Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd - [2003] NSWSC 460

No judgment structure available for this case.

CITATION: Carpet Fashion Pty Limited v Forma Holdings Pty Limited [2003] NSWSC 460

HEARING DATE(S): 26/05/03, 27/05/03, 28/05/03, 29/05/03

JUDGMENT DATE:
5 June 2003

JURISDICTION:
Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Proceedings to be dismissed.

CATCHWORDS: Leases - lease of shop in shopping centre - representations by lessor as to use of shopping centre - change of use of shopping centre - effect of provisions of lease purporting to exclude liability for any reliance on representations - Trade Practices - Misleading or deceptive conduct - pre-contractual representations as to future matter - reasonable ground for making representations - genuine change of mind - reliance - Trade Practices Act 1974 (Cth) ss 51A, 52 - Non-derogation from grant - implied term - principles upon which term is implied

LEGISLATION CITED: Fair Trading Act 1986 (NZ),
Retail Leases Act 1994 (NSW)
Trade Practices Act 1974 (Cth)

CASES CITED: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Australian Development Corporation Pty Ltd v White Construction (ACT) Pty Ltd, Supreme Court of New South Wales, 8 February 1999, unreported
Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043
Birmingham , Dudley and District Banking Co v Ross (1888) 38 Ch D 295
Bonnington Castings Ltd v Wardlaw [1956] AC 613
Bowler v Hilda Pty Ltd (1998) 80 FCR 191
Brookteck Pty Limited v Lumocol Australia Pty Limited, Federal Court of NSW, 23 October 1996, unreported
Brown v Jam Factory Pty Ltd (1981) ATPR 40-213
Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367
Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670
Cox & Coxon Ltd v Leipst [1999] 2 NZLR 15
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
GIO Australia Holdings Limited v Marks (1997) ATPR 41,544
Gissing v Gissing [1971] AC 886
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9
Harrington & Anor v Harrington Services Pty Ltd [2002] 55 NSWLR 618
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) ATPR 40-850
Henville v Walker (2001) 75 ALJR 1410
James v ANZ Banking Group Ltd (1986) 64 ALR 347
Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR 41-265
Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd [2002] NSWSC 840
Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 41-601
Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207
Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 107 ALR 291
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Myers v Catterson (1889) 43 Ch D 470
Nelson v Walker (1910) 10 CLR 560
Non-Derogation from Grant" (1964) 80 LQR 244
Non-Derogation from Grant and Tenant Mix" (1998) 6 APLJ 197
Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450
Oraka Pty Ltd v Leda Holdings Pty Ltd (1997) ATPR 41-558
Peech v Best [1931] 1 KB 1
Petera Pty Ltd v EAJ Pty Ltd (1985) 7 FCR 375
Re Creditor Tribunal (1977) 137 CLR 545
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Sydney Harbour Casino Properties Pty Ltd v Coluzzi [2002] NSWCA 74
Toteff v Antonas (1952) 87 CLR 647
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Wilcox v Richardson (1997) 43 NSWLR 4
Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679

PARTIES :
Carpet Fashion Pty Limited (Plaintiff)
Forma Holdings Pty Limited (Defendant)

FILE NUMBER(S): SC 50030/02

COUNSEL: Mr DL Warren (Plaintiff)
Mr RP Lancaster (Defendant)

SOLICITORS: Robilliard Plowman Herat (Plaintiff)
Minter Ellison (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Thursday 5 June 2003

50030/02 Carpet Fashion Pty Limited v Forma Holdings Pty Limited

JUDGMENT

The Proceedings

1 The plaintiff, Carpet Fashion Pty Ltd ["Carpet Fashion"] has since 1973 carried on the business of retail sale of carpet, carpet underlay, rugs, floor coverings, vinyl and timber flooring at various shopping centres and shops throughout Sydney. These items are principally installed in residences and to a lesser extent commercial premises.

2 Carpet Fashion brings these proceedings in relation to representations which it alleges were made during its inquiries directed to the defendant, Forma Holdings Pty Ltd ["Forma"], concerning the leasing of a shop in a shopping centre owned by Forma at the corner of Homebush Bay Drive and Underwood Road, Homebush, New South Wales. The centre was known as "HIA Building and Renovata Supa Centre" ["the Centre"].

3 By registered lease 3438596R, Carpet Fashion became the lessee of Shops 7E and 7F on level 3 of the centre for a term of five years from 18 March 1997 (“the lease”). The lease permitted Carpet Fashion to use Shops 7E and 7F for the retail sale of carpets and floor coverings and provided for an option to renew for another term of five years.

4 Carpet Fashion conducted a retail shop business from its premises in the Centre until it purported to terminate the lease on 18 September 2000. It subsequently ceased trading and vacated the premises on 30 November 2000.

5 Carpet Fashion's claim for damages is founded on two asserted causes of action:

· the contention that Forma made a certain representation to it [“the representation”] that was misleading or deceptive or likely to mislead or deceive (in contravention of section 52 of the Trade Practices Act 1974) [“the Act”] and that the lease was entered into in reliance on that representation.

· the contention that Forma, by its actions since the grant of the lease derogated from the grant of the lease.

The representational case

The alleged representation

6 The alleged representation was “that the Centre was to be used exclusively for the sale of bulky goods and retail sales of products, used in the home building and renovation industry”. Particulars of the representation as pleaded were as follows:

(a) Advertising brochures
(b) Conversation with the Defendant’s officer or representative Mr Sid Londish on a number of occasions prior to November, 1996. The substance of the conversations between Mr Glyn John, the principal of the Plaintiff, and Mr Londish was to the following effect:

(i) That the centre would be the hub of Sydney in home renovations.

(ii) That the centre would be the biggest bathroom and kitchen display in Sydney.

(iii) That the Defendant’s research had shown that these bathroom and kitchen elements were the crucial components in successful home renovation centres and would attract a lot of customers to the centre.

(iv) That the centre was going to be the biggest home renovation centre in the southern hemisphere and when Woolworths moved out, the centre would take over their space.

(v) That floor coverings were a necessary part of the centre.

(vi) There were plans to extend the centre over the roof area to permit more home renovation businesses.
(vii) The defendant had development consent to use the centre as a home renovation centre.

(viii) That the centre would be laid out specifically for use as a home renovation centre.

(ix) The floor was inlaid with a sign “HIA Renovator Super Centre”.

(c) The Retail Leases Act disclosure statement received prior entering into the lease

The derogation from grant/breach of lease cases

7 Fashion also claims that:

· actions of Forma in changing the usage of the Centre constituted a derogation from grant by reason of which it suffered loss and damage

· the giving by Forma to Carpet Fashion of a "Relocation Notice"

- requiring Carpet Fashion to vacate the premises on 4 December 2000,

- notifying Carpet Fashion that the existing lease would terminate on that date,

8 No cause of action was pressed pursuant to the Retail Leases Act 1994 (NSW). [cf Transcript 28 May 2003 at 48]

The principal issues

9 The principal issues appear to be:

· Whether the representation as pleaded was made [In the fashion litigated in the final hearing the issues were in narrow compass];

· Whether the representation was misleading or deceptive or likely to mislead or deceive;

· It being conceded by Carpet Fashion that the representation is appropriately characterised as related to future conduct, did the defendant have reasonable grounds for making the representation? [cf s51A(2) of the Act];

· Whether the lease contained an implied term:

- that the lessor would not derogate from the grant of the lease; or

- that the lessor would not during the term of the lease and option, if exercised, alter the type of tenant mix or the type of products sold in the Centre (paragraph 19A summons);

· If either or both of such terms are to be implied, whether the conduct of the defendant in changing the usage of the Centre and/or by altering the type of tenant mix or the type of products sold in the Centre constituted a breach of such term by reason of which loss and damage was suffered;

· Whether the defendant's said conduct was such as to constitute a repudiation of the lease?; and

· The quantum of damages for breach of the contract or under the Act.

