Byblos Building Co Pty Ltd v DARLANE Pty Ltd
[1999] WASC 248
BYBLOS BUILDING CO PTY LTD -v- DARLANE PTY LTD & ORS [1999] WASC 248
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASC 248 | |
| Case No: | CIV:2999/1991 | 26 JULY, 13, 16 - 20 AUGUST & 19 SEPTEMBER 1999 | |
| Coram: | STEYTLER J | 6/12/99 | |
| 49 | Judgment Part: | 1 of 1 | |
| Result: | Claim against each of the defendants dismissed | ||
| PDF Version |
| Parties: | BYBLOS BUILDING CO PTY LTD DARLANE PTY LTD JACKSON McDONALD (A FIRM) |
Catchwords: | Torts Negligence Real estate agent Turns on its own facts Torts Negligence Solicitors Turns on its own facts Torts Negligence Measure of damages Turns on its own facts |
Legislation: | Nil |
Case References: | Baltic Shipping Co v Dillon (1993) 176 CLR 344 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) ANZ Conv Rep 681 Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 C Czarnikow Ltd v Koufos [1969] 1 AC 350 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 Hungerfords v Walker (1989) 171 CLR 125 March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 Masters v Cameron (1954) 91 CLR 353 Medlin v State Government Insurance Commission (1995) 182 CLR 1 Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113 Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Wenham v Ella (1972) 127 CLR 454 Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253 Amadio Pty Ltd v Henderson (1998) 81 FCR 149 Ardlethan Options Ltd v Easdown (1915) 20 CLR 285 Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Beach Petroleum NL v Johnson (1993) 43 FCR 1 Belmont Finance Corporation v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 C H R Salvesen & Co v Rederi Aktiebolaget Nordstjernan [1905] AC 302 Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 Copping v ANZ McCaughan Ltd (1997) 67 SASR 525 Covacevich v Thomson (1988) Aust Torts Rep 67,370 Cusmano v Pinner (1998) 157 ALR 61 Dixon v Winch [1900] 1 Ch 736 Edgington v Fitzmaurice [1885] 29 Ch D 459 El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685 Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 6 WAR 68 Esso Petroleum Co Ltd v Mardon [1976] QB 801 Fox v Everingham (1983) 76 FLR 170 Gallagher v Carman [1990] Aust Torts Rep 67,655 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Georgieff v Athans (1981) 26 SASR 412 Gipps v Gipps [1978] 1 NSWLR 454 Goody v Baring [1956] 1 WLR 448 Gould v Vaggelas (1985) 157 CLR 215 Hanflex Pty Ltd v N S Hope & Associates [1990] 2 Qd R 218 Hawkins v Clayton (1988) 164 CLR 539 Henjo Investments Pty Ltd v Colins Marrickville Pty Ltd (1988) 79 ALR 83 Instant Nominees Pty Ltd v Redman [1987] WAR 218 Jones v Dunkel (1959) 101 CLR 299 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307 Krakowski v Eurolynx Properties Pty Ltd (1995) 183 CLR 563 Macindoe v Parbery (1994) Aust Torts Rep 61,532 Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 Mummery v Irvings Pty Ltd (1956) 96 CLR 99 Neagle v Power [1967] SASR 373 Nikolic v Commonwealth Accommodation & Catering Services Ltd (1992) 106 FLR 413 Obacelo Pty Ltd v Taveraft Pty Ltd (1986) 10 FCR 518 Orszulak v Hoy [1989] Aust Torts Rep 69,181 Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492 Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 Rawlinson & Brown Pty Ltd v Witham [1995] Aust Torts Rep 62,403 Roe v Cullinane Turnbull Steele & Partners (No 2) [1985] 1 NZLR 37 San Sebastian Pty Ltd v Minister Administering Environmental Planning & Assessment Act 1979 (NSW) (1986) 162 CLR 340 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Sheehan v Zaszlos [1995] 2 Qd R 210 Sinclair v Preston [1970] WAR 186 South Australia v Johnson (1982) 42 ALR 161 Spargo v Haden Engineering Pty Ltd (1993) 60 SASR 39 Tarzia v National Australia Bank (1996) ANZ Conv R 379 TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd (1986) 16 NSWLR 130 Vane v Vane (1873) LR 8 Ch App 383 Wilcher v Steain (1961) 79 WN (NSW) 141 Wood v Apple Introductions (Brisbane) Pty Ltd (1990) ANZ Conv R 518 Wright v Lodge [1993] 4 All ER 299 Yates Property Corporation (In Liq) v Boland (1998) 157 ALR 30 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : BYBLOS BUILDING CO PTY LTD -v- DARLANE PTY LTD & ORS [1999] WASC 248 CORAM : STEYTLER J HEARD : 26 JULY, 13, 16 - 20 AUGUST & 19 SEPTEMBER 1999 DELIVERED : 6 DECEMBER 1999 FILE NO/S : CIV 2999 of 1991 BETWEEN : BYBLOS BUILDING CO PTY LTD
- Plaintiff
AND
DARLANE PTY LTD
First Defendant
JACKSON McDONALD (A FIRM)
Second Defendant
JACKSON McDONALD (A FIRM)
Third Party
Catchwords:
Torts - Negligence - Real estate agent - Turns on its own facts
Torts - Negligence - Solicitors - Turns on its own facts
Torts - Negligence - Measure of damages - Turns on its own facts
Legislation:
Nil
(Page 2)
Result:
Claim against each of the defendants dismissed
Representation:
Counsel:
Plaintiff : Mr R H B Pringle QC & Mr P M Hobday
First Defendant : Mr R E Birmingham QC & Mr M A Atkinson
Second Defendant : Mr M J Buss QC & Ms R J Lee
Third Party : Mr M J Buss QC & Ms R J Lee
Solicitors:
Plaintiff : Lewis Blyth & Hooper
First Defendant : Healy Pynt
Second Defendant : Minter Ellison
Third Party : Minter Ellison
Case(s) referred to in judgment(s):
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) ANZ Conv Rep 681
Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653
C Czarnikow Ltd v Koufos [1969] 1 AC 350
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241
Hungerfords v Walker (1989) 171 CLR 125
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
Masters v Cameron (1954) 91 CLR 353
Medlin v State Government Insurance Commission (1995) 182 CLR 1
Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601
Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310
Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642
Wenham v Ella (1972) 127 CLR 454
Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253
(Page 3)
Case(s) also cited:
Amadio Pty Ltd v Henderson (1998) 81 FCR 149
Ardlethan Options Ltd v Easdown (1915) 20 CLR 285
Australian Broadcasting Corporation v XIVth Commonwealth Games (1988) 18 NSWLR 540
B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147
Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647
Beach Petroleum NL v Johnson (1993) 43 FCR 1
Belmont Finance Corporation v Williams Furniture Ltd (No 2) [1980] 1 All ER 393
C H R Salvesen & Co v Rederi Aktiebolaget Nordstjernan [1905] AC 302
Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398
Copping v ANZ McCaughan Ltd (1997) 67 SASR 525
Covacevich v Thomson (1988) Aust Torts Rep 67,370
Cusmano v Pinner (1998) 157 ALR 61
Dixon v Winch [1900] 1 Ch 736
Edgington v Fitzmaurice [1885] 29 Ch D 459
El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685
Entwells Pty Ltd v National & General Insurance Co Ltd (1991) 6 WAR 68
Esso Petroleum Co Ltd v Mardon [1976] QB 801
Fox v Everingham (1983) 76 FLR 170
Gallagher v Carman [1990] Aust Torts Rep 67,655
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Georgieff v Athans (1981) 26 SASR 412
Gipps v Gipps [1978] 1 NSWLR 454
Goody v Baring [1956] 1 WLR 448
Gould v Vaggelas (1985) 157 CLR 215
Hanflex Pty Ltd v N S Hope & Associates [1990] 2 Qd R 218
Hawkins v Clayton (1988) 164 CLR 539
Henjo Investments Pty Ltd v Colins Marrickville Pty Ltd (1988) 79 ALR 83
Instant Nominees Pty Ltd v Redman [1987] WAR 218
Jones v Dunkel (1959) 101 CLR 299
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307
Krakowski v Eurolynx Properties Pty Ltd (1995) 183 CLR 563
Macindoe v Parbery (1994) Aust Torts Rep 61,532
Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500
Mummery v Irvings Pty Ltd (1956) 96 CLR 99
Neagle v Power [1967] SASR 373
(Page 4)
Nikolic v Commonwealth Accommodation & Catering Services Ltd (1992) 106 FLR 413
Obacelo Pty Ltd v Taveraft Pty Ltd (1986) 10 FCR 518
Orszulak v Hoy [1989] Aust Torts Rep 69,181
Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735
Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
Rawlinson & Brown Pty Ltd v Witham [1995] Aust Torts Rep 62,403
Roe v Cullinane Turnbull Steele & Partners (No 2) [1985] 1 NZLR 37
San Sebastian Pty Ltd v Minister Administering Environmental Planning & Assessment Act 1979 (NSW) (1986) 162 CLR 340
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Sheehan v Zaszlos [1995] 2 Qd R 210
Sinclair v Preston [1970] WAR 186
South Australia v Johnson (1982) 42 ALR 161
Spargo v Haden Engineering Pty Ltd (1993) 60 SASR 39
Tarzia v National Australia Bank (1996) ANZ Conv R 379
TCN Channel Nine Pty Ltd v Hayden Enterprises Pty Ltd (1986) 16 NSWLR 130
Vane v Vane (1873) LR 8 Ch App 383
Wilcher v Steain (1961) 79 WN (NSW) 141
Wood v Apple Introductions (Brisbane) Pty Ltd (1990) ANZ Conv R 518
Wright v Lodge [1993] 4 All ER 299
Yates Property Corporation (In Liq) v Boland (1998) 157 ALR 30
(Page 5)
1 STEYTLER J: This is a claim for damages brought by the plaintiff against the first defendant ("Mair & Co"), a company carrying on business as a real estate agent, and against the second defendant ("Jackson McDonald"), a firm of solicitors.
2 During 1989 the plaintiff ("Byblos") developed land which it owned in Maddington. The development was commercial. It comprised the building of a number of units designed to be leased to industrial or commercial tenants.
3 On about 20 June 1989 Byblos appointed Mair & Co as its agent for the purpose of letting the units. Mair & Co had earlier (on 31 May 1989) been appointed as agent for a business known as Tactix Clothing Company ("Tactix"). Tactix wanted to lease premises which it could use as a factory for the purpose of making clothes.
4 Negotiations followed for an agreement for lease of seven of the units ("the premises") upon the basis that they would be combined to form one factory. Mair & Co had the carriage of the negotiations on behalf of Byblos. Foodland Associated Limited ("Foodland"), a public company, negotiated on behalf of the intending lessee. Byblos contends that it was led by Mair & Co to believe that Foodland was to be the lessee. However Foodland had never owned the business operating under the name Tactix. By the time negotiations for the lease of the premises commenced that business and the name "Tactix Clothing Co" had been acquired by a company known as Kerangle Pty Ltd ("Kerangle") in which Foodland held only 25 per cent of the issued shares. The agreement for lease, when made, was made with Kerangle which later executed a lease ("the Lease") of the premises. Notwithstanding this, Byblos contends that it did not know that Kerangle, and not Foodland, was the lessee until well after the agreement for lease had been made.
5 Byblos and Mair & Co say that the agreement for lease was made on 17 October 1999. Jackson McDonald, who later prepared the Lease and a more formal agreement for lease ("the formal agreement"), says that the agreement for lease was made on 11 July 1989, before Jackson McDonald was retained to prepare the Lease and the formal agreement.
6 Jackson McDonald was instructed in early August 1989. On 23 August 1989 it wrote and delivered to Mair & Co a letter in which it drew attention to the fact that the draft lease which it had then prepared, and which accompanied the letter, allowed for a guarantee to be given in favour of Byblos. The letter asked Mair & Co to hand a draft of the lease
(Page 6)
- to each of the parties thereto for consideration and reference back to Jackson McDonald. Notwithstanding this the Lease, when later executed on about 15 May 1990, did not provide for the giving of a guarantee by anyone as to the performance by Kerangle of its obligations as lessee. Nor, for that matter, had the agreement for lease contained any such provision.
