigs were in the form of exhibit P1 (EK7), a larger copy of which was exhibit P2. these showed tenancies 14 and 15 as being part of the complex and at the north‑western corner of the cinema foyer and entrance.
Tenancy no 14 was earmarked for Hungry Jacks and Kentucky Fried Chicken; tenancy no 15 was earmarked for food use. Tenancy no 7 was designated "pancakes". It was adjacent to tenancy no 8 which was that ultimately proposed for the Konigs.
As one entered through the main entrance of the foyer, tenancy no 14 was on the right. Directly facing the foyer was tenancy no 12 earmarked for "bistro" and in the centre of which was an escalator leading to the lower level. Adjacent to that to the left was an area of offices and the ticket office for the cinema whilst to one's immediate left was tenancy no 7. Moving towards the entrance to the cinemas, one would pass tenancy no 7 on the left and then tenancy no 8 as the last tenancy before the cinemas proper. Directly opposite tenancy no 8 to the right as one moves towards the cinemas was the counter area which later became the candy bar. There was nothing on the plans initially shown to Mr Konig to indicate a candy bar.
At that first meeting Mr Konig was given general information about the Entertainment Centre and was asked questions about his qualifications and financial position, which were relevant to whether or not his application for a tenancy would be approved.
According to Egon Konig, somewhere between May and July 1992 he received a telephone call from Steele, inviting him for a further interview. At that meeting ("the second meeting") he was given a standard form containing questions about his financial position and previous experience. Steele told him that it would not matter who had the most money or experience, although those two factors were part of the selection process. WEC wanted tenants who were prepared to stay for some years and not sell the business after a short while to make a profit. That is consistent with the evidence of Carey, McCubbing and Steele.
Following that second meeting, Egon Konig wrote to McCubbing by letter dated 21 May 1992, forwarding a completed assets and liability statement and an outline of his previous experience.
There was a third meeting which Egon Konig thought was about the end of July or early August 1992 ("the third meeting"). Steele and McCubbing were both there. McCubbing told Konig that the coffee shop in the food hall in which he had been interested to that point was already leased to another tenant, but that a better position was available on the upper level. In the course of the meeting, Konig was handed a set of plans for the upper and lower levels of the centre. These were the same as the plans he had earlier been shown by Steele. I accept that the three of them sat around the plans and discussed the possibilities. McCubbing in particular, compared the rentals and associated costs of the upper and lower level tenancies. He wrote various details on the plans. On the plan of the lower level he wrote:
"8 stall holders
Costs p.a.
Approx - $50,000
Inc.    .      rent
.      outgoings
.      food court
.      operating
and $65,000 contribution to establishment of food court i.e. airconditioning, tables, chairs, floorcoverings in dining area, crockery & cutlery for general crockery bank. Depreciable in hands of lessee.
PLUS
Cost of fitting out own stall."
He marked up the various tenancies on the lower level as "Chinese", "Timezone", "Food Court", "Tavern", and "Video". Tenancies 4 and 6 on the lower level he marked as "Business/commercial" with the notation "eg banks, Tandy Electronics, hairdresser, sports store and toy shop."
In the margin of the plan of the upper level, McCubbing wrote the following:
"Size : 137 m²
Net Annual Rental :
$250/m², i.e. $47,950
Outgoings :
Approx $97/m², i.e. $13,289
Hence total cost would
be $61,239 pa or
$5,103.25 pcm or
$1,177.67 pw.
For lease on a
'shell basis'. Airconditioning
etc., wall finishes, floor
covering to be done by
lessee.
Rent reviews :
Annual alternating between
CPI and market with a minimum increase of 6%
Yr. 1  Yr. 2  (5)
3  4
5  6
7  8
etc.  etc"
On that plan, he also wrote in various tenancies:
"Pancakes" (tenancy 7),
"Bistro" (tenancy 12),
"8 Cinemas" (tenancy 13),
"HJ's and KFC" (tenancy 14),
"Food use?" (tenancy 15).
It was Konigs' evidence that McCubbing told him at this meeting that if he took a tenancy on the lower level he would have to pay $65,000 in what McCubbing called "key money". He said McCubbing actually used those words. That was a further incentive for him to consider accepting a tenancy on the upper level of the Centre, because no "key money" was payable in respect of the upper level.
McCubbing denies the words "key money" were used. He said he did not use those words and would not have done so because he was well aware charging "key money" was illegal under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ("the Commercial Tenancy Act"). (I take this to be a reference to s 9 of that Act which stipulates that a provision in a retail shop lease under which a landlord claims key money or any consideration in respect of the goodwill of the lease is void). On the other hand, Konig says he had never heard the expression before.
So far as the tenancies are concerned, it was Egon Konig's evidence that McCubbing wrote on the plan those whom he said had agreed to be tenants. These were Hungry Jacks and KFC, Pancake Parlour and bistro. He says McCubbing told him the Entertainment Centre would include an Indian restaurant or bistro and negotiations were underway with Pancake Parlour. Konig says he believed that having Hungry Jacks and KFC as part of the upper floor site was a real bonus and incentive as well as a positive reason to become part of the Centre. That factor he says, convinced him to enter an agreement with the defendant to lease a tenancy on the upper level.
The tenancy which McCubbing said was available to the Konigs was No 8. That is the one they took for their business which they subsequently called "Beverly Hills Café". The number of the tenancy was changed in September 1993 from 8 to 15.
It seems to have been at the third meeting that the pleaded misrepresentations were said by Egon Konig to have been made by McCubbing and Steele.
Konig testified that McCubbing said that not only would the Konigs be able to attract patrons who attended the cinema, but they would also obtain "spin‑off sales" from those using the parking premises at the entrance to the Entertainment Centre and availing themselves of the shopping facilities in the Shopping Centre.
Furthermore, he says he was told by either or both of them at this meeting that neither they, nor any other tenants could sell drinks, ice-cream, popcorn or any other food directly into the foyer "as they did not want the mess like other cinemas had experienced in their foyer".