Case management of the issues before the court during the final hearing

10 A particular difficulty arose during the final hearing concerning the service of a statement of Mr David John many months following the time limited for filing by Carpet Fashion of statements in chief. The statement was served on the afternoon of Friday 23 May 2003 and deals with a number of matters of significance in relation to assumptions made by the expert retained by Carpet Fashion and sought to be relied upon in the damages case. Forma's counsel made it plain that there was very real prejudice in permitting the statement to be now relied upon for the reason that Forma had not had any opportunity to deal with this new material. In the light of this development the Court raised with counsel the question of whether or not either party would oppose the case management of the final hearing involving the taking during the first tranche, only of evidence going to all matters outside of relief. A judgment would then be delivered dealing with all matters outside of relief. In the event that the judgment would be favourable to Carpet Fashion relief would be dealt with in a second tranche where only evidence given by the experts or by Forma in replying to the new evidence sought to be adduced from evidence given by Mr David John, would be permitted. It was made plain to counsel that no order of a separation of issues pursuant to Part 31 of the Supreme Court Rules was proposed to be made or should be regarded as having been made. Both counsel agreed with this course and explicitly accepted that no difficulties with respect to credit would arise by treating with the matter in this bifurcated fashion. In consequence this judgment deals only with all matters outside of relief.

Brief overview of background matters

11 The Centre was the subject of a number of changes in direction.

12 The original development and situation of the property at the time when Forma acquired it, had been as a two storey warehouse and distribution centre for Woolworths and also for David Jones.

13 The original redevelopment up to and including 1996 comprised the renovation of the second floor of the warehouse and distribution facility to transform it into shop spaces. Ceiling height meant that there was an attraction for the sale of larger style goods. The second floor was redeveloped as the shopping centre. At the time Carpet Fashion moved into the Centre, it occupied space on the second floor, Woolworths continuing its distribution function from below.

14 Woolworths are still present but part of the downstairs section includes a few shops. As a general proposition however it can be said that by and large the centre is still a one level shopping centre on the second floor of a warehouse building.

The evidence

15 It cannot be suggested that much of the factual evidence was in any way in dispute. A number of statements were read and cross-examination took place in relation to disparate but very limited issues. Both parties prepared chronologies for the assistance of the court. To my mind the convenient course is to proceed:

· by first giving a general overview of evidence adduced from witnesses by statement and then in the witness box; and

· by in essence, then using the chronologies but interpolating, as necessary, where a particular matter may have been pointed up during the final hearing as a live issue for focus.

General overview of evidence adduced from witnesses who had made statements and were cross-examined

Mr Glyn John

16 Mr Glyn John has been a director of Carpet Fashion since its incorporation in 1973. He gave detailed evidence in relation to Carpet Fashion and its business; in relation to the negotiations anterior to the execution of the lease; and in relation to the communications dealing with and discussions concerning the closure of the Homebush store.

17 His evidence included:

· The centre at Homebush Bay was ideally suited to the company's needs because it was easily accessible by good roads from the north, west and south. There was substantial building being carried out or proposed in the area of Homebush and a new suburb, Newington, was proposed. There were to be many new home units built in the area.

· In that regard the Homebush centre was near to the new development and in his opinion would have attracted many customers seeking to lay carpet or timber flooring or linoleum in their properties. Because of the road access the centre would also have attracted people from surrounding suburbs who would have found it easy to visit the Centre.

· Although there was a new centre at Parramatta Road, Auburn described as the "Megacentre Auburn" this complex would not have been suitable for a Carpet Fashion Pty. Limited store as that centre was too close to Carpet Fashion’s store at Parramatta and instead of getting new customers it would be drawing off those customers who would go to the Parramatta store. Additionally at Parramatta there were three other carpet stores in the immediate vicinity.

· Homebush was in a different location and drawing area and did not conflict with either the Parramatta store or any other stores operated by Carpet Fashion.

· With the success of the Homebush store it was feasible to lease a warehouse for storage of carpet and other items sold in the shop. Storage of carpet is an ongoing problem as a large warehouse is needed to keep sufficient quantities of stock.

· With the closure of the Homebush store it was not practical to lease a further warehouse and this had an effect on the amount of stock that the company could keep. This also had a run on effect as to the overall expansion of the company.

· The closure of Homebush was a severe blow to Carpet Fashion Pty Limited as Homebush was a central and forward position in establishing the Carpet Fashion brand in the inner city and eastern suburbs. It was in turn crucial to its advertising program and its loss limited the amount which could be spent on advertising.

· From his experience in thirty years of carpet retailing, for a carpet store to be successful in a centre such as the Homebush centre it must have predominantly homeware or bulky goods sold in the immediate vicinity. The centre itself must be associated with homeware products. If the centre changed its style of business to sale of fashion goods or sale of clothing and footwear, a carpet store would not be successful as a stand alone homeware store. Such a store however needs other stores of the type previously at the centre in order to be successful as, collectively, such a mixture of shops will attract more customers and each shop can benefit from the customers of the other.

18 His evidence as to the decision to take a lease in the Centre included:

“Q. How did you come to make that decision?
A. The decision to take a lease?

Q. Yes.
A. I was very aware of the Homebush centre for some time. I had been approached previously about it, about taking a static display on it. I watched the centre develop. They had a weekend type sale there prior to it opening and they attracted a lot of people. The marketing strategy and the support literature was very impressive. All the statistics about who would visit the centre, where it was located, and the general demographics were perfect for us.

Q. What support literature?
A. They had very good marketing. It went into depth about how many people they would attract, the general demographics of the area, the houses that would be built in the area. They seemed to have a strategy that I subscribed to that the majority of money that is spent is spent on bathrooms and kitchens and that type of thing in renovations and it was going to be the biggest and largest in the southern hemisphere, we were told, and from that would flow on the normal renovation and building, et cetera.
…..
Q. And did those conversations, and if so in what way, influence your decision or Carpet Fashion's decision to take a lease?
A. Well, the conversations were along the line, as the centre was developing, the tenants that they had already engaged in the centre and the expansion of the centre, the renovation centre and the promotional plans and everything they had for the centre.

Q. And did those conversations have any influence on the company in taking a lease?
A. Very definitely.
…

Q. Did those conversations and, if any, which have the basis for the company taking a lease?
A. I think it was a commitment to making it the largest renovation bulky good centre in the southern hemisphere, or certainly in the Sydney basin, and the amount of people that would be attracted to it, and the suggestion that we would also have a reference centre to other stores, all of that was very attractive in location. As I say, there was - during that period they were very prone and very heavy at approaching people to go into the centre and it was very dominant, a very big thing at the time within the bulky goods industry.

[Transcript 26 May 2003, 73-74]

Q. The company moved out of the centre on 30 November 2000?
A. Yes.

Q. And what steps after that time did you take to try to find other premises in the Homebush area?
A. We looked extensively. There was nothing suitable in the Homebush area. I negotiated with Simons Carpets at Lidcombe, had a couple of meetings with them, because I heard he was retiring and he had approached me, but that didn't come up. We looked at the Joyce Mayne centre at the time, which was a bit further up Parramatta Road. We had negotiations with Michael Slade.