7 Kerangle went into occupation of the leased premises in about January 1989. As will be apparent, this was after the making of the agreement for lease but before the execution of the Lease. Matters went smoothly for a while. Then Kerangle's business foundered. It went into liquidation in about April 1991. In or about June 1991 it ceased to make any further payments under the Lease. Byblos says that it has, as a result, lost money. None of Kerangle's shareholders or directors has offered to make good that loss, no doubt because none of them was under any legal obligation to do so.
8 Byblos seeks to hold Mair & Co and Jackson McDonald liable for its loss. It says that each was negligent and that it has a claim against each in contract and in tort.
9 It alleges (par 22 of its statement of claim) that Mair & Co breached a duty of care owed by it to Byblos, and also an implied term of its agency agreement with Byblos (to the effect that it "would conduct itself with reasonable care and skill pursuant to its engagement and to any authority given by … [Byblos] in connection therewith"), because it:
"negligently caused … [Byblos] to believe that Foodland was a party to the agreement for a Lease and negligently failed:
(a) To investigate adequately or at all the financial position and resources of Kerangle;
(b) To advise the plaintiff that Foodland was not the proposed lessee nor a proposed party to the lease;
(c) To provide copies of … [the letter dated 23 August 1989], … [the] draft lease and … [the draft] agreement for … lease … to the plaintiff or inform the plaintiff of their contents;
(d) To recommend to the plaintiff that a guarantee should be obtained from Foodland or all the shareholders of Kerangle;
(Page 7)
- (e) To advise the plaintiff that it should not enter into an agreement to lease the land to Kerangle without such a guarantee;
(f) To request such a guarantee in its negotiations on behalf of the plaintiff with Foodland;
(g) To instruct … [Jackson McDonald] to make all usual enquiries and searches and to provide advice to the plaintiff as conveyancer in the matter, including … advice whether a guarantee was needed … "
10 Byblos goes on to plead (par 22A of its statement of claim) that, had Mair & Co not breached the duties owed to it, it would either have obtained "an appropriate guarantee or guarantees of Kerangle's obligations" or it would not have made the agreement for lease and would not have made structural alterations which it in fact made in order to make the premises suitable for Kerangle's purposes.
11 Byblos also contends that it entered into the agreement for lease and, later, executed the Lease on the strength of negligent misrepresentations made expressly by Mair & Co on three occasions. The first occasion is said to have been on or prior to 20 June 1989. Mair & Co is then said to have represented that it "had a very solid client, namely … [Foodland] … who wished to take a lease of the … premises" (par 5). The second is said to have been between June and October 1989. Mair & Co is then said to have made a representation to the effect that "Foodland, the Lessee, was a reputable and financially sound company" (par 9(a)). The third is said to have been in about June or July 1989. Mair & Co is then said to have made a representation to the effect that Byblos need not be concerned about alterations required to the premises to make them fit for the purpose for which they were to be used by the intended lessee as "Foodland was a reputable and financially sound company" (par 10(b)).
12 In addition Byblos says that Mair & Co impliedly represented to it that it was unnecessary for it to obtain a guarantee or guarantees in order to protect its interests. This implication is said (in par 10A(b)) to arise from the making of the representations pleaded in par 9(a) and par 10(b) of Byblos' statement of claim and from the fact that Mair & Co did not during 1989 provide to Byblos copies of the draft Lease and formal agreement prepared by Jackson McDonald or of the letter dated 23 August 1989 and did not tell it that Jackson McDonald had, in the draft
(Page 8)
- documents, made provision for a guarantee to be obtained for performance of Kerangle's obligations under the Lease.
13 As against Jackson McDonald Byblos pleads (par 33) that it negligently breached an implied term of its contract with Byblos (that it "would provide the usual ancillary services provided by a conveyancer in relation to the letting of commercial property, and that the services provided pursuant to the retainer would be performed with reasonable care, skill and diligence") and also a duty of care which it owed to Byblos because it:
"(a) Failed to search Kerangle at the Corporate Affairs Office thereby failing to follow usual conveyancing practice.
(b) Neglected to recommend to … [Byblos] that guarantees be obtained or to advise as to the possible consequences of failure to do so, further contrary to usual conveyancing practice.
(c) Neglected to inquire of … [Byblos] why the provision for a guarantee included by … [Jackson McDonald] in the agreement for a lease and in the lease had not been acted on by insertion of the names of guarantors and execution by them, or to warn … [Byblos] of the possible consequences of not obtaining guarantees.
(d) Failed to consider properly or at all what steps … [Byblos] should take to protect itself as a proposed lessor of commercial property before entering into a binding agreement for a lease with Kerangle and neglected to advise … [Byblos] as to such steps."
14 Each of Mair & Co and Jackson McDonald denies that it was negligent or in breach of contract in any of the respects alleged.
15 Mair & Co contends that Byblos knew, before the agreement for lease was made, that Kerangle was to be the lessee. It also contends that Byblos knew that no guarantees would be provided in respect of Kerangle's performance as lessee.
16 Jackson McDonald contends that, because it was instructed to prepare the Lease only after the agreement for lease had already been made, as it says, on about 11 July 1989, it was presented with a fait accompli, that agreement having contained no provision with respect
(Page 9)
- to a guarantee or guarantees. It says, in any event, that it did make provision for guarantees in the draft lease prepared by it and that it drew attention to that fact in its covering letter dated 23 August 1989. It says that if Byblos was not already then bound to proceed without any guarantees it became so on about 17 October 1989 (the date upon which Byblos and Mair & Co contend the agreement for lease was made) in circumstances in which there had been no reference back to Jackson McDonald in that regard.
17 Each of Mair & Co and Jackson McDonald also says that if either of them is to blame for Byblos' loss then the fault lies with the other. Mair & Co has brought third party proceedings against Jackson McDonald. It claims, in those proceedings, that if it should be found liable to Byblos then it is entitled to be indemnified against that liability by Jackson McDonald. It says that this is because Jackson McDonald negligently failed properly to carry out instructions given to it by Mair & Co on behalf of Byblos in breach of a duty of care owed to Byblos and/or Mair & Co and in breach of its retainer by Byblos. It says also that Jackson McDonald negligently failed to ensure that "adequate safeguards by way of directors [sic] guarantees" had been provided. Each of Mair & Co and Jackson McDonald also claims a contribution from the other in case it should be found liable to Byblos.
18 I will, against this background, consider each of these issues in turn.
The agreement for lease
19 I will, first, consider the subsidiary issue of when the agreement for lease was made between Byblos and Kerangle.
20 I have mentioned that Jackson McDonald contends that the agreement was made on about 11 July 1989.
21 It relies on two documents in support of that contention.
22 The first is a letter written by Mair & Co to Foodland (which, as I have said, conducted negotiations on behalf of the Kerangle) dated 29 June 1989. It reads as follows:
"Dear Sir,
RE: UNIT 7, LOT 31 RYE LANE STREET, MADDINGTON
(Page 10)
- Further to our recent negotiations regarding your company's intention to lease the above property, and after further consultation with the owner, we are able to advise that the lessor has indicated that a lease on the terms and conditions detailed below would be acceptable.
- Lessor: Byblos Building Company
8 Bourke Street, Kensington
Lessee: Kerangle Pty. Ltd. (Trading as Tactix Clothing Co.) 18 Miles Road, Kewdale
Demised Premises: Units 7 to 13 inclusive Lot 31 Rye Lane Street, Maddington having a total lettable area of approx 1750m2.
Lease Term: 5 years
Option: 2 periods of 5 years each
Legal Costs: Each party to bear their own legal costs for the preparation of the lease. The lessee to pay stamp duty.
Date of Commencement: To be 2 weeks after the date of occupancy.
Date of Occupancy: To be approximately 1st August, 1989 or upon completion of the subject premises.
Date of Notice: Confirmation of the date of occupancy shall be given to the lessee not less than 14 days in advance.
Minimum Rental: $56,875.00 (fifty six thousand eight hundred and seventy five dollars per annum).
Rent Review: The rent reviews are to be every 18 months to market with
(Page 11)
- increases limited to a maximum of 15% of the previous Rental. On the 4th and 8th reviews only, the reviews to be to full market rental, not withstanding [sic] that the rent shall be not less than in the preceding term.
- Lessee The lessee shall be responsible for
- Responsibilities: all usual outgoings including;
Rate [sic] & Taxes
Building Insurance including loss of rent through destruction.
Management Fees limited to 3% of the gross annual rent
Direct charges for power, telephone etc.
Construction of To be in accordance with the plans
The Lessor will remove all the dividing walls between units 8 & 12 inclusive, alter the wall between units 12 & 13 to include a double door at it's [sic] centre, plus 2 fixed windows of approx. 3000 x 1200 each, remove half of the wall between units 7 & 8 and put a double door in the remaining structure and 2 fixed windows of approx. 2000 x 1200 each.
Provide toilets (5 female and 2 male) lunch room and sick bay to a central area between units 9 & 10, delete toilets shown in units 7, 8, 11 & 12, retain toilets in unit 13.
(Page 12)
- Retain main doors only in units 7, 8 & 12 and the personnel door in 12. Retain rear doors in units 7 & 8 only and the main entry on left hand side of Unit 13. Other exits required only to satisfy fire requirements.
To provide insulation under the metal deck roof area, delete the ridge cap vent and supply cowl ventilation to the roof.
Supply 3 air conditioned offices in unit 13 and leave balance to be finished as a show room.
Fit high bay lighting to main work areas except unit 13. Provide a canopy over the main doors of units 7 & 8 at finished gutter height with minimum fall and concrete apron under. Provide small concrete apron under wash down area at rear of unit 7 and trough and sink in screen printing area. Construct a fence dividing the two blocks of units to make the site secure.
Reticulation of electricity to be advised.
We await your confirmation that the above terms and conditions are acceptable to you and, upon receiving the same, will instruct our solicitor's [sic] to prepare the lease documentation.
Yours faithfully"
24 The second document is a letter dated 11 July 1989 written by Foodland to Mair & Co. It reads as follows:
(Page 13)
- "Dear Sir,
RE: UNIT 7, LOT 31 RYE LANE, MADDINGTON
We are in receipt of your correspondence dated 29th June 1989 outlining the principal terms of the proposed lease on the above property. We find those terms acceptable and understand that you will provide us with a draft lease for us to peruse for the balance of the conditions for our approval. It is our intention to use Mr Don Briers of Mallesons to act on our behalf in this matter.
Yours faithfully"
25 It is open to parties to make an agreement by which they are immediately bound but to expect to make a further contract, in substitution for the first, containing, by agreement, additional terms. (See Woodside Offshore Petroleum Pty Ltd v Atwood Oceanics Inc [1986] WAR 253 at 261; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) ANZ Conv Rep 681 at 686; Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601; and Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486). This, Jackson McDonald contends, is what Byblos and Kerangle did.
26 There is no doubt that each of those parties contemplated that a formal lease would be prepared. It may be so (although this was disputed by counsel for Byblos and Mair & Co) that the letter of 29 June 1989 evinces a willingness on the part of Byblos that it should immediately be bound notwithstanding that lease documentation had still to be prepared and that there remained outstanding matters with respect to the nature and cost of the "Reticulation of electricity". However it seems to me that Foodland's letter of 11 July 1989 did not evince any similar intention on the part of Kerangle. That letter said expressly that Mair & Co's letter of 29 June 1989 outlined only "the principal terms of the proposed lease" and that, while those terms were acceptable, Foodland wanted to see a draft lease in order to decide whether or not it (presumably on behalf of Kerangle) approved "the balance of the conditions". That is not, in my opinion, the language of someone who is "content to be bound immediately and exclusively by the terms … agreed upon whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms" (see Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 317, per Knox CJ, Rich and Dixon JJ, cited by McLelland J in Baulkham Hills Private Hospital Pty Ltd, above,
(Page 14)
- at 686, cited in turn by Ipp J in Tern Minerals NL, above, at 494 - 495). Rather, it is the language of someone whose intention falls within the third of the categories described in Masters v Cameron (1954) 91 CLR 353 at 360, being an intention not to make a concluded bargain at all unless and until a formal contract is executed.