This, Konig says, made him believe nobody was going to be selling food into the foyer and that anyone who wanted food or drink would have to come inside the shops. That further created the belief in his mind that the competition amongst the shop holders in the area would be similar; that is, customers would come into the area and then select which type of food they wanted and then step inside the shop and that the businesses within the various tenancies would complement each other.
He testified that at the meeting McCubbing repeated the statement in the advertisements that their business could receive considerable customer traffic from people using the Shopping Centre. The figures in the advertisement of 85,000 people per week attending the Shopping Centre and a projected flow of in excess of one million people per year for the cinemas, were a major factor influencing their decision to enter into a lease.
He says it was represented to him by McCubbing that he would receive much customer flow‑through from the eight cinemas from the cinema lobby and that there would be "an enormous amount" of customer flow‑through from the Shopping Centre of about 85,000 people per week.
This was confirmed by McCubbing's own evidence. He testified (t 697) he told Konig there would be hundreds of thousands of people per year going to the cinema complex, so because of that passing trade past the window or entrance of the tenancy it would be noticed by a "huge amount" of people, whether they be going for a movie to go and patronise any other tenancy in the complex.
The plan (Ex P1 EK7) does not show the Shopping Centre. It is a plan only of the Entertainment Centre development property itself. The whole Regional Shopping Precinct is bounded by Beach Road to the south, Dorchester Avenue to the west, Erindale Road to the east and Dugdale Street and Ellersdale Avenue to the north. The Entertainment Centre (including its associated car parking areas) occupies approximately one‑third of the whole developed area at the south‑western corner of the precinct. It is apparent from the evidence generally, and in particular from the plans and aerial photograph (ex D5), that the area of the Shopping Centre development (which was already well established in 1992) is on a higher level than the Entertainment Centre and physical access from it to the Entertainment Centre is restricted. There is a drive‑way ramp from the Shopping Centre rooftop car park which leads into the northern end of the Entertainment Centre car park and there is limited pedestrian access from the north‑eastern edge of the Entertainment Centre parking bays.
It was Egon Konig's evidence that from the photographs (ie the artist's impressions) which were hung in the office in which the meeting took place, and from what was said to him by McCubbing, he gained the distinct impression that the Shopping Centre would be on the same level as the Entertainment Centre, whereas, because of the ultimate difference in elevation, a customer of the Shopping Centre, would need to make no use whatever of the Entertainment Centre car park. He said customer flow from the Shopping Centre as well as to the Centre generally, was part of the reason he entered into the agreement and was considered very important by him to the extent that he "… may well have reconsidered the agreement if [he] had known there was to be no such customer flow".
A third meeting concluded on the basis that Konig would discuss the matter further with his wife.
The Konigs then made enquires with their accountant Mr Paul Raats, who is a Public Accountant and registered Tax Agent. They also made enquiries of a real estate agent by the name of David Gaubert, who at that time was with a real estate company "The Professionals".
Having received advice from their accountant and the real estate agent, Mr Konig advised Westpoint Realty they were prepared to go ahead with a tenancy at the Entertainment Centre. They later received a letter advising that Alpine Holding's tenancy application had been approved. Egon Konig says that he was then told about the "do's and don'ts" of the prospective tenancy.
There was a fourth meeting ("the fourth meeting"). Although not entirely clear about it, Egon Konig recalled it taking place sometime between August and 9 October 1992. Apart from him, there was Steele and Mrs Konig. McCubbing came in briefly but did not remain. The fourth meeting was the first one attended by Shelley Konig. Egon Konig says it focused on re‑emphasising the layout of the tenancies. Shelley Konig could not recall clearly the exact topics of conversation at that meeting, but did remember that her husband asked Steele if other tenants had been signed up for the upper level and that Steele advised that negotiations were going very well with all tenants. She added that neither Steele nor McCubbing said there would be any change to the tenancies or the tenants from those previously advised to her husband, namely, that Hungry Jacks and KFC were confirmed tenants and would be inside the complex on the same level as the coffee shop venue. She testified this was represented to them by McCubbing who set it out in his own handwriting on the floor plan of the complex. That, I think, can only be a reference to what had been written on the plans by McCubbing at the third meeting - at which she had not been present. She did testify however, that no mention was made by Steele or McCubbing about any changes.
Shelley Konig had earlier said that after a meeting in July or August 1992, her husband came home and told her that after talking to McCubbing, he was considering applying for a coffee shop venue on the first floor of the complex rather than for the food hall area. She stated that her husband told her Steele and McCubbing had told him that the coffee shop venue was a far more attractive proposition "… because of its location, its sole right to sell cappuccino, and the large number of patrons that would pass through the doors" (T 240). She testified that her husband was also told that customers would be encouraged to eat in the coffee shop because they would not be permitted to take food or drinks into the actual cinemas and furthermore that no shop would be permitted to sell into the common foyer area (T 241). She stated that after that they were excited about the prospect of becoming part of the new complex.
Egon Konig testified there was a fifth meeting on or about 9 October 1992. Mrs Konig said it was around late September to early October. This was the occasion Steele came to their home at Carine in the evening.
The Konigs and Steele all agreed Steele came to their house only once. I am satisfied on the balance of probabilities this was the visit noted by Steele in his diary for 6 pm on Tuesday 15 September, but that he was late and probably arrived about 8 pm or even later.
There is a major conflict between them about what occurred on that occasion.
The Konigs say Steele had with him an agreement for lease which he pressed them to sign with "a certain sense of urgency", the reason for which Egon Konig could not recall. The Konigs say Steele did not explain the agreement for lease to them and pre‑empted their request to see plans by telling them that the plans would be attached later. They say that as they did not know Steele was coming to see them that evening, they had not sought any legal or financial opinion in relation to the agreement for lease and no‑one from Westpoint Realty at any time suggested to them that they should do so. They say that at the time of signing the agreement for lease on that occasion, they understood the construction and layout of the Entertainment Centre was going to be as conveyed to them in the plans and advertisements that had been provided to them previously.
The Konigs say that the agreement for lease document (ex P1 (EK10)) signed by them and witnessed by Steele, is the document they signed that night.
That exhibit is executed by them on behalf of Alpine Holdings as the lessee and signed by them individually as guarantors. The only date purporting to be an execution date, appears on the title page of the document and that is 4 February 1993.
The document is a photocopy. It is of 25 pages. There are no plans attached. The Konigs' personal and financial details and the other information specific to the transaction have been typed. I accept the submission made by counsel for the first and second defendants, that this could not have been the documents the Konigs signed on 15 September 1992 because the solicitor's office identification code on the last page bears the printed date "02/11/92".
There is a Westpoint Realty receipt dated 12 October 1992 (ex P1 (EK11)) made out to the Konigs, signed by Steele, for an amount of $5,103.25, described as a deposit on tenancy 8.
The procedure was that prospective tenants would complete a signed agreement to lease which Steele or McCubbing would then present to Carey, who was the only person who could decide whether or not to accept them as tenants. If he did so, the first defendant would then execute the agreement.
Carey testified that either McCubbing or Steele had earlier informed him of Egon Konig's interest in taking a tenancy for use as a coffee shop and commended him as a sound financial and commercial prospect. According to Carey, during the course of the negotiations with Konig, McCubbing came to see him and told him Konig had asked for the exclusive right to sell coffee. Carey's evidence was that he told McCubbing there was "no way" such an exclusive right could be granted because other tenants would also need to serve coffee as incidental to their businesses. In cross‑examination he said he was sure the request put to him was about coffee, but his response would have been the same if it had been cappuccino. According to Carey, sometime after this, but prior to the first defendant entering into the agreement to lease with the plaintiffs, he met Mr Konig. One of the purposes of that meeting was to enable him to gauge whether Konig would be an appropriate tenant. Konig was very enthusiastic and keen to impress Carey. The meeting was brief. Carey's recollection was that it took only about 10 minutes. During the course of it, Konig reiterated his request for an exclusive licence to sell coffee on the first level. Carey repeated that he could not agree to that because it would be unfair to other tenants who would need to serve coffee. Carey testified that following that meeting he executed an agreement for lease, and later the lease itself. He did not meet the Konigs again until sometime after they had taken up the tenancy.
Exhibit P1(EK14) is a letter dated 9 October 1992 from the first defendant's solicitors, Parker & Parker to the Commercial Registrar. The exhibit itself is a copy and obviously not complete, in that documents which are referred to are not attached to it. The letter advised that the first defendant and Alpine Holdings proposed to enter into an agreement for lease of the premises shown on the plan attached. It stated that the agreement for lease had annexed to it the form of lease which the parties would execute upon completion of the construction of the Centre. It noted that the agreement for lease documents had been prepared "but not fully executed". The purpose of the letter was to apply on behalf of the first defendant pursuant to s 13(7) of the Commercial Tenancy Act for approval of the inclusion in the proposed lease of certain paragraphs, copies of which accompanied the letter. On the second page, after the signature for Parker & Parker, was the following indorsement:
"The lessee acknowledges that it has been shown a copy of the proposed lease and a copy of this letter and that it has no objection to the lessor making application referred to in this letter."
To that indorsement was affixed the common seal of Alpine Holdings, attested by the signatures of the Konigs.
The inferences to be drawn from this letter are that the parties proposed to enter into the agreement to lease and that document had been executed by the plaintiffs but not by the first defendant. The letter itself was probably signed by Parker & Parker and by the plaintiffs on or immediately after 9 October 1992. There was a suggestion that Steele had taken this letter to the Konigs' home on 9 October 1992 for them to sign urgently, but that seems to me to be unlikely. He visited them at home only once, and as I have found, that was on 15 September 1992.
Steele's evidence was that the Konigs had a signed agreement to lease when he called at their home. The usual practice was for he or McCubbing to give to prospective tenants three documents clipped together. They were the agreement to lease, the Tenancy Fitout Guide and the proforma lease. It accords with common‑sense that those documents should be given to prospective tenants before they were asked to sign them.
Exhibit D1(A) is an early version of a document titled "Agreement for Lease". This is a proforma draft with blank spaces for insertion of the details required for particular tenants and tenancies. Thus, handwritten details here include the name "Alpine Holdings Pty Ltd" as lessee, the names of the Konigs as guarantors and the description "Coffee Shop Warwick Entertainment Centre". At p 20, cl 29 is headed "Special Conditions". There is a handwritten clause "subject to settlement of Egon's Coffee Shop, Carillon Arcade, Perth by 2/10/92" with the Konigs' initials. However, a line has been drawn through that. The blanks in the schedule have been completed in handwriting. On this document some of the writing is that of Steele and some is that of McCubbing. The Konigs' initials appear next to both. McCubbing was not present at the Konigs' home on 15 September 1992 (nor at any time). Even more significantly, the Konigs' signatures attest to the fixing of the common seal of Alpine Holdings and the same page has been signed by Raats and bears his office stamp. Raats' diary shows he had a meeting with the Konigs on 1 September 1992 to discuss a five year plan for the Beverley Hills Café. He would have needed the rental figures for that. The additions to the draft which are handwritten on ex D1(A) are all typed on ex P1(EK10). The draft agreement to lease, ex D1(A) was prepared sometime after 3 July 1992 (that date being printed with the solicitor's office identification) by McCubbing and Steele, necessarily on information provided by Mr Konig and almost certainly in conjunction with him. It was a document which he had with him when he sought advice on the proposed tenancy from Raats, probably around 1 September, if not earlier. That advice having been obtained, he informed Steele or McCubbing that he wished to proceed with the tenancy. The typed document ex P1(EK10) was prepared subsequently, but that could not have been before 2 November 1992.
In cross‑examination Steele said what was signed (or given to him) on 15 September, was the handwritten version from which the formal documents were prepared. On 15 September they did not have the approval of the commercial registrar nor that of the Department of Planning and Urban Development.
However, Steele had no actual recollection of these events. He frankly conceded he was doing his best to reconstruct them from his examination of the documents. Nonetheless, I am satisfied he is correct on this point.
There is in evidence another document headed "Agreement for Lease". That is part of ex D2. It bears the handwritten date 4 February 1993. It is a photocopy of the same document as ex P1(EK10). It bears the solicitor's printing date of 2 November 1992. Exhibit D2 runs to 77 pages and has plans attached. Those plans show the fast food outlets in their stand‑alone drive‑through configuration and bear an architect's date of July 1993.
On the evidence, I think it most likely that the Konigs had been given the three standard documents under a bulldog clip, comprising the proforma agreement to lease, ex D1(A), the Tenancy Fit‑out Guide and the proforma lease, which they had then discussed with Raats and Gaubert. Having decided to proceed with the Beverley Hills Café, they completed the agreement to lease document by hand and executed it. Raats also signed and stamped the document. This was the original of ex D1(A). There are no plans attached to that exhibit. I am satisfied that in the same way they also completed the draft lease document, a photocopy of which is ex D1(B). The proforma is marked "first edition" and bears a solicitor's identification number and date of 1 July 1992. It has been executed by the Konigs and witnessed (in several places, unnecessarily, by Raats). Plans are attached to that document and tenancy 8 is initialled by the Konigs. The plans show the original proposed layout, in particular with the fast food outlets shown as internal tenancies.
An original executed and stamped agreement to lease was eventually provided to the Konigs under cover of a letter dated 16 December 1993 from Mr Ian Scott of Westpoint Realty. Although the letter was in evidence, the original stamped agreement was not.
Exhibit D2 was a composite set of documents, comprising the typed and executed agreement for lease dated 4 February 1993, together with the Tenancy Fitout Guide and the proposed lease, with plans attached. But there is a conflict about whether the documents were ever in that composite form. The second and third plaintiffs say they were not. They certainly could not have been in September 1992 because that lease document was not printed until 2 November 1992.
The Konigs were adamant that they were not given a copy of the plans of the Entertainment Centre until they received the lease for execution in September 1993. There are no plans attached to the agreement to lease document, whether as ex P1(EK10), D1(A) or that document forming part of ex D2. As I have observed, the first version of the lease was that in ex D1(B) and that does have plans attached - however they show the fast food tenancies as internal to the building. The plans attached to the original executed and stamped lease (ex D3) show the fast food outlet as external tenancies. The dates on that document are confusing. It bears a handwritten date 21 February 1994, but there are two stamp duty office stamps, one bearing the date 4 February 1993 and the other being 23 February 1994. Whatever the position may be though, the earliest possible date of that document is February 1993.
I am satisfied that the Konigs were given a copy of the plans of the Entertainment Centre in ex D1(B) before September 1992, but those plans showed the fast food outlets as internal to the premises.
Although the Konigs were not required to pay a deposit until the agreement to lease was fully executed (cl 14.1) and WEC could not have executed it until sometime after 2 November 1992, their earlier payment of a deposit of $5,103.25 is evidenced by receipt ex P1(EK11) dated 12 October 1992.
The term of the lease was 15 years, with a further term of 10 years. The starting rent was $47,600 per annum ($350 per square metre). There were two‑yearly rental reviews.
By letter dated 18 January 1993, Westpoint requested the Konigs to provide details of their tenancy fit‑out by 15 February 1993.
Between 9 June and 6 July 1992 there was a series of letters from McCubbing on behalf of Westpoint, outlining the tenants' obligations in respect of the procedure for the fit out of their tenancies. He advised first that the tenancy would be ready for lessee's works by 8 July, but later changed that to 5 July.
On 22 July 1993, Scott wrote that it was anticipated the Entertainment Centre would open in the first week of August.
Most of the Konigs' shop fittings were prefabricated at the contractors premises. The Konigs did not have access to the Entertainment Centre site until about late August or early September 1993.