Q. In respect of Joyce Mayne, did you find that suitable or not?
A. Nothing suitable.

Q. Why not?
A. Because there wasn't premises available.

Q. Right, and sorry, what about the premises other than Joyce Mayne?

A. The ones I mentioned or -

Q. You were about to mention one and then there were some others?
A. Well, we looked at the Mega Centre at Auburn.

Q. Yes and why wasn't that suitable?

…

[Transcript 26 May 2003, 77]

Mr Jan Koch

19 Mr Koch had made a statement on 10 April 2003. He had been Forma's chief representative in Australia since approximately August or September 1995. He is employed by a company which provides management services to Forma and gave evidence that all the directors of the company (save for Mr Wise) are located overseas. His evidence was that Forma is in general terms a property investment company and that its primary asset is the Homebush shopping centre. His evidence covered the history of the Centre and of the involvement of Forma with the Centre. His evidence also covered the original intentions of Forma, in terms of the development of a shopping centre specifically dedicated to the retail sale of bulky goods; the concept of the Centre having changed in about 1995 to combine both a retail centre (with retailers of bulky goods, and home improvement and renovation products) and a permanent exhibition centre. The aim was to develop a 'one stop shop' for building and renovating products where consumers could view a wide range of retailers and products, and see and compare different products at one time, as well as purchase such products.

20 He gave evidence to the following effect:

· Forma had commissioned a number of research studies regarding the viability of the Centre, including its likely trading levels and the consumer acceptance of the Centre.

· In 1993, Davlon commissioned Plant Location International ('PLI') on behalf of Forma to carry out a market assessment of the Homebush site for use as a bulky goods retail centre ('PLI Report'). The PLI Report concluded that the Homebush site had an excellent chance of success as a bulky goods retail centre.

· The PLI Report was referred to in an internal report prepared for Forma in about late 1993 by Davlon ('First Davlon Report'). Davlon was managing the development of the Centre on behalf of Forma and its principals had been involved in other retail developments, including the successful Moore Park Supacenta, one of the few shopping centres that existed at that time that specialised in the retail sale of bulky goods. The First Davlon Report provided a summary of the current status of the then Homebush project. The First Davlon Report noted that there had been little development of shopping centres for bulky goods:

'Throughout the 1970's and 1980's whilst conventional main stream property development grew into its current super-regional shopping centre concept, bulky goods retailers with high floor space requirements and specialist logistical infrastructures were forced into secondary strip locations, in free standing environments, and little or no synergy from integrated marketing or one-stop shopping facilities.'

· The First Davlon Report noted that the Homebush site was an excellent location for a bulky goods retail centre, given its excellent road access, close proximity to major suburbs, high visibility and constant high volume passing traffic.

· A further report was prepared by Davlon in about mid 1995 ('Second Davlon Report'). By that stage, the decision had been made that the Centre would comprise both a retail and exhibition centre. The Second Davlon Report concluded that the prospects for the Centre were very good, given the lack of competition in the vicinity, the size of the market for home renovation and building products, the potential customer base and the proposed services to be provided by the Centre.

· The Second Davlon Report included the following statements:

(a) 'The development will concentrate on providing an extensive range of products and services for the home. It is concerned with filling a gap in the exhibition and home show market, through establishment of a one stop centre for the purchase of these products and increasing the level of service currently available in this area.';

(b) '[T]he Homebush area, through its central geographic location, is able to access trade areas which are both significant in size and variable in terms of demographic composition.';

(c) 'The primary and secondary trade areas represent 30.9% of the total population of the Sydney Region. Within these trade areas it is estimated that there are approximately 300,000 homes which are older than thirty years - it is expected that all of these homes will necessarily undergo some form of renovation in the next twenty years. Furthermore, by the year 2001 the proposed Homebush Centre will have access to a total population of 1.2 million persons.';

(d) 'The Sydney Region has a very limited number of purpose-designed bulky goods retail centres';

(e) '[T]he Homebush complex will have a significant impact on the market through the provision of 624 car parking spaces - one third of which are under cover - which are easily accessed and by its offer of maximum shopper comfort, including ample food services and a child minding centre.';

(f) 'The strength of the Renovata Centa is intensified by the fact that, with the demonstration area, customers will be provided with a permanent home show where they will be able to purchase or order their goods. In contrast to all of the competition, the Renovata Centa will incorporate an extensive range of home renovations products and services, including financial services, kitchens, bathrooms, lighting and computers. People can experience the products first hand - as opposed to traditional exhibitions, the products displays will not be static.';

(g) 'The owners of the Homebush Supa Centa have retained the highly successful team which developed and marketed the Moore Park Supa Centa. The design and layout of the centre capitalises and improves on the substantial knowledge and experience gained from the development of the Moore Park Supa Centa …';

'To capitalise on the 'wet area' of the renovation market, 2000 square meters of floor space on the northern side of the development have been allocated to bathroom presentations, complete with tiling, lighting and all bathroom accessories …

'Kitchen and other related products will take up 1,000 square meters of floor space on the main retail floor of the Renovata Centre. This should provide a full selection of variety and price of more than 100 kitchens. …';

(i) '[The Housing Industry Association of New South Wales'] endorsement [of the Centre] will have enormous ramifications for the Centre's credibility as a location for exhibitors and general tenants. It will also serve as a reference for anyone in the home renovations market.'; and

· In June 1996, Leyshon Consulting Pty Ltd ('Leyshon') was commissioned by Davlon to provide a report regarding the proposed development and the size of the market in Sydney and New South Wales for home-related products and services ('Leyshon Report'). That research indicated that at that time, there were few central venues for home products retailers in the Sydney region. It concluded that there was a considerable market for home renovation products, and suggested that the number of visits to the Centre per year could extend into the millions.

· The Leyshon Report included the following statements:

(a) 'To our knowledge the proposed development will be by far the largest home products display centre in the Sydney Region or, for that matter, anywhere in Australia. … In view of the size of the proposed Homebush development it should have a revolutionary effect on the display and promotion of home-related products in the Sydney Region.';

· a limited number of major operators with multiple outlets;

· operators occupying relatively small floorspace areas; and

· the general absence of a centralised display area of any significant scale.';

(c) 'In our opinion, the proposed site at Homebush has two major locational advantages. First, the site is close to the acknowledged demographic centre of Sydney. Second, the metropolitan road system facilitates access to the site from all directions throughout the Sydney metropolitan area.';

(d) '[T]he market for additions, alterations and improvements in the Sydney Region is currently estimated at some $1,957 billion per annum and can be expected to grow in real terms … by some $230.4 million annually to $2.187 billion per annum in 2001.';

(e) 'Spending on household contents is currently estimated to be some $3.192 billion per annum in the Sydney Region alone with a projected annual increase of some $375.9 million to $3.568 billion by 2001 in real terms.';

(f) 'It is likely … that the Homebush centre could be visited in much the same way as are leading bulky goods retail centres. That is, a low frequency and incidence of visitors on a household basis but when spread over a large trade area producing a significant number of visits per annum.'; and

· The Centre was endorsed by the Housing Industry Association ('HIA'). The aim was that HIA would also actively participate in the operation of the Centre by operating a training centre within the Centre for consumers and tradespeople. The Centre was in fact initially called the 'HIA Building and Renovata SupaCenta'.

· Once completed in 1996, the Centre was in fact the largest home renovation retail and exhibition centre in Australia.

21 Mr Koch also gave evidence in relation to the leasing of the Centre and in relation to the commissioning of numerous feasibility studies on the Centre. This evidence included:

22 He also gave evidence in relation to the launch of the Centre and the position which had obtained thereafter:

· Whilst the Centre was not officially opened until 18 March 1997, some tenants commenced trading in the Centre before then, including Carpet Fashion. Throughout late 1996 and early 1997, Byvan undertook promotion and marketing of the Centre in readiness for its full launch in March. Such promotion included newspaper advertisements, a competition and a live radio broadcast.

· The Centre was officially opened on 18 March 1997 under the name 'HIA Building & Renovata SupaCenta'. The launch of the Centre went well. At that stage, 19 of the 26 retails stores had fully executed leases, with three leases outstanding and four vacancies. However, only three of the 21 external stores were leased, with 18 vacancies.