27 As matters turned out Kerangle did later enter into a binding agreement to lease the premises notwithstanding that a formal lease had then yet to be agreed. So much was common cause between the parties albeit, in Jackson McDonald's case, only on the strength of its alternative submission. However by that time agreement had been reached in relation to the carrying out of the additional electrical work (and as to the payment of the cost thereof) and, on 17 October 1989 (the day upon which the agreement was made), Mair & Co, on Byblos' behalf, received and deposited Kerangle's cheque for $21,869.50, being three months rental in advance.
28 I shall consequently proceed upon this basis.
What did Byblos know of Kerangle by the time of the making of the agreement for lease?
29 That brings me, next, to the question what, if anything, Byblos knew of Kerangle at the time of making the agreement for lease on 17 October 1989.
30 Byblos contends that none of its employees then knew of Kerangle's existence (other than one who had chanced to see the name "Kerangle Pty Ltd" in circumstances to which I shall return below). Mair & Co and Jackson McDonald, on the other hand, contend not only that Byblos then knew of the existence of Kerangle but that it knew, before making the agreement for lease, that Kerangle was to be the lessee.
31 Byblos had only two directors. These were Mr John Roufael and his son Mr John Roufael Junior. Mr Roufael Senior (to whom I shall refer as Mr Roufael) spent much of his time working on a project undertaken by Byblos in the northwest of the State. Mr Roufael Junior (and I shall continue to refer to him in that way) worked, in 1989, as an articled clerk at Jackson McDonald. Although Mr Roufael was the manager of Byblos' business (but not its managing director, Byblos not having had a managing director) the office was run, when he was away, by Mrs Helen Stainthorpe, a full-time secretary and bookkeeper who appears to have doubled as office manager in Mr Roufael's absence. The only
(Page 15)
- other employee of Byblos who was present in its office from time to time was Mr Kenneth Russell, a building supervisor and estimator.
32 Mr Roufael said that he was never told of Kerangle's existence until such time as the agreement for lease had been made and Kerangle was already in occupation of the leased premises. He went so far as to say, in his evidence-in-chief, that he did not even notice that Kerangle was a party to the Lease or that the Lease had been sealed by Kerangle when he signed it on behalf of Byblos. He was, he said, always led by Mr Larry Park, the employee of Mair & Co who had the conduct of negotiations on Byblos' behalf, to believe that Foodland was to be the lessee. Mr Roufael said that he was never shown any document which suggested the contrary. He added that his eyesight was at that time so poor that he had difficulty reading with the consequence that he ordinarily had Mrs Stainthorpe, or someone else, tell him what was the effect of material documents.
33 Mr Roufael said that his earliest recollection of the name Kerangle was when it came to his attention, through a document or documents sent to Byblos, that a cheque for rent had been drawn by Kerangle. He said that he discussed this with Mrs Stainthorpe and Mr Russell. He was not sure whether Byblos had received the cheque itself (or a copy of it) or whether it had received a document which referred to the fact that a cheque had been received by Mair & Co from Kerangle. He said that he and Mr Russell both wanted to know "who the hell Kerangle is" and that they then found out that that company was "something to do with Foodland". However, he said, the horse had by then bolted and Kerangle was already in occupation of the premises. He said that the cheque to which he referred "must be" the cheque for $21,869 paid in the form of a deposit of three months rental although, as will be apparent from what I have said above, that cheque was received by Mair & Co on 17 October 1989, some three months before Kerangle went into occupation of the leased premises and some seven months before the Lease was executed.
34 Mr Roufael also denied that he had ever heard of the name "Tactix Clothing Co". However, as I will later explain, this was not so.
35 Mr Roufael also gave evidence of a conversation which he had with a Mr Chris Nash of Jackson McDonald, the solicitor who had the responsibility of preparing the Lease, which, he said, occurred some two or three months before he signed the Lease. He said that Mr Nash told him, in the course of that conversation, that Foodland did not give
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- guarantees. He also said that Mr Nash told him that he need not worry about that because if Foodland was to "go down" then "Australia will go down".
36 Mr Roufael Junior also initially denied any knowledge of Kerangle's existence until after the agreement for lease had been made.
37 He confirmed in evidence that he was employed, in 1989, as an articled clerk at Jackson McDonald. He also said that although he was a director of Byblos his father controlled that company and made all of its decisions. He said that while instructions for preparing the Lease might have been faxed to his attention (as in fact they were) he was then working in the workers' compensation section of the firm and had nothing to do with the Lease or its preparation.
38 He was shown a facsimile message which was sent to him at Jackson McDonald on 7 August 1989. Attached to it were, inter alia, the letter from Mair & Co to Foodland dated 29 June 1989 and that from Foodland to Mair & Co dated 11 July 1989. It was plain from the earlier of those letters that the lessee was to be Kerangle. He was asked whether he read that letter and responded by saying that he did not. He said that he took the documents faxed to him to Mr Nash. However, when pressed, he at first acknowledged that he had "flicked" through the documents and then said that he "could well have read" the letter dated 29 June 1989 although he said that he did not take "much notice of all these terms".
39 Ms Stainthorpe, too, said that she formed the impression that the prospective tenant was Foodland. She said that Mr Park spoke of Foodland in that way and that Mr Roufael never said anything to her in 1989 which suggested that he had any different understanding.
40 Ms Stainthorpe had started work with Byblos in about mid July 1989. She said that in October 1989 she noticed that there was not a great deal of "paperwork" concerning the leasing arrangements on her file so she asked Mr Park to send out copies of all relevant documents. She said that that took a very long time. When asked what "paperwork" was on the file she said that she believed that Byblos "had a few of the early ones with FAL's name on it", by which she meant letters to and from Foodland. While she could not remember which letters had been on the file, she said that the file "had some letters and some faxes perhaps". When shown the letter from Mair & Co to Foodland dated 29 June 1989 she said that she could not say whether or not that had been one of the documents on the file.
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41 Ms Stainthorpe could not say when she first heard the name Kerangle. She was shown a letter from Foodland to Mair & Co dated 17 October 1989 which confirmed "our offer to lease the premises" on stated conditions and which appears to have been faxed to Byblos (under a cover sheet which referred to "F.A.L. Lease"), marked for her attention, on that day. That letter was accompanied by a photocopy of a cheque drawn by "Kerangle Pty Ltd trading as Tactix Clothing Company" in payment of the deposit of $21,869.50. She remembered seeing a faxed copy of the cheque with the name Kerangle on it. She said that when the copy of the cheque was received she would "have to say" that it was discussed with Mr Roufael (although she also said, during the course of cross-examination, that she did not remember with whom she discussed the fact of the receipt of a copy of a cheque drawn by Kerangle). She thought that this was the only copy of a cheque drawn by Kerangle that she had ever seen. She also said, at another point in her evidence, that she thought that there was some discussion, at that time, about who Kerangle was but she could not "remember it expressly".
42 That the copy of the cheque for $21,869.50 was that which Ms Stainthorpe saw is supported by the evidence of Mr Guy Tristram, a director of Mair & Co. He gave evidence to the effect that moneys received by Mair & Co from lessees or purchasers of property were and always are paid into its trust account. He said that this practice has never varied. Cleared cheque funds are then drawn and paid to the principal by Mair & Co's cheque drawn on its trust account. He said that between 1989 and 1991 Mair & Co's trust cheques did not provide any indication of the source of the funds. That being so, the lessor would never ordinarily receive a cheque (or a copy of one) directly from the lessee.
43 It is important to mention, in this context, that Ms Stainthorpe was first asked to give a statement to Byblos' solicitors on 4 April 1991. She then said the following:
"In October I noted that there wasn't a great deal of paperwork concerning the leasing arrangements on file so I requested Mr Park to send out copies of all paperwork.
It was about this time I became aware of the offer to lease whereby Kerangle was proposed as lessee.
Though Kerangle's name was mentioned I was always under the impression that it was Foodland who would be leasing the premises.
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- This impression came about through Larry Parks [sic] continually referring to F.A.L.
He continually stressed that Byblos would be secure in taking on F.A.L. as a tenant and to this end was continually urging us to accede to the requests made by F.A.L. in respect of alteration of the premises."
44 Mr Russell, too, said that he had always assumed that Foodland would be the tenant. While he knew that the premises were to be used under the business name Tactix Clothing Co, he assumed that this was a business name used by Foodland. It was he who had had the chance encounter to which I earlier referred, having once encountered the name Kerangle when visiting Foodland in order to meet with Mr John Smith who had had the prime carriage of negotiations in respect of the agreement for lease. While waiting for Mr Smith he flipped through a prospectus in which he saw the name Kerangle Pty Ltd and saw also that it was a company which was related to Foodland. He was struck by the name "Kerangle" as it was similar to the name of a farm at which he had once been employed.
45 Mr Russell, in his evidence, recalled a discussion between himself, Ms Stainthorpe and Mr Roufael about a cheque from Kerangle but did not think that it related to the cheque for $21,869.50 which was paid by way of deposit. He thought that the discussion was "much later on" although he acknowledged that he might be mistaken. He said that he had never seen a cheque from Kerangle and that the document discussed was "an advice" from Mair & Co referring to receipt of a cheque from Kerangle. The discussion, to the best of his recollection, took place after Kerangle had already moved into the leased premises.
46 Evidence was also led on behalf of Byblos from Mr Russell Black, an accountant in public practice who has, since about 1986, been Byblos' accountant. He gave evidence of a luncheon which he attended with Mr Roufael and Mr Nash. He could not remember when the luncheon occurred but said that it was "at or about the time that … Byblos was about to enter into the lease for managing premises". He said that there was general discussion regarding the letting of commercial units and that Mr Roufael said that he "would have to spend a lot of money to get them into the condition required by a future tenant". He said that he enquired who the tenant was and that one of Mr Nash or Mr Roufael said that it was Foodland. He said that the other of them did not contradict this.
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47 Mr Park gave evidence on behalf of Mair & Co. He said that, after forwarding to a number of businesses in the Maddington area a standard form questionnaire by which Mair & Co hoped to locate prospective tenants, he received a response from a company known as Glenrich Pty Ltd ("Glenrich"). He spoke to Mr Charles Llewellyn, a director of Glenrich. He said that Mr Llewellyn told him that that company carried on business under the name "Tactix Clothing Company" at a number of locations. He was also told that it manufactured clothing for Foodland. Mr Park said that Mr Llewellyn told him that a new company was to be formed to acquire the business of Tactix Clothing Company and that this new company would be "50 per cent owned" by Foodland. Mr Llewellyn also told him that, because of increased production, Tactix Clothing Company was looking to consolidate all of its activities into one location.
48 Mr Park said that in early June 1989 he noticed the development being undertaken by Byblos in Maddington. He telephoned Mr Roufael and told him that he had several prospective tenants one of which was "a substantial or solid company". He obtained an authority to act on behalf of Byblos. At that time, he said, he told Mr Roufael that the proposed tenant was Tactix Clothing Company and that he had been told by Mr Llewellyn that "Foodland were fully backing and supportive of Tactix and had a 50 per cent shareholding in the company". He said that he also told him that Foodland was a large company. Thereafter, he said, he commenced negotiations with Foodland.
49 He said that on 23 June 1989 he received a letter of intent from Foodland to take seven of the units under construction if those units (then only partially completed) could be consolidated into one factory. That letter of intent, which was tendered in evidence, made it quite plain that the lessee was to be Kerangle trading as Tactix Clothing Co.
50 Mr Park said that when he received the letter he gave a photocopy of it to Mr Roufael, read it to Mr Roufael and discussed the contents of it with Mr Roufael and Mr Russell. He said that Mr Roufael then asked him who Kerangle was and that he said that he believed that it was jointly owned by Foodland and "Tactix" but that he would confirm this. He said that he thereafter spoke to Mr Llewellyn and then confirmed to Mr Roufael that his understanding was correct. After obtaining instructions from Mr Roufael he wrote to Foodland suggesting alternative terms and conditions to some of those which had been suggested by the latter in its letter. Thereafter further correspondence ensued between Foodland and Mair & Co which, Mr Park said, was discussed with Mr Roufael.
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51 He said that on either 11 or 12 July 1989 he was told by Mr Roufael to send instructions in relation to the preparation of the lease documentation to Mr Roufael Junior at Jackson McDonald. He said that he met with Mr Roufael Junior at the offices of Jackson McDonald on about 4 August 1989 and faxed various documents to him on 7 August 1989. The documents so faxed included the letter from Mair & Co to Foodland dated 29 June 1989 and that from Foodland to Mair & Co dated 11 July 1989.
52 Mr Park said that on about 25 August 1989 he received the letter dated 23 August 1989 from Jackson McDonald and the enclosed draft lease.
53 He also said that on about 1 September 1989 he spoke to Mr Ivor Cohen, a director of Mair & Co, about whether or not Foodland's directors would provide guarantees of Kerangle's obligations under the Lease. Mr Cohen told him that Foodland's directors would not do so and, he said, he later told Mr Roufael of this. He said that he also told Mr Roufael that he should consequently "make a decision whether it [the proposed lease to Kerangle] was to go forward or end". To the best of his recollection this took place in early September 1989.
54 Mr Park also gave evidence of a letter which he had been asked to write in response to a number of queries raised by Byblos' solicitors in mid 1991, by which time he was no longer employed at Mair & Co. The request was made to him by Mr Rick Pawell of Mair & Co.
55 Byblos' solicitors had written to Mair & Co on 3 June 1991. They said that they were instructed that:
"(a) In or about June 1989, your agent Larry Park advised he had a prospective lessee for the premises;
(b) Substantial alterations were required to the premises to meet the needs of the prospective lessee;
(c) Our client was reluctant to undertake those alterations in view of the costs;
(d) Your agent assured our client that the prospective lessee would be FAL;
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- (e) Your agent assured our client that it ought not be concerned, as the prospective lessee, FAL, was a secure and reputable company with a sound financial standing."
56 The letter then goes on to record that in fact Kerangle entered into the Lease as lessee and asks Mair & Co to answer eight questions as follows:
"Would you advise:
(a) Whether FAL [Foodland] or Kerangle Pty Ltd offered to lease the premises;
(b) If FAL was the prospective lessee, why your instructions to Jackson McDonald were that the Lease be prepared with Kerangle Pty Ltd as lessee;
(c) If Kerangle Pty Ltd was the prospective lessee was our client advised of this fact;
(d) What enquiries, if any, were made about the financial standing of Kerangle Pty Ltd;
(e) Whether a guarantee of the Lease by FAL or any other party … was sought;
(f) If no guarantor [sic] was sought, why none was sought;
(g) Why the provision in the Lease for a guarantor was not given effect to;
(h) Why the question of the guarantee was not discussed with our client."
57 Mair & Co, after making enquiries of Mr Park, responded by letter dated 26 June 1991 as follows:
"Re: Unit 7, Lot 31 Rye Lane Street, Maddington
Further to your letter of the 3rd June 1991, we are able to advise that we have contacted Mr Larry Park, formerly of this firm, and have referred your letter to him.
Mr Park's reply to the issues raised by you is as follows.
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- The instructions you have received are essentially as Mr Park believes them to be save that FAL indicated early in negotiations that Kerangle Pty Ltd would be the Lessee. This, in itself, caused no concern to Mr Park or the Lessor as they were both given to believe that Kerangle and FAL were effectively one and the same.
With respect to your queries, therefore:-
(a) FAL were [sic] the only party with whom we have had contact throughout negotiations and with whom the contract to lease was made. In a Letter of Intent dated 23rd June, 1991 (copy attached), they [sic] gave notice that the Lessee would be Kerangle, however, in no way indicated that this was not an FAL company.
(b) The final offer to lease authorised by the Lessor (conveyed to FAL in our letter of the 29th June, 1991) incorporated most of the conditions of the original Letter of Intent and was accepted by FAL on the 11th July, 1991. Copies of these documents are also enclosed. Mair & Co instructed Jackson McDonald in accordance with the contract to lease.
(c) From the first documented negotiations, the Lessor was aware that the Lessee would be Kerangle, however, at this time there was no indication that Kerangle and FAL were not synonymous.
(d) No instructions to investigate the financial position of Kerangle were issued by the Lessor and no action in this respect was taken by Mair & Co. In the absence of such instructions, Mair & Co would normally only undertake an investigation if there were reasonable grounds to suspect the financial capacity of the proposed tenant. For the reasons described previously, we had no cause for any such suspicion.
(e) No form of guarantee was agreed to by the parties in the offer to lease, however, the draft lease document made provision for such guarantees to be included. The matter was drawn to the attention of the Lessor by Jackson McDonald in their letter accompanying the draft document (copy included) but at no time during ensuing
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- discussions between Lessor and Lessee concerning various alterations to the draft was the subject of guarantees again addressed.
- (f) We can only speculate that the Lessor sought no guarantees for the performance of the lease because it believed (as indeed did we) that the contract was with FAL and that such guarantees were neither required nor usually given.
(g) As the offer to lease contained no provision for a guarantee there would have been no requirement for its inclusion in the lease document. For the reasons stated in (f) above, the lessor would have every reason to believe that this was not a matter of great concern.
(h) As stated previously, guarantees from major national companies are very rarely sought or given for dealings of this magnitude and it had been the belief of Lessor and Agent that this is whom we were dealing with. Notwithstanding, the Lessor had opportunity to cover this matter at the time of negotiation and upon presentation of draft documents.
We believe that the subject of contracting parties is central to most of the questions raised by you. FAL had clearly indicated to us that Kerangle Pty Ltd was owned by them [sic] and all our negotiations have been with FAL.
Copies of attached correspondence as late as January, 1990, support this assumption and you will note the constant reference to 'our offer' on FAL letterheads.
We trust this information will be of assistance to you."
58 It was suggested in evidence that Mair & Co's responses were based upon information provided in the letter from Mr Park to which I have earlier referred. That letter was never produced at trial. However a draft of it went into evidence. In that draft Mr Park recorded that, after showing Mr Llewellyn Byblos' premises, he was told by Mr Llewellyn that "Tactix was partially owned by F.A.L." and that when Mr Park "told Byblos who the companies were and what the tie-up was with F.A.L. Byblos appeared to be most happy to discuss the matter of compleating
(Page 24)
- [sic] the building as one Unit". However the draft also contains the following:
"All dealings, after the initial showing were done through F.A.L. … . As the company we were negotiating the lease to be with was … to the best of our knowledge to be F.A.L., no further financial investigation was requested, or was made."
60 Mr Llewellyn also gave evidence. He said that he told Mr Park, at his initial meeting with him, that Foodland was a shareholder of Kerangle "and that they were fully backing and supportive of Kerangle". He said that he told Mr Park that Foodland, "in conjunction with David's [a reference to David's Supermarkets Ltd ("David's"), a public company], had a 50% interest in Kerangle".
61 He also said that he discussed the leasing of the premises with Mr Roufael and that this discussion took place a few months before Kerangle moved into the premises, probably in October or November 1989. He said that Mr Roufael then asked him who Kerangle was and that he told Mr Roufael that "Tactix Clothing Co was the trading arm of Kerangle". He said that he also told Mr Roufael that Glenrich owned 50 per cent of that company, that Foodland owned 25 per cent of it and that David's owned the remaining 25 per cent. He said that Mr Roufael asked him where the name "Kerangle" came from and that he, in turn, asked Mr Roufael where the name "Byblos" came from.
62 Mr Llewellyn also said that when Kerangle moved into the premises it put up a "very visible" sign in red, white and blue colours which spanned an area 10 feet by 4 feet. The sign was, he said, right across the front of the building. It read "Tactix Clothing Co".
63 I am unable, after considering all of this evidence, to accept that Byblos did not know, at the time of making the agreement for lease, that the lessee of the premises was to be Kerangle.
64 I am satisfied, firstly, that Mr Roufael was told at a relatively early stage of the existence of Kerangle. I prefer, in this respect, the evidence
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- of Mr Park over that of Mr Roufael. The lapse of time since the material events has made it difficult for any witness to recall, with any degree of accuracy, what took place. However Mr Park's evidence was, in this respect, confident and unhesitating. It is also supported by the draft of the letter written in response to Mr Pawell's request which was prepared at a time proximate to these events and after Mr Park had left the employ of Mair & Co. I have mentioned that he there recorded the fact of a discussion with Mr Llewellyn in which Mr Llewellyn told him that "Tactix was partially owned by F.A.L.", a reference, of course, to Foodland and that when he "told Byblos who the companies were and what the tie-up was with F.A.L. Byblos appeared to be most happy to discuss the matter of compleating [sic] the building as one Unit' ".
65 Also, Mr Roufael's evidence is in conflict with that of Mr Llewellyn whose evidence I have no hesitation in accepting in its entirety. Mr Llewellyn had no axe to grind and seemed to me to be a patently honest witness. He was confident in his recollection and the discussion as to the origin of the name "Byblos" has caused the events of which he gave evidence in this respect to remain clear in his memory. While the discussion of which he gave evidence took place after the making of the agreement for lease it preceded the time at which Mr Roufael said that he became aware of Kerangle's existence. Moreover he did not suggest that Mr Roufael expressed any surprise at the revelation of the identity of the proposed lessee. Nor was there anything in the evidence to suggest that Mr Roufael thereafter expressed any surprise or concern to Mr Park. It was also quite plain from Mr Llewellyn's evidence that, notwithstanding his denial of this fact, Mr Roufael knew of the name "Tactix Clothing Co".
66 Moreover I find it, with respect, difficult to accept Mr Roufael's evidence to the effect that he might not have noticed the name Kerangle even at the time of signing the Lease (and Byblos has pleaded, in par 12 of its statement of claim, that it executed the Lease in ignorance of the fact that Foodland was not a party to it). It is readily apparent, from the briefest scanning of the Lease, that Kerangle was the lessee. So much is apparent from the printing, in comparatively large letters, on the facing page of the Lease which is legible through the window of the cover of that document. It is also apparent from the very first page of the Lease which bears the date of that document. Finally, it is apparent from the typed provision for execution of the Lease by the parties thereto, which bears the name Kerangle immediately below that of Byblos. I should mention, in this last respect that the evidence of Mr Park and Mr Llewellyn at the trial was to the effect that Kerangle very probably signed the lease before
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- Byblos did with the consequence that its common seal, which clearly shows the name "Kerangle Pty Ltd", would have been plainly visible to Mr Roufael and Mr Roufael Junior when they executed the lease on behalf of Byblos.
67 I am compelled to say, also, that it seems to me that Mr Roufael overstated his problems with his eyesight. Dr Graham Raad, an ophthalmic surgeon who treated Mr Roufael at the relevant time and has continued to treat him since said that when he saw him on 28 September 1989 Mr Roufael's eyesight was 90 per cent of normal. He was then able to read "in a good light and … preferably with larger print". He was shown a copy of the letter from Mair & Co to Foodland dated 29 June 1989 and said that he "would think" that Mr Roufael would be able to read that document with good light.
68 Moreover, the material tendered at the trial included documents addressed to Byblos and dated prior to 14 May 1990 which identified Kerangle as the lessee. These included a letter from Mair & Co dated 8 February 1990 and rental statements dated February 1990, March 1990 and April 1990. There was no real suggestion in the evidence that any complaint was made to Mair & Co in this regard at any time prior to the date upon which Kerangle went into liquidation.
69 I accept, also, Mr Park's evidence, ahead of that of Mr Roufael, that he made available to Mr Roufael and discussed with him a photocopy of the letter from Foodland dated 23 June 1989. I consider it to be most unlikely that he would not have done so, having regard for the importance of that letter. On the same day Mr Park sent a letter to Foodland raising three items of concern arising out of what was said in Foodland's letter of 23 June 1989. Mr Park's response went on to say that, subject to confirmation by Byblos, the remaining conditions appeared to be acceptable. On 27 June 1989 Foodland sent to Mr Park a facsimile transmission dealing with the three matters of concern. On the same day Mr Park sent to Foodland a response, addressing those three matters. He there recorded that his response was made "After consultation with … [Byblos] and discussing the points raised by you in detail … ". It seems to me to be unlikely that the consultation and discussion to which Mr Park referred did not encompass the terms of Foodland's letter of 23 June 1989 and did not involve the provision to Mr Roufael of a copy of that letter. Moreover it seemed to me that Mr Park's evidence in that respect was confidently given, notwithstanding the lapse of time since the events in question.
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70 While Mrs Stainthorpe could not remember what documents were on the file when she commenced working for Byblos in mid-July 1989 it seems to me to be very probable that the letter dated 23 June 1989 was one of them. I have mentioned that she was first asked to give a statement on 4 April 1991. Events must then have been very much fresher in her memory than they were at the trial, more than eight years later. I have mentioned also that she there said that it was in October 1989 that she "noted that there wasn't a great deal of paperwork concerning the leasing arrangements on file", that she asked Mr Park to send her copies of all documents and that it was "about this time" that she "became aware of the offer to lease whereby Kerangle was proposed as lessee". It seems to me that she very probably became aware of that information through examining, on her file, a copy of the letter dated 23 June 1991. I have earlier mentioned that, in her evidence at trial, Mrs Stainthorpe said that Mr Park took "a very long time" to send her copies of all relevant documents. That adds to the probability that the knowledge which, she said, she obtained in about October 1989, if that is the date referred to by the rather ambiguous words "about this time", was obtained from her own file. However, even if the reference to "about this time" is taken to mean the time at which Mr Park provided Mrs Stainthorpe with additional documentation I am still satisfied that Mr Roufael, at least, had seen the letter dated 23 June 1989 and had its contents read to him by Mr Park even if the latter was mistaken about the fact of Mr Russell's presence at that time.
71 Moreover, I do not consider that Mrs Stainthorpe's evidence lends any real support to the proposition that Mr Roufael did not know of Kerangle's existence or that it was to be the lessee of the premises. It might well be so that Mrs Stainthorpe did not then know what was the relationship between Kerangle and Foodland. It may also be so that there was some discussion in that regard at the time of receipt of the photocopy of the cheque drawn by Kerangle or of the document which referred to a cheque so drawn. However I very much doubt that Mr Roufael then expressed surprise at learning of the existence of Kerangle. I have earlier said, in any event, that Mrs Stainthorpe could not "expressly" remember this discussion at all.
72 Similar comments might be made in respect of the evidence of Mr Russell with respect to this discussion. He may well have been surprised to learn that a cheque, and it is by no means clear to which cheque he was referring, had been drawn by Kerangle as tenant but I do not accept that he heard Mr Roufael express any similar surprise. I
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- formed the impression that his recollection in this respect was not at all confident and I am unwilling to place any reliance upon it.
73 Finally, I have little hesitation in accepting that Mr Roufael Junior knew that the proposed lessee was to be Kerangle. The briefest reading of the letter of 29 June 1989 would have told him of this. I have mentioned that he acknowledged, in the end, that he did read that letter.
74 As to the evidence of Mr Black, it seems to me to be probable that there was a conversation of the kind described by him at which Mr Nash was present. Mr Nash did not give evidence at the trial and Mr Black's evidence was consequently not contradicted. However, the fact that Mr Roufael might have referred to Foodland as the prospective lessee (and I consider it more likely that it was he, and not Mr Nash, who said this) does not mean that he did not know that Kerangle was in fact to be the lessee. Rather, it seems to me to be more probable that he simply spoke of Kerangle as if it was a trading arm of Foodland much as, it seems to me, was done by Mr Park.
The misrepresentation claim against Mair & Co
75 That brings me, next, to the alleged misrepresentations by Mair & Co.
76 The first of the alleged misrepresentations is, as I have said, one to the effect that Mair & Co had a "very solid client, namely … [Foodland] … who wished to take a lease of the … premises".
77 I am satisfied that Mr Park very probably did describe Foodland as his client, and say that it was a "very solid client". He acknowledged that he told Mr Roufael that he had "a very solid client that was interested in leasing" and that he was then referring to Foodland.
78 I have little doubt that Mr Park did talk about Foodland as if it was to be the lessee and not Kerangle. He very likely did so on or prior to 20 June 1989.
79 So much is, I think, apparent from the terms of his draft letter prepared in answer to the queries raised by Byblos' solicitors in their letter dated 3 June 1991. He has there recorded that on 20 June 1989 Mair & Co received a facsimile transmission from Foodland asking him to attend at its office "to discuss the possibility of … us (F.A.L.) taking a lease on the premises … ". He has also recorded that on 23 June 1989 "FAL documented a letter of intent to lease the premises … that was signed
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- J. W. Smith, PROJECT AND DEVELOPMENT MANAGER the same as the fax" although this letter made it plain, as I have already said, that the lessee was to be "Kerangle Pty Ltd (Trading as Tactix Clothing Co)". Also, as I have previously mentioned, the final paragraph of Mr Park's draft letter records that "the company we were negotiating the Lease to be with was, to the best of our knowledge, to be FAL" and that it was for this reason that "no further financial investigation was requested, or was made."
80 While he knew, at least from the time of his receipt of the letter from Foodland dated 23 June 1999, that Kerangle was to be the lessee he appears to have regarded Kerangle and Foodland as being, as Mair & Co had put it in its letter dated 26 June 1991, "effectively one and the same". This was no doubt because Foodland conducted all negotiations on behalf of Kerangle, treating it as if it were a wholly owned subsidiary (as, in effect, was said by Mair & Co in par (a) and par (c) of its abovementioned letter), and, perhaps, because Mr Llewellyn had told Mr Park that Foodland was "fully backing and supportive of Kerangle".
81 Notwithstanding that Mr Park spoke of Foodland in this way, he did so, as I have found, in circumstances in which Byblos, by Mr Roufael and Mr Roufael Junior, knew, prior to 17 October 1989, that the lessee was in fact to be Kerangle and believed, by Mr Roufael, that Kerangle was half owned by Foodland.
82 As to the second of the alleged representations, that to the effect that "Foodland, the lessee, was a reputable and financially sound company", I am satisfied that Mr Park very probably did describe Foodland as a reputable and financially sound company. He did not suggest otherwise in the course of his evidence. Moreover, it seems to me to be probable, for the reasons I have expressed, that he spoke of it in that way, between June and October 1989, in the course of referring to it as if it, and not Kerangle, was to be the lessee under the proposed lease. However that, too, would have been done in the circumstances to which I have referred when dealing with the first of the alleged representations.
83 As to the third of the alleged representations it is, once again, more probable than not, for similar reasons, that Mr Park told Mr Roufael that he need not be concerned about the cost of alterations to the premises in order to make them fit for the purpose for which they were to be used by the intended lessee as "Foodland was a reputable and financially sound company". There was, in Mair & Co's letter to Byblos' solicitors dated 26 June 1991, no denial of the allegation in Byblos' solicitors letter that
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- Byblos had been "assured … that it ought not be concerned" about the cost of alterations to the premises to meet the needs of the prospective lessee "as the prospective lessee, FAL, was a secure and reputable company with a sound financial standing". However that representation, too, was made in the circumstances to which I have referred when dealing with the first of the alleged representations.
84 That brings me to the allegation that there was an implied representation by Mair & Co to Byblos that it was unnecessary for it to obtain a guarantee in order to protect its interests.
85 I do not accept that any such representation was made.
86 It seems to me to be very probable that Mr Park did not himself think that it was necessary for Byblos to obtain a guarantee from Foodland. He could hardly have thought that such a guarantee was necessary in circumstances in which he believed that Foodland would stand behind Kerangle and that Kerangle might, for any practical purpose, be regarded as if it was Foodland. However I accept that he did ask Mr Cohen whether or not the directors of Foodland would provide guarantees and that he was told that they would not. There is simply no reason to doubt Mr Cohen's evidence in that respect. I also accept the evidence of Mr Park, in preference to that of Mr Roufael, to the effect that he told Mr Roufael of that conversation and left to him the decision whether to proceed or not and that he did so in early September 1989, prior to the making of the agreement for lease. This would have been not long after his receipt of the letter from Jackson McDonald dated 23 August 1989 which, as I have said, raised the question of guarantees. I am unable to accept that Mr Park was in any sense dishonest in the course of his dealings with Mr Roufael or that he did not give evidence to the best of his recollection. I am satisfied that, having raised the question of guarantees (after it had been raised with him by Jackson McDonald), he passed on to Mr Roufael what he had been told by Mr Cohen.
87 While Mr Park's evidence in this respect is not entirely consistent with what was written by Mair & Co in par (f) of its letter dated 26 June 1991 to Byblos' solicitors, that letter was written by Mr Pawell and not by Mr Park who plainly knew, as did Mr Roufael, that the agreement for lease was with Kerangle. In any event the statement, in that paragraph, that Mair & Co could "only speculate" that no guarantees were sought by Byblos "because it believed (as indeed did … [Mair & Co]) that the contract was with FAL" must be read in the context of the letter as a whole which makes it plain (for example in par (a)) that Mair & Co knew
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- that Kerangle was to be the lessee but regarded it as if it was "an FAL company". Moreover Mr Park's evidence is, perhaps, consistent with par (h) of that letter which records that Byblos had the "opportunity to cover this matter at the time of negotiation".
88 Of course, if, as I have found, the discussion with Mr Cohen was one in the context of the provision of guarantees by directors of Foodland, rather than Foodland itself, this lends some support to the proposition that, in his own mind, Mr Park equated Foodland with Kerangle and that he may, in his discussions with Mr Roufael, have similarly equated those two companies. It also follows that Mr Roufael may have formed the impression from what was said by Mr Park that Mr Park considered that it was unnecessary to obtain a guarantee from Foodland itself. However, even if it be accepted that Mair & Co, through Mr Park, conveyed an impression to Mr Roufael that no such guarantee was, in its opinion, necessary, I accept Mr Park's evidence to the effect that he expressly left the question whether or not Byblos should proceed in the absence of any guarantees for decision by Mr Roufael.
89 I am, in this respect, unable to accept that Mair & Co owed to Byblos any relevant duty of care. There was no special relationship of proximity marked either by reliance on the part of Byblos or by the assumption of responsibility on the part of Mair & Co. Mair & Co, by Mr Park, did not hold itself out as having any special expertise or knowledge in this regard. Nor did it have any special means of acquiring information that was not available to Byblos. Instead, Byblos knew what Mair & Co knew. Also, Mr Roufael was an experienced businessman who understood, very well, the nature of a corporate structure and, consequently, the need for a guarantee if absolute certainty was required that financial support would be provided in respect of Kerangle's obligations if it was to find itself in financial difficulty. He said in evidence that "of course" he understood that in some circumstances it is desirable for a lessor of premises to obtain a guarantee from someone to ensure that the tenant actually pays the rent and that he had been familiar with this for at least the last 15 years. Mr Roufael Junior, too, can presumably be taken to have understood the nature of a corporate structure, and the need for guarantees, in the light of the fact that he had completed a law degree in the course of which he studied company law, property law and contract law.
90 Moreover, Mr Roufael accepted in evidence that at some time in 1989 he was "probably" told by Mr Nash of Jackson McDonald that it "was desirable that Byblos … request and obtain guarantees in relation to the Lease" although he denied that Mr Nash ever mentioned the name
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- Kerangle to him and it is not apparent when, in 1989, that discussion occurred.
91 Finally, in this respect, I should mention that Byblos was, throughout, aware that Mair & Co appeared to be acting as agent not only for it, but also for Kerangle. Indeed, Mrs Stainthorpe, when writing to Mair & Co on behalf of Byblos on 12 October 1989, specifically referred to the intended lessee as being "Your client". It is also noteworthy that Mr Roufael, in his evidence, said at one point that he probably told Mr Nash at Jackson McDonald to "watch" Mr Park. This evidence is not consistent with reliance, by Byblos, on advice from Mair & Co.
92 The following comments of Toohey and Gaudron JJ in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 265 are apposite:
"The decided cases do not identify precisely what it is that results in liability for economic loss suffered in consequence of the voluntary provision of information or advice. However, commonsense requires the conclusion that a special relationship of proximity marked either by reliance or by the assumption of responsibility does not arise unless the person providing the information or advice has some special expertise or knowledge, or some special means of acquiring information which is not available to the recipient. Moreover, ordinary principles require that the relationship does not arise unless it is reasonable for the recipient to act on that information or advice without further inquiry. Similarly, ordinary principles require that it be reasonable for the recipient to act upon it for the purpose for which it is used. That is not to say that a special relationship of proximity exists if these conditions are satisfied. Rather, it is to say that the relationship does not arise unless they are."
93 I have said that Mair & Co not hold itself out, or have, any special expertise or knowledge in this regard, or some special means of acquiring information which was not available to Byblos. It was always open to Byblos, if it chose to do so, to make its own additional enquiries and to form its own conclusion. I should add, in this respect, that Mr David Liggins, a certified practising valuer who gave evidence at the trial, said in evidence, and I accept, that at the material time the giving of advice in respect of guarantees "was a matter that the agent had little expertise in" and one which was left to solicitors.
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94 I am, in any event, satisfied that if Mair & Co had recommended to Byblos that it obtain guarantees from Foodland or, for that matter, any other of Kerangle's shareholders or from any of its directors, that request would have been met by a refusal. I am also satisfied that in that event Byblos would nevertheless have proceeded to make the agreement for lease with Kerangle and to execute the Lease on precisely the same terms as it in fact did so. Moreover I would have reached this conclusion even if I had not accepted Mr Park's evidence that he discussed the issue of guarantees with Mr Roufael. However, before expressing reasons for these last two conclusions, I propose first to deal with the other heads of negligence and the breach of contract alleged by Byblos against Mair & Co.
Was Mair & Co negligent?
95 The various heads of negligence and breach of contract pleaded against Mair & Co are set out in sub-par (a) to sub-par (g) inclusive of par 22 of the statement of claim. In each case Mair & Co is said to have acted negligently and in breach of the duty of care owed by it to Byblos to "perform its functions … with reasonable care and skill" and in breach of the implied term of its "engagement" that it "would conduct itself with reasonable care and skill pursuant to its engagement".
96 I will deal first with the allegation in sub-par (a), which pleads Mair & Co's failure to investigate the financial position and resources of Kerangle, and that part of sub-par (g) which alleges that Mair & Co failed to instruct Jackson McDonald to make all usual inquiries and searches.
97 It was common cause that Mair & Co did not investigate the financial position or resources of Kerangle and that it did not ask Jackson McDonald to do so. I have little doubt that this was because Mr Park was not asked to do so and also because he looked upon that company as if it was Foodland itself. This last reason appears quite plainly from the last paragraph of the draft letter written by him.
98 Mr Park was, of course, quite wrong in his assumption that Kerangle could be looked upon as if it was Foodland. In fact Foodland and David's owned, between them, 50 per cent of Kerangle, as Mr Llewellyn told Mr Roufael. While each was a substantial public company in whom every confidence might be reposed the fact was, of course, that Kerangle could not be looked upon as if it was one or other of them. Indeed Kerangle could not be looked upon as if it was Foodland even if Foodland had owned all of its shares. Neither it, nor anyone else, would even then have
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- been under any obligation to support Kerangle if it got into financial difficulty.
99 However I do not accept that Mair & Co was required by the implied term of its "engagement" relied upon by Byblos to investigate Kerangle's financial situation or to instruct Jackson McDonald to do so. Nor do I accept that it owed to Byblos a duty of care which required it to do either of those things.
100 I have mentioned that Mr Park was not asked to undertake any financial investigation in respect of Kerangle or to give any advice in that respect. No-one else at Mair & Co was asked to do so. Nor was it asked to ask Jackson McDonald to do any such thing. I have already said that Byblos knew as much about Kerangle as Mair & Co did (save only that Mr Park had told Mr Roufael that Foodland owned 50 per cent of its shares rather than that Foodland and David's, between them, owned 50 per cent of its shares). There is nothing to suggest that Mr Park or anyone else at Mair & Co was or was believed by Mr Roufael to be more experienced in business than was Mr Roufael. I have mentioned that it was open to Byblos, if it chose to do so, to make its own enquiries or, if it preferred, to instruct Mair & Co, or Jackson McDonald, to do so on its behalf. However it did not do so. Mair & Co assumed no responsibility of that kind and nor was there anything in the evidence which has led me to conclude that Byblos relied upon Mair & Co to do so.
101 Mr Liggins said in evidence in this respect, and I accept, that at the material time real estate agents would not undertake financial enquiries into proposed tenants unless there were reasonable grounds to suspect their financial capacity. He said that if he was told that an intending tenant was a company which was 50 per cent owned by Glenrich, 25 per cent owned by Foodland and 25 per cent owned by David's he would accept it as a desirable tenant.
102 Moreover it seems to me that if any investigation of that kind had been made little would have turned upon it. Kerangle's first year of trading was 1989. However its annual return for the financial year ended on 31 October 1989 was lodged with the National Companies and Securities Commission only on 28 May 1990. Consequently, a search of the company prior to that date would not have turned up any financial statements. The earliest date of any notice of any registered charge given by Kerangle is one dated 22 February 1990 which was lodged on 27 February 1990. That notice refers to a charge created on 22 February 1989 in favour of the Banque Nationale De Paris. However
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- it seems very probable that the charge was in fact created on the day of the notice, being 22February 1990. That this is so is supported by note 20 to Kerangle's financial statements for the year ended 31 October 1989 which suggests that subsequent to that date the company obtained a $750,000 loan facility from the Banque Nationale De Paris although it seems from the note that no assets of the company had then been pledged as security, the shareholders having provided guarantees.
103 If enquiries had been made of the then directors of Kerangle, and if these had been answered, they presumably would (as Mr Llewellyn acknowledged in his evidence) have yielded information generally to the effect of that provided in the financial statements for the year ended 30 October 1989. The company then had current assets of $895,187 and current liabilities of $1,119,509. It had non-current assets totalling $668,485 (including goodwill of around $500,000). There were then no non-current liabilities. Current liabilities included an unspecified unsecured loan of $364,000 as well as an unsecured loan of $504,655 from related corporations. Its profit and loss statement for the year ended 31 October 1989 discloses an operating loss before income tax of $28,461 derived from a total operating revenue of $2,703,300. The notes to the accounts disclose that there was a sales revenue, for that year, of $2,696,311.
104 A company search conducted prior to 17 October 1989 would, of course have revealed the shareholding in Kerangle. Its return of allotment of shares dated 10 February 1989 records that it had allotted 469,998 shares of which 117,498 were held by Foodland, 235,000 by Glenrich and 117,500 by David's. Had this information been disclosed to Mr Roufael he would have appreciated that Foodland owned only 25 per cent of the shares in Kerangle and not, as he had been told by Mr Park, 50 per cent. However nothing turns on this (and nor was any complaint made by Byblos in this regard) presumably because it was not disputed that David's, also the holder of 25 per cent of the shares in Kerangle, was no less reputable or sound than Foodland.
105 Enquiries of Mr Llewellyn would no doubt have elicited, in addition to the financial information to which I have referred, his confidence that Kerangle's business would prove to be profitable. The effect of his evidence was that, while he had had an unpleasant experience in his own negotiations with Foodland, he had, in and around October 1989, good reason to be confident about the future of Kerangle's business. Tactix Clothing Co had only recently received massive orders for clothing from Foodland. The fact that Foodland and David's were owners of a
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- substantial number of shares in Kerangle provided some assurance as to continuity of supply to those companies. Moreover Kerangle's purpose in moving into larger premises was both to consolidate its existing factories under one roof and to enable it to expand its business.
106 Mr Llewellyn said in evidence that "there was no inkling of any suggestion" that Kerangle was likely to fail. While he did not identify the timeframe to which he was referring it seems very probable that it encompassed the whole of the period prior to 17 October 1989. Mr Llewellyn also said that at the time Foodland was supportive of Kerangle and wanted "the thing to succeed". He said that Foodland "wanted to possibly make a lot of money out of the manufacturing, that they were going to sell the goods through their supermarkets. It was a good thing for them to do. It gave them surety of supply."
107 I will return to the allegation in sub-par (a) and the first part of sub-par (g) after considering the other pleaded heads of negligence and breach of contract.
108 As to the plea in sub-par (b) that Mair & Co negligently failed to advise Byblos that Foodland was not the proposed lessee nor a proposed party to the Lease I have already found that Byblos was told that Kerangle was proposed to be the lessee and a party to the Lease. It is consequently unnecessary to consider this allegation further.
109 As to sub-par (c), which relies upon Mair & Co's failure to provide copies of Jackson McDonald's letter, the draft lease and the draft formal agreement to Byblos, the fact is that the lack of reasonable care and skill asserted in that regard rests in the alleged failure to draw to Byblos' attention the fact that Jackson McDonald had made provision for the giving of a guarantee and had drawn attention to that fact in its covering letter. I have already found that Mr Park told Mr Roufael that no guarantee would be given (as was the fact) and left to him the decision whether or not Byblos would proceed in the light of that fact. It was, in the circumstances, unnecessary for Mair & Co to do anything further in that respect. It is consequently unnecessary to consider this paragraph further.
110 Sub-paragraphs (d) to (f) and the second part of (g) can conveniently be dealt with together. Each of these relies, essentially, on alleged negligence or breach of the implied term on the part of Mair & Co in failing, one way or another, to recommend to Byblos that a guarantee should be obtained from one or more of the shareholders of Kerangle or to
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- take any steps to attempt to obtain such a guarantee or to obtain advice from Jackson McDonald in that respect.
111 I have already said that Mair & Co owed no duty to Kerangle in this regard. Nor, for similar reasons, was there, in my opinion, any contractual obligation upon Mair & Co to do any of these things by virtue of the implied term upon which Byblos relies. However there are other points which might be made in this respect and in respect, also, of the alleged implied representation that no guarantee was needed.
112 The first is that I am, as I have said, satisfied that there was no prospect that any guarantee would have been forthcoming if one had been sought.
113 It appeared from Mr Llewellyn's evidence that he would have told an enquirer that none of Kerangle's shareholders, including Glenrich, would provide a guarantee in respect of its obligations under a lease. He also said that none of its directors would have provided personal guarantees.
114 Mr Llewellyn said in evidence that he could not recall any instance in which the directors of Kerangle agreed to give personal guarantees for its obligations other than in the case of the bank loan which was required in order to expand the business of Tactix Clothing Company. Indeed, he said, its directors had twice been asked to give guarantees and had refused. The first occasion was when it was asked by Westpac Banking Corporation to provide guarantees in respect of a lease of a new delivery van. It declined to give those guarantees but the bank nevertheless loaned the money. The second occasion involved a request for directors' guarantees by a nationwide textile company from which Kerangle bought stock. Once again it declined to provide the guarantees requested.
115 Mr Llewellyn said that once Byblos was under a legally enforceable obligation to lease the premises to Kerangle he would have insisted that it did so in the absence of the provision of guarantees by anyone had the question then arisen. He also said that if, prior to 17 October 1989, he had been told that Byblos would not proceed with the agreement for lease unless Kerangle's directors provided guarantees, he did not think that any would have been provided and said that Kerangle would have extended its leases on its existing premises. He said that its then landlord would have been "delighted to keep us there" and "didn't want the leases to end". He also said that Kerangle would have looked for alternative premises (presumably during the period for which, he anticipated, the existing leases would be extended)
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116 Mr David Fawcett, who was in 1989 the managing director of Foodland, said in the course of his evidence that Tactix Clothing Company needed to relocate because, with its on-going growth plans, it was not viable for it to operate out of more than one set of premises. However, he said, if Byblos had refused to lease the premises unless guarantees were provided, "[t]hey wouldn't have been leased" and Kerangle would have gone elsewhere. He was emphatic that neither he nor Foodland would have given a guarantee in those circumstances. He said that it was his policy as managing director of Foodland not to have it guarantee the obligations of associated companies other than obligations to banks. He would himself have dealt with any question which arose as to the giving of a guarantee by Foodland of Kerangle's obligations, either in whole or in part, under the Lease. He said also that he did not believe that David's would have provided a guarantee based upon his experience with that company. No evidence was led to the contrary.
117 Counsel for Byblos contended that the evidence demonstrated that Kerangle had to move premises and that the only suitable premises for its purposes were those provided by Byblos. He relied upon the fact that Mr Park said in evidence that he came up with several possibilities for Kerangle but that it was not interested in them. He also relied upon Mr Llewellyn's evidence that Kerangle wanted, if possible, premises in or close to Maddington, close to a railway or bus station and with an area of around 2,000 square metres. However Mr Llewellyn plainly did not consider that a move was essential as opposed to desirable and, he said, he had several agents looking for premises for Kerangle. There is no sufficient reason, on the evidence, to think that other suitable premises would not have been found had Byblos refused to lease its premises to Kerangle. Moreover I have already mentioned that Mr Llewellyn said that if Kerangle had found it necessary to stay on in its existing premises while it looked for an alternative location he anticipated no difficulty in securing the consent of its existing landlord accordingly.
118 I should, next, make the point (and this applies also to what is pleaded against Mair & Co in sub-par (a) and the first part of sub-par (g)) that once it is accepted, as I do accept, that any searches or financial enquiries would have produced only the information to which I have referred and that guarantees, if sought, would not have been obtained then it seems to me, on the whole of the evidence, that Byblos would, if all of this had been known to it, have done precisely what it did, namely enter into the agreement for lease and the Lease with Kerangle in the absence of any guarantee. I am unable to accept Mr Roufael's evidence to the contrary.
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119 I have already mentioned that Mr Llewellyn was, in October 1989, optimistic as to the future of Kerangle's business and that he would have expressed that optimism to Mr Roufael had any enquiries been made of him. I have mentioned, also, that one of the purposes of the acquisition of the new premises by Kerangle was to expand its business. Mr Fawcett, too, was then optimistic as regards the future of Kerangle. I have little doubt that Mr Roufael, if he turned his mind to this (and it seems to me to be very probable that he did), would have formed the opinion that Kerangle was a desirable tenant because it was conducting an existing business which was in the process of expansion, had a secure ongoing market for its products and was seen to be a sufficiently attractive proposition to be invested in by a large public company.
120 Mr Liggins said in evidence, and I accept, that it might have taken six to nine months to fully let, as single units, the area which was in fact let to Kerangle. Moreover Mr Patrick Matthews, a licensed valuer who gave evidence on behalf of Byblos, agreed with the proposition that a lease of units 7 to 13 to one tenant for an initial term of five years commencing in late 1989 or early 1990 was an attractive proposition from the viewpoint of the owner of the premises. He acknowledged that individual industrial units generally have a high turnover of tenants because they tend to have shorter lease terms. He said that the leasing of units 7 to 13 to Kerangle was to the advantage of Byblos in that it avoided the inefficiencies associated with leasing individual units. Similar evidence was given by Mr Liggins. He said that tenants at the front of the building would normally be prepared to take leases for a longer term but, as one moves towards the back of the building, lease terms range from between 6 and 12 months. He said that there was a very high turnover of this second category of tenants.
121 Mr Liggins also said that, had Byblos chosen not to proceed with the lease to Kerangle, the opportunity of leasing a relatively large area of 1,750 m2 to another occupant not requiring owner's contribution to fit-out or property improvements would have been difficult, particularly at a rental of $32.50 per square metre. He said that the opportunity to lease the total area of 1,750 m2 for five years with the cost of improvements to be borne by the tenant was a better alternative, in any market, for the future of the property than the letting of individual industrial units on short term leases.
122 I accept all of this evidence.
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123 It seems to me that when regard is had to the aforegoing there is more than enough in the evidence to support the conclusion at which I have arrived that, had Byblos been advised to obtain guarantees from Kerangle and to undertake a financial investigation in respect of it, it would still have done exactly what it did, namely enter into an agreement in terms of which it agreed to lease the premises to Kerangle for a period of five years without guarantees.
124 It follows, in all of the circumstances to which I have referred, that Byblos has failed to make out any cause of action, either in tort or in contract, against Mair & Co.
125 It also follows that it is unnecessary to consider the third party proceedings instituted by Mair & Co against Jackson McDonald.
Was Jackson McDonald negligent?
126 That brings me, next, to the allegations of negligence against Jackson McDonald.
127 Jackson McDonald admits, in its defence, that on 7 August 1989 it was instructed by Mair & Co, as the duly authorised representative of Byblos, to draft a lease in respect of the premises proposed to be leased by Byblos to Kerangle.
128 Byblos alleges (par 29 of the statement of claim) that it was an implied term of Jackson McDonald's retainer that it would provide the "usual ancillary services" provided by a conveyancer in relation to the letting of commercial property and that the services provided pursuant to the retainer would be performed with reasonable care, skill and diligence. Jackson McDonald, in its defence (par 17), admits that it was "an implied term of providing" the services provided by it that it would do so with reasonable care, skill and diligence but otherwise denies what is alleged against it.
129 Byblos also alleges against Jackson McDonald that it owed a duty of care to Byblos in providing services under and ancillary to the retainer. While Jackson McDonald admits that it owed to Byblos a duty of care in providing the services provided by it it otherwise denies what is alleged against it.
130 Jackson McDonald was instructed by way of the facsimile message, referred to above, sent to Mr Roufael Junior on 7 August 1989. The documents attached to that facsimile message comprised, as I have said,
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- the letter from Mair & Co to Foodland dated 29 June 1989 and Foodland's response dated 11 July 1989. Jackson McDonald appears to have been asked to do no more than to prepare a lease for consideration by the proposed parties to it. Mr Roufael, in his evidence-in-chief, said no more in this respect than that he told Mr Park "to instruct Jackson McDonald to prepare the lease".
131 I have mentioned that the draft lease was sent out under cover of a letter dated 23 August 1989 from Jackson McDonald to Mair & Co.
132 That letter records that the draft lease had been prepared upon the basis of the letter dated 29 June 1989 and noted that Jackson McDonald had "allowed for a guarantor to be included in the schedule". The letter concluded, as I have earlier mentioned, by asking Mair & Co to hand the drafts on to "the respective parties for their consideration and reference back to us".
133 On 1 September 1989 Mair & Co sent a facsimile transmission to Jackson McDonald with some suggested amendments to pages 4, 5, 17 and 22 of the draft lease (none of which pages dealt with the provision of guarantees).
134 Jackson McDonald appears to have made those changes on the same day. It wrote, on 1 September 1989, to Mair & Co enclosing two copies of each of the amended pages as well as a draft of the formal agreement in duplicate. That agreement plainly assumes that there would be guarantors in respect of Kerangle's obligations under the Lease. Clause 10 of the formal agreement provides for the obligations of the guarantors, the schedule identifies the guarantors and there is a place for execution of the agreement by the guarantor or guarantors.
135 That no one had responded to Jackson McDonald by 11 October 1989 is apparent from its letter of that date addressed to Mair & Co. It there referred to its letters dated 23 August and 1 September 1989 and sought Mair & Co's "advice as to progress in this matter".
136 It seems that there was no other communication between Jackson McDonald and Byblos than those to which I have referred, plus a brief meeting between Mr Park and Mr Roufael Junior at Jackson McDonald on 4 August 1989 (at which, albeit this was not made clear in the course of the evidence, Mr Park presumably told Mr Roufael that Jackson McDonald would be asked to prepare the formal documentation) and two telephone conversations between Mr Park and Mr Roufael Junior, on 7
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- and 14 August 1989 respectively, in the course of the first of which Mr Roufael Junior told Mr Park that the lease documentation would be available by 11 August 1989 and in the course of the second of which Mr Roufael Junior told Mr Park that the lease documentation was not ready.
137 It also seems from Mair & Co's answers to interrogatories administered by Byblos that a copy of the draft lease prepared by Jackson McDonald was first sent to Byblos, after it had been amended by Kerangle, under cover of a letter dated 8 February 1990
138 There is consequently nothing in the evidence to suggest that Jackson McDonald was asked to do anything other than to prepare the Lease and the formal agreement. Nor is there anything to suggest that it was given any instructions other than those contained in the documents provided to it (which identified the proposed lessee and which said nothing, one way or the other, as to the need for guarantees) and in the subsequent request for amendment (which did not touch upon the issue of guarantees). Nor is there any evidence that it was told, at any time on or prior to 17 October 1989, that guarantees would not in fact be given.
139 As has been said by Salmond LJ in Sykes v Midland Bank Executor and Trustee Co Ltd [1971] 1 QB 113 at 125, it is impossible to lay down any code setting out the duties of a solicitor when advising a client about a lease. Rather, much will depend upon the facts of each particular case. The solicitor's duty is, as Salmond LJ has said (ibid), "to use reasonable care and skill in giving such advice as the facts of the particular case demand". (See also Hawkins v Clayton (1988) 164 CLR 539 at 579 and Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 at 652 and 654).
140 In the circumstances of this case as I have recounted them I am unable to accept that there was any negligence or breach of contract on the part of Jackson McDonald upon any of the pleaded bases. It did recommend to Byblos, through Mair & Co, that guarantees be obtained (and the consequence of a failure to obtain them was obvious to any experienced businessman) but its recommendation was not acted upon in circumstances in which it did not know of this at any time prior to the making of the agreement for lease. Even if its like recommendation to Mr Roufael himself was not made prior to 17 October 1989 (and it is, as I have said, not clear when it was made) I am not persuaded that it was under any obligation to make this recommendation directly to Byblos in circumstances in which it had been instructed through Mair & Co. I should mention in this last respect that evidence was led from
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- Mr John Syminton, an experienced solicitor, as to solicitors' practice at the material time in leasing transactions of this kind. Mr Syminton said that if instructions were submitted through a real estate agent the general practice was to "go back through" that real estate agent.
141 I am in any event satisfied, as I have said, that no guarantees would have been obtained and that Byblos would have acted no differently had it been told that it was prudent to obtain guarantees but that no guarantees would be given.
142 Next, while it is true that Jackson McDonald did not make any search of Kerangle, it was never asked to give any advice or make any enquiry as to Kerangle's financial position and nor, in these circumstances and in circumstances in which it did not know, until it was too late, that guarantees were not to be given, could it be said that it was required to do so by virtue of the implied term of its retainer relied upon by Byblos.
143 Moreover, if there was, as Mr Roufael suggested, a discussion between him and Mr Nash in the course of which Mr Nash told him that he need not be concerned about Foodland's unwillingness to give guarantees this may well have occurred after the agreement for lease had been made.
144 Nothing turned upon any failure to conduct searches or make financial enquiries or give advice as to the need for guarantees or make enquiries as to reasons for their absence after 17 October 1989. Byblos was, by then, committed to Kerangle in terms which did not require the giving of any guarantees. There was no suggestion and nor, on the evidence, was any suggestion open that Byblos then had any entitlement to rescind the agreement which had been made and, as I have mentioned, Mr Llewellyn said in evidence that Kerangle would have held Byblos to that agreement. Indeed, it will be apparent from what I have said that Byblos would in any event not have chosen to rescind that agreement even if it could have done so.
145 It follows that none of the causes of action pleaded against Jackson McDonald has been made out.
Byblos' damages claim
146 While it is, having regard for the conclusions at which I have arrived, unnecessary for me to comment on Byblos' claim for damages I will do so, briefly, in case the matter should go further.
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147 Byblos puts its damages claim on two alternative bases.
148 The first of these, which assumes that were it not for the various alleged breaches of duty and/or misrepresentations Byblos would have obtained enforceable guarantees, takes as the rental payable under the Lease from 15 January 1990 to 15 January 1995 the sum of $284,375 and then deducts from that sum three amounts (and I shall, in setting out the various calculations, use figures which were proved in evidence, as some of these differ from the pleaded amounts). The first is the rental actually received from Kerangle, being a total of $83,242. The second is the rental paid by a replacement tenant found by Byblos, Benjamins Furniture Pty Ltd ("Benjamins"), in respect of the premises for the period from 16 December 1991 until September 1993, a total of $110,720.54 (the pleaded sum being $108,038). The third is an amount of $8,050 (the pleaded sum being $6,900) being rental received from Australian Vanlines (WA) Pty Ltd ("Vanlines") up to 15 January 1995 pursuant to a lease executed by that company and Byblos on 21 June 1994, after Benjamins had a receiver and manager appointed to in September 1993 and ceased, in that month, to make any further payments under its lease. After making those deductions Byblos arrives at a total loss of rental of $82,362.46 (the pleaded sum being $86,195) to which it adds the cost of structural alterations to strengthen the premises to enable them to be used by Kerangle as a clothing factory ($7,892) and the sum of $47,237.08, being the cost of electrical works for Kerangle's special requirements ($60,746) less instalments received in that respect by Byblos from Kerangle ($13,508.92). Finally, Byblos adds to the ensuing total of $137,491.54, lost outgoings of $5,072.62 (the pleaded sum being $4,680) between July 1991 and December 1991, lost outgoings of $12,094.43 (the pleaded sum being $12,203.82) between September 1993 and July 1994 and a cost of $14,566.90 incurred in respect of alterations to enable the premises to be leased to Vanlines, giving a total of $169,225.49.
149 The Benjamins lease was for a term of three years commencing on 16 December 1991 at an annual rental of $59,148 (Kerangle had initially paid $56,875, with its rent to be reviewed every 18 months) payable by monthly instalments of $4,929, together with monthly outgoings of $993, with the rent to be reviewed every 12 months. After Kerangle vacated the premises and prior to Benjamins moving in no modifications were made to the premises other than by way of the removal and storage of a large quantity of electrical tracking. The lease to Vanlines was for a part, only, of the premises formerly leased to Kerangle and provided for an annual rental of $27,600 payable by monthly instalments of $2,300 with the first
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- instalment being payable on 1 October 1994 after a three month rent free period.
150 If, contrary to my findings, shareholders' or directors' guarantees could and would have been obtained by Byblos were it not for the alleged breaches of duty and/or contract (assuming that there were such) then it follows that Byblos would have been compensated, under those guarantees, for losses suffered by it as a consequence of Kerangle's inability to perform its obligations under the Lease. It would, on this assumption, be entitled to the amounts claimed by it in the form of lost rental of $82,362.46, lost outgoings in the sum of $17,167.05 ($5,072.62 plus $12,094.43) and the unrecovered cost of electrical works payable by Kerangle, being $47,237.08 ($60,746 less $13,508.92), making up a total of $146,766.59. However there is no basis upon which it would be entitled, on the assumption to which I have referred, to recover the cost of alterations required to strengthen the premises for Kerangle's purposes (there having been no obligation on Kerangle to pay that cost) or, in my opinion, the cost of alterations required to enable the premises to be leased to Vanlines (which cost exceeded the rental received from Vanlines in the relevant period), there being no evidence to suggest that a cost of this last kind would not anyway have been incurred in order to enable Byblos to lease the premises at the end of Kerangle's tenancy.
151 The alternative manner of calculating damages pleaded by Byblos is one which assumes that guarantees would not, in any event, have been given (as seems to me to be plainly right) but which contends that, were it not for the shortcomings alleged against the defendants, the premises would not have been leased to Kerangle at all. On that assumption, Byblos pleads, it would have obtained rental from another tenant or tenants in an amount of $61,000 per annum from about 1 August 1989. Over a period of 5 years this amounts to $305,000 from which Byblos deducts the total rental received by it from Kerangle, Benjamins and Vanlines, leaving a net loss of $106,820. To this sum it adds the sums of $7,892 and $47,237.08 referred to above (being the costs of strengthening the premises for Kerangle's purposes and the unrecovered cost of electrical works), the loss of outgoings between August 1991 and December 1991 ($5,072.62), loss of outgoings between September 1993 and July 1994 ($12,094.43) and the cost of alterations to the premises incurred in respect of the lease to Vanlines ($14,566.90), giving a total of $193,399.80.
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152 Byblos contends that the best evidence of what could reasonably have been achieved had it not altered units 7 to 13 and leased them to Kerangle is provided by transactions concerning units 1 to 6.
153 Construction of those units was, around September 1989, ahead of that in respect of units 7 to 13 by about 5 or 6 weeks. Units 1, 2, 3 and 4 were let on 30 October 1989, unit 5 was let on 30 September 1989 and unit 6 was let on 27 November 1989. Byblos consequently submits that it is reasonable to assume that units 7 to 13 would have been let to others before 15 January 1990 (from which date rent was payable by Kerangle).
154 The average annual rental agreed in 1989 for units 1 to 6 equated to about $35 per square metre and the agreement to lease executed in respect of these units contained options which provided that rent would not thereafter be less than during the original term.
155 Byblos contends that if there had been full leasing of the area of 1,780 m2 let to Kerangle at what it says is a conservative average of $32.50 per square metre from 1 June 1991 to 14 January 1995 (the date of expiry of the term of the Lease) the total rent recoverable for that period would have been $209,706.25. It is not entirely clear to me why the commencement date of 1 June 1991 should have been selected in respect of this calculation. Presumably it has been selected upon the basis that Kerangle made no payments from June 1991 onwards. However this alternative is, as I have said, posited upon the assumption that there never would have been a lease to Kerangle.
156 Be that as it may, Byblos contends that if there is deducted from this sum the rent paid by Benjamins ($110,720.54 and not the pleaded figure of $108,038) and Vanlines up to 14 January 1995 ($8,050), its net loss of rent was $90,935.71 and that it lost outgoings, over the two periods set out above, totalling $17,167.05. However it acknowledges that there should be deducted from the total of $108,102.76 some unspecified allowance "for the contingency of vacancies".
157 It also raises, in respect of this alternative basis of calculation, three claims for what it refers to as "wasted expense relating to the alterations to the units and provision of electrical installations" being the unpaid amount of $47,237.08 in respect of the cost of the electrical installations, the cost of $7,892 incurred in strengthening the roof of the premises and the cost of $14,566.90 incurred in respect of alterations to enable the premises to be leased to Vanlines.
158 There are problems with this approach.
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159 The first is that there is considerable scope for debate as to how long it would have taken for the premises to be let had they not been let to Kerangle. I have mentioned that Mr Liggins said in evidence that it might have taken six to nine months for Byblos to let all of the units. Mr Matthews, in the course of his evidence, said that it was difficult to estimate for how long the premises might have been vacant. Part of the premises, he said, might have been leased within a month with the middle section being leased within the second month. He acknowledged, as I have said, that individual industrial units generally have a high turnover of tenants because they tend to have shorter lease terms. He said, in this respect, that leasing terms of between six months and three years might have been expected in respect of units of the kind proposed to be constructed. Mr Liggins' evidence was to similar effect.
160 It seems to me, in the light of this evidence (and I should say that I was inclined to prefer that of Mr Liggins in this respect, if only because he has had considerably more experience than Mr Matthews in this area), that I should assume that the premises would not have been fully let until about six months after their completion. That would mean that the premises would have been fully let, if not entirely let to one tenant, from about the end of June 1990. If fully let from 1 July 1990 to 15 December 1991 (the day before the date of commencement of the Benjamins lease) they would, at $32.50 per square metre, have produced a total rent of $84,361 (1.46 years x 1780m2 x $32.50). Because the units might have been let individually in which case some of them might, as Mr Matthews pointed out, have been let prior to 1 July 1990 it would be reasonable to add to this sum additional rental of about $15,000 (which assumes that half of the units might have been let throughout the six month period), giving a total of $99,361. From this sum should be deducted the rental actually received from Kerangle ($83,242) giving a total lost rental of $16,119.
161 This sum might marginally be reduced to allow for the contingency of vacancies over the period ending on 15 December 1991. Mr Liggins said in this respect that, by the end of 1990, sales and leasing activity in industrial properties had slowed down considerably with an increased number of lessors and lessees placing their properties on the market seeking sub-tenants in order to reduce overheads. Moreover, as events in respect of Benjamins illustrates, there is an inherent risk for any lessor of premises that the lessee (and, indeed, any guarantors of the lessee's obligations) might not pay the rent.
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162 I consider that a reasonable allowance in this respect, taking into account the evidence of Mr Liggins and Mr Matthews, would be one of 15 per cent (taking into account the shortness of the period under consideration), giving rise to a total loss, in this respect, of $14,444 (85 per cent of $16,119). To this sum should be added the sums of $47,237.08 and $7,892 referred to above and also the lost outgoings of $5,072.62 from August to December 1991.
163 The upshot of this is that, at the time at which Benjamins took up its tenancy of the premises, Byblos had suffered a total loss of $74,645.70. While it was contended that there should be deducted from this sum the (unproved) cost of completing the partitioning of the seven units had that exercise been continued, it does not necessarily follow that that exercise would in fact have been continued. As matters turned out the premises were let, as a whole, to Benjamins which did not require any internal partitioning. Moreover there remained the prospect that Byblos would, at some time in the future, have to complete the partitioning or otherwise alter the premises to suit the needs of tenants as, indeed, is evident from the cost which has been incurred in order to lease the premises to Vanlines.
164 While it will be apparent from what I have said that Byblos sought to recover its loss on a different basis I am not persuaded that any loss after the commencement of Benjamins' tenancy (at a rental which, the parties appear to have assumed, was approximately equivalent to that which would by then have been paid by Kerangle) is recoverable. Were it not for Benjamins financial failure (and that of its guarantors) there would have been no additional loss. There is nothing in the evidence to suggest that Byblos was forced to take on Benjamins because there was no other option open to it. Rather, the evidence was entirely silent as to the circumstances in which Benjamins became a tenant. In these circumstances it seems to me that the loss occasioned through the failure of Benjamins, and the inability of its guarantors to pay, was not a loss of a kind which was reasonably foreseeable by the defendants at the material time (as to which see C Czarnikow Ltd v Koufos [1969] 1 AC 350 at 385; Wenham v Ella (1972) 127 CLR 454 at 471 - 472; Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 667; Hungerfords v Walker (1989) 171 CLR 125 at 140 - 144, 161; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92, 99; and Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 368) or which, as a matter of common sense and experience (as to which see March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 and Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 6 - 7) should be recoverable from them.
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165 Moreover, in the absence of any evidence to establish the claim for interest which has been brought by Byblos (and no evidence at all was led in this respect) I would have been prepared to allow interest, pursuant to s 32 of the Supreme Court Act 1935, only at the rate provided for in respect of judgments from the date at which each relevant loss occurred. I am not persuaded that I should disallow interest altogether either because of lack of proof or because of what was said to be Byblos' delay in bringing the action on to trial.
The contribution proceedings
166 It is, in all of the circumstances, unnecessary for me to consider the questions raised by the contribution proceedings.
Conclusion
167 I would, consequently, dismiss the claim against each of the defendants.
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