The lease documents in triplicate were sent to the Konigs for their execution under cover of a letter from Westpoint dated 28 September 1993. They said it was only then they realised that the plans of the upper level of the Centre were not the same as those which had been shown and explained to them by McCubbing and Steele. The Konigs complained that rent was payable by them two weeks prior to their opening, even though only two tenants out of approximately 20 had opened for business at the Centre at that time.
According to Mrs Konig, because the development site was fenced off and they were refused access from before construction commenced until September 1993, she and her husband were unable to see how building was progressing and that the layout was different to the plan showed to them by McCubbing in August 1992. She says they were given access about 8 September 1993 and only then realised that the layout was different.
She said the differences were that a candy bar for the cinema had been built in the foyer opposite Beverley Hills Café and there were two large pillars in front of, and almost obstructing the coffee shop's car park entrance. The fast food outlets were now drive‑through venues and were not tenants in the first level of the complex as shown on the plans they had seen.
Although they were concerned about these changes, they had already spent a large amount of money for the interior design and equipment and so continued to prepare for the venue opening.
Mrs Konig employed some 12 staff to start work upon the opening of the coffee shop. She had uniforms especially made for them. Menus, serviettes and the like were printed and crockery and other items were purchased.
The Konigs say that Steele and McCubbing had told them that Westpoint would provide a grand opening for the cinema complex, but that did not eventuate. The cinema complex opened on 11 September to coincide with a Telethon event and Beverley Hills Café opened on 27 September 1993. According to the Konigs, the following weeks were very quiet. All of the shops surrounding the coffee shop were vacant and part of the complex was still incomplete.
In an effort to reduce expenses, Mrs Konig reduced the number of staff members at the café and did much of the work there herself.
When the lease documents arrived, forwarded under cover of the letter from Westpoint Realty dated 28 September 1993, the Konigs delayed signing them because the business was going badly, the complex was still not fully leased and building material was still to be seen in uncompleted sections of it.
In his evidence, Egon Konig identified differences between the plans they had originally been shown and what actually happened. He said the Konigs had originally been told that Hungry Jacks and KFC would be part of the Centre and located on the same floor as their tenancy. In fact the tenancies were taken by McDonalds and Chicken Treat, but instead of being located within the Entertainment Centre and on the same floor as the Konigs, they occupied drive‑through restaurants which were outside the Centre proper. The Konigs had no difficulty with McDonalds and Chicken Treat instead of Hungry Jacks and KFC; their concern was that these tenancies were no longer within the Entertainment Centre itself.
The Konigs say that they were originally told by Steel or McCubbing or both, that their's would be the only café in the cinema foyer, yet tenancy 23 was empty until 5 May 1994 when it opened as Frederico's Café which traded in competition with them as a café/restaurant and bar. Frederico's Café later became "Bronco's" and then "Creations for Food" and most recently "Topolini's". Egon Konig said the competition from Frederico's Café added a further burden to their budget and that the decision to allow business not unlike their own in such close proximity was extremely prejudicial to them. They had understood from discussions with McCubbing and Steele that they would have the sole right to run a café. Amongst other things, Frederico's Café added cappuccinos for sale and their signage described them as a "café" as well as a restaurant.
The tenancy immediately adjacent to the Beverley Hills Café was "Deadly Desserts". That was split in two and a further business, "Tradefire", opened in January 1995 between Deadly Desserts and the Beverley Hills Café.
One of the major complaints of the Konigs in evidence was that there were two large pillars on the inside and two on the outside of their tenancy which obscured customers' views of their shop from the car park. They said that at the time of entering into the agreement for lease, they were unaware of the pillars. Egon Konig testified that had he known of the existence of the pillars and their size, he "may not have entered into the agreement for lease".
According to Egon Konig, two or three weeks before the Beverley Hills Café opened, a candy bar was placed in a position opposite their tenancy where the Konigs had understood, from what was told to them by Steele and McCubbing, that a ticket counter would be. He said the candy bar started trading into the foyer, which was something which they were not allowed to do and so was competing on terms quite unfavourable to them.
They also discovered, that upon opening, the cinema had roped off the area immediately in front of the shops, and particularly in front of Beverley Hills Café, during busy periods to help with customer flow to the candy bar and cinema. The ropes were placed there by the cinema management and although the Centre management was aware of them, nothing was done to prevent it. The flow of cinema patrons was thereby controlled in such a way as to result in customers being unaware of the existence of Beverley Hills Café.
The Konigs had two complaints about customer access to and from the car parks. The first was that the design and construction of the Entertainment Centre's car parking facilities effectively isolated their shop from the car parking area serving the shopping centre component of the Centre. The car park was on a lower level to the cinema centre in which their shop was located and the parking facilities serving the cinema centre was surrounded by a retaining wall. Access between the two levels of parking facilities was by stairs and a ramp which made access cumbersome for the public and so discouraged shoppers using the car park and therefore the Beverley Hills Café. Their second complaint was that customers from the cinema were often made to use exits that took them straight into the car park, rather than into the foyer. This obviously meant cinema patrons were not returning to the cinema foyer and so not passing the Beverley Hills Café.
On 29 September 1993, only a couple of days after their business opened, Mrs Konig wrote to Westpoint Realty, confirming an earlier conversation with Scott in which the Konigs had requested approval to put some tables and chairs on the footpath outside the café to enhance their business. They also sought permission to have a sign writer paint a "now open" sign on the lower portion of the window of the empty shop next to the Beverley Hills Café so as to advertise the café but more to hide the unsightly condition of the empty shop.
On 6 October 1993 Mrs Konig wrote to Westpoint Realty advising that the Konigs strongly objected to the recent account for rent received from them. They objected to being charged rent from 15 September, particularly since they had only opened for business on 27 September. Amongst other complaints she made were that to date their's was still the only shop open inside the complex, the appearance of the other shops in their various stages of completion was very unattractive and discouraging customers, the workers' vans continually in front of their shop also detracted from it and led to the impression they were still not open for business and that the takings for their first two weeks of trading would not cover wages, let along other outgoings. She also complained that when they originally signed the agreements, they had been led to believe they would have the monopoly in the coffee shop trade and it was not until they were nearly ready to open that they discovered that a business that would be in direct competition with them would be opening almost next door. Their "out of meal time" trade was almost completely cakes and coffee and that was exactly what "Deadly Desserts" would be selling. She argued that taking all of those matters into account, they should be given a rent free period until 15 October so that they could establish themselves and give the other shops time to open and make the whole venture more attractive and viable.
On 22 October 1993 Westpoint wrote to the Konigs approving their request to install two tables and chairs outside the tenancy on the northern side and to put limited signage on the adjoining tenancy.
On 6 December 1993, Mrs Konig again wrote to Westpoint. This time her first complaint was as to the state of disrepair of the front door of the café, which she said was extremely heavy and difficult for some customers to open. She expressed alarm at having recently heard that management intended to install a large sign at the top of the escalator, directing people to the food hall and tavern. She insisted that a sign of similar size be placed on the bulkhead at the bottom of the escalator directing people to the Beverley Hills Café. She then continued:
"Further, before signing our agreement with you we were informed which other businesses would be operating on the Cinema Level. Under these conditions we signed. Now we find that we are the only tenant open for the whole day Monday plus 9.30am to 3.30pm for the rest of the week. Therefore the Cinema level is generally completely empty during these hours as there is nothing to attact (sic) customers except for our Café which is tucked away and out of sight of people new to the Complex. Our trade is therefore affected to the point where our takings for the week average between $3,000.00 and $4,000.00 which gives us an operating loss of $2,000.00 per week. This sort of loss cannot be absorbed for an indefinite period."
On the basis of those concerns, the Konigs requested a rent review and reduced hours of trading.
By letter dated 14 December 1993, Scott acknowledged receipt of the Konigs' letter and advised that it had been passed to the owners for their attention. There was no other response to that letter.
In December 1993 the Konigs sought legal advice. That was to the effect that because they had signed an agreement to lease, they were obliged to sign the lease documents but that they could take legal action later.
On 23 December 1993 the Konigs' then solicitors, Murie & Edwards, wrote to Westpoint Realty referring to unspecified "difficulties" which the Konigs had faced in their business, arising out of representations made to them by the lessor and/or Westpoint Realty prior to them entering into leases (sic) in relation to the Entertainment Centre. They added that there were "various other complaints relating to unsatisfactory conditions which had had some impact on the profitability of their clients' business and appeared to have impeded its future growth", some of which had been addressed in the Konig's letter of 6 December 1993. The solicitors asked that their interest be noted and a response be made directly to them. They wrote that they wished to open "further lines of communication in the hope [the] matter [could] be resolved without litigation".
There was no response to that letter. I will refer later to Carey's explanation for that.
Mrs Konig's evidence was that she had sold her own ballet teaching business to be at home with their two sons. She had not intended working at the café. However, as it became evident that the business was going badly and they needed to cut expenses, she found herself working there and for increasingly longer hours. Their personal financial circumstances had become difficult. This was reflected in serious stress and strain on the family.
Frederico's opened on 5 May 1994.
By August of that year the Konigs were trying to sell the business. They appointed an agent for that purpose. On 31 August 1994 they wrote to Carey detailing their complaints and concerns. These were reiterated in their evidence.
They observed that the projections provided to them by or on behalf of the developer indicated that the operation of a business in the cinema complex was feasible, and although they regarded them conservatively, the Konigs nonetheless relied upon them to establish their initial budget which led them to anticipate a reasonable level of profitability. They noted that to August 1994, they had outlaid in excess of $240,000 on the Beverley Hills Café business. They said that their first quarter of trading (October to December 1993) was disastrous, with a loss of some $23,000 and although the last quarter (February to May 1994) had reduced their losses to a break‑even situation, the cash‑flow and profitability had not allowed them to draw wages, even though they were both working in excess of 100 hours a week in an effort to reduce overheads and running costs. They asserted that their difficulties were directly attributable to the following facts.
First, they said they were originally told that McDonald's and Chicken Treat would be located in the main complex. The original plans however changed and that did not occur. When they signed the agreement to lease, that did not contain the plans, although they were told that plans would accompany the signed lease upon approval. They complained that no disclosure statement was ever received, even though they had been given a verbal assurance that one would be provided. They said that McCubbing told them the upper level of the complex would include an Indian Restaurant, a Pancake Parlour and a bistro, but that had not occurred. Rather, the tenants then occupying that level included a Federal Member of Parliament, Timezone and "Deadly Desserts". That last sold coffee, cakes and Devonshire teas which were lines which had been promised to the Konigs. They complained that Beverley Hills Café was hidden by two large pillars, contrary to the initial plans shown to them and although they had arrived at a solution to that problem, their proposal to install extruding signs had been refused.
They complained that they had been told they would have a prime location, however, when the cinemas were full, all patrons were let out through emergency exits on the lower level, which led all potential customers away from the café. They said that shops on both sides of them were still vacant and that although original artists' impressions shown to them had extensive landscaping, none of that had been carried out. Although the upper level had signs indicating the food hall and tavern, the lower level had a sign indicating the cinema only, giving no indication to potential patrons of the Konigs' facility to sell food and beverages on the upper level.
They reiterated their complaint that they had been told by McCubbing and Steele that they could not sell drinks, ice creams, popcorn, nor any other food into the foyer as the cinema owners "did not want the mess like other cinemas …" Because of that, they said their café had been redesigned so that customers would have to come right inside to purchase and they would have no provision to sell into the foyer itself. However, two weeks prior to opening, they discovered that the candy bar opening directly opposite the Beverley Hills Café would be able to sell all the items forbidden to them.
Further complaints included that they were hindered from displaying and advertising prices "in a professional manner" although other shops were able to do so, that they had to pay rent two weeks prior to opening even though only two tenants out of 20 or so had opened for business at that time, that they had not received any response to their request of November 1993 to shorten their trading hours. They complained they had previously explored the possibility of opening their business in the Whitfords area rather than Warwick, but had relied upon "an unconditional verbal assurance" that a cinema complex would not be constructed in Whitfords whereas they had since discovered that a six‑cinema complex had been approved for the Whitfords area.
Finally, they complained that Frederico's restaurant had commenced trading in May 1994 as a café/restaurant/bar contrary to original advice given to them that they would be the only café in the cinema foyer. They complained that the decision to allow a business not unlike their own in such close proximity had extremely prejudiced "a right which at all times has been implied as being our sole right."
In essence, they complained that they had been misled by misrepresentations made to them and as a result of which they had suffered significant losses. They particularly relied upon their assertion that the plans accompanying the final lease agreement were "drastically" different from those originally shown to them. They concluded that unless Carey was prepared to discuss and agree upon compensation, it would be necessary for them to sell the business and take legal action to recover their losses.
Shortly afterwards, the Konigs made an appointment to see Carey to discuss the issues raised in the letter. They say that was the first time that either of them had spoken to, or met, Carey. According to Mr Konig, Carey was quite frank and made it clear that he did not wish to discuss the letter. He told them their rent was not too high, but their turnover was too low and they should work to correct it. Their impression was that he was quite dismissive about their predicament and they left the meeting very disheartened.
As I have already observed, Carey's evidence was that he met Mr Konig briefly prior to deciding whether or not to enter into the agreement to lease. He acknowledged a further meeting with both Mr and Mrs Konig sometime after they had taken up the lease. His understanding was that they had come to see him to seek a rent rebate or reduction on the basis they were having difficulty making a profit from the tenancy. He did not have a recollection of their letter of 31 August 1994 and he would not necessarily have seen it. If he had done, there was no reason he would not have been prepared to discuss it with them. He did agree that, at what he described as the second meeting, he reviewed the Konigs' financial accounts for the coffee shop business and told them, in effect, that the problems they were experiencing were not the result of rental costs and general overheads, which were not out of line with industry averages, but lack of revenue. He testified that he suggested they needed a business plan to attract further business to generate greater revenue and may need to adapt that plan to take into account that they were in an entertainment centre and not a general shopping centre.
The base rent for the Beverley Hills Café as at 1996, was $416.86 per square metre. Other tenancies in the Entertainment Centre were paying more; some were paying less. The Chinese restaurant was paying the same rate. The evidence shows, and I accept, that the rent payable by the Konigs was consistent with that being paid by other tenants of the Entertainment Centre. Whether they were in line with industry averages is not something I am in a position to determine.
On 12 July 1995, Mr Konig again wrote to Carey. He pointed out that their business had been operating for 22 months and the trading figures were still below $5,000. He pointed out that while Frederico's restaurant was operating (it appears to have terminated in the meantime), their trading figures actually rose - which he suggested proved their "legal claim", that if there had been the variety of four restaurants as indicated on the original plans, they would be in a far better financial position. He complained that Westpoint had done very little to give the upper level of the Entertainment Centre a good appearance. The shop next to them and on the outside entrance was still vacant as it had been since their opening. The windows had never been cleaned and the inside of the shop was littered with building material and rubbish. The paving in front had gaps and Frederico's signage had been vandalised. He complained that they could not be expected to perform well when the front appearance of the building was so neglected and the whole of the upper level was totally lifeless at night except for the Beverley Hills Café.