· At that time, Forma commissioned focus group research by Q2 Strategic Market Research Pty Ltd ('Q2'), which showed very positive feedback to the Centre ('Q2 Report'). That research contained conclusions regarding the range of facilities that the Centre should offer (such as adequate parking, accessible and knowledgeable staff, child care facilities, good signage, refreshment areas, and so forth), the range of retail stores desired, and indicated that there was a strong desire amongst potential visitors for independent advice on renovation and building issues.

· As at the date of the launch, Forma had invested a total sum of $45 million in relation to the Centre, comprised of:

(a) $14.5 million - purchase price and acquisition costs; and

· Following the launch of the Centre, he was involved as the initial point of contact for the landlord. He received monthly management reports setting out the operations at the Centre, weekly leasing reports regarding vacancies, and so forth. He also attended meetings to discuss the Centre.

· During the year after the launch of the Centre, there were concerns about the trading at the Centre. For instance, the 'traffic count' (the number of customers attending the Centre in a given period of time) was below expectations. The traffic count showed an immediate spike at the launch of the Centre, but thereafter remained well below March 1997 levels.

· Management at Forma was concerned at the performance of the Centre. It was considered that despite having spent a significant amount of money on developing and marketing the Centre, the results had been inadequate. In response, Forma took action to boost the trading at the Centre, including:

(a) commissioning further market research on the Centre, which resulted in a change of the name of the Centre to 'Homebush Home Improvement Centre' and a relaunch under this name on 15 March 1998;

(b) hiring an executive to assist in managing the Centre, in addition to the existing centre manager; and

· Approximately $5 million was spent on marketing the Centre in the four years to 30 June 2000.

· In addition, there were some unanticipated but significant difficulties following the launch of the Centre.

· First, the exhibition space was still largely vacant and expected anchor tenants substantially delayed their arrival, causing difficulties in leasing exhibition space to prospective tenants. For instance, as at March 1997, CSR was expected to be a major anchor tenant at the outdoor exhibition area on the roof of the Centre. Forma had entered into an agreement with CSR prior to the opening of the Centre. However, after the launch of the Centre and despite its agreement, CSR decreased its scale of involvement, and ultimately did not open its exhibition until late 1999.

· In addition, Forma had planned that HIA would have a strong involvement in the marketing of the Centre. HIA had agreed to have an exhibit at the Centre. However, HIA did not put up their exhibit until 1999.

· Second, there were difficulties with the swipe card technology used at the Centre. Forma's plan was that customers could use a swipe card to access information at the Centre. For instance, if an exhibit was not staffed, a customer could swipe a card to obtain written information or connect by phone to the owner of the exhibit. Forma anticipated that this technology would be a resounding success. However, the technology was extremely erratic and did not operate properly despite attempts to remedy it. The equipment had actually been recalled by the manufacturer due to faults, but Forma was not advised of this until March 1999.

· The trading of the Centre was also affected by the opening of the Mega Mart in Auburn in March 1999. Some tenants left the Homebush Centre and moved to the Auburn Centre. Furthermore, prospective tenants took leases at Auburn rather than at the Homebush Centre. Despite this and other difficulties, Forma continued marketing and advertising the Centre.

· Despite the initiatives, the traffic count for the Centre did not show a substantial increase from the first year.

· The Centre operated continuously as a home renovator centre from March 1997 to November 2000. In this period, Forma committed funds in excess of $14 million to the Centre. Its returns from the Centre were well below this amount, resulting in the following losses:

(a) financial year 1996/1997: $6.2 million;

(b) financial year 1997/1998: $6.8 million;

(c) financial year 1998/1999: $6.0 million; and

· The losses would have been approximately $2 million higher each year if income from the Woolworths distribution centre had not been taken into account.

· By late 1999, it was clear to Forma that the Centre was not viable in its then current form. The Centre was incurring considerable losses and there were no indications that trading levels would improve. The main source of income for Forma was the rental from Woolworths.

· Forma commenced discussions with Austexx during 1999 in relation to a joint venture to redevelop the Centre. In 2000, Forma entered into a joint venture with Austexx in relation to the redevelopment of the Centre. The Centre closed in November 2000 so that redevelopment could take place.

· On 13 September 2001, the Centre was relaunched as a direct factory outlets centre.

· In his opinion, Carpet Fashion would have traded well had it remained at the Centre. Bing Lee, a tenant selling electrical goods, remained at the Centre throughout the redevelopment and following the relaunch in 2001 and has traded well. The current tenant mix includes retailers of homewares, including a furniture and furnishings shop. Furthermore, the current traffic count for the Centre is four times that of when it traded as a home renovation centre. He also understands that the Direct Factory Outlets Centre in Melbourne, which is similar to the Homebush Centre, has a tenant selling floor coverings. More recently, Supa Factory Outlets Tuggerah on the central coast of New South Wales has opened, with a combination of fashion and accessories stores as well as furniture/homemaker stores.

· It is his understanding that most of the tenants of the Home Improvement Centre who elected to terminate their leases in 2000 easily found new leases in the vicinity, including at the Auburn Centre.

23 Mr Koch gave evidence in chief as follows:

“Q. Can I ask you to cast your mind back to late 1999. You say in your statement that it was clear to Forma Holdings at that time that the centre was not viable in its then current form; do you remember that?
A. Distinctly, yes.
…
Q. There was a company called Byvan that managed the centre?
A. Yes.

Q. They were managing the centre?
A. They were, yes.

I had numerous discussions with Byvan. I'm not sure exactly what the question was. I might have misunderstood it.

LANCASTER: Q. The question is specifically on the way they managed the centre?
A. It's difficult because we had numerous discussions on the fact the centre was faring so badly and whether it specifically - the question was their performance, that's the question. We discussed the performance of the centre as opposed to their performance…
A. We said to them, "We need to do something to rescue this centre" and there were a couple of planning type discussions with them but they looked at the possibility of abandoning the exhibition centre.

Ms Jean Smith

24 Ms Smith is the Centre Manager of the Direct Factory Outlets shopping centre. She commenced employment as Centre Manager of the Centre on 11 May 1999. Her employer was Byvan Management (NSW) Pty Limited ('Byvan'), which undertook the day to day management of the Centre. Since 1 December 2000, she had been directly employed by Direct Factory Outlets Homebush Pty Ltd as Centre Manager.

25 Her evidence included a detailed statement of the nature of the Centre at the time when she commenced in employment as Centre Manager; her responsibilities which included matters concerning lease administration; vacancies in the retail centre from time to time; traffic counts [cf Exhibit 2]; the numerous marketing and advertising promotions in respect of the Centre and the fact that despite the continued attempts of Forma to market and promote the Centre, there was no significant change in the performance of the Centre in 1999. Tenants were leaving the Centre or remaining in the Centre as monthly or casual tenants rather than renewing their leases.

26 Her evidence was also that the Centre was detrimentally affected by the opening of a new purpose built homemaker centre in Auburn (known as the Auburn Megamart) in or about early 1999. Following the opening of the Auburn Megamart, it had become more difficult to attract tenants to the Centre.

27 She gave evidence as to her own knowledge towards the end of 2000 about the availability of these premises for a shop in the order of 200 approximate sq metres. Her evidence was that there was space available in the Auburn Mega Store which was probably only one third leased. [Transcript 27 May 2000, 65]

28 She also gave some evidence in relation to alternative premises obtained by a number of the tenants who elected to terminate their leases at the Centre in 2000.

29 In relation to the redevelopment of the Centre she gave evidence that:

· On 13 September 2001, the Centre reopened under the name 'Direct Factory Outlets'. The new Centre has proven to be extremely popular and the tenants are trading well. There are no longer any vacant stores within the Centre. There is now a waiting list for tenancies.

· The traffic counts in the new Centre are approximately four times greater than the traffic counts for the Centre prior to September 2000

Mr De Rango

30 Mr De Rango gave evidence by statement dated 9 April 2003. He is the Managing Director of Direct Factory Outlets Pty Ltd and of Direct Factory Outlets Homebush Pty Ltd. His evidence was that:

· Direct Factory Outlets Pty Ltd and Direct Factory Outlets Homebush Pty Ltd are responsible for the management and development of the Direct Factory Outlet centres in Moorabbin, Melbourne and Homebush, Sydney respectively.

· Centre Managers are employed at each centre. The centre managers each report to him.

· He was involved in the Direct Factory Outlet since its establishment in 1997 and in the Direct Factory Outlet at Homebush since the redevelopment of the Centre in 2000/01. The Melbourne centre was the first factory outlet established in Australia.

· He has been involved in the retail sales and leasing area since 1994. Prior to that, he was involved in a retail and wholesale clothing business. He is generally familiar with the retail and retail leasing markets in Melbourne.

· He also gave evidence in relation to the fact that the Carpet Fashion store at the Centre sold carpet, rugs, floor coverings, vinyl and timber flooring. He believed that Carpet Fashion had the capacity to modify its product mix in order to maximise sales from premises at the Centre following the redevelopment in 2000/01. In addition, he gave evidence that it was possible that the store could provide a referral point for other stores in the Carpet Fashion chain of stores in Sydney given the number and geographic range of shoppers which the Centre attracts.

31 He also gave evidence that after the Centre commenced trading as a Direct Factory Outlet he had not approached any prospective new tenant who sold bulky goods to come into the Centre. This was not necessarily because the size of those goods was different from the type of product and tenant mix which he wanted in the new outlet but "it was primarily because the bulky goods traders that had been there had not been successful". He could not recall meeting a single tenant who had told him that they had an active, viable, strong business that was flourishing or trading well. Everyone he had met had been only too willing to tell him how bad the centre was and how poor trading was and how there was no traffic. [Transcript 27 May 2003, 51-52]

Mr Geoffrey Solomons

32 Mr Solomons gave evidence by statement dated 15 May 2003. He is employed by By Dezign Pty Ltd (‘By Dezign’) in the position of Customer Services Manager. He works at the By Dezigns store located in the Auburn Megamall located on Parramatta Road, Auburn. He is also a shareholder in By Dezign. He had previously been a director of By Dezign.

33 He gave evidence as to the circumstances in which having had two stores at the Homebush shopping centre, upon being informed by Forma of the proposed redevelopment of the Centre, By Dezign located available premises at Auburn. His evidence was generally that:

· By Dezign is a retailer of furniture, kitchenware and giftware.

· By Dezign is also a retailer of flooring, namely Forbo vinyl flooring and German laminated floating floor.

· By Dezign is not a retailer of carpet.

· From March 1997 to November 2000, By Dezign had two stores located at the Homebush shopping centre in Underwood Road, Homebush (‘Centre’). One store was called ‘By-Dezign’ and the other store was called ‘By-Dezign Kitchenware’.

· The ‘By-Dezign’ store was located next to the store operated at the Centre by Carpet Fashion before the redevelopment of Homebush Centre.

· By Dezign started looking for alternative premises in about July 2000. It took By Dezign approximately eight to ten weeks to find and secure a new lease.

· The process of searching for a new lease involved speaking with agents, research on available premises and inspecting possible shopping centres and shopping areas.

· Amongst others, By Dezign located available premises at the Auburn Megamall, the bulky goods precinct on Parramatta Road, the Norwest Homemaker Centre, the Liverpool MegaCenta, the David Jones site at Parramatta and the Red Barn Centre on the corner of Silverwater Road and Parramatta Road.

· These premises ranged in size, however many were too small for By Dezign as it required premises about 3,000m2 in size. Many would have been suitable for a retailer seeking premises less than about 500m2 in size.

· Suitable premises for By Dezign were located at the Auburn Megamall. It was decided to merge the ‘By Dezign’ and ‘By Dezign Kitchens’ stores into one By Dezign store. By Dezign vacated its premises at the Homebush Centre in November 2000 and moved into the new premises at the Auburn Megamall on 16 November 2000. The new By Dezign store commenced trading on 23 December 2000.

· At that stage, there were three vacant premises in the Auburn Megamall and at least one tenant who wanted to assign its lease. The available premises ranged in size from approximately 250 to 700m2. One of the available premises later became a rug store.

· From his experience as a bulky goods retailer, he did not agree that an existing store at Parramatta would be a restriction on opening a new store at the Auburn Megamall or the nearby bulky goods precinct on Parramatta Road.

· Whilst the catchment areas for Parramatta and the Auburn Megamall (including the nearby bulky goods precinct) overlap to some extent, they are by and large separate catchments.

Mr Peter Leyshon

34 Mr Leyshon is a qualified town planner and corporate member of the Planning Institute of Australia. His current occupation is research analyst and town planner. In that capacity, he operates a consulting business specialising in retail analysis and the planning of business and shopping centres. He has operated this consulting business for 17 years.

35 He was asked to provide an expert opinion on:

· whether the redeveloped Homebush Centre was suitable for the continued trading of a carpet and rug store; and

· whether alternative premises were available in the Homebush vicinity for the relocation of the Carpet Fashion store in around late 2000.

36 His evidence was:

· In his opinion, although the redeveloped Centre is not a location that is typical for a carpet and rug store (or for general homewares retailing), the redeveloped Centre at Homebush presents a particularly unique retailing opportunity for a number of reasons, in particular:

- the Centre draws customers from the entire Greater Sydney area (save for the area from the eastern suburbs of the city) to the site. He does not believe that there is any other location in Sydney which has such a wide catchment area for customers except for the Sydney Fish Markets at Pyrmont;

- a survey of customers to the Centre in April 2002 indicated that 51% of shoppers are 'first time shoppers' (as compared to repeat customers to the Centre); and

· The above factors mean that if Carpet Fashion had remained as a tenant in the Centre, it would have:

- been exposed to customers from a wide geographic in Sydney;

- had a constant flow of new shoppers from areas outside what it likely to be its traditional customer base; and

· These factors would have given Carpet Fashion the opportunity of conducting a successful business at the Centre.

· Because of these unique aspects of the Homebush area and the Centre, he considers that:

- any disadvantages of the change in the tenant mix after the redevelopment would have been outweighed by the advantages of being situated in the Centre, in particular the wide trade area of the Centre; and

· In addition, Carpet Fashion would have also had the opportunity to alter or modify its product mix (for example, more towards rugs or to a change in range) to maximise its returns or mitigate its loss. In this regard, he is aware that there is a rug retailer at the Direct Factory Outlet conducted in Moorabbin, Melbourne.

37 He understands that Carpet Fashion operated stores in the following areas in the Greater Sydney area at the time of the termination of the its lease at Homebush in late 2000: North Parramatta; Prospect; Campbelltown; Caringbah; Chatswood; Castle Hill; Minchinbury; Penrith; Tuggerah; Warwick Farm.

38 He believes that there were two broad alternatives available to Carpet Fashion after it terminated its lease at the Centre, namely:

(a) it could have relocated the Homebush store to a location within the region surrounding Homebush; or

39 He believes that the most appropriate relocation of the Homebush store would have been to the Auburn area, either within the 'Megacentre Auburn' ('Auburn Centre') or in the strip shopping area running eastward of the Auburn Centre along the Great Western Highway/Parramatta Road for approximately two kilometres. This area contains the largest concentration of bulky goods and homeware stores in Sydney, is very well known and would have been a very good alternative to the Homebush store.

40 He does not agree that the Auburn Centre was not a suitable replacement for the Carpet Fashion store at the Centre because it would draw on customers already served by the North Parramatta store for a number of reasons:

· the Auburn Centre is less than five kilometres closer to the North Parramatta store than the Centre. Therefore, while it may draw on the North Parramatta store's customers to some degree, he does not believe that it would do so to such an extent that Carpet Fashion should not have considered opening a store in that area;

· the North Parramatta store is likely to attract a very different customer base to a store set up in either the Auburn Centre or the surrounding area. He would expect that the North Parramatta store would draw areas principally from the north of Parramatta whereas a store in Auburn would tend to draw customers predominantly from areas to the south, east and west of Auburn. These customers tend to be from different sociological groups and therefore may be attracted to the different centres;

· customers who would have frequented the Homebush store and those in the catchment area for an Auburn store would be unlikely to frequent the North Parramatta store. As mentioned above, customers to the North Parramatta store would be more likely to come from the north and would be unlikely to bypass the North Parramatta store in favour of an Auburn store if their primary purpose was to inspect or purchase carpet. Similarly, given the quality of the Auburn Centre and the range of homewares tenants in the surrounding area, it is unlikely that customers from around the Homebush area who would have frequented Carpet Fashion's store at the Centre would now proceed past Auburn to the North Parramatta store. Instead, they would shop at one of Carpet Fashion's competitors who had a store in Auburn. By establishing its own store in Auburn, Carpet Fashion could regain these customers who have taken their business elsewhere; and

· one of Carpet Fashion's main competitors, Carpet Choice, has stores at 570 Church Street, Parramatta and 265 Parramatta Road, Auburn. The Parramatta Carpet Choice is very close to Carpet Fashion's North Parramatta Store and the Auburn Carpet Choice is very close to the Auburn Centre. He presumes that both these stores are profitable and therefore Carpet Fashion could also trade profitably in both locations.

41 His evidence was that:

· if Carpet Fashion chose not to establish a store at the Auburn Centre, or elsewhere in the Auburn area, the resources which became available to it after it terminated its lease at the Centre could have been used to open a store in an area where Carpet Fashion did not already have a presence.

· Given Carpet Fashion's stores in operation in late 2000, there were several bulky goods and homewares precincts in the Greater Sydney area where Carpet Fashion did not have a presence and where it could have opened a new store and thus tapped into a new market.

· In late 2000, the areas in and around South Bankstown, Moore Park, Norwest/Bella Vista, Erina and Balgowlah were all developing or developed bulky goods and homewares precincts. Carpet Fashion did not have stores in or around any of these areas. Upon the freeing up of resources after the termination of the lease at the Homebush Centre, Carpet Fashion could have opened and, in his belief, run a successful store from any of these areas.

· He understood from an expert's report that Carpet Fashion in fact opened a new store in the Bella Vista / Norwest area in February 2001. This store is located in an area of Sydney which is experiencing rapid population growth as a consequence of new housing development. Arguably, this store was a replacement for the Homebush Centre, despite the fact that it is in a different area of the city to the Centre.

42 Significantly he did not put himself forward as having any experience in relation to carpets and flooring and floor coverings. Most of his experience had been in retailing, the planning and development of retail shopping centres, particularly bulky goods shopping centres. [Transcript 27 May 2003, 58]

Mr Lechmere

43 From about September 1997 to mid 1999, Mr Lechmere was employed by Forma. Part of his job involved negotiating with prospective tenants for leases of retail and/or exhibition space at the centre. Prior to that, he was employed by Supa Dupa Promotions Pty Ltd from about early 1996. Supa Dupa had been engaged to assist in finding tenants for the exhibition space at the Centre. The Centre was to contain both retail and exhibition space. The brief to Supa Dupa was to create a permanent home show at the Centre. Mr Lechmere was heavily involved in this work when he was employed by Supa Dupa. He had had considerable experience in organising the International Home Show that is held in Sydney. Over the course of time, in addition to negotiating with prospective tenants of exhibition space, he also conducted negotiations with prospective tenants of retail space.

44 During 1996, he was involved in negotiations with Carpet Fashion. His evidence covered these negotiations.

45 He gave evidence concerning the prospects of success of the Centre as follows:

· At the time he was negotiating with Mr John with respect to Carpet Fashion taking a lease of premises at the Centre, he believed that the Centre had a very good prospect of success as a specialist centre for the exhibition and retail sale of homemaker and renovator products. He was aware that Forma had commissioned reports into the viability and likely success of the Centre. He was provided with and read extracts from these reports. [The mid 1995 and June 1996 reports] He recalled in particular that the reports indicated that the Centre would attract high customer levels due to its accessibility and location in the demographic centre of Sydney.

· He believed that one of the main reasons why the Centre was not successful was due to problems leasing out the exhibition space. By the time the Centre officially opened in March 1997, the retail space was mostly leased – there were only about three or four vacancies. In contrast, the exhibition space was only about a third full. He expected that the remaining exhibition space would be leased once the Centre opened. However he subsequently experienced difficulties in getting potential exhibitors to commit to leasing exhibition space. Some major exhibitors, such as CSR, were late in opening their exhibitions. Some expected exhibitors did not actually open their exhibitions. For instance, companies including General Electrical, Major Electrical Appliances and Schollets were negotiating to lease a major area to build a complete display of electrical products. However, this display was eventually built at another location. Finally, he found that some companies, despite initially enthusiastic, elected to direct their marketing budget towards the International Home Show, rather than having a permanent display at the Centre.

· He believed that had the Centre (including the exhibition space) been fully leased, it would have been a success. As it turns out, there were ongoing problems filling vacancies in the exhibition area, despite concerted efforts to locate prospective exhibitors, and a decision to transform some of the exhibition space into retail space.

Chronological sequence of events

1973

46 Carpet Fashion commences business of retailing carpet, rugs, floor coverings, underlay, vinyl and timber flooring at premises Old Northern Road, Castle Hill.

1993

March 1993

47 Mr Londish commences as adviser to Forma group of companies.

48 Mr Londish identifies the site at Underwood Road, Homebush for possible purchase and development as a shopping centre. [Statement of Mr Jan (known as John) Godfried Koch dated 10 April 2003 ('Koch Statement'), paras 7, 21]

June 1993

49 Plant Location International prepares market assessment of the site at Homebush for use as a bulky goods retail centre. [Koch Statement, para 11]

1 June 1993

50 Forma becomes registered proprietor of the land on which the centre is constructed. Woolworths had a current lease of part of the land being the ground floor which it used as a distribution centre for food. David Jones leased the upper level which was used by that company and related companies as a warehouse.

Late June 1993

51 Davlon prepares first report on Homebush development. The intention of Forma at this time was to develop a shopping centre on the Homebush site specifically dedicated to the retail sale of bulky goods. [Koch Statement, paras 4, 8, 12, 13; Exhibit JGK - 1]

Mid 1995

52 Davlon prepares second report on Homebush development. This report is prepared based on the concept now favoured by Forma, namely a centre combining retail space and a permanent exhibition space. [Koch Statement, paras 9, 15, 16; Exhibit JGK-2]

53 In Mid 1995 Supa Dupa Promotions is engaged to assist in leasing negotiations for the exhibition component of the Centre. [Koch Statement, para 22]

August/September 1995

54 Mr John Koch commences as chief representative of Forma in Australia. [Koch Statement, para 2]

Late 1995

55 Construction of new upstairs premises at Centre commences. Premises comprise both retail shops and exhibition centre. [Koch Statement, para 6]

Early 1996

56 Mr Melvyn Lechmere commences employment with Supa Dupa Promotions, assisting with negotiating leases at the Centre. Mr Lechmere was originally only involved in lease of exhibition space, but was later involved in negotiating with prospective retail tenants. [Statement of Mr Lechmere dated 15 May 2003 ('Lechmere Statement'), para 3]

57 Two agents visited Mr John of Carpet Fashion. The agents were trying to sell static display space in the HIA Building and Renovata Supa Centa (the “Centre”). A static display is an arrangement whereby customers can visit the space where details of products are displayed and then if they are interested, they can telephone for more details. [Mr John Statement, para 6; Lechmere Statement, para 8]

58 Mr John advised the agents that he was not interested in a static display. However, he did express some interest in leasing a shop in the Centre. [Mr John Statement, para 7]

59 The agents returned at a later date and Mr John supplied them with some details of the requirements he had for a shop. He did not hear from them again. [Mr John Statement, para 8]

June 1996

60 Leyshon Consulting Pty Ltd prepares a report regarding the proposed development of the Centre and the market in Sydney and New South Wales for home-related products and services. [Koch Statement, paras 7, 8; Exhibit JGK-3]

End of 1996

61 Mr John became more interested in leasing a shop in the Centre, in light of the expansion of the company. [Mr John Statement, para 9]

September/October 1996

62 Mr John telephones Mr Lechmere, a representative of the leasing agent, and expressed interest in the Centre. [Mr John Statement, para 10]

First meeting with Mr Lechmere

63 Mr John and Mr Lechmere met at the Centre for approximately ninety minutes. During the meeting Mr Lechmere took Mr John to inspect the Centre. [Mr John Statement, para 10; Lechmere Statement, paras 9-13]

64 Various issues were discussed during the meeting, including the term of the proposed lease, the renewal option of the proposed lease, the tenant mix of the Centre and the various spaces available for lease. [Mr John Statement, paras 12-15]

65 Mr John gave the following evidence in respect of the term of the lease and the renewal option:

66 In reply to paragraph 12 of Mr John’s affidavit, Mr Lechmere gave the following evidence:

67 Mr John gave evidence that during the meeting he enquired about the tenant mix in the Centre:

“I said:-

Mr John: "What is the tenant mix?"
Mr Lechmere: "We want the centre where people can purchase everything for the home and for refurbishment and renovations."
Mr John: "Who are some of your tenants?"

[Mr John Statement, para 13]

68 In reply to the paragraph 13 of Mr John’s Statement, Mr Lechmere agreed that he made statements to the effect of those attributed to him. [Lechmere Statement, para 11]

69 Mr John and Mr Lechmere also discussed spaces which were available for lease. Mr John gave the following evidence:

“Mr. Lechmere and I spoke about the various spaces which were available for lease in the centre. Mr. Lechmere suggested a specific shop but in my opinion the shop was too small. At that time the centre was only on one level, the lower level being occupied by Woolworths. Mr. Lechmere said about this arrangement:

[Mr John Statement, para 14]

70 Mr Lechmere did not take issue with the affidavit evidence given by Mr John in paragraph 14. [Lechmere Statement, para 12]

71 Mr John gave further evidence in relation to the proposed expansion of the Centre in stage two of the development:

72 Mr John and Mr Lechmere discussed the displays proposed for the rooftop of the Centre. Mr John recalled the conversation as follows:

[Mr John Statement, para 15]

73 Mr Lechmere put on affidavit evidence agreeing with the general effect of the statements attributed to him. [Lechmere Statement, para 13] He then continued his evidence:

74 During the first meeting, specific rent was not discussed but Mr Lechmere indicated that it would be in the high $300 per square metre range, although he informed Mr John that this would have to be discussed with his superior, Mr Sid Londish. [Mr John Statement, para 17]

The weeks following the first meeting

75 Further meetings were held between Mr John and Mr Lechmere in the weeks following their initial meeting. His brother Noel John, who was also a director of Carpet Fashion, accompanied Mr John to one of the meetings. [Mr John Statement, para 18]

First meeting with Mr Londish

76 At a meeting about a month after the first meeting with Mr Lechmere, Mr John was introduced to Mr Londish, who he recalled being described by Mr Lechmere as “the decision maker”. [Mr John Statement, paras 19, 20]

77 Mr Londish, Mr John and his brother Richard John, and a note taker attended the meeting, held at Mr Londish’s office. It lasted half an hour. Mr John spoke on behalf of Carpet Fashion. [Mr John Statement, paras 21]

Details of the meeting with Mr Londish

78 Mr John gave evidence of the meeting with Mr Londish as follows:

“After introductions Mr. Londish started the conversation by extolling the virtues of the centre, saying:-

Mr Londish: "We are spending an unbelievable amount of Hong Kong money on this centre. I have no interest other than in an advisory capacity. The rents are way under what we were hoping to get and what it is worth. We do want a complete centre with carpets. The centre is to be outfitted and if you are the tenant you will get the work."

Carpet Fashion Pty. Limited subsequently did get the work laying carpet for the centre. Mr. Londish continued:-

Mr Londish: "The bathroom and kitchen centre will be the like of things Sydney has never seen before. Everything for the home will flow from these displays. We will be pulling people from all over New South Wales. You will be seen to be an exhibitor in the centre."

79 The meeting concluded with Mr John indicating he would get back to Mr Londish after considering his position. [Mr John Statement, para 25]

80 Mr Londish did not give evidence.

81 Mr Lechmere gave evidence about the discussions at this meeting.

82 Mr Lechmere agreed generally with Mr John’s version of the meeting, only taking issue with two matters.

83 Firstly:

“I agree that Mr Londish made statements to the effect of those attributed to him, but for the alleged statement regarding ‘Hong Kong’ money. We did not generally discuss the owner of the Centre with prospective tenants.” [Lechmere Statement, para 15]

84 And Secondly:

“I agree that Mr Londish made statements to the effect of those attributed to him, but for the alleged statement that ‘we will be pulling people from all over New South Wales.” [Lechmere Statement, para 16]

Second meeting with Mr Londish

85 A further meeting was held between Mr Londish and Mr John at the Centre a week or two later. Mr John gave the following evidence of the discussions at the meeting:

“Mr Londish: "There are other carpet people looking at it. One of the tenants is much bigger than you but if you commit they will not worry about it."…

Mr John: "But what about the rent?"

[Mr John Statement, paras 26-27]

86 Mr John also stated in his affidavit that Carpet Fashion was to be the only carpet retailer in the Centre. [Mr John Statement, para 26] However under cross examination his evidence was that he asked Mr Londish for exclusivity as regards floor coverings only to be told that exclusivity would not be given but that there would only be one other retailer permitted to sell floor coverings (ie carpets) [Transcript 26 May 2003, 71].

20 November 1996 – Disclosure Statement signed

87 The Disclosure Statement was signed on 20 November 1996. [Exhibit JGK-4]

Late 1996

88 First tenants move into the Centre. [Koch Statement, para 6]

December 1996

89 Carpet Fashion made the decision to lease Shops 7E and 7F on Level 3 of the Centre. The company was given possession from December 1996 to commence fitting out the Premises. [Mr John Statement, para 29; Koch statement, para 29]

Late 1996/early 1997

90 Byvan Management (engaged by Forma to undertake the day to day management of the Centre) undertakes promotion and marketing work in readiness for its official launch in March. The promotion work includes newspaper advertisements, a competition and a live radio broadcast. [Koch Statement, para 31]

March 1997 to February 1998

91 Traffic count for Centre (excluding May and June 1997):

18 March 1997

92 The Centre was officially opened under the name 'HIA Building & Renovata SupaCenta'. At that stage, 19 of the 26 retails stores had fully executed leases, with three leases outstanding and four vacancies. However, only three of the 21 external stores were leased, with 18 vacancies. [Koch Statement, paras 32, 34]

93 As at the date of launch of the Centre, Forma has spent a total of $45 million in relation to the Centre, comprised of:

§ $14.5 million - purchase price and acquisition costs; and

§ $30.5 million - redevelopment costs and expenses, promotion and marketing of the Centre. [Koch Statement, paras 32, 34]

March 1997 (approx)

94 Q2 Strategic Market Research Pty Ltd ('Q2') performs market research on Centre. That research contained conclusions regarding the range of facilities that the Centre should offer (such as adequate parking, accessible and knowledgeable staff, child care facilities, good signage, refreshment areas), the range of retail stores desired, and indicated that there was a strong desire amongst potential visitors for independent advice on renovation and building issues. [Koch Statement, para 33; Exhibit GJK-5]

8 March 1997 – commencement of the lease

95 The Forma lease commenced on 8 March 1997 for a term of five years with an option to renew for a further five years.

March 1997 – Carpet Fashion commences trading

96 Shortly after the commencement of the lease, Carpet Fashion commenced trading. [Mr John Statement, para 34] According to Mr John’s evidence, at this stage there were approximately 37 shops operating from the upper floor of the Centre. The tenancy mix was observed by Mr John to be 30% selling bulky items and 70% selling goods for home building and renovation. [Mr John Statement, para 34]

30 June 1997

97 For the financial year ending 30 June 1997, Forma sustained a loss of $6.2 million. [Koch Statement, para 46]

30 June 1998

98 For the financial year ending June 1998, Forma sustained a loss of $6.848 million. [Exhibit JGK – 7]

15 February 1998

99 Forma relaunched the centre under the name ‘Homebush Home Improvement Centre’ following the commissioning of further market research. [Koch Statement, para 37]

March 1998 to August 2000

100 Traffic count for the Centre:

March 1999

101 Bulky Goods Megamart opens in Auburn. [Koch Statement, para 43; Statement of Jean Smith dated 9 April 2003 (‘Smith Statement'), para 11]

11 May 1999

102 Jean Smith commences as Centre Manager of the Centre. [Smith Statement, para 3]

May 1999 to December 1999

103 Marketing and advertising promotions at the Centre include:

· the 'Sydney worst bathroom' promotion in July 1999;

· a Spring sale catalogue promotion;

· a mini bathroom expo;

· a radio broadcast from the Centre in October 99;

· a themed 'Security month' and 'Cool Weekend' promotion in November 1999;

· press and electronic media advertising.

[Smith Statement, para 9]

Mid 1999

104 Mr Lechmere ceases employment with Forma. [Lechmere Statement, para 2]

30 June 1999

105 Forma sustains a loss of $6.0 million for the financial year ending 30 June 1999. [Koch statement, para 46]

30 June 2000

106 Forma sustains a loss of $5.4 million for the financial year ending 30 June 2000. [Koch Statement, para 46]

107 Forma claims to have spent approximately $5 million on marketing the Centre during the four years ended 30 June 2000. [Koch Statement, para 38]

108 According to the evidence of Ms Smith, the centre manager of the Centre, she met with Mr John to advise of the proposed redevelopment of the Centre on 30 June 2000. The meeting was held at the centre management offices. [Smith Statement, para 14]

109 Ms Smith prepared notes following this meeting:

“JS advised she had been asked by the Owners to have an initial meeting with all retailers regarding major changes planned for the HHIC. Council have approved the HHIC be changed from its present concept and developed into a factory outlet centre. The exhibition, bathroom and conference centre would no longer exist. Three staff were made redundant on Monday with more redundancies to come over the next few months.

The information given to GJ was:

Construction would commence November 2000.

It was unclear at the moment whether the centre would close during construction or whether trade would continue throughout the building period.

GJ initial reaction was that a factory outlet concept would not suit his business. He had put a lot of work into his shop and was disappointed in the change of direction.

JS advised that it was a commercial decision each retailer must make, however, she suggested he keep his options open and speak to the project management team who have been appointed to handle the refurbishment. JS advised these people would be available towards the end of next week.

165 The Court’s finding is that Carpet Fashion must have realised or be taken to have been on notice that the lessor had reserved to itself (among other things) the power and capacity to change the name and logo of the Centre, to redevelop it, to move the premises of Carpet Fashion in the course of that redevelopment, and to change the other tenants and tenancy mix of the Centre. So much is of course apparent from:

· the terms of the Lease; and

· the terms of the Disclosure Statement.

Dismissal of misleading and deceptive conduct case

166 For those reasons Carpet Fashion fails in its misleading and deceptive conduct case.

Non-derogation from grant

The principles

167 The principles appear to be as follows:

The general principle

· There is a general principle of property law that a grantor must not derogate from the grant: 2 Shepp.Touchst. by Preston, p.286; cf the reference to “the taking away with one hand what the other hand has given”: Birmingham , Dudley and District Banking Co v Ross (1888) 38 Ch.D 295 at 312; D W Elliott, “Non-Derogation from Grant” (1964) 80 LQR 244 at 244, citing Peech v Best [1931] 1 KB 1 where the rule was applied to prevent a grantor of sporting rights from so acting as to annihilate the game

Vendor or and purchaser context

· The matter was put (in the context of vendor and purchaser) by Griffith CJ in Nelson v Walker (1910) 10 CLR 560 at 572 in terms of an implied term of the transaction that:

“the grantor should not use the land which he retains in such a way as to preclude any use of the land which he sells, or that use for which he knows he is selling it to the purchaser”.

Lessor and lessee context

· The principle has application in the lessor and lessee context where premises let for a purpose would be rendered unfit by a particular use of adjoining premises retained by the landlord or let to another tenant; cf Harrington & Anor v Harrington Services Pty Ltd [2002] 55 NSWLR 618 per Palmer J at [81].

Degree of affectation of use by lessee

· "Premises will be regarded as having been rendered unfit for the demised purpose if the facts, even though falling short of establishing absolute unfitness, are sufficient to enable the Court to conclude that the premises are for practical purposes to be fairly regarded as having been rendered unfit".

Gordon v Lidcombe Developments Pty Ltd

· None of the tests propounded require a plaintiff lessee to establish that the premises were rendered totally unfit for their intended use. The question is whether, having regard to all the circumstances, the interference with the lessee’s use was so ‘substantial’ or ‘material’ that it is to be regarded as rendering the premises unfit for their particular use: Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd [2002] NSWSC 840 at [73] per Palmer J.

Implied covenant not to derogate from grant of lease is

subject to agreement

· the implied covenant of a lessor not to derogate from the grant of a lease is subject to any relevant agreement between lessor and lessee, whether in the lease itself or otherwise:

"It is both consistent with principle and authority of long standing that parties can, by specific arrangement, modify or vary covenants that will otherwise be implied from the relationship of lessor and lessee".

Lend Lease Development Pty Ltd v Zemlicka

· “[o]f course, express words might reserve to the grantor the right to derogate in some way” : D W Elliott, “Non-Derogation from Grant” supra at 259; cf Myers v Catterson (1889) 43 Ch.D. 470

168 W D Duncan, “Non-Derogation from Grant and Tenant Mix” (1998) 6 APLJ 197, discusses the principle of non-derogation from grant in the context of leases of retail shops. The author suggests, it seems to me, entirely correctly, that the doctrine may be simply stated as follows:

169 As Handley JA observed in Wilcox v Richardson (1997) 43 NSWLR 4 at 18, it does appear that in the lessor/lessee context, claims invoking the non-derogation from grant implied term have rarely succeeded and then only in extreme circumstances. Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450 was cited by Handley JA as one of the very few modern authorities in which a lessor has been found to have derogated from the grant of a lease of retail premises by reason of the identity and operations of nearby premises (leased to other parties by the lessor). The extreme circumstances in Nordern were that the third floor of a city building was let for commercial use as a computer personnel bureau. The lessor subsