Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd
[2006] NSWADT 323
•13/11/2006
Set aside by Appeal:
Set aside by Appeal on 6 September 2007 and 28 September 2007: Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Ltd (RLD) NSWADTAP 47; Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (No 2) (RLD) NSWADTAP 52
CITATION: Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd [2006] NSWADT 323 DIVISION: Retail Leases Division PARTIES: APPLICANT / CROSS RESPONDENT
Armstrong Jones Management Pty Ltd
RESPONDENT / CROSS APPLICANT
Saies-Bond & Associates Pty LtdFILE NUMBER: 055169; 065015 HEARING DATES: 15-16 May 2006, 23-24 May 2006, 21 June 2006 SUBMISSIONS CLOSED: 08/11/2006
DATE OF DECISION:
11/13/2006BEFORE: Chesterman M - ADCJ (Deputy President); Harrison B - Non Judicial Member; Griffiths G - Non Judicial Member CATCHWORDS: Claim for compensation for pre lease misrepresentations - Damages - Misleading or deceptive conduct - Unconscionability MATTER FOR DECISION: Principal matter LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Conveyancing Act 1919
Fair Trading Act 1987
Trade Practices Act 1974 (Cth)CASES CITED: Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557
D & D Ventures Pty Ltd v Evans & Anor [2004] NSWADT 130
Gizah Pty Ltd v AXA Trustees Ltd [2001] NSWADT 116
Golden Harvest (Australia) Pty Ltd v Paing Pty Ltd [2002] NSWADTAP 40; affirmed [2004] NSWCA 85
Holmes v Jones (1907) 4 CLR 1692
Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313
Khao Thai Pty Ltd v Coles Myer Properties Holdings Ltd [2001] NSWADT 83
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5
Taylor Farms (Aust) Pty Ltd v A Calkos & Ors [1999] NSWSC 186
Trust Company of Australia Ltd (Stockland Property Management) v Skiwing Pty Ltd (trading as Café Tiffany’s) [2005] NSWADTAP 9
Trust Company of Australia Ltd (trading as Stockland Property Management) v Skiwing Pty Ltd (trading as Café Tiffany’s) [2006] NSWCA 185
Watson v Foxman (1995) 49 NSWLR 315
Xin v Zakos [2002] NSWADT 189
Young v Lamb (No 2) [2001] NSWSC 1014REPRESENTATION: APPLICANT / CROSS RESPONDENT
RESPONDENT / CROSS APPLICANT
M Henry, barrister
S Spring, agentORDERS: 1. The Applicant/Cross Respondent is to pay to the Respondent/Cross Applicant the sum of $45,230.54, comprising a principal sum of $40,695 and $4,535.54 for interest charged at 9% from 18 August 2005 to the date of this decision; 2. The Applicant/Cross Respondent’s application is dismissed; 3. Any application for costs must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to s 76 of the Administrative Decisions Tribunal Act.
REASONS FOR DECISION
The competing claims in this case
1 In this case, one of the inaugural lessees in a newly established retail shopping centre claimed that it should not be required to make good acknowledged arrears of rent, or to pay any rent due for the remainder of its lease, for a number of reasons. In particular, the lessee alleged that it was induced to enter into the lease by misrepresentations made on behalf of the lessor and that the lessor acted unconscionably, notably in failing to ensure that the shopping centre was not as attractive as it should have been to potential customers, with the consequence that the lessee’s business did not generate sufficient turnover to remain viable. The lessee claimed damages on these grounds.
2 It is useful at the beginning of this lengthy judgment to summarise the Tribunal’s principal conclusions. These are (a) that the lessee should succeed in its claim based on one of the alleged misrepresentations and (b) that in consequence it should not be liable for any unpaid rent and should obtain a refund of money drawn down on its bank guarantee in order to pay arrears of rent.
3 The lessor, Armstrong Jones Management Pty Ltd (‘Armstrong Jones’), is the trustee of the ING Retail Property Fund Australia (‘ING’). In that capacity it owns a property at 49-59 O’Riordan Street, Alexandria, on which a retail shopping centre (‘the Centre’) is situated. The Centre is called ‘Style at home’.
4 By an undated agreement of lease, Armstrong Jones granted to the lessee, Saies-Bond & Associates Pty Ltd (‘Saies-Bond’), a five-year lease (‘the lease’) of premises known as shop T1.2 (‘the leased premises’), on the first floor of the Centre. The lease, which was governed by the Retail Leases Act 1994 (‘the RL Act’), was for a term of five years commencing on 5 October 2004. Saies-Bond executed it on 26 August 2004. The permitted use was ‘storage and retail sale of home furniture and accessories’ and the rent was $118,800 per annum, stipulated to commence on 5 February 2005.
5 In circumstances described below, Armstrong Jones terminated the lease and took possession of the shop on 5 September 2005. Saies-Bond has remained out of possession since then.
6 These proceedings were commenced by a retail tenancy claim filed by Armstrong Jones in the Tribunal on 8 December 2005 (file 055169). In it, Armstrong Jones claimed a total sum of $360,298.79 (plus interest), representing arrears of rent, outgoings and promotional levy (including GST) due under the lease until the time of its termination and damages for loss of rent thereafter, less an amount of $40,695.00 obtained by recourse on to a bank guarantee furnished by Saies-Bond in accordance with a term of the lease.
7 In a schedule of damages handed up to the Tribunal on 21 June 2006, Armstrong Jones claimed that as at 31 May 2006, the total amount due to it, including interest charged at 9% per annum, was $321, 310.67.
8 Saies-Bond does not dispute that it has made no payments on account of rent, outgoings or promotional levy. But it contests all other aspects of Armstrong Jones’s claim.
9 On 27 January 2006, Saies-Bond filed a combined retail tenancy claim and unconscionable conduct claim against Armstrong Jones (file 065015). An amended version was filed on 3 March 2006. In it, Saies-Bond sought (a) orders that Armstrong Jones restore it to the position that it would have been in if it had not entered into the lease, or alternatively orders that Armstrong Jones refund the bank guarantee and pay damages, interest and costs; and (b) a number of declarations, including that Armstrong Jones had engaged in unconscionable conduct and misleading or deceptive conduct, had contravened a number of sections of the RL Act, was not entitled to enforce the provisions of the lease (including the collection of rent and outgoings) and was not entitled to damages for the loss of its bargain, in the quantum claimed or at all. Armstrong Jones contested all aspects of these claims.
10 In so far as Saies-Bond’s claim relies on statutory provisions conferring remedies for misleading or deceptive conduct, it must fail, for the following reasons. Recently enacted provisions in the RL Act (ss 62C, 62D and 62E) conferring a right of damages for such conduct when it occurs in connection with a retail shop lease do not apply when, as is the case here, the conduct complained of occurred before 1 January 2006 (see Schedule 3 to the RL Act, clause 33). Furthermore, in a judgment delivered on 13 July 2006 (Trust Company of Australia Ltd (trading as Stockland Property Management) v Skiwing Pty Ltd (trading as Café Tiffany’s) [2006] NSWCA 185), the Court of Appeal held that this Tribunal lacks jurisdiction to entertain claims under the broad provision regarding misleading or deceptive conduct (s 52) in the Trade Practices Act 1974 (Cth) because it is not a ‘court of a State’ within the meaning of s 86(2) of that Act. In so holding, it reversed an Appeal Panel decision to the opposite effect (Trust Company of Australia Ltd (Stockland Property Management) v Skiwing Pty Ltd (trading as Café Tiffany’s) [2005] NSWADTAP 9). It has been held in the Supreme Court (Taylor Farms (Aust) Pty Ltd v A Calkos & Ors [1999] NSWSC 186) that the Tribunal has no jurisdiction under a comparable provision in a New South Wales statute (Fair Trading Act 1987, s 42).
11 By virtue of the Court of Appeal decision in Trust Company v Skiwing, Saies-Bond’s must also fail in so far as it seeks relief under s 51AC of the Trade Practices Act 1974 (Cth) for unconscionable conduct.
12 Since the amended application by Saies-Bond includes a claim of unconscionable conduct under s 62B of the RL Act, the Tribunal must be constituted in these proceedings in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997. It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.
13 It is useful when considering the numerous components of Saies-Bond’s claims to distinguish between those based on events leading up to the execution of the lease by Saies-Bond on 26 August 2004 and those based on later events.
EVENTS PRECEDING THE EXECUTION OF THE LEASE
The approach adopted to finding tenants for the Centre
14 During 2002, the site on which the Centre is established was purchased from Cadbury Schweppes Australia Pty Ltd by PDP (O’Riordan) Pty Ltd (‘PDP’). The owner of PDP was a property developer called Charter Hall Holdings Pty Ltd (‘Charter Hall’). Charter Hall then carried out substantial alterations and renovations in order to create Style at home as a new retail shopping centre. These works continued, as outlined below, until late 2004.
15 By an agreement dated 2 August 2002, PDP appointed McKenzie Hall as the exclusive leasing agent to find tenants for the Centre. McKenzie Hall describes itself on its web site as ‘a small specialist, property management, leasing and consultancy company specialising in the bulky retail goods sector of the property investment market’.
16 McKenzie Hall, in its agreement with PDP, undertook to assign Mr Antony Draper, one of its directors, as the ‘key person’ acting on its behalf for the duration of McKenzie Hall’s appointment as the exclusive leasing agent. The agreement provided that McKenzie Hall could introduce prospective tenants to PDP, but that PDP was free to accept or reject them and McKenzie Hall could only bind PDP to a lease with PDP’s written consent.
17 In an affidavit dared 12 May 2006, Mr Draper outlined the steps that he took in carrying out McKenzie Hall’s obligations under the agreement. Having familiarised himself with the nature of Charter Hall’s plans for the site, he started looking for tenants early in 2003. Once he had identified someone as a possible tenant, his practice was to arrange a meeting in order to provide information about the Centre and to discuss that person’s particular needs. If the person continued to show interest, the discussions would move to such matters as the size and location of the premises required and the rent that he or she would be prepared to pay. Mr Draper would give the prospective tenant a Lease Deal Summary Approval Sheet setting out the basic terms on which Charter Hall would be prepared to grant a lease. Often, the recipient would alter those terms and submit the revised document to Charter Hall, through Mr Draper, by way of counter offer. Charter Hall would either accept the revised terms or negotiate further, using much the same process. When the terms were agreed, Mr Draper would give the prospective tenant a formal disclosure statement and drafts of an agreement for lease and a lease.
18 In or about October 2003, Charter Hall arranged for brochures to be printed describing the proposed new centre. Having seen a copy of this document, Mr Draper asked Charter Hall to consider some changes to it, as he thought that some phrases in it might mislead prospective tenants. Having taken legal advice, Charter Hall revised the brochure. Brochures in three different sizes were then printed. The largest of them contained the most detail. It was Mr Draper’s practice to give one of the brochures to prospective tenants, also indicating to them whether the current floor plans, which were being revised from time to time, differed in any material respect from what was depicted in the brochure.
19 On 25 May 2004, PDP sold the property on which the Centre was situated to Armstrong Jones.
20 The Centre opened on 16 October 2004 – i.e., eleven days after the date of commencement of the lease – in circumstances described below.
The affidavit evidence of conversations between Mr Draper and Ms Jocelyn Bond
21 For all practical purposes, the controlling owner and director of Saies-Bond appears throughout to have been Ms Jocelyn Bond. She swore three affidavits in these proceedings, of which the first and most substantial was dated 2 March 2006.
22 Saies-Bond operates as an importer and retailer of Balinese style furniture. It trades under the registered business name of Coco Interiors. In mid-2004, it carried on business in leased premises at Neutral Bay, but because the property was about to be developed it was seeking new premises. A neighbouring shop owner told Ms Bond about the Centre and gave her Mr Draper’s contact details.
23 Many of the alleged misrepresentations claimed by Saies-Bond to have been made on behalf of Armstrong Jones were oral representations that, according to Ms Bond, Mr Draper made to her in the course of ensuing negotiations that led to the lease being granted. Relevant parts of their conversations are outlined in the ensuing narrative. Where their versions differed materially with regard to the alleged misrepresentations, both versions are set out. Their accounts of these conversations diverged also on a number of other matters, but these are not set out below in any detail.
24 Ms Bond said in her principal affidavit that during or shortly after most of these conversations she took notes, copies of which form part of the material exhibited to the affidavit. The copied notes (‘the Bond notes’) are handwritten, undated and generally very brief. Mr Draper said in cross-examination that he did not take any notes of the conversations.
25 On or about 12 July 2004, Ms Bond telephoned Mr Draper to inquire about the Centre. He said, amongst other things (a) that the Centre was the former Cadbury Schweppes building, which was being developed as a bulky goods centre; (b) that the landlord was ING; (c) that there would be 32 shops; (d) that only three of them were left for lease, with floor areas of 160, 414 and 800 square metres respectively; and (e) that each of the two larger shops, but not the smallest, had a loading dock. She said that she would only be interested in the smallest of the shops and that the rent which he quoted for that shop ($395 per square metre plus outgoings) seemed a large amount.
26 Later on the same day, Ms Bond visited the Centre and was shown around it by Mr Draper. Building work was still in progress and she had to wear a hard hat. They discussed loading access to the smallest of the available shops. According to Ms Bond, she took notes and drew a rough plan of the Centre during this visit. She said also that Mr Draper identified the proposed location of (a) a large display window where retailers could display their goods (this being in a wall near the lifts and facing O’Riordan Street); (b) what he called ‘the Harvey Norman end’ of the Centre; and (c) a coffee shop.
27 Mr Draper testified that he did not see her taking any notes or drawing any plans. While he agreed that he mentioned a coffee shop, he claimed not to have referred to any display window, adding that if they were standing near the lifts at the time when he allegedly made such a statement, they would not have been able to see the external walls facing O’Riordan Street.
28 Mr Draper also denied having referred to ‘the Harvey Norman end’ of the Centre. He said that he did not tell anyone interested in the Centre that Harvey Norman was taking space in it because ‘this was not the case’. He claimed instead to have told Ms Bond that Joyce Mayne, which was ‘part of the Harvey Norman group’, would be a tenant, that he believed that Gerry Harvey (the owner of both Harvey Norman and Joyce Mayne) was ‘trying to revive the name’ and that Joyce Mayne sold furniture and electrical goods. He added that he only mentioned Harvey Norman to her in order to ‘explain to her who was behind the Joyce Mayne offer’.
29 The Bond notes do not include any notes purporting to record this meeting, but do include a rough handwritten plan, which Ms Bond claimed to have prepared during the meeting.
30 Ms Bond’s principal affidavit described next a telephone conversation with Mr Draper on or about 15 July 2004. According to her, this included (a) a statement by him that the Centre was aiming to open during the October long weekend, and (b) in the course of a discussion of amounts of rent and sales potential, an exchange along the following lines:-
31 The Bond notes include a page containing two relevant entries. One comprises the phrase ‘2% of rent to go to promo’. The other is made up by the words ‘Basic rule Total Rent Bill 10% of t/over’, followed by two illegible notations, then ‘x 100 = 750K’. This page also refers very briefly to other topics, such as the projected opening date, which Ms Bond claimed to have been discussed during that conversation.
Mr Draper : 2% of the rent goes towards promotions…
Ms Bond: That’s not much spent for promotions and advertising.
Mr Draper: The smaller shops automatically feed off the anchor tenants in the big shops. That’s always how it is.
Ms Bond: Oh, all right, but how exactly do you establish what the rent should be in the first place? What is a good rent?
Mr Draper: The basic rule for the Centre is the total rent bill is 10% of turnover for your store type. In the 160 square metre case, rent plus marketing at 2% plus outgoings multiplied by the shop area and the total rent bill is about $75,000 annually so your turnover will be about $750,000.
32 Ms Bond stated in her principal affidavit that ‘later’ she telephoned the managers of a shopping centre and was told by a leasing agent whom she knew that homewares trade at about $4,300 per square metre and that Harvey Norman turned over $20 million per annum. A brief note of this information appears in the Bond notes.
33 In an email to a friend on 2 August 2004, Ms Bond said that she was negotiating a lease at the Centre, that the rent being charged was ‘scary’ and that she would ‘have to sell $3000.00 worth of stuff a day to make it work’.
34 In his affidavit, Mr Draper disputed Ms Bond’s version of their discussion of rent and sales. In the first place, he denied quoting a figure of 2% for promotions, on the ground that in discussions with prospective tenants he always started with a figure between 3% and 4%, which typically was negotiated down to 2%. He did not recall Ms Bond’s comment about the amount spent on this and denied suggesting that the smaller shops ‘feed off’ the larger ones.
35 As to the remainder of this conversation, Mr Draper’s version was along the following lines: -
36 On or about 16 July 2004, Ms Bond received from Mr Draper a Lease Deal Summary Approval Sheet (hereafter ‘LDSAS’). She also received a copy of the largest of the three types of brochure promoting the Centre that Charter Hall had prepared. She filled out the LDSAS and sent it to McKenzie Hall. It related to the shop of 160 square metres.
Ms Bond: How am I going to know if I can afford to pay the rent?
Mr Draper: As a guide, a shop selling high margin items needs to be turning over at least ten times the gross annual occupancy costs. For example, a shop that pays $100,000 in rent will need to turn over at least $1,000,000.
37 Later the same day, during a telephone conversation, Mr Draper told her that this shop was no longer available. She told him that the shop of 414 square metres was too large for her, as was the rent (about $15,600 per month) that he quoted for it. In response to a question from her, he listed a number of businesses that would be going into the Centre.
38 According to her principal affidavit, this list included Bing Lee, The Good Guys, Cane Design and, most relevantly, Harvey Norman. She claimed that Mr Draper told her that Harvey Norman were ‘taking 3,000 square metres’ and that ‘they do furniture and electrical’.
39 Ms Bond also claimed that Mr Draper responded to the following effect when she said that the rent quoted for the shop of 414 square metres was too high for her: -
40 On a page of the Bond notes, the words ‘Harvey Norman – 3,000’ appear amongst a number of other names which Mr Draper admits having mentioned to her. They include Bing Lee, the Good Guys and Cane Design.
It may sound a lot but remember, bulky goods customers are 50% qualified by the time they walk in your door because they will be coming to look at furniture – unlike other centres. This centre will easily take over from Moore Park because it will be known for its boutique stores. It’s going to be a unique upmarket homemakers’ centre.
41 On 16 July 2004, Ms Bond sent to a man whom she described as ‘a property developer friend’ a request by email for ‘urgent advice’. She said that she was about to receive notice to quit her current business location, that she had ‘looked at a new furniture centre being built on the corner of O’Riordan Street and Doody Street’, that the centre was ‘huge with some of the biggest retailers going in – including Harvery (sic) Norman, Bing Lee and The Good Guys’ and that as it was ‘going to be ALL furniture… the buyers are quite well qualified before they walk in the door’. She asked what he thought of this prospect. The evidence does not refer to any reply from him.
42 Ms Bond said in her affidavit that on 18 July 2004, she visited the Supacenta at Moore Park in order to view the pedestrian traffic and ascertain how many staff were employed in the shops. A gift shop operator told her that all the shop-owners in the centre had been invited to move to Style at home but that in his opinion, it would take a long time to ‘bed down’, and in any event he had a good business at the Supacenta. Ms Bond testified that in her opinion he was ‘making a big mistake’ because by this stage she had been ‘convinced’ by Mr Draper that the Supacenta would ‘suffer badly’ with the opening of Style at home.
43 In the email of 2 August 2004 mentioned above, Ms Bond’s comments about the rent being ‘scary’ and about having to ‘sell $3000.00 worth of stuff’ were followed by the sentence ‘Still, The Good Guys, Bing Lee and Harvey Norman are coming in so I hope to get a bit of business from them’.
44 In his affidavit, Mr Draper denied having referred to Harvey Norman when responding to Ms Bond’s question about who would be moving into the Centre. He said that the only conversation during which he mentioned Harvey Norman to Ms Bond occurred, as described above, when she first visited the Centre, on or about 12 July 2004.
45 Mr Draper also denied saying to Ms Bond that bulky goods customers were ‘50% qualified’ or that the Centre would ‘easily take over from’ the Supacenta at Moore Park. He described the latter suggestion as ‘silly’, asserting that the Supacenta was far and away the most successful bulky goods retail centre in New South Wales and that its rentals were three to four time higher than those achieved in most other centres of this type.
46 What he said to Ms Bond, according to his affidavit, was along the following lines: -
47 On or about 18 July 2004, Mr Draper informed Ms Bond by telephone that the shop of 414 square metres had been leased by another leasing agent to another tenant. She asked whether the sole remaining shop, which had a floor area of 800 square metres, might be split.
A homemaker centre like Style at home has a better-qualified customer than a strip shop like you are in at the moment, because people will be shopping for items for their home, rather than just shopping for their groceries and other everyday items.
48 On 22 July 2004, Mr Draper told her on the telephone that ‘the landlord’ had agreed to do this and that a shop of 350 square metres would be available for her. He described its shape and dimensions to her and she drew a rough floor plan. He also sent her a second LDSAS, relating to these newly conceived shop premises. These were the premises, known as Shop T1.2, that were ultimately leased to Saies-Bond.
49 According to Ms Bond, when she then asked Mr Draper who might be taking the shop next door, he replied that three parties – Beyond Furniture, Base Warehouse and Vast Interiors - were interested. She said: ‘God, don’t put Base Warehouse in to compete with me or I’ll never make it.’ He said: ‘Why, are they a bargain type shop?’ She indicated that they were. He suggested that she look at Beyond Furniture’s web site and agreed to send her by email some pictures of the stock of a business called Home Living (which he did later that day). She asked whether anyone else was ‘doing a Bali type shop’. He said no to this, but added that there was a ‘cane furniture importer’. She told him that it was important to her that she would not be trying to sell ‘the same sort of things as other shops’ and said that she would send him by email some pictures of her current shop (which she did later that day), so that he could ‘see for himself’.
50 The Bond notes include a page headed ‘Tony Draper 22-7-04’. Amongst other things, this page contains a drawing of a floor plan and the words ‘Home for Living 414’. This note suggests that Home for Living might have been the newly engaged tenant of the shop of 414 square metres.
51 The Bond notes also include, on another page, references to Beyond Furniture, Base Warehouse and Vast Interior. They are surrounded by a number of notes apparently recording calculations of rent.
52 Mr Draper denied three aspects of this evidence given by Ms Bond. The first was her claim that she asked him not to ‘put Base Warehouse in to compete with me’. He asserted that if she had said this he would have discontinued negotiations with her and looked for another tenant ‘with more robust financial arrangements’. Secondly, he denied having asked whether Base Warehouse was a ‘bargain type shop’. He said that, having worked in the bulky goods industry for more than ten years’ he knew the type products sold by that business. Thirdly, he did not recall her asking whether anyone else was ‘doing a Bali type shop’, or indeed suggesting that she would not take a lease within the Centre if any other business was selling merchandise similar to hers. In this connection, he added that at this stage only one or two shops remained available for lease and that, as Ms Bond knew, no tenant was being offered exclusivity.
53 At about this time, according to Ms Bond, Mr Draper responded to a question from her as to the amount of rent that she should offer for Shop T1.2 by saying ‘go for $350 per square metre; if they want more than that they are just being greedy’. Shortly after, when she asked him whether a three-month rent-free period would be sufficient for her, he said that ‘it could be a bit quiet to start with’. When she then said that she would enter four months on the LSDAS, he said that he thought this should be ‘OK’. In the LSDAS that she sent back, she substituted a $350 per square metre as the rent, in place of $395, and a rent-free period of four instead of three months.
54 The Bond notes do not contain any material purporting to record these statements by Mr Draper.
55 Mr Draper denied having suggested what might be an appropriate rent-free period for Saies-Bond, saying that he could not have offered an opinion on this question as he had no information regarding Saies-Bond’s financial condition or its business prospects or as to the likely success of the Centre. He also denied having suggested what figure should be proposed for rent, pointing out that this would both be unprofessional and run counter to McKenzie Hall’s interests.
56 On 27 July 2004, Ms Bond received a final LSDAS from McKenzie Hall. It proposed a rent figure of $360 per square metre and a rent-free period of four months. The estimated date for the start of the lease was October 2004 and the fitout period was entered as ‘4 weeks prior to centre opening’.
57 According to Ms Bond, Mr Draper told her on 27 or 28 July 2004 that she should sign and fax the LSDAS to him urgently because he needed it for a meeting on 28 July. She did as requested.
58 On 29 July 2004, Ms Bond received copies of the lessor’s and lessee’s disclosure statements and of drafts of a lease and an agreement to lease. This was the first time that any of these documents were provided to her.
59 The lessor’s disclosure statement, which was dated 28 July 2004, designated Armstrong Jones, as trustee, for ING, as the lessor. It also stated that the lessor had purchased the property from PDP and had ‘contracted PDP to complete the development, including entering into binding Agreements for Lease with the various tenants of the Centre and construction of the Centre’.
60 According to Ms Bond, a telephone conversation with Mr Draper on or about 30 July 2004 included an exchange between them along the following lines:-
61 Ms Bond claimed that when on 9 August 2004 she asked Mr Draper to confirm what would happen if she sold her business, he replied to the same effect. In the Bond notes, a page headed ‘Tony Draper 9.8.04’ contains directly under this heading the words ‘To assign lease must give copy of disclosure statement to new lessee then I’m not liable for lease’.
Ms Bond: What happens if I want to sell my business later as I don’t want to be liable for the rent if I sell my business to someone?
Mr Draper: The new law is that you must give a copy of the disclosure statement to the buyer and that way you won’t be liable for the lease.
62 Mr Draper said that he might have advised Ms Bond that if she sold her business she would need to give a copy of the disclosure statement to the purchaser. But he denied having suggested that if she did this ‘she would not be liable for the lease’. He asserted that as a rule he did not provide legal advice to tenants.
63 In what Ms Bond alleges to have been a further telephone conversation with Mr Draper, she asked him who was taking the shop next to Bing Lee. His reply was ‘J & D @ Home’. When she asked what their business was, he said: ‘They are a wholesaler and have a warehouse in Ralph Street. They do something similar to Bay Swiss.’
64 A page in the Bond notes contains, on separate lines, the phrases ‘Bay Swiss’, J & D @ Home’ and ‘Ralph St’. Save for three short and illegible entries, nothing else appears on this page.
65 Mr Draper denied that this conversation occurred. His version was that he told her that ‘a wholesaler of bulky goods’ would be taking the shop next to Bing Lee, that this business ‘wholesaled to other stores including the Base Warehouse’, that this would be the first time that they had opened a retail store and that he didn’t know exactly what they would be selling. It would appear from accompanying references to a business which he called ‘G & D’ that he was in fact referring to G & D @ Home.
The Tribunal’s assessment of the evidence on these matters
66 Whether Armstrong Jones was bound by any representations that Mr Draper made. It is convenient here to consider a submission by Mr Henry, counsel for Armstrong Jones, to the effect that even if Mr Draper did make some material misrepresentations to Ms Bond in the course of negotiating the lease, they could not form the basis of any claim by Saies-Bond against Armstrong Jones because Mr Draper was not an agent of Armstrong Jones at the relevant time.
67 In so submitting, Mr Henry relied on the following matters: (a) it was PDP, not Armstrong Jones, that engaged McKenzie Hall, with Mr Draper as the ‘key person’, to find tenants for the Centre; (b) Mr Anthony Bertoldi, who is a director and the chief executive officer of Armstrong Jones, said in cross-examination that the ‘presentations’ that were made to Saies-Bond were made on behalf of Charter Hall, not ING or Armstrong Jones; and (c) that Armstrong Jones was not a party to the leasing agreement and did not acquire from PDP any entitlements or obligations arising under it, either by novation or by transfer.
68 The Tribunal considers, however, that countervailing arguments advanced by Mr Stephen Spring, agent for Saies-Bond, must prevail. Mr Spring relied on (a) Ms Bond’s evidence, mentioned above, that at her first meeting with Mr Draper he said that ING was the landlord; (b) the description of the roles of Armstrong Jones, ING and PDP in the disclosure statement received by Ms Bond on 29 July 2004; (c) an acknowledgment by Mr Draper in cross-examination that in the disclosure statement ING would seem to have been offering the leased premises to Saies-Bond; (d) the proposition that lessors of premises that have just been redeveloped should not be permitted to avoid liability for pre-lease misrepresentations by arguing that they were made solely on behalf of the developer; and (e) what he described as ‘enough agency law to reject this argument’.
69 The Tribunal takes into account also the fact that the sale of the property from PDP to Armstrong Jones took place in May 2004, before any of the relevant conversations between Mr Draper and Ms Bond.
70 Its conclusion is that during July and August 2004 Mr Draper had ostensible authority, and possibly also actual authority, to make representations as the agent of Armstrong Jones to Saies-Bond, a prospective tenant of the Centre, regarding all matters of potential relevance to any leasing agreement being negotiated with Saies-Bond.
71 The alleged misrepresentations by Mr Draper on which Saies-Bond relies. As has already been indicated, a significant component of Saies-Bond’s case is based on alleged misrepresentations made to Ms Bond by Mr Draper before the lease was signed. They are integral, in particular, to its claims for damages arising from reliance on them and for unconscionable conduct. In its Amended Application and in written submissions filed after the hearing had concluded, Saies-Bond indicated that the relevant misrepresentations by Mr Draper could be classified under nine headings.
72 In addition, Ms Bond, at paragraph 170 of her affidavit, stated that Saies-Bond would not have entered into the lease had it not been for a number of specified representations (the number, again, happens to be nine). These are nearly, but not quite, co-extensive with the representations by Mr Draper referred to in Saies-Bond’s submissions.
73 The last of the nine listed items in para 170 reads: ‘the tenants represented have (sic) taken space in the Centre were not the tenants that opening (sic) of the Centre.’ This is not phrased as a representation by Mr Draper or anyone else and furthermore is unintelligible. It will be left out of account.
74 In paragraph 171 of her affidavit, Ms Bond added that Mr Draper ‘presented the Centre in glowing terms as a place to establish a business along with other high quality tenants whereas in reality those tenants cannot pay their rents either…’
75 In relation to each of the nine subject matters identified in Saies-Bond’s submissions, the Tribunal must investigate the following matters: (a) what (as far as may realistically be determined) Mr Draper did actually say; (b) whether or not what he said was false or misleading; (c) whether, in relation to any false or misleading representation, he knew or ought to have known that it answered this description; and (d) whether Saies-Bond relied on any false or misleading representations. While the foregoing affidavit evidence provides a starting-point for this exercise, a number of other factors must also be taken into account.
76 Two general aspects of the role played by alleged misrepresentations in Saies-Bond’s case are deferred for later consideration. These are, first, to what extent precisely did Saies-Bond rely on any misrepresentations found to have been made when it was deciding whether or not to enter into the lease and, secondly, what was the legal effect of provisions in the lessor’s disclosure statement regarding reliance on representations.
77 In assessing the evidence, a factor of obvious importance is the comparative credibility of Mr Draper and Ms Bond. The Tribunal considers that, generally speaking, both of them endeavoured to give truthful evidence. But it is highly relevant that Ms Bond made notes during or soon after the various conversations, whereas Mr Draper, despite being (according to his own evidence) a leasing agent of more than ten years’ experience in the field of bulky goods retailing, did not do so. During his cross-examination, there were therefore a number of matters on which he gave tentative answers. It must be added however that (a) the Bond notes are almost invariably too brief to indicate by themselves exactly what Mr Draper said on the relevant occasion; and (b) that at a number of points in Ms Bond’s evidence, both in relation to the alleged misrepresentations and on other matters, Ms Bond made confused and unconvincing statements. In the ensuing discussion of the nine subject matters, some of these weaknesses in the evidence of both witnesses are noted.
78 (i) The tenancy mix of the Centre. This is the first of the nine subject matters in Saies-Bond’s submissions. It happens also to be the only subject matter relating to which no specific misrepresentation allegedly made by Mr Draper can readily be identified. None of the representations on which Ms Bond claims specifically to have relied falls within this category.
79 (ii) The quality of other tenants in the Centre. Under this heading falls one of the key issues in dispute in this case. It is whether or not Mr Draper represented to Ms Bond that Harvey Norman was a prospective tenant. This is one of the alleged representations (hereafter referred to as the ‘representations relied on’) in relation to which Ms Bond testified that if they had not been made to her Saies-Bond would not have entered into the lease.
80 Ms Bond’s assertion that Mr Draper said this during two separate conversations with her receives support from three contemporaneous documents. First, there is the ‘Bond note’ relating to the later of these conversations (on 16 July 2004). It mentions also a proposed tenancy area of 3,000 square metres for Harvey Norman. It lists a number of other businesses that Mr Draper mentioned to her, but not Joyce Mayne. In addition, there were two emails that she sent to friends (on 16 July and 2 August 2004 respectively) in which she said that Harvey Norman would be a tenant.
81 During cross-examination, Mr Draper, in response to a question whether he ‘said Harvey Norman and other tenants’ while showing Ms Bond around the Centre, replied: ‘Yes, I said those words.’ He later denied specifically having said that Harvey Norman was taking 3,000 square metres. He went on to say that at that time he was mentioning Harvey Norman to prospective tenants because they might not have known who Joyce Mayne was or whether it was a ‘credible retailer’. He told them that it was run by ‘the Harvey Norman people’ in order, he said, to give it credibility. They would know that it was ‘not going to open and shut in a week’ as it had a ‘substantial retailer behind it’. He agreed that Ms Bond was ‘potentially’ under a misapprehension in believing that Harvey Norman would be a tenant.
82 As Mr Spring pointed out, in the cross-examination of Ms Bond on this issue, it was never specifically put to her that she was not telling the truth in saying that she believed Mr Draper to have identified Harvey Norman as a prospective tenant. The questions that Mr Henry asked appeared instead to be directed to obtaining an admission from her that when she signed the lease she realised that it might not after all be a tenant during the term of Saies-Bond’s lease. On two separate occasions, he put it to her that she knew or understood at that time ‘that Harvey Norman may or may not be a tenant at the Centre during the term of your lease’.
83 In the Tribunal’s opinion, there is no reason to doubt that on at least one of the two occasions to which Ms Bond’s affidavit referred in this connection, she understood from words used by Mr Draper that Harvey Norman was a prospective tenant. There is no other plausible reason for the reference in the Bond notes to Harvey Norman or for the mention of this company in her two emails to friends. The question of greater difficulty is whether Mr Draper did in fact say this explicitly.
84 The Tribunal’s finding is that on or about 15 July 2004 (if not also some three days earlier), Mr Draper made a false or misleading representation to Ms Bond that Harvey Norman was a prospective tenant in the Centre. He did not say that this company was the backer of another company (Joyce Mayne) that was expected to be a tenant. Mr Draper knew at that time, as he himself said in his affidavit, that Harvey Norman was not a prospective tenant.
85 The Tribunal makes these findings applying the evidentiary standard of the balance of probabilities, but also taking into account the well-known principle that on matters of such seriousness the evidence must be clear and convincing. With specific reference to pre-lease misrepresentations under s 10 of the RL Act, this requirement was emphasised in Golden Harvest (Australia) Pty Ltd v Paing Pty Ltd [2002] NSWADTAP 40 at [26] (a decision affirmed by the Court of Appeal: see [2004] NSWCA 85).
86 The Tribunal has also taken account of observations of McLelland CJ in Equity, on which Mr Henry relied, in Watson v Foxman (1995) 49 NSWLR 315 at 318-319. His Honour said that where claims of ‘misleading or deceptive conduct’ under trade practices legislation are based on spoken words, the words allegedly spoken must ‘be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances’. He pointed out that a finding that words were misleading may depend on ‘subtle nuances’ and stressed the fallibility of human memory. He went on to say that considerations of this nature ‘can pose serious difficulties of proof for a party relying on spoken words’. But he added the qualification, which is significant here, that this might not be the case where there was ‘some reliable contemporaneous record or other satisfactory corroboration’.
87 The principal grounds for the Tribunal’s findings are (a) the contemporaneous references to Harvey Norman, alongside other prospective tenants (but not Joyce Mayne) in the Bond notes; (b) the absence of any contemporaneous notes taken by Mr Draper; (c) his admissions in cross-examination that he did ‘say those words’ (i.e. ‘Harvey Norman and other tenants’) to Ms Bond and that what he said had the potential to mislead her; and (d) his tentativeness in otherwise dealing with the issue in cross-examination.
88 The Tribunal also finds that, in deciding to enter into the lease, Ms Bond relied on the statement or statements by Mr Draper that caused her to believe that Harvey Norman was a prospective tenant.
89 Two further claimed misrepresentations within this category are the alleged statements by Mr Draper, on or about 16 July 2004, (a) that the Centre would ‘easily take over from Moore Park’ and (b) that it would be ‘known for its boutique stores’ because it would be a ‘unique upmarket homemakers’ centre’. In her principal affidavit, Ms Bond implicitly referred to them as having been relied upon. This stems from her assertion at para 171 that Mr Draper ‘presented the Centre in glowing terms as a place to establish a business along with other high quality tenants’.
90 As indicated above, Mr Draper denied making these two statements, giving reasons why the former of them would have been a ‘silly’ thing to say.
91 In cross-examination, Ms Bond adhered to her assertion that he made both these statements, even though neither of them is mentioned in the Bond notes. She also denied that her visit to the Supacenta on 18 July 2004 was for the purpose of forming her own independent opinion as to whether Style at home would ‘easily take over ‘ from it.
92 Mr Spring’s submissions made only limited references to these alleged misrepresentations by Mr Draper.
93 The Tribunal finds that, on the balance of probabilities, Mr Draper did not make such an extreme prediction regarding Style at home’s prospects of competing with the Supacenta. It accepts his argument that to predict that Style at home would ‘take over easily’ would have been ‘silly’. It considers, moreover, that Ms Bond’s claim to have relied materially on such a prediction is implausible, given that on her own account it was not backed up by any other statement by Mr Draper regarding the Supacenta’s future prospects.
94 The Tribunal considers that there is less reason to doubt that Mr Draper used phrases such as ‘boutique stores’ and ‘an upmarket homemakers centre’. But at about the same time he identified for Ms Bond virtually all the other tenants, enabling her to decide for herself, at least up to a point, whether these descriptions were accurate.
95 Furthermore, it has not been established to the Tribunal that these descriptions of the other tenants were in fact inaccurate or misleading. In his submissions, Mr Spring argued that they could not be regarded as high quality tenants because within a few months after the Centre opened a number of them, like Saies-Bond, were in arrears of rent. This does not necessarily follow, since a significant component of Saies-Bond’s own case is its assertion, canvassed below, that the Centre failed on account of Armstrong Jones’s failures of management to complete the redevelopment on time, to display adequate signage and to market and advertise it properly.
96 (iii) Marketing and advertising of the Centre. Two alleged misrepresentations by Mr Draper fall within this category.
97 The first, occurring at his first meeting with Ms Bond (on or about 12 July 2004), was that in the wall of the Centre facing O’Riordan Street there would be a large display window where retailers could exhibit their goods. In his affidavit, he denied having said this. But in cross-examination he admitted that one of the plans for the Centre had provided for glass display cases on the external walls in the car park adjoining the Centre. He admitted also that these display cases were never constructed.
98 The Tribunal’s finding is that on the balance of probabilities Mr Draper did mention this plan for a display window to Ms Bond. No such windows were ever constructed. But there is no evidence to suggest that this representation by Mr Draper was false at the time when he made it, or indeed that he should have suspected that it might be false.
99 The second alleged misrepresentation in this category was that 2% of the rent would be applied to promoting the Centre. Mr Draper denied having said this. There is no evidence as to whether or not it was true. In the Tribunal’s opinion, the proportion of rent applied in this way was not in any event a material issue.
100 As just mentioned, the issue of marketing and advertising of the Centre was raised by Saies-Bond as an important one in connection with other parts of its claim. The brief discussion here concerns only the limited role that it played in the discussions between Mr Draper and Ms Bond during July and August 2004.
101 (iv) Rent for bulky goods retailers as 10% of turnover. Into this category of claimed misrepresentations falls the alleged statement by Mr Draper, made on or about 15 July 2004, to the following effect: -
102 Ms Bond’s list of representations relied on includes the following: ‘the rent for my store type is equivalent to about 10% of turnover in bulky goods centres’.
The basic rule for the Centre is the total rent bill is 10% of turnover for your store type. In the 160 square metre case, rent plus marketing at 2% plus outgoings multiplied by the shop area and the total rent bill is about $75,000 annually so your turnover will be about $750,000.
103 Saies-Bond’s contention in this context is that Mr Draper, having quoted an approximate figure ($75,000) for the rent that would be charged for the shop of 160 square metres, used that figure as the basis for a prediction, which he communicated to Ms Bond, that if Saies-Bond leased that shop its turnover would in fact be of the order of $750,000.
104 Mr Draper’s version contains a quite different proposition. It is that as a guide, a shop of this nature needs to be turning over at least ten times the gross annual occupancy costs. In his affidavit, he claimed to have said this, adding the following example: ‘a shop that pays $100,000 in rent will need to turn over at least $1,000,000.’ This constitutes a warning against agreeing to paying rent that the turnover of the business might not be able to sustain, not a prediction as to what that turnover might be.
105 In answer to questions from Mr Spring and from the Tribunal, Mr Draper confirmed that he did not suggest to Ms Bond that there was a ‘basic rule’ in the Centre that the total rent bill for a tenant was ‘10% of the turnover for your store type’. He maintained that the message that he wished to convey was that as a tenant ‘you would need to be comfortable with your level of sales’. He said also that ‘most of the retailers we deal with … always give us feedback that once rent gets more than 10% they can’t run a successful business…’ But he was somewhat defensive when asked by the Tribunal what was the basis for his nominating 10% rather than some other percentage.
106 Mr Henry pointed out in his submissions that it was highly unlikely that Mr Draper, knowing virtually nothing at this stage about Ms Bond’s capacities or past achievements as a furniture retailer, would have been prepared to try to predict what the turnover of her business at the Centre would be.
107 In cross-examination, Ms Bond maintained that, having no other way of estimating what Saies-Bond’s turnover would be if it took a lease in the Centre, she relied on Mr Draper’s statement, backed up by his expertise in the field of bulky goods retailing, as indicating what she could expect in the way of turnover. She claimed that, not knowing what the traffic flow would be or what other businesses would be going into the Centre, she could not arrive at an estimate of turnover in any other way.
108 In cross-examination, however, she also said the following: -
109 As the Tribunal interprets this evidence, Ms Bond, towards the end of this passage, recognised that the ratio of 10% suggested by Mr Draper was intended to give an indication of the turnover that she would have to achieve to remain solvent, not of the turnover that, in his opinion, she would in fact achieve.
It was a brand new building. I had no idea as to how they were going to establish the rent. He talked about it as being 10% of turnover, so to pay the rent, I had to work out what my turnover was going to be, based on that 10% figure, and I calculated how many containers I was going to have to bring in, and various things like that.
110 A clearer indication that at the time when Mr Draper made this observation she interpreted it as a warning, not a prediction, appears in the email, mentioned above, that she sent to a friend on 2 August 2004. In it, she said that the rent being charged was ‘scary’ and that she would ‘have to sell $3000.00 worth of stuff a day to make it work’.
111 The Bond notes on this particular matter are very brief indeed. They are compatible with both versions of Mr Draper’s statement advanced before the Tribunal.
112 Taking account of all these matters, the Tribunal concludes that, on the balance of probabilities, Mr Draper’s statement to Ms Bond regarding the ratio of rent to turnover did not contain, and could not reasonably have been interpreted to contain, the representation claimed by her, viz, that the turnover of Saies-Bond’s business, if it became a tenant in the Centre, would be of the order of 10 times the rent paid under the lease. It was instead to the effect that, in order to survive, the business would need to achieve a turnover of this scale.
113 (v) Bulky goods patrons being ‘50% qualified’. This category of claimed misrepresentations comprises Mr Draper’s alleged statement, on or about 16 July 2004, that ‘bulky goods customers are 50% qualified by the time they walk in your door because they will be coming to look at furniture – unlike other centres’.
114 Ms Bond’s list of representations relied on includes the following: ‘bulky goods Centre patrons are 50% qualified buyers’.
115 According to Mr Draper, the gist of what he said was that a homemaker centre like Style at home has a better-qualified customer than a strip shop, because people will be shopping for items for their home.
116 In the Tribunal’s opinion, not much turns on the difference between these formulations. It may be significant that the Bond notes, while recording other aspects of the conversation on the relevant day, do not include any phrase such as ‘50% qualified’.
117 The more important point is however a simple one. Neither Ms Bond’s nor Mr Draper’s version of the statement in question has been shown to be false or misleading.
118 (vi) Other tenants not offering equivalent merchandise. The Tribunal has experienced some difficulty in determining what alleged misrepresentations by Mr Draper are claimed by Saies-Bond to be relevant under this heading. It would appear, however, that Saies-Bond relies on three alleged statements by him: (a) that the tenants would include a business called Cane Design; (b) that no other tenant would be selling ‘Bali style furniture’ but that there would be a ‘cane furniture importer’; and (c) that the shop next to Bing Lee would be taken by ‘J & D @ Home’, which was a wholesaler, had a warehouse in Ralph Street and did ‘something similar to Bay Swiss’.
119 In Ms Bond’s affidavit, one of the representations relied on is that ‘other traders within the Centre would not offer merchandise equivalent to the merchandise I had sourced from Indonesia’.
120 Of these three alleged statements, the first and the third receive some substantiation within the Bond notes. In addition, Ms Bond testified that Mr Draper sent her by email some pictures of the stock sold by a business called Home Living and that she sent him pictures of the frontage of her own shop.
121 Mr Draper agreed that he mentioned Cane Design and, as he described it, ‘G & D @ Home’ as prospective tenants. He told Ms Bond that the second of these was a wholesaler which was going into retail for the first time and that he did not know what it would sell. He denied having said to her that no other tenant would be selling ‘Bali style furniture’, or that there would be a ‘cane furniture importer.
122 Ms Bond testified that she tried to find out what sort of stock was carried by the business that she noted down as ‘J & D @ Home’, but could not locate its shop.
123 When the Centre opened in October 2004, Ms Bond discovered that shops called Cane & Wood (not Cane Design) and G & D @ Home (not J & D @ Home) were displaying products similar to those of Saies-Bond, though she said in cross-examination that her products were of ‘slightly better quality’ and were priced differently. This assertion by her was not disputed by Armstrong Jones.
124 The Tribunal is satisfied that Mr Draper knew of Ms Bond’s concern that there should not be other shops in the Centre selling merchandise that closely resembled the merchandise of Saies-Bond. Having regard to this, his misdescription of Cane & Wood as Cane Design must be regarded as a material misrepresentation. The Tribunal does not find that he made this misrepresentation deliberately, as there is no affirmative evidence to show that he knew that he was giving an incorrect name to Ms Bond and the possibility of carelessness on his part cannot be ruled out. But the fact that Cane & Wood would become a tenant would, if known to her, have been a matter of relevance to her in deciding whether or not to enter into the lease.
125 On the other hand, Ms Bond may simply have been mistaken in believing that Mr Draper used the name ‘J & D @ Home’, not G & D @ Home. The Tribunal is not prepared to find that his statements on this matter were misleading. It is relevant here that, according to her own evidence, she tried to find out more about ‘J & D @ Home’. When she failed, it was open to her to ask Mr Draper for more details. She did not do so.
126 (vii) Sufficiency of rent-free period. The claimed misrepresentation within this category is the alleged statement of Mr Draper, on or about 22 July 2004, that a rent-free period of four months would be ‘OK’ for her, having regard to the likelihood that trading would be ‘a bit quiet to start with’.
127 Ms Bond’s list of representations relied on includes the following: ‘the rent-free period would be sufficient to cover start up difficulties sometimes experienced by new shopping centres’.
128 The Bond notes do not refer any statement by Mr Draper along the lines. He denied making any such statement.
129 The Tribunal finds that, on the balance of probabilities, Mr Draper made an observation of this nature, on which Ms Bond placed reliance. Following the relevant conversation between him and Ms Bond, Saies-Bond in fact sought and obtained a rent-free period of four months. As matters transpired a significant proportion of the tenants, including Saies-Bond, did not pay rent for a period well exceeding four months following the commencement of their leases. To this extent, the representation was misleading. But there is no evidence to support a finding that Mr Draper, at the time when he made this statement, knew it to be false or misleading.
130 (viii) A coffee shop opposite the leased premises. Here the relevant representation by Mr Draper, which is included in Ms Bond’s list of representations relied on, is his statement during her first visit to the Centre, that one of the tenants near the leased premises would be a coffee shop. He agrees that he said this to her.
131 The issue in dispute between the parties, however, is whether a shop selling coffee that did in fact open near the leased premises falls within the description ‘coffee shop’.
132 In cross-examination, Ms Bond said that this shop was no more than a takeaway snack bar, selling sandwiches, cakes, rolls, ice cream and similar items of food and drink, but also operating a coffee machine. She claimed that ‘it wasn’t very interesting at all’ and that she ‘was expecting brewing coffee and the like’. She also admitted that in February 2005, when responding to a request from the management of the Centre to advise of any defects in the premises, she referred to the shop as a ‘coffee shop’.
133 In the Tribunal’s opinion, Mr Draper’s statement in July 2004 that a coffee shop would be opening near the leased premises cannot in these circumstances be held to be a misrepresentation, let alone a deliberate one. Such a finding could not be based solely on the fact that the shop that was subsequently established did not live up to Ms Bond’s expectations. Moreover, if it had been a matter of concern to her to ascertain what kind of coffee shop would be set up, she could easily have made further inquiries. She did not do so.
134 (ix) Assignment of the lease. Within this category falls two alleged statements by Mr Draper, made on or about 30 July and on 9 August 2004 respectively. They were both to the effect that if Saies-Bond took a lease but subsequently wanted to assign it, then under ‘the new law’ it would have to ‘give a copy of the disclosure statement to the buyer’, in which event it would not be ‘liable for the lease’.
135 The Bond notes include a short statement to this effect, appearing under the words ‘Tony Draper 9.8.04.’ Mr Draper said that he might have advised Ms Bond that on any sale of her business she would need to give a copy of the disclosure statement to the purchaser. But he denied having said that if she did so she would not be ‘liable for the lease’, adding that as a matter of practice he did not give legal advice to tenants.
136 Taking into account particularly the entry in the Bond notes, the Tribunal finds that, on the balance of probabilities, Mr Draper did make a statement along these lines. In cross-examination, he was noticeably tentative on this topic. When asked, for instance, whether he told Ms Bond that there was ‘a new law regarding assignment of leases’, he said: ‘I don’t believe I said it in those words.’ He admitted later that they did ‘have a discussion’ about the assignment of leases.
137 The words attributed to him are however markedly ambiguous. The phrase ‘disclosure statement’ could, for instance, mean the lessor’s disclosure statement, required under s 11 of the RL Act, or an assignor’s disclosure statement, required under s 41. The phrase ‘liable for the lease’ could indicate liability for all rent not paid by the assignor, whether falling due before or after the assignment, or merely for rent due from the assignee after the assignment. If in each case the latter of these suggested alternatives were the correct interpretation, Mr Draper’s statement would correctly set out the effect of a ‘new’ provision of the Act (s 41A), which was inserted in 1998.
138 The Tribunal finds that when Mr Draper referred in this conversation to ‘the disclosure statement’, he may well have meant, and could reasonably have been understood to mean, the lessor’s disclosure statement, not that of the assignor. But it finds also that, on the balance of probabilities, Ms Bond interpreted the phrase ‘liable for the lease’ as indicating liability only for rent due under the lease following an assignment. Its reason for taking this view is that, according to her own account, when she raised this matter with him for the first time, on or about 30 July 2004, the question that she asked him was to the following effect:-
139 It is simply not credible that Ms Bond would have been suggesting that she did not ‘want to be liable’ for any unpaid rent due from Saies-Bond to Armstrong Jones with respect to any period, however long, preceding an assignment of the lease. It is equally not credible that, having heard Mr Draper’s response, she should have believed that through the simple expedient of giving a disclosure statement to an assignee she could wholly escape liability for any such rent, leaving the lessor out of pocket or the assignee obliged to pay the arrears due from Saies-Bond out of his or her pocket.
Also, what happens if I want to sell my business later as I don’t want to be liable for the rent if I sell my business to someone (emphasis added)?
140 On this footing, Mr Draper may have misled Ms Bond into believing that on an assignment she would avoid liability for future rent by giving the assignee a copy of the lessor’s disclosure statement. Under s 41A, it is the assignor’s disclosure statement that must in fact be supplied. But this hardly qualifies as a material misrepresentation. It is unthinkable that Saies-Bond’s decision to enter into the lease was influenced in any way by any such misunderstanding of s 41A, if indeed Mr Draper’s words caused such a misunderstanding to arise.
141 The net outcome of the foregoing investigation of the misrepresentations alleged to have been made by Mr Draper to Ms Bond will be summarised below, following a discussion of other similar components of Saies-Bond’s case.
Material in the brochure promoting the Centre and in the disclosure statement
142 In its Amended Application and in written submissions filed after the hearing had concluded, Saies-Bond asserted that false and misleading representations in July and August 2004, on which Saies-Bond relied in deciding to enter into the lease, arose from ‘documentation supplied to Saies-Bond’.
143 The relevant documentation comprised (a) a copy of the largest of the three types of brochure promoting the Centre that Charter Hall had prepared; and (b) the lessor’s disclosure statement. As mentioned above, Ms Bond received the brochure from Mr Draper on or about 16 July 2004. She received the disclosure statement on 29 July 2004.
144 The misrepresentations that Saies-Bond claimed to have been made in the brochure and the disclosure statement (chiefly the former) were formulated in its submissions as follows:-
145 In the list in para 170 of Ms Bond’s affidavit, one of the nine misrepresentations relied on was as follows: ‘adequate signage to the Centre would attract patrons’. Ms Bond also stated in para 172 that ‘McKenzie Hall as spruikers for ING and [Armstrong Jones] held themselves out to be experienced experts and an organisation who could be trusted’.
i. the managers of the Centre were experts who could be trusted;
ii. huge population and household growth on the doorstep;
iii. Saies-Bond’s business would flourish;
iv. significant signage to the Centre to maximise exposure to attract patrons.
146 As with the alleged statements by Mr Draper that have just been discussed, the Tribunal’s initial task in the present context is to investigate the following issues: (a) what relevant statements are in fact contained in the brochure and the disclosure statement; (b) whether or not each of these statements was false or misleading; (c) whether, in relation to any false or misleading representation, the maker of it knew or ought to have known that it answered this description; and (d) whether or not Saies-Bond relied on any false or misleading representations.
147 A copy of the brochure was tendered in Saies-Bond’s case. It is an A4 size booklet of 42 pages, containing many colour photographs (of which most occupy a full page) and a number of pages on which relatively small quantities of text appear in white print on a bright red background. The only words on the front cover are ‘STYLE at home’, accompanied by the letters ‘TM’ in small print. The words ‘at home’ are in distinctive handwriting. The text is overtly designed to encourage prospective tenants to think highly of the Centre. The brochure is manifestly a promotional document.
148 For reasons already outlined, Mr Draper must be regarded as the agent of Armstrong Jones in delivering the brochure to Ms Bond and the material contained in it must be regarded as communicated on behalf of Armstrong Jones (and indeed of other enterprises such as Charter Hall and McKenzie Hall). In cross-examination, Mr Draper stated that he said nothing to prospective tenants that would either encourage or discourage them from relying on this material. The brochure contained no disclaimers.
149 In the present context, the disclosure statement is only of significance because it had as an annexure a rough sketch of the external signage proposed for the Centre.
150 It is convenient to consider each of the four alleged misrepresentations separately.
151 (i) ‘The managers of the Centre were experts who could be trusted’. Saies-Bond’s claim in this regard derives from a page in the brochure which bears the heading ‘TRUST’ in large letters and commences as follows: ‘From development through to management, Style at home will be in the hands of experts.’
152 The remainder of the text makes claims about the quality and experience of Charter Hall and McKenzie Hall. None of these specific claims has been shown to be false.
153 What Saies-Bond asserts is that it relied on the broad description of these two enterprises as both expert and trustworthy, but this description proved to be false.
154 The Tribunal finds that Saies-Bond relied reasonably on these claims to expertise and trustworthiness. It does not find, however, that the writers of the brochure knew or had reason to believe that such claims were false or misleading. The question whether they did in fact prove false or misleading depends upon an overall assessment of the degree of expertise and trustworthiness shown by Charter Hall, McKenzie Hall and the other enterprises (including Armstrong Jones itself) which were or became involved in the development or management of the Centre.
155 (ii) ‘Huge population and household growth on the doorstep’. A number of statements in the brochure contain assertions to this effect. But nothing was put before the Tribunal to suggest that any of them were false. They cannot therefore provide the basis for a claim of misrepresentation.
156 (iii) ‘Saies-Bond’s business would flourish’. The statement in the brochure coming closest to making a representation to this effect appears on a page headed ‘SPACE’. One of three dot-points under this heading is as follows: ‘22,400 square metres of space dedicated to bulky goods and associated foods retail, giving your business scope to flourish’.
157 The brochure contains numerous other statements depicting the Centre as highly likely to attract many customers for a whole range of reasons: for example, its proximity to an area of fast population growth, the ‘convenience’ of its car parking arrangements, its ‘pleasant environment’, and its ‘unique design’. Some of the language can be characterised as pure ‘puff’: for example, the assertion that ‘Style at home will offer consumers a shopping experience to remember’.
158 In the Tribunal’s opinion, these statements, even when viewed collectively, cannot be regarded as containing a representation that the business of each and every tenant in the Centre will inevitably ‘flourish’. The claim that every such business will have ‘scope to flourish’ is significantly different. The Tribunal finds that the representation claimed to have been made in this part of Saies-Bond’s case was not in fact made.
159 (iv) ‘Significant signage to the Centre to maximise exposure to attract patrons’. With regard to this alleged misrepresentation the sole statement of importance in the text of the brochure appears on the page headed ‘SPACE’ which has just been mentioned. The third and final dot-point on that page reads as follows: ‘Significant signage to maximise your exposure’.
160 In addition, the brochure contains three pages headed ‘VIEW.1’, ‘VIEW.2’ and ‘VIEW.3’ respectively. Under each of these headings there appear, in upper case but distinctly smaller print, the words ‘architects impression’ and ‘perspective’. Further below, there is a colour photograph occupying about one-third of the page. The photographs different from each other, but are all evidently intended to show how the external walls of the Centre would appear on completion.
161 The significant feature of each of these ‘architect’s impressions’ is that they show large and elegantly designed signs on the external walls. The largest sign in each of them reads ‘STYLE at home’. Other signs are clearly ‘mock-ups’ of signs for individual shops, employing fictitious names such as ‘VOID’, ‘DESIGN’, ‘allgood’ and ‘aus living’. The clear message conveyed is that the Centre would have attractive external walls, on which the names of the Centre and of some at least of the tenants would be prominently displayed in elegant formats.
162 The rough sketch, already mentioned, that was attached to the lessor’s disclosure statement, depicts an external wall containing a large ‘STYLE at home’ sign at the top and a number of ‘mock-up’ signs of tenants underneath. The print styles resemble those on the ‘architect’s impressions’ in the brochure. The sketch in the disclosure statement bears the label ‘signage zone d & g’, followed by the words ‘signage zone j & k are a mirror image’.
163 After the Centre opened during October 2004, Mr Richard Jack was its manager. He was an employee of CB Richard Ellis Pty Ltd, a property management company that Armstrong Jones had engaged to manage the Centre.
164 Mr Jack’s evidence included some important statements regarding signage at the Centre. These were (a) that because it was a closed centre, in which the individual shops were not visible from outside, external signage was important for the tenants; (b) that any right of an individual tenant to erect signs advertising its own shop was subject to the terms of its lease; (c) that Charter Hall did not implement the large signage on the external wall of the building because it believed that this would detract from the signage of individual tenants; (d) that on 10 December 2004, a temporary vinyl banner, measuring 14 metres x 3 metres, was erected on the external wall; (e) that, as shown in an annexed photograph, this banner bore the words ‘Style at home’ in large letters and the words ‘over 30 contemporary stores’, ‘furniture’, ‘bedding’, electrical, lighting’ and ‘flooring’ in smaller letters; (f) that, as also shown in this photograph, signs advertising the businesses of nine tenants, including Bing Lee, Joyce Mayne and G & D @ Home, but not Saies-Bond, were also erected at that time on the external wall; and (g) that on 26 May 2005 Mr Jack ordered permanent illuminated signage, which was installed on 16 June 2005.
165 Ms Bond said in her principal affidavit that for about two weeks following the Centre’s opening on 16 October 2004, the ‘signage outside was just a few simple A-frames in the driveway entrances’. This statement was not contested.
166 Mr Spring pointed out in submissions on Saies-Bond’s behalf that the lease conferred no right on Saies-Bond to erect additional external signs.
167 Saies-Bond’s case on this matter is, in brief, as follows: (i) that in deciding whether to enter into the lease, it relied on representations in the brochure and the disclosure statement to the effect that the external signage would be of the scale, type and quality depicted in the brochure; (ii) that having regard to the nature of the brochure and the importance of external signage for a closed centre, it was reasonable for Saies-Bond to place such reliance and to treat this matter as important; (iii) that until June 2005 the signage actually erected fell far short of what was depicted, notably in the period of nearly eight weeks between the Centre’s opening and the installation of the temporary banner; (iv) that the deficiencies in signage contributed materially to the difficulties experienced by Saies-Bond and other tenants in the Centre; and (v) that as an individual tenant, Saies-Bond had no right to try to improve the situation by erecting its own external signage.
168 Mr Henry argued that so far as signage was concerned the brochure simply contained ‘3 architect’s impressions that provide no more than an indication of what the external signage may look like post construction’.
169 In the Tribunal’s judgment, Saies-Bond’s contentions on this matter should be accepted. It is not open to Armstrong Jones to maintain that the statements and photographs in the brochure purporting to show what external signage was planned for the Centre should be dismissed as no more than ‘an indication’ of what this signage ‘may look like’. The brochure was distributed to persons who had displayed interest in becoming tenants. Its evident purpose was to encourage them to enter into leases. In the absence of any express disclaimer of responsibility for reasonable accuracy, either in the text of the brochure or in words used by Mr Draper, prospective tenants were entitled to believe that specific information contained in the brochure was at least broadly accurate. The signage shown in the photographs was eye-catching to the extent that it could be expected to play a significant role in attracting customers to the Centre at and following its opening. But the signage erected by the time the Centre opened was significantly less attractive and remained so for a significant period of time. For these reasons, a finding that material representations on which Saies-Bond relied, with good reason, proved to be false is manifestly warranted.
170 The Tribunal does not, however, find that, at the time when Ms Bond received the brochure, either Armstrong Jones or any relevant agent on its behalf (including Mr Draper) knew that its representations regarding signage were false. There was no evidence to suggest this. In particular, it is not clear from the evidence when (or for that matter, why) Charter Hall decided not to proceed with its original plans regarding signage.
Some implications of these findings regarding the alleged pre-lease misrepresentations
171 Summary of relevant findings. So far as is relevant for future purposes in this judgment, the outcome of the foregoing investigation of alleged oral and documentary misrepresentations made to Saies-Bond on behalf of Armstrong Jones before the signing of the lease may be summed up as follows.
172 First, Mr Draper represented orally that Harvey Norman was a prospective tenant in the Centre. This was a false or misleading representation. At the time when he made it, Mr Draper knew this to be so. It was of significance to Saies-Bond because of the potential of Harvey Norman to attract customers to the Centre.
173 Secondly, he made a false oral representation to the effect that Cane Design was a prospective tenant, when the name of the business in question was Cane & Wood, being a shop potentially competing with Saies-Bond. The Tribunal does not find that he knew this representation to be false at the time when he made it.
174 Thirdly, he represented orally that a four-month rent-free period would be sufficient for the purposes of her business. This was of significance to Saies-Bond. It proved not to be correct. But it is not found that Mr Draper knew this representation to be false at the time when he made it.
175 Fourthly, he represented orally that there were plans to include in an external wall of the Centre a large display window where retailers could exhibit their goods. This plan was never executed. It was of significance to Saies-Bond. But there is no evidence that at the time when this representation was made it was false, let alone that Mr Draper knew or suspected that it was false.
176 Fifthly (and also relating to promotion of the Centre), the brochure and the disclosure statement represented in statements, photographs and a sketch that prominent and elegant signs advertising the Centre would be installed on an external wall. The existence of such signage when the Centre opened was of significance to Saies-Bond. There was very limited external signage until nearly two months after the Centre opened, and signage of the nature depicted in the brochure was not erected for a further six months. But there is no evidence that at the time when this representation was made it was false, let alone that Mr Draper or any other agent for Armstrong Jones knew or suspected that it was false.
177 Sixth and finally, the representation in the brochure (referring particularly to Charter Hall and McKenzie Hall) that those developing and managing the Centre were trustworthy proved false, to the extent that Charter Hall did not implement the external signage depicted in the brochure and that Mr Draper, a director of McKenzie Hall, made the significant misrepresentation regarding Harvey Norman.
178 It is convenient next to examine two general issues, relating to these representations, that have already been foreshadowed.
179 The extent of Saies-Bond’s reliance on these representations. The opening words of paragraph 170 of Ms Bond’s affidavit (see above at [72]) are as follows: ‘I would not have entered into the Agreement for Lease and Lease had it not been for representations that…’ She then listed what have been referred to in this judgment as the nine ‘representations relied on’.
180 In cross-examining Ms Bond, Mr Henry put to her that, correctly interpreted, this statement meant that she relied collectively on all of the nine representations in deciding that the lease should be executed. According to this interpretation, she was alleging that if any one of the listed representations had not been made she would have decided not to take up the lease. The significance of this is that, according to this interpretation, a finding that any one of the nine alleged representations had not been made at all would prevent her from claiming that she had been induced to enter into the lease by any one or more of the remaining representations that were found (a) to have been made and (b) to have been false.
303 In contrast to the present case, the facts in Golden Harvest did not raise the question of how the requirement of knowledge that the statement or representation is false or misleading is to be interpreted when the relevant statement or misrepresentation is made, not by the lessor, but by an agent acting under the lessor’s authority. In the Tribunal’s opinion, the wording of s 10(1) clearly indicates that what matters is the state of knowledge of the agent, not of the lessor. The lessee must prove that the agent knew the statement or representation to be false or misleading at the time when he or she made it. The Tribunal adopts this proposition as a qualification to proposition (e) in the list in Golden Harvest .
(c) that the statement or representation was false; or that the statement or representation was misleading;
(d) that each lessee entered into the lease as a result of the statement or representation;
(e) that the lessor made the statement or representation with knowledge that it was false or misleading;
(f) that each lessee suffered damage attributable to the lessee’s entering into lease (sic); and its amount…
304 At [70], [172] and [183] above, the Tribunal has recorded its findings that (a) during July and August 2004 Mr Draper had ostensible authority, and possibly also actual authority, to make representations as the agent of Armstrong Jones to Saies-Bond, a prospective tenant of the Centre, regarding all matters of potential relevance to any leasing agreement being negotiated with Saies-Bond; (b) on or about 15 July 2004 (if not also some three days earlier), he made a false or misleading representation to Ms Bond that Harvey Norman was a prospective tenant in the Centre; (c) he knew at that time that Harvey Norman was not a prospective tenant and (d) Saies-Bond relied on this representation to the extent that, if it had not been made, Saies-Bond would not have entered into the lease.
305 At [206] above, the Tribunal held that Saies-Bond was not precluded by clause 6 of the lessee’s disclosure statement and s 10A(2) of the RL Act from relying on this representation as the basis for proceedings under s 10 because it was not a representation required by clause 6 to be identified in the disclosure statement.
306 The outcome of these findings and this ruling is that, subject to proving damage attributable to its having entered into the lease, Saies-Bond is entitled to ‘reasonable compensation’ under s 10(1) in respect of such damage.
307 It is well established (see eg Carter, JW and Harland, D J, Contract Law in Australia, 4th edn, 2002, para 1069) that when at common law a party to a contract is held entitled to claim an award of damages on account of having been induced to enter into the contract by a false representation, the aim of the award must be, as far as possible, to put the party in the position that he/she would have been in if the contract had not been made. The party should be ‘recompensed for the damage that he has sustained by entering into the contract’: Holmes v Jones (1907) 4 CLR 1692 at 1709. This is to be distinguished from the approach to be adopted when awarding damages for breach of contract. Here the aim is to put the aggrieved party into the position that he/she would have occupied if the contract had been performed.
308 Saies-Bond’s evidence included draft profit and loss accounts and balance sheets for the year ending 30 June 2005 and for the period from 1 July 2005 to 31 March 2006. In cross-examination, she acknowledged that these accounts might not be wholly reliable.
309 Mr Spring requested in his submissions that if Saies-Bond were held entitled to damages it should be given the opportunity to submit further evidence as to quantum. The Tribunal is not inclined, however, to grant this request, as there has been ample opportunity during these proceedings for any such evidence to have been tendered.
310 Saies-Bond can however claim that on account of having entered into the lease it has suffered loss through (a) the drawing down of $40,695 on its bank guarantee on 18 August 2005 and (b) its exposure, as outlined above, to further liability for rent, outgoings and promotional levy throughout the period of the lease, together with amounts to cover a leasing incentive, a leasing fee and interest.
311 In the Tribunal’s opinion, the compensation to which Saies-Bond is entitled under s 10 of the RL Act by virtue of Mr Draper’s misrepresentation that Harvey Norman was a potential tenant should comprise these two components. It should have a refund from Armstrong Jones of the bank guarantee amount of $40,695 and it should be relieved of any further liability to Armstrong Jones under the lease.
312 As claimed in its Amended Application, Saies-Bond should also receive an award by way of interest. It should be calculated at 9% per annum on the sum of $40,695, from 18 August 2005 to the date of this decision.
Saies-Bond’s unconscionable conduct claim
313 The section of the RL Act that proscribes unconscionable conduct by a lessor or a lessee and elaborates this concept is s 62B. For present purposes, the relevant provisions within it are these:-
314 The definition of ‘lessor’ in s 3 should also be quoted:-
62B Unconscionable conduct in retail shop lease transactions
(1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable….
(3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to:
(a) the relative strengths of the bargaining positions of the lessor and the lessee, and
(b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and
(c) whether the lessee was able to understand any documents relating to the lease, and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and
(e) the amount for which, and the circumstances under which, the lessee could have acquired an identical or equivalent lease from a person other than the lessor, and
(f) the extent to which the lessor’s conduct towards the lessee was consistent with the lessor’s conduct in similar transactions between the lessor and other like lessees, and
(g) the requirements of any applicable industry code, and
(h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code, and
(i) the extent to which the lessor unreasonably failed to disclose to the lessee:
(j) the extent to which the lessor was willing to negotiate the terms and conditions of any lease with the lessee, and
(i) any intended conduct of the lessor that might affect the interests of the lessee, and
(ii) any risks to the lessee arising from the lessor’s intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and
(k) the extent to which the lessor and the lessee acted in good faith….
(5) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person institutes legal proceedings in relation to that lease or refers to arbitration a dispute or claim in relation to that lease….
(7) For the purpose of determining whether a lessor has contravened subsection (1) or whether a lessee has contravened subsection (2):
(a) the Tribunal must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention,…
315 If unconscionable conduct by a lessor is held to have occurred, the lessee may recover from the lessor the amount of any resulting loss or damage: see s 62B(8). The Tribunal may order that the lessor pay or refund money to the lessee, that a specified amount of money is not due or owing by the lessee to the lessor and/or that the lessor is not entitled to a refund of any money that it has paid to the lessee: see s 72AA(1).
3 Definitions
In this Act:…
lessor means the person who grants or proposes to grant the right to occupy a retail shop under a retail shop lease, and includes a sublessor and a lessor’s or sublessor’s heirs, executors, administrators and assigns.
316 Within what is sometimes described as the ‘shopping list’ of factors in s 62B(3) to which the Tribunal ‘may have regard’, Mr Spring specifically relied on those in subparagraphs (a), (d), (f), (i), (j) and (k). He relied in addition on various of the leading cases on unconscionability at general law, but not (to any significant extent) on the cases specifically relating to s 62B or to comparable provisions in Commonwealth trade practices law (Trade Practices Act 1974 (Cth), ss 51AB, 51AC).
317 Mr Spring also drew the Tribunal’s attention to a passage in the Second Reading speech for the Retail Leases Amendment Bill 1998, by which the unconscionable conduct provisions were introduced into the RL Act. He pointed out that in this speech the Minister for Small Business said that these provisions were ‘aimed at changing the behaviour of both retailers and landlords in relation to retail leasing transactions’.
318 Mr Henry relied principally on recent Court of Appeal dicta regarding s 62B in Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557. At 583 [120 – 121], Spigelman CJ, with whom Tobias JA agreed, said: -
319 As indicated earlier, there was no reliable evidence as to the quantum of any economic loss suffered by Saies-Bond as a result of the conduct of Armstrong Jones and its agents, other than the loss resulting from the drawing down on its bank guarantee and its exposure to liability for rent and associated charges. Saies-Bond, being a company, could not make any claim in this case for non-economic loss. It follows that since (a) the Tribunal has found that Saies-Bond is entitled to an award of damages under s 10 of the RL Act covering both these items of economic harm and (b) Saies-Bond could only obtain orders compensating it for ‘loss or damage’ if its unconscionable conduct claim succeeded (see s 62B(8)), it is strictly not necessary for the Tribunal to reach final conclusions as to the extent, if any, to which Saies-Bond has established unconscionable conduct on the part of Armstrong Jones.
120 Unconscionability is a well-established but narrow principle in equitable doctrine. It has been applied over the centuries with considerable restraint and in a manner which is consistent with the maintenance of the basic principles of freedom of contract. It is not a principle of what “fairness” or “justice” or “good conscience” require in the particular circumstances of the case…
121 The Ministerial Second Reading Speech, quoted (at 581 [112]) above, indicates a similar concern to distinguish what is unconscionable from what is merely unfair or unjust. Even if the concept of unconscionability in s 62B of the Retail Leases Act is not confined by equitable doctrine, as the decisions under s 51AC of the Trade Practices Act suggest, restraint in decision-making remains appropriate. Unconscionability is a concept which requires a high degree of moral obloquy. If it were to be applied as if it were equivalent to what as “fair” or “just”, it could transform commercial relationships in a manner which the Minister stated was not the intention of the legislation. The principle of “unconscionability” would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises.
320 The unconscionable conduct claim in this case has however embraced a wide variety of alleged acts or omissions by Armstrong Jones and its agents, on which the Tribunal has made a number of rulings. A number of the issues of law and policy raised by the claim appear to the Tribunal to be somewhat novel. Their novelty stems in part from the fact that the business context within which the claim arose – that of a small and independent business proprietor taking up a retail shop lease from a large corporate landlord of a ‘greenfields’ shopping centre – has not (as far as the Tribunal is aware) been a feature of unconscionable conduct cases. In these circumstances, it is appropriate for the Tribunal to express its opinion on some at least of the questions raised by the claim.
321 The earlier parts in this judgment have specified a number of findings by the Tribunal as relevant to the determination of the unconscionable conduct claim. The extent, if any, to which they provide grounds, individually or in conjunction, for a conclusion that Armstrong Jones’s conduct in any respect was unconscionable will now be considered.
322 The misrepresentations made by Mr Draper. In the Tribunal’s opinion, its decision that Mr Draper’s representation regarding Harvey Norman was false or misleading so as to entitle Saies-Bond to damages under s 10 of the RL Act warrants the additional conclusion that ‘unfair tactics’, within the meaning of s 62B(3)(d), were used against Saies-Bond by ‘a person acting on behalf of the lessor in relation to the lease’.
323 It does not automatically follow, however, that Armstrong Jones itself must be found to have engaged in unconscionable conduct, since the matters referred to in the various sub-paragraphs of s 62B(3) are merely matters to which the Tribunal ‘may have regard’.
324 In this instance, as with many of the other acts and omissions involved in the relevant findings of the Tribunal, the conduct relied on by Saies-Bond was that of an individual who, while acting as Armstrong Jones’s agent for the purpose of establishing or managing the Centre, was not employed by Armstrong Jones The relationship between Mr Draper and Armstrong Jones is outlined above at [14 – 18]. It is clear that, except with respect to his limited role as an agent, initially appointed by Charter Hall, to find tenants for the Centre, his professional activities were independent of Armstrong Jones. There is no evidence to suggest that Armstrong Jones authorised or ratified his making the representation to Ms Bond regarding Harvey Norman.
325 In these circumstances, the Tribunal’s conclusion is nonetheless that this misrepresentation by Mr Draper, which provided grounds for an award of damages against Armstrong Jones under s 10 of the RL Act, must be deemed also to constitute unconscionable conduct by Armstrong Jones. This appears to follow from the fact that s 62B(3)(d), unlike the other subparagraphs within the subsection, specifically refers to conduct by a lessor’s agent.
326 The remaining three misrepresentations made by Mr Draper were that Cane Design was a prospective tenant, that a four-month rent-free period would be adequate and that the Centre would have a large display window (see [173 – 175 above). With respect to these, there can be no finding that he used ‘unfair tactics’, since he did not know at the time that these representations were false. Equally, there was no evidence to suggest that Armstrong Jones authorised them. Accordingly, the fact they were false or misleading representations cannot be said to provide grounds for a finding of unconscionable conduct against Armstrong Jones. The failure to install the proposed display window may, however, be of relevance to such a finding in another way.
327 The misrepresentations in the brochure. The statement in the brochure (which proved false) that the Centre would have external signage as depicted in it and the further statement (which proved false to a degree) that those developing and managing the Centre were ‘trustworthy’ (see [176 – 177]) were not proved to have been known to be false by Armstrong Jones, Mr Draper or any other relevant agent of Armstrong Jones. No finding of unconscionable conduct can therefore be made solely on the basis that they were false or misleading representations. But these aspects of the case may have relevance in another way, as will now be explained.
328 Failure to ensure that the Centre, as from the time of its opening, would attract a sufficient number of potential customers. The Tribunal has found that those developing and managing the Centre signally failed to ensure (a) that it was physically ready for its ‘grand opening’ in October 2004, (b) that it had adequate external signage at this time (having regard to the earlier indications given in the brochure and in Mr Draper’s mention of a display window) and (c) that there was effective promotion and advertising of what it had to offer. In consequence, Saies-Bond and a number of the other tenants made insufficient sales to be able to commence rent payments, even though there was a rent-free period.
329 To a significant extent, these deficiencies appear to have been attributable to negligence or incompetence on the part of one or more of the independent enterprises (such as Charter Hall, CB Richard Ellis and the advertising firm that CB Richard Ellis engaged) that were involved in the early stages of the Centre’s life. This is not to say that Armstrong Jones should be regarded as being entirely free from blame. Having bought the Centre from PDP nearly five months before it opened, it could clearly have made efforts on its own behalf to ensure (for instance) that external signage as such as the brochure depicted was installed before the opening.
330 But it is important that no evidence of fraud or of any deliberate intention to deal with these matters in a substandard manner was offered. This aspect in the case brought by Armstrong Jones was recognised in a passage in Mr Spring’s submissions where, in essence, the accusation laid against Armstrong Jones was that it breached, in a number of ways, some form of duty of care that it owed to tenants such as Saies-Bond.
331 Mr Spring placed emphasis, however, on the fact that defects in management such as these, whether attributable to negligence, incompetence or something worse, were, and could clearly be seen to be, particularly damaging to tenants such as Saies-Bond. This was because in an important sense – and in a manner not generally found at all in leases of ‘strip shops’ – the landlord and the various new tenants in this ‘greenfields’ shopping centre were linked together in a joint enterprise. Deficiencies in the performance of one ‘side’ in this situation – in this case, the landlord – were inevitably damaging to the likelihood of success for the other ‘side’.
332 Failure to investigate Saies-Bond’s financial situation. In this context, a further matter noted above (see [200-225]) was of special significance. This was the failure by Mr Draper, or anyone else engaged on Armstrong Jones’s behalf in the task of finding tenants for the Centre, to take steps to ensure that Saies-Bond had sufficient capacity and experience in financial matters to take on its tenancy in the Centre. Armstrong Jones, a large corporate landlord, had much better access to reliable commercial and financial advice than an individual small business owner such as Saies-Bond. To say the least, it would have been sound management practice by Armstrong Jones to protect both itself and business owners such as Saies-Bond from the risks associated with their likely inexperience by ensuring that its leasing agent carried out proper financial checks on their financial capacity. In the case of Saies-Bond at least, it did not do so.
333 In the result, significant shortcomings in the efforts made by Armstrong Jones and its agents to attract potential customers to the Centre, combined with their failure to ensure that Saies-Bond had adequate financial capacities to take on its tenancy, led to Saies-Bond being unable, from the outset, to make sufficient sales to have a chance of maintaining its rent payments (once it became obliged to do so) or of succeeding in its retail business.
334 While this outcome might well be characterised as ‘unfair’ for Saies-Bond, the Tribunal does not accept Mr Spring’s submission that Armstrong Jones’s role in bringing it about involved unconscionable conduct on its part. The terms of sub-paragraphs (a) and (to a limited extent (i)) of s 62B(3) (these being provisions on which Mr Spring relied) bear some relationship to the issues raised here. It may well be that the relevant conduct of Armstrong Jones’s agents was negligent and/or incompetent and/or in breach of standards of sound management practice. It is, moreover, open to argument that this conduct by them should be attributed to Armstrong Jones itself when determining, having due regard to s 62B(3), whether unconscionable conduct by Armstrong Jones occurred (though the definition of ‘lessor’ in s 3 seems to imply that only the conduct of Armstrong Jones itself should be taken into account, save where, as in s 62B(3)(d), there is an express mention of persons ‘acting on behalf of the lessor’). But even if all these matters are taken into account in Saies-Bond’s favour, it cannot be said that the relevant behaviour of Armstrong Jones and its agents was ‘highly unethical’, involving a ‘high degree of moral obloquy’. Failures to adhere to professional management standards, even serious failures, do not of themselves constitute unconscionable conduct.
335 Having reached this conclusion, the Tribunal wishes to add that if it were shown in any comparable case that the owner/lessor of a retail shopping centre (particularly a ‘greenfields’ centre) had recklessly – i.e., not merely though carelessness or incompetence – failed to establish or maintain the centre as a moderately attractive place to visit, or to arrange any significant publicity for it, with the entirely foreseeable result that some or all of the tenants failed to achieve sufficient sales to pay their rent and thereby became vulnerable to eviction, the Tribunal might well hold that this amounted to unconscionable conduct on the lessor’s part. If there were a deliberate policy along these lines, this conclusion would be hard to resist. To this extent, the Tribunal indicates that in this particular situation, the landlord owes important duties to the tenants over and above those set out in the lease and the associated rules of property law.
336 Treatment of Saies-Bond following the commencement of the lease. The remaining findings by the Tribunal to be considered in this context are to the effect that Armstrong Jones refused to defer the commencement date of Saies-Bond’s lease or to extend the rent-free period (see [245], [249]), that it gave no notice of its intention to lock Saies-Bond out of the premises (see [272]) and it ‘targeted’ Saies-Bond for eviction.
337 Although the principal ‘actor’ in these measures appears to have been CB Richard Ellis, it is apparent that Armstrong Jones was involved in the decision-making and took responsibility for what was done. Sub-paragraphs (d), (f) and (i) of s 62B(3) refer to analogous conduct by a lessor.
338 The Tribunal’s conclusion again is that, while aspects of this conduct can undoubtedly be described as ‘unfair’ to Saies-Bond, it does not rank as unconscionable.
339 In the first place, it is important to note that in each of these instances what Armstrong Jones did was within the rights that it enjoyed as lessor under the lease and the associated rules of property law.
340 The ‘unfairness’ of its refusal, despite the problems arising for tenants in the early stages of their leases, to defer the commencement of the lease or extend the rent-free period must be considered in conjunction with the fact that it made an offer to accept deferred payments of rent arrears and that it in fact permitted many tenants, including Saies-Bond for some months, to remain in possession despite being substantially in arrears. But for these mitigating factors, its conduct in this regard might well have been held unconscionable.
341 When effecting the lockout, Armstrong Jones (or more specifically CB Richard Ellis) undoubtedly acted in an unnecessarily peremptory way. But having been sent several letters threatening legal action and having discovered that proceedings had been taken against its bank guarantee, Saies-Bond could hardly maintain that it did not realise that Armstrong Jones was ‘serious’ in wanting to deal with the issue of rent arrears.
342 It is clear that Saies-Bond was ‘targeted’. Although several tenants were in arrears of rent to a similar degree, it was the tenant chosen for eviction. There was an objective reason for this – namely, that for some time it had failed to open its shop during the core hours prescribed by the lease. This was accordingly not a case where, to use the terminology of s 62B(3)(f), ‘the lessor’s conduct towards the lessee’ fell short of being ‘consistent with the lessor’s conduct in similar transactions between the lessor and other like lessees’.
343 A further possible ground for a finding of unconscionable conduct. The Tribunal gave consideration to a further possible line of reasoning – not specifically mentioned in either of the parties’ submissions – whereby Armstrong Jones’s conduct might, on the face of it, be held to have been unconscionable. In line with a number of decisions on the concept of unconscionability at general law, it could be argued that Armstrong Jones has acted unconscionably in seeking, in these proceedings, to claim from Saies-Bond not only the arrears of rent etc relating to its relatively short period of occupation of the premises but also the rent for the much longer period between the lockout and the expiry of the lease (subject to an appropriate deduction to allow for the prospect of reletting). The argument here would be that Armstrong Jones should be held bound, as a matter of conscience, to restrict its claim to the losses that it has actually suffered and to abandon any claim to ‘the benefit of its bargain’. This argument gains strength from the consideration that the rent now potentially obtainable for the premises is lower than it would have been if Armstrong Jones and its agents had been more effective in ensuring that the Centre attracted customers in sufficient numbers.
344 It appears to the Tribunal, however, that a finding along these lines is precluded by s 62B(5). This states that unconscionable conduct does not occur simply by virtue of the institution of legal proceedings by a party to the relevant lease.
345 The Tribunal’s conclusion, for the foregoing reasons, is that on one ground only, stemming from Mr Draper’s misrepresentation regarding Harvey Norman, Sailes-Bond’s unconscionable conduct claim should be upheld. Saies-Bond’s success under s 10 entitles it to orders to the same effect as it could have obtained under s 62B.
Alleged miscellaneous breaches of the Retail Leases Act
346 Saies-Bond also claimed that in the course of these events Armstrong Jones breached a number of provisions of the RL Act. These are: s 9 (provision of a copy of the lease at negotiation stage), s 15 (registration of the lease by the lessor), s 17 (payment of rent when lessor’s fit-out not completed), s 19 (provision of statement and report on outgoings), s 34 (compensation of lessee for disturbance), s 51 (provision of statistical information to lessee) and s 55 (provision of statement and report on advertising and promotion expenditure).
347 These claims, which with one exception were not strongly pressed, must all be rejected, for the following reasons.
348 The alleged breaches of ss 9, 19, 34, 51 and 55 were not shown to have caused any damage to Saies-Bond. It is not necessary, therefore, to consider whether they were proved to have occurred.
349 As to the claim relating to s 17, it could not succeed because the section is only applicable where (to quote subsection (1)(a) ‘the liability of the lessee to pay rent under the lease commences on the lessee entering into possession of the shop’. This was not the case under the lease granted to Saies-Bond.
350 The alleged breach of s 15 was the matter that received some emphasis in the evidence and the submissions. Although Armstrong Jones was obliged by a provision in the lease, inserted by virtue of s 15(1)(b), to register the lease within one month of its being returned to it or to its lawyer, registration did not in fact occur until 18 August 2005. Relying on the High Court decision in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, Mr Spring argued that this failure constituted a repudiation of the lease by Armstrong Jones.
351 The reason proffered by Armstrong Jones for the delay in registering the lease was, however, that there was a substantial delay before the solicitors for PDP delivered the lease to the solicitors for Armstrong Jones. Mr Spring argued in response that since all or virtually all of the other leases were registered in February 2005, the Tribunal was bound to infer that Armstrong Jones’s solicitors received the lease to Saies-Bond together with these other leases. But there was no further evidence supporting this inference.
352 Although the Tribunal has some concerns about the way that Armstrong Jones dealt with this matter, it cannot in these circumstances draw the inference sought by Mr Spring. It follows that the claim based on s 15 must be rejected.
The Tribunal’s orders
353 For the foregoing reasons, by virtue of Saies-Bond’s success in its claim based on s 10 of the RL Act, the Tribunal’s principal orders are: (1) that Armstrong Jones pay to Saies-Bond the sum of $45,230.54, comprising a principal sum of $40,695 and $4,535.54 for interest charged at 9% from 18 August 2005 to the date of this decision; and (2) that Armstrong Jones’s claim against Saies-Bond must be dismissed.
354 In their submissions, the parties sought costs. If these are to be awarded, the requirement of ‘special circumstances’ in s 88 of the Administrative Decisions Tribunal Act 1997 must be satisfied (see RL Act, s 77A).
355 The Tribunal further orders that any application for costs must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to s 76 of the Administrative Decisions Tribunal Act.
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