Konig wrote that the main purpose of his letter was to make the point that after 22 months of struggling, they had found it was no longer possible to open on a Monday as takings for that day ranged between $135 and $300, which was barely enough to cover wages. He said that as there was no variety of restaurants to attract customers, the whole Entertainment Centre was virtually dead in the day and some of the evenings. Unless they were to receive some sort of rent reduction, they would have to consider opening evenings only. Closing during the day would not only save money but would allow him to seek employment to help cover the loss of income.
There was no reply to that letter.
In cross‑examination, Carey said he did not specifically recall that letter but there would not necessarily have been a reply to letters of that kind. Such matters were dealt with at the property management level and the people dealing with them had a wide discretion. The policy was to try and be proactive and solve a problem with a tenant, rather than engage in dispute by correspondence or through solicitors.
On 14 July 1995 the Konigs appointed Joseph Charles Learmonth Duffy as agent to sell Beverley Hills Café and on 2 February 1996 they appointed Roy Weston similarly.
On 9 April 1996 the Konigs wrote to Daryl Goad of Westpoint Realty, advising that Mr Konig had found it necessary to apply for daytime employment because for the past 2‑1/2 years the café had not been able to take enough money during the "lunch trade" to justify remaining open. When Mr Konig was successful in obtaining employment, it would be necessary for them to close the café during the day. They said that even after 2‑1/2 years of very hard work, their rent was between 25 per cent and 30 per cent of their turnover, which was an excessively high amount, and that after having the business on the market for two years, they were still unable to sell because of that. They mentioned that the only offer they had received was for "the pitiful amount" of $20,000. They requested an immediate 30 per cent decrease in their rent so that the business could run on a worthwhile basis at the present operating hours.
Goad replied on behalf of Westpoint Realty by letter dated 12 April 1996. He noted their comments and advised that he had referred their request to the Entertainment Centre owners, although there was insufficient information contained in it to warrant a reduction as sought. He also pointed out that the lease required them to remain open for business during the hours specified in it.
In their reply dated 5 May 1996, the Konigs pointed out that they had the shop listed with five different agents over the past 28 months, but each of them had been unsuccessful in securing a buyer and each of them had complained that it was because the rent and outgoings were too high. Although Mr Konig repeated this in evidence, the assertion in that form is, of course, hearsay, and I do not accept it as evidence of what was asserted, only the fact that it was.
In the letter the Konigs instanced April, which included a supposedly busy time of two weeks school holidays plus Easter. During that period, they had takings of $21,927 whilst the rent, outgoings and rates was $5,800 - a "rent" percentage of 26.36 per cent.
So far as the hours of business were concerned, they pointed out that for two years they had been surrounded by empty and closed shops, but had never been given any rent reductions, notwithstanding the obvious adverse impact that had on their business. "Deadly Desserts" was only ever open in the evenings, even though the lease for that business stipulated hours similar to the Beverley Hills Café.
They further pointed out that there were then three food outlets in the foyer, all of whom sold cakes and cappuccinos, even though the Konigs had signed a lease on the understanding they would be the only such venue.
They said that although they were initially pleased to have the Chinese restaurant as another tenant on their level, when that restaurant began to sell cappuccino, cakes, chips, pies, fruit salad, Danish pastries and other such items, they realised that it was not a Chinese restaurant but simply a duplication of their business. They said exactly the same could be said of "Broncos", which was advertising itself as a café.
Between August 1994 and September 1996, the Konigs had appointed five agents to sell the Beverley Hills Café.
About September or October 1996, Mr Konig had what he described as his second and final meeting with Carey at the latter's West Perth office. He had learned that Westpoint was considering building onto the complex to add a megascreen cinema. He proposed to Carey that it would be a cheaper option for Westpoint if they were to use the existing cinema next to the Beverley Hills Café, the space occupied by the café, together and the vacant shop next door which had been "Tradefire". That area could be used for the megascreen, rather than adding to the building. As compensation for leaving the business he asked for $50,000 plus the equipment, which he would sell. Mr Konig says that Carey told him he would consider the proposal, but although he waited for several weeks for a reply, none came. He testified that he telephoned Carey who told him that he had decided not to proceed with the megascreen, but 12 months later, one was built as an addition to the building.
According to Carey, this was his third meeting with Mr Konig. His testimony was that his response to Konig's proposal was that the cinema operators might wish to put in a megascreen but may not need further space and in any event he doubted the Konigs' tenancy was suitable for it. He testified that he queried whether Konig was serious about wishing to leave the Entertainment Centre, to which Konig responded that he was because he had been unable to improve the figures significantly and believed it was best for his family that they leave. According to Carey, he told Konig that if the latter undertook to keep the business running to a reasonable standard, he would work towards assisting them to effect an exit, to which Konig agreed.
Carey agreed that the megascreen was eventually built, but there were particular technical design requirements relating to the width and length of the auditorium based upon the focal length and size of the screen which meant it was not suitable to build it in that location in any event.
There was further correspondence between the Konigs and Westpoint Realty in October 1996. Not all of it is in evidence. It is not clear whether the meeting just described preceded that correspondence or was a result of it. It appears there was an undated letter from the Konigs which was received by Westpoint Realty on 9 October 1996. That is not before me. There is, however, a reply from Goad dated 18 October 1996 in which he acknowledged receipt of their cheque for $4,349.18, being part payment of rental for that month. He noted their letter did not advise when the balance of $3,000 would be paid and he requested a post‑dated cheque for the outstanding amount. He wrote that Carey would be overseas on the date the Konigs had requested for a meeting and that he assumed the purpose of the proposed meeting was to discuss and seek assistance with regard to comments made by the Konigs in their letter. He said that should that be the case, there would be no benefit in discussing it without sufficient preparation and presentation of sufficient meaningful information to enable full consideration to be given to the request. He accordingly enclosed a proforma document requiring the provision of certain information and he also requested other information including the last two years profit and loss statements and balance sheets, cash flow and profit and loss projections for the current financial year, a current statement of assets and liabilities and an update of the position regarding the sale of the Konigs' house and business. The only other evidence which I take to be in relation to that was from Mr Konig who produced (as exhibit P1(EK46)) copies of financial statements which he said were submitted in an effort to obtain an abatement of rent prior to vacating the premises.
ABPS Real Estate and Business Brokers ran an advertisement for the sale of the business in "The West Australian" newspaper of Wednesday 24 July 1996. This advertised the business as a "fantastic opportunity superb business …" with a long lease and in a "stunning location" in a northern entertainment centre. The net profit was said to be $70,000 per annum and the vendor was asking only $115,000 for a quick sale.
The Konigs' attempts to sell the business were markedly unsuccessful.
On 30 December 1996 they signed an agreement for the sale of it to one Peter Plank for a gross purchase price of $6,000 but settlement did not eventuate.
In January 1997 they signed an agreement for sale to Mr and Mrs Lilburne for $8,000. This was subject to conditions that a satisfactory assignment of the lease or a new lease would be granted by the landlord to the purchasers, that the lease be for a three year term with three options to renew, each of three years, and there be a rent reduction of 10 per cent plus a 2 per cent reduction of the minimum increase, to 4 per cent per annum.
The Konigs anticipated that all of this would be agreed to by Westpoint. The Lilburnes were seeking to purchase the business for their daughter, who was a chef, and who had in fact been working as an employee of the Konigs for the last two years. Mr Konig paid the first week of the January rental in advance. He then handed over the business to Ms Lilburne, who paid the three remaining weeks rent. The Konigs left the business and moved to live at Pemberton in the south of the State.
The Konigs' evidence was that although Goad had made it clear the final decision on whether or not to accept the Lilburnes as new tenants could only be made by Carey, they were encouraged to think that would be forthcoming because Goad had indicated he would recommend that it be approved. Nonetheless, that approval did not eventuate. On 23 January 1997, the Lilburnes wrote to the Konigs advising that settlement date had passed and the conditions had not been met. Accordingly, they no longer wished to go ahead with the purchase of the café.
At trial, Carey confirmed that he had decided it was not in the best interests of the Entertainment Centre to accept the assignment of the lease. He considered Westpoint would be prejudiced by the variations requested and that the business plan the Lilburnes had been asked to provide was unconvincing. He was also concerned that they did not have any strong financial backing which would have left them in a position of having insufficient working capital to get the business running properly, but he pointed out that the Lilburnes withdrew in any event. Carey also had a concern about the legal ramifications under the Commercial Tenancy Act in that, had he accepted a new tenant, then the Konigs' obligations would have terminated and he would have effectively been exchanging the financial risk of the Konigs, for the subsequent tenant - whom he considered to be an even worse risk. In effect, his position was that it would have been preferable to have had another tenant because vacancies were undesirable, but that would only be so provided the new tenant was an equivalent or better financial risk from the point of view of the landlord.
When they left the Beverley Hills Café, the Konigs left behind considerable plant and equipment which they claimed had a value of $91,300, as appears from a copy of a list faxed to Goad.
In early February 1997 and after receiving the letter from the Lilburnes, the Konigs travelled back to Perth. With the help of some friends with a truck, they returned to the premises about midnight and removed all the chairs, tables, fridges, freezers and other removable items and took them back to Pemberton. Mr Konig's explanation for why that was done at midnight was that he was working until 5 pm and the trip to Perth took 4‑1/2 hours. He said he deliberately did not give notice to the landlord of his intention to remove the equipment because when the tenant of the adjoining tenancy (Deadly Desserts) did so, he was locked out of the shop and his equipment was confiscated. Konig did not want the same thing to happen to him.
So far as the rent was concerned, Konig explained that he had paid the first week instalment to the Lilburnes who then paid Westpoint Realty for the full month. When the Lilburne purchase did not proceed, Westpoint Realty repaid the amount for the whole month to the Lilburnes and sought payment from the Konigs. However, nothing further was paid by them.
When Carey learned early next morning of what had transpired, he telephoned Mr Konig. According to Konig, Carey threatened to force him to return to the Centre and return the plant and equipment. He said Carey threatened to inform their bank and to send them bankrupt. Konig told Carey there was no way they could return. He explained to Carey that they had taken up a new business in an effort to recover their financial position and for them to go back to the Beverley Hills Café was not financially possible. Konig again refused to return the equipment.
Carey's account of this conversation was that his immediate concern was that removal of the fittings made it impossible for the tenancy to be immediately relet to another coffee shop operator or even for WEC to operate the coffee shop with its own staff or using contractors. He says he told Konig "in no uncertain terms" that he was in breach of his lease and should immediately return with the fit out items he had taken and fulfil his obligations under the lease. He says he also told Konig that his actions were in breach of his undertaking to work with Carey to effect a sensible exit from the business. He testified that Konig refused to return to the business or to return the items and that he had decided it was in his best interests and those of his family to vacate the premises. Carey says he then asked Konig how he was going to pay the rent, to which he says Konig responded to the effect that he was not going to be paying the rent and Carey would have to sue him. Carey testified that his response was to call on Konig to honour his obligation and his undertaking to work with Carey to effect a sensible exit. Konig said he could not help and as he thought the conversation was going nowhere, Carey terminated the call.
On 11 February 1997 Carey wrote to Alpine Holdings advising that WEC had terminated the lease dated 21 February 1994 and the premises had been re‑entered. By notice dated 1 March 1997 to Alpine Holdings, the first defendant made a formal demand for $617,581.08 pursuant to cl 46.7(c) of the lease, comprising rent which would have been payable under the lease had it not been terminated (estimated at $938,472.73) plus the variable outgoings and rates and taxes which also would have been so payable (estimated at $260,611.54) less the rent and variable outgoings which the first defendant reasonably expected to obtain by re‑letting the premises, namely $581,503.19.
By notice of the same date, the first defendant made the same demand of the Konigs as guarantors under the lease.
There is no doubt the Konigs' expectations of the Beverley Hills Café were totally disappointed. Nor that the effects upon them financially and personally were traumatic. Virtually from the very outset of the tenancy in September 1993, they found themselves under enormous pressure. They both worked hard and for long hours to operate the business. Mr Konig recounted in evidence how he found himself working in a shop in which he had invested almost $250,000 but getting little or no return. He found the repeated refusals of WEC to give him rent relief demoralising. He was further depressed when he was unable to sell the business. He says he was "totally shattered" and became very depressed after Carey told him on the telephone that he would be sued. The stress and worry have continued over the last five or so years. He has been prescribed medication for a stomach ulcer and has suffered other health problems. In evidence he said (t 103) that:
"Since first taking on the café I have had many sleepless nights where all I can think of is how I was tricked into becoming part of the Warwick cinema complex and investing so much of my life savings there …
Since taking on the café, my financial situation has not allowed me to take my family on holidays. I have not been able to visit my family in Switzerland for ten years even though both my parents [are: sic] in their 80s and several times my father's life has been in jeopardy due to ill‑health.
I am now continually concerned that I have had to force my bank overdraft up so high to cover legal expenses. I seem never to have a waking or sometimes sleeping moment when my financial situation does not [cause: sic] me concern."
Mrs Konig confirmed the enormous physical and emotional strain on both of them, having to work six or seven days a week all year round with no finance nor opportunity for holidays. Because of the nature of the business, weekends and school holidays were their busiest times, which meant Mrs Konig was not able to spend time with her sons. It is apparent that the experience has severely affected the family.
I advert to these matters in this brief way because the Konigs claim damages for distress both at common law and under s 82 of the Trade Practices Act (Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445; Gurr v Forbes & Dakar Nominees Pty Ltd (1998) ATPR 41‑491; "McGregor on Damages" (15th ed) at [1737] and Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40‑490).
The plaintiffs' claim generally is that they suffered loss as a result of reliance by them upon untrue representations made by the first defendants or its agents, Steele and McCubbing. The action is based upon s 52 of the Trade Practices Act 1974 (Cth), s 10 of the Fair Trading Act 1987 (WA) and upon common law negligence under the principle of Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465. The same pleaded misrepresentations are relied upon in each instance.
It is convenient to deal first with the claim under the Trade Practices Act and to begin with the misrepresentations pleaded. These are set out at pars 7 and 7A of the statement of claim as follows:
" 7.During the negotiations referred to in paragraph 5 above both Steele and McCubbing represented to the Second Plaintiff and thereby to him, the First Plaintiff and the Third Plaintiff that:
(a)in addition to the business, the upper level of the Centre would also include an Indian Restaurant, or Bistro, Kentucky Fried Chicken, Hungry Jacks and a Pancake Parlour and such occupancy together with the cinema complex in the upper level would attract patrons to the Business and produce spinoff sales;
(b)the construction of the Centre including car parks, cinema and control of patrons to the Centre would be such as to place the First Plaintiff's Business in a prime location attracting patrons from those attending the cinema as well as those using the parking premises at the entrance to the Centre and availing themselves of shopping facilities in the Warwick Shopping Centre proper;
(c)there would be adequate signage on the upper and lower levels of the Centre advertising facilities including the Business;
(d)the tenants in the upper level of the Centre would not be permitted to sell coffee and cappuccino on its own, such sales being preserved for exclusive sales from the Business which was to be the only coffee shop in the foyer;
(e)no shop in the upper level of the Centre would be permitted to sell drinks, ice creams or any food direct to patrons in the foyer of the cinema complex;
(f)with the exception of the Indian Restaurant, Kentucky Fried Chicken, Hungry Jacks and the Pancake Parlour the Business would be the only shop to operate in the foyer of the cinema.
7A.During the negotiations referred to in paragraph 5 above and contrary to the representations pleaded in paragraph 7(e), both Steele and McCubbing knew but failed to disclose to, and concealed from, the Second Plaintiff and thereby to him, the First Plaintiff and the Third Plaintiff, that there would be a "Candy Bar" on the premises to be situated in and around the foyer selling food and drinks direct to patrons of the cinema."

On this issue I think the practical answer to that contention is that the plaintiffs' costs have not yet been agreed nor taxed and presumably, given this application, they have not been quantified to the defendants at all.
Nor do I think that the case management principles now embodied in the Rules of the Supreme Court militate against the grant of the plaintiffs' application in the circumstances.
Finally, counsel for the defendants identified what he said was prejudice to them should the application be granted.
There were three as I apprehend it. The first is that final orders have been made and the defendants are entitled to know where they stand and that includes his reference to the fact that Mr Steele has not filed an appeal; secondly, that the appeal has in fact already been instituted, but if this application were to be granted, that would involve further consideration of the defendants' position and, in particular, whether or not the grounds of appeal should be amended, or there should be a further appeal instituted against any order which might be made today; and thirdly, there is - he says - the prejudice of the defendants having to appear by counsel today.
The third, it seems to me, is not something which can go to the question whether or not the extension of time should be granted, nor indeed whether or not the plaintiffs' application should itself be granted nor, in my view, does the second. So far as the first is concerned it is true that final orders have been made, but as I have observed, they are subject now to the pending appeal and the position of Mr Steele, I think, is dealt with in the way I have just indicated.
There is a general power to extend time notwithstanding the application to extend is itself made outside the time limit - O 5 r 1 and 2 RSC: Snowtop Mushrooms v Powley, unreported; FCt SCt of WA; Library No 4501; 14 May 1982. In addition to those to which I have referred, one factor to which it is relevant to have regard on the question of extension of time, is whether the application for raising or removal of the limit should be granted.
And so, in that context, I return to my consideration of that question. I mentioned the plaintiffs' reliance on s 215 of the Legal Practice Act 2003. In my view s 215 does not apply here. As Mr Dillon points out that Act did not come into operation until 1 January 2004. In any event, it would not affect any substantive change to the law in this area. I say that because it seems to me that if a case were of such unusual difficulty as to justify an increase in or removal of a cost limit, then it would inevitably also be a good or sufficient reason for doing so.
Section 215 in its terms is more narrow in effect than O 66 r 12(1) because the section allows an increase in costs only in three circumstances: namely, unusual difficulty, unusual complexity or unusual importance. The order, on the other hand, recognises unusually complex or unusually important matters, but the words "any other good or sufficient reason" are susceptible of encompassing not only unusual difficulty but any other relevant circumstance. That includes, in my view, the amount of work involved in preparation itself constituting a good and sufficient reason to increase the allowance provided under the scale: see Schmidt v Gilmour [1988] WAR 219.
It is neither necessary nor appropriate that I go through line by line the material setting out the claim for time spent or costs incurred and analyse what has been claimed; although I think that is effectively what Mr Dillon sought to have me do. I accept I need to be satisfied not only that work was done to the extent claimed, but also that it was prima facie necessarily done, but that needs to be shown only in a general and global way and against the background of my knowledge of the trial itself. I am so satisfied.
On the face of it, the amount of time deposed by Mr Feinauer as having been spent on getting up, suggests the case was of a degree of complexity and/or difficulty which extended well beyond that which would be regarded as ordinary. My own impressions of the conduct of the trial, the evidence, the pleadings and the submissions made by the parties, confirm that.
I accept it is at least probable that the case was one of unusual complexity and difficulty in the sense I have mentioned. Considerations going to that conclusion include that the case was hard fought on every point, two of the defendants were unrepresented and conducted their own cases, and the issues of causation and assessment of damages were complex.
I am satisfied the plaintiffs have shown it is probable there was greater work which was needed to be done in preparation than the scale amount contemplates as a maximum for the ordinary case. That is, in itself, a good and sufficient reason for removing the limit within the meaning of those words in O 66 r 12(1).
Thus, had the application for removal of the costs limit been made within time, it would have been granted. That is a further reason for extending time notwithstanding the long delay.
A point urged upon me on behalf of the first and second defendants that the work was or may have been done by junior practitioners and the scale limit would therefore not be inadequate, again has some force. However, I consider there is nonetheless prima facie justification for removing the limit.
Even if some substantial part of the claimed approximate total which is in excess of 400 hours was done by junior practitioners, the money claimed would still significantly exceed the amount in the scale which has been calculated on the basis of 100 hours of a senior practitioner's time. Whether or not costs should actually be allowed for junior or senior practitioners and, if so, for what work, will be a matter for the taxing officer.
As to the contention that the plaintiffs failed on a number of points, Mr Sheavyn submits that that should not bear on this application because there has been no apportionment of costs. The order already made is that the defendants must pay the plaintiffs' costs of the action. That submission must be accepted.
I would grant the application to extend time and allow the application for removal of the limit pursuant to O 66 r 12(1).

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53 (S3)

CORAM: ROBERTS-SMITH J

HEARD: 4-8 & 11-14 NOVEMBER 2002, 27 & 31 MAY 2004

DELIVERED : 24 MARCH 2003

SUPPLEMENTARY
DECISION :31 MAY 2004

FILE NO/S: CIV 1208 of 1998

BETWEEN: ALPINE HOLDINGS PTY LTD (ACN 009 471 907)
First Plaintiff
EGON KONIG
Second Plaintiff
SHELLEY KONIG
Third Plaintiff
AND
WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)
First Defendant
WESTGEM HOLDINGS PTY LTD (ACN 050 218 954)
Second Defendant
ROBERT STEELE
Third Defendant
BRIAN McCUBBING
Fourth Defendant

Catchwords:

Costs - Application for removal of costs limit pursuant to O 66 r 12(1) of the Rules of the Supreme Court - No appearance by third and fourth defendants - Order made - Application not served on third and fourth defendants - Order not perfected - Denial of natural justice - Order recalled

Legislation:

Rules of the Supreme Court, O 66 r 12(1)

Result:

Order recalled

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr O D Feinauer
Second Plaintiff            :     Mr O D Feinauer
Third Plaintiff               :     Mr O D Feinauer
First Defendant             :     Mr D R Kilpatrick
Second Defendant         :     Mr D R Kilpatrick
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance

Solicitors:

First Plaintiff                :     Feinauer & Associates
Second Plaintiff            :     Feinauer & Associates
Third Plaintiff               :     Feinauer & Associates
First Defendant             :     Williams & Hughes
Second Defendant         :     Williams & Hughes
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

ROBERTS-SMITH J: On 27 May this year, having heard submissions from counsel for the plaintiffs and from Mr Dillon, counsel for the first and second defendants, I made orders that the plaintiffs have leave to make their application for removal of the cost limit in item 13 of the Supreme Court scale to be removed pursuant to O 66 r 12(1) of the Rules of the Supreme Court.
I granted the application for removal of the limit and I made an order that the plaintiffs pay the first and second defendants' costs of the application in any event. There was no appearance on that occasion by the third and fourth defendants, Messrs Steele and McCubbing.
On Friday afternoon, 28 May, my Associate was telephoned by the plaintiffs' solicitors to advise that they had ascertained that the applications and material in support had not been served on the third and fourth defendants and that was the reason for their non‑appearance. That telephone advice was subsequently confirmed in faxed correspondence.
By letter dated 28 May, Feinauers, the plaintiffs' solicitors, advised that upon a review of the files following the hearing before me the day before, they had become aware that due to an oversight, the third and fourth defendants had not been served with the relevant papers and accordingly had no notice of the hearing. They apologised for the error and indicated a willingness to do all things necessary to rectify it.
They advised that they were sending the papers under correspondence explaining the matter to both the third and fourth defendants that day. They noted that although they would be able to courier the documents to Messrs Wilson and Atkinson as representatives for the fourth defendant, the third defendant was presently resident in Halls Head and has not to date responded to any correspondence sent to him in the course of this matter.
They indicated that unless I was willing to deal with the matter having heard only the submissions of the plaintiffs and the first and second defendants on the basis that no further submissions made on behalf of the third or fourth defendants could or would have altered the decision reached the day before, the matter would unfortunately have to be listed again before me to allow the third and fourth defendants the opportunity to make submissions in opposition to the application if they wished.
On 31 May the plaintiffs' solicitors, again by facsimile letter, forwarded copies of the correspondence from them to the third defendant and the solicitors for the fourth defendant. In that correspondence they made various suggestions as to possible courses of action, noting that I will be in Albany on circuit from tomorrow, Tuesday, 1 June, for possibly some five weeks.
It was suggested that there were potentially three ways the matter may be dealt with. First it was pointed out that having filed written submissions and making extensive oral submissions at the hearing, counsel for the first and second defendants had not only raised the potential prejudice to the first and second defendants but also that prejudice he felt might befall the third and fourth defendants as litigants in person.
It was pointed out that my decision was made having regard to those submissions and that if the view were to be taken that no further submissions could or would have altered the decision, then it may be allowed to stand.
Secondly it was suggested that if the third and fourth defendants so wished, the matter might be dealt with by the filing of written submissions on behalf of them or by them, as the case may be. I could then consider the submissions and return a supplementary judgment taking them into account.
The third option suggested was that the matter be brought on for hearing before me to allow the third and fourth defendants to make oral submissions. Also on 31 May (that is to say today) I received through my Associate a copy of a letter from Messrs Wilson and Atkinson to Feinauers. They recited the circumstances briefly as known to them and indicated that having been spoken to by Mr Feinauer they had taken urgent instructions from their client on the understanding that I had indicated I wished to hear from the parties at 2.15 pm today prior to my departure for Albany.
Messrs Wilson and Atkinson indicated that they wished to make it clear that they were not acting for Mr McCubbing at the trial of the primary action and that he was representing himself. They went on to say:
"Mr McCubbing is extremely unhappy at the fact that he was not served with or even made aware of this application before it was heard. He is being placed under pressure in being forced to make an instant decision on this issue today. In the circumstances Mr McCubbing believes he has no choice but to acquiesce to the application and on that basis will not be attending court at 2.15 today."
As I indicated to Mr Feinauer in the course of his submissions this afternoon, I would not regard that as any appropriate indication of consent to the orders being made.
The orders I made on Thursday have not been settled nor extracted. Under the circumstances it seems to me that I have inherent power to recall orders which have not been perfected where there is a substantial reason for so doing.
The situation which exists here seems to me to be one in which that is appropriate. An order which has been made without one or more of the parties having been given an opportunity to be heard in respect of it, when it is an order made against that party or those parties and an order of some substance, is clearly a denial of natural justice. I do not understand anyone in this matter to be taking any view different to that.
In my view, as I say, there has been a fundamental breach of the right to be heard and that has given rise in the circumstances to orders which have not been perfected and which ought to be recalled and set aside. I say that because despite the fact that Mr Feinauer's application is for the orders to be held as against the first and second defendants on the basis that the third and fourth defendants be given an opportunity to appear and make submissions with respect to their positions, I think there are very real problems with that.
There is clearly potentially the prospect that having heard from the third and fourth defendants I might be disposed to make some different orders than those made last week. If that be so, there would then be some considerable difficulty with what might be inconsistent orders as against the first and second defendants by comparison with those against the third and fourth defendants.
There are significant difficulties in that situation and I do not think it is one which I should willingly allow to occur, even potentially.
Secondly, in terms of prejudice, it seems to me there is no prejudice to the plaintiffs were I to proceed on the basis of setting aside the orders made last week and giving the third and fourth defendants an opportunity to make submissions in respect of the application and the first and second defendants a limited opportunity to deal with any matters affecting them which might arise out of the submissions made by the third and fourth defendants.
I am told by Mr Feinauer that the process of taxation is going to take a very long time in any event and although clearly there would be some inconvenience in proceeding with the work in respect of the item "getting up" on one basis rather than another, that is to say, on the basis the cost limit has been lifted or not, nonetheless to the extent that might be seen as prejudice to the plaintiffs, it is in any event prejudice which has arisen as a result of the way in which the matter has been conducted by their own solicitors.
On that basis it seems to me it would be unjust to let the order stand and I propose to recall it. I will recall the orders made on Thursday and set them aside, except for the order made then that the plaintiffs pay the first and second defendants' costs of the application in any event, which order shall stand.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53 (S4)

CORAM: ROBERTS-SMITH J

HEARD: 4-8 & 11-14 NOVEMBER 2002, 14 JULY 2003, 27 & 31 MAY 2004

DELIVERED : 24 MARCH 2003

SUPPLEMENTARY
DECISION :23 JULY 2004

FILE NO/S: CIV 1208 of 1998

BETWEEN: ALPINE HOLDINGS PTY LTD (ACN 009 471 907)
First Plaintiff
EGON KONIG
Second Plaintiff
SHELLEY KONIG
Third Plaintiff
AND
WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)
First Defendant
WESTGEM HOLDINGS PTY LTD (ACN 050 218 954)
Second Defendant
ROBERT STEELE
Third Defendant
BRIAN McCUBBING
Fourth Defendant

Catchwords:

Costs - Whether O 66 r 12(1) of the Rules of the Supreme Court or s 215 of the Legal Practice Act 2003 (WA) applies - Judgment delivered before Legal Practice Act came into operation - Plaintiffs had vested right to costs - Order 66 r 12(1) applied

Legislation:

Legal Practice Act 2003 (WA), s 215

Result:

Application for extension of time granted
Application for removal of costs limit granted

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr P Sheavyn & Mr O D Feinauer
Second Plaintiff            :     Mr P Sheavyn & Mr O D Feinauer
Third Plaintiff               :     Mr P Sheavyn & Mr O D Feinauer
First Defendant             :     Mr N D C Dillon
Second Defendant         :     Mr N D C Dillon
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance

Solicitors:

First Plaintiff                :     Feinauer & Associates
Second Plaintiff            :     Feinauer & Associates
Third Plaintiff               :     Feinauer & Associates
First Defendant             :     Williams & Hughes
Second Defendant         :     Williams & Hughes
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance

Case(s) referred to in judgment(s):

Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53
Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S)
Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S2)
CIBC Wood Gundy Australia Ltd & Anor v ICL Australia Pty Ltd [1999] WASC 93
SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2004] WASC 26(S2)

Case(s) also cited:

Nil

ROBERTS-SMITH J: This matter has become unfortunately protracted.
This is the fourth occasion on which I have had to deliver a supplementary judgment in it.
The trial of this action was held in November 2002. My primary reasons allowing the plaintiff's claim and dismissing the first defendant's counterclaims were delivered on 24 March 2003: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53.
On 14 July 2003 I delivered a supplementary judgment in which I gave judgment for the plaintiff and assessed damages. I dismissed counterclaims by the first and second defendants, refused an application by the plaintiff for indemnity costs, ordered the defendants to pay the plaintiff's costs on a party/party basis and dismissed an application by the first and second defendants for a stay of execution pending appeal, but granted a partial stay in respect of the third and fourth defendants: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S).
On 27 May 2004 I made orders that the plaintiffs have leave to apply out of time for removal of the costs limit in item 13 of the costs scale pursuant to O 66 r 12(1) of the Rules of the Supreme Court ("RSC"). I granted the application for removal of the limit: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S2).

It was subsequently learned that the plaintiff's applications and material in support had not been served on the third and fourth defendants and that is why they had not appeared at the hearing on 27 May. I called the matter on before me again and having heard from counsel for the plaintiffs and the first and second defendants I recalled the orders made the previous Thursday and set them aside, except for an order that the plaintiffs pay the first and second defendant's costs of the application in any event: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S3).
On 31 May 2004 I further ordered that unless the third and fourth defendants, by no later than 4.00 pm Wednesday 7 July 2004, filed and served upon the plaintiffs any affidavits or submissions in opposition, or wrote to the Court to the effect that they wished to be heard in the matter, the plaintiffs would be granted leave to make the application out of time and pursuant to O 66 r 12(1) RSC the taxing officer tax the plaintiffs' bill of costs on the basis the limit in item 13 of the Supreme Court scale of costs had been removed.
I indicated at the hearing on 31 May that if either of the third or fourth defendant wished to be heard, the matter would be re‑listed and that in any event, if the third or fourth defendant did make either written or oral submissions, the first and second defendants and the plaintiffs would also have the opportunity to address any new matters so raised.
No affidavit nor submission has been filed or served by the third defendant.
On 5 July 2004 the fourth defendant filed a submission in opposition to the plaintiff's application for a special costs order.
In his written submission the fourth defendant adopted the submissions previously made by the first and second defendants. He then set out the terms of O 66 r 12(1) RSC and s 215(2) of the Legal Practice Act 2003, which he described as "effective at the time of the plaintiff's application". The balance of his submission was as follows:
"4.Sub‑section 215(2) of the Legal Practice Act (which by virtue of being legislation, takes precedence over the Rules of the Supreme Court) therefore:
4.1adds 'unusual difficulty' as a basis for making a special order as to costs; and
4.2removes 'any other good or sufficient reason' as a basis for making a special order as to costs.
5.In drafting sub‑section 215(2) of the Legal Practice Act 2003, a deliberate decision was made by Parliament to depart from the wording of Order 66 rule 12(1) as it was seen as providing too broad a discretion for the making of special orders as to costs.
6.In the premises, the Court's orders granting leave to the plaintiff to bring an application out of time and removing the limit imposed on recovery by the plaintiffs of their costs of trial by the Supreme Court Scale of Costs on Item 13, should not have been made. The application should have been dismissed."
On 8 July 2004 Feinauers, solicitors for the plaintiffs, wrote to my Associate referring to the submission of the fourth defendant and noting no submission was filed by the third defendant and no intention to oppose the plaintiff's application had been indicated by him. The plaintiff's solicitors submitted that the submission of the fourth defendant raised no ground which had not already been substantively addressed before me on 27 May and that although if I was minded to hear oral submissions for the fourth defendant they would attend, the matter could be dealt with in terms of the "springing orders" made by me on 31 May.
I had my Associate inform Feinauers that I intended to deal with the matter on the papers and requested them to advise the other parties of that. They did so by letter dated 8 July 2004, a copy of which was forwarded to my Associate.
By facsimile letter to my Associate dated 9 July 2004, Williams & Hughes, solicitors for the first and second defendant, acknowledged that advice and wrote that on the plaintiff's application for a special costs order the Court had not been made aware of the inconsistency between the Legal Practice Act and the RSC. They said the issue had not come to their attention prior to the hearing, and submitted that the Court might be assisted by hearing further submissions on that discrete issue. On the basis that I wished to deal with the matter on the papers they advance the following:
"1.The primary difference between the position under Order 66 rule 12(1) and the Legal Practice Act 2003 is that the words 'or for any other good or sufficient reason' have been removed by the Act. It is clear, that the authorities decided in the previous rules or similar rules support the fact that, if the amount of work done appears to have been reasonable and to exceed the Scale that does constitute a good or sufficient reason for the making of an order: see Esther Investments Pty Ltd-v-Markalinga Pty Ltd (1992) 8 WA 400 (sic) @ 404 and Seaman on Civil Procedure para 66.12.1A.
2.It is quite clear that Parliament has considered it appropriate to restrict the discretion of the Court in awarding costs above the Scale, and has restricted the Court's ability to lift the Scale into circumstances where the legal costs determination is inadequate because of either (sic):
2.1unusual difficulty;
2.2unusual complexity; or
2.3unusual importance of the matter.
3.We simply adopt the submissions previously made on behalf of the first and second defendants in relation to this action not being a matter of unusual difficulty, complexity or importance.
4.It is submitted that it is clear Parliament's intention was to impose a restriction on the cases in which an order lifting the Scale was made. The mere fact that work which performed which appears to have been reasonable exceeded the Scale is insufficient."
On 12 July 2004 Feinauers wrote to my Associate pointing out the assertion by Williams & Hughes that the s 215 issue had not been raised at the hearing on 27 May was not correct and referring to the plaintiff's outline of written submissions in support of the application pursuant to O 66 r 12(1). Paragraphs 11 – 13 of that outline specifically dealt with the issue of s 215. Feinauers accordingly submitted the scope of the orders made previously did not allow for any further submissions being entertained touching on that particular point in light of the previous opportunity afforded to the first and second defendants to be heard on the issue.
By facsimile message dated 12 July 2004 Williams & Hughes acknowledged that Feinauers were correct and withdrew the comments made in their facsimile of 9 July.
Quite coincidentally, the conflict between O 66 r 12(1) RSC and s 215 of the Legal Practice Act and the question of the applicability of those provisions to certain proceedings, had already arisen and were the subject of submissions in an unrelated matter before me. My decision on that application has been handed down today: SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2004] WASC 26(S2) and I do not need to repeat here what I have said there about this issue.
Unlike the situation in SDS v Pasdonnay (supra), where judgment was not delivered until after the Legal Practice Act came into operation on 1 January 2004, in this case judgment was delivered on 24 March 2003 and a supplementary judgment in which I ordered the defendants to pay the plaintiffs' costs was handed down on 14 July 2003. The plaintiffs' right to costs became a vested right on 14 July 2003 at the latest. Section 215 is not to be given a retrospective operation which would affect that right (CIBC Wood Gundy Australia Ltd & Anor v ICL Australia Pty Ltd [1999] WASC 93; SDS v Pasdonnay).
That is the view I took in my reasons for judgment of 27 May 2004 (at [44]). I also said that I did not think s 215 had effected any substantial change to the law in this area. I was there referring to the situation where a matter was of such unusual difficulty as to justify an increase in or removal of a costs limit. A case which would fall within that category, it seemed to me, would also be one which would fall within the category of there being "a good or sufficient reason" for increasing or removing a costs limit.
I went on to point out (at [45]) that s 215 is narrower in effect than O 66 r 12(1) because it does not include "any other good or sufficient reason" (and the words "unusual difficulty" are obviously much more limited in scope). I did refer to s 215 as allowing an increase in costs in only three circumstances, namely unusual difficulty, unusual complexity or unusual importance, but that observation was obiter and for the reasons given in SDS v Pasdonnay (at [106]) I have on reflection come to the view that the adjective "unusual" applies only to "difficulty". The word "or" is disjunctive, so that what must be shown is unusual difficulty, or complexity or importance.
The further submissions now made by the fourth defendant go only to the issue of the application of s 215 of the Legal Practice Act. For the reasons I have given above and in SDS v Pasdonnay I have come to the conclusion that s 215 does not apply to the plaintiff's application here.
In my reasons for decision of 27 May 2004 (at [45] – [49]) I allowed the plaintiff's application because I was satisfied the work necessarily and reasonably done in preparation was greater than that contemplated by the scale, by reason of the degree of complexity and/or difficulty which extended well beyond that which would be regarded as ordinary. Those conclusions are sufficient to warrant an order removing the costs limit pursuant either to O 66 r 12(1) or s 215 of the Legal Practice Act.
In the circumstances there is no reason judgment cannot be entered in accordance with these reasons and those delivered on 27 May 2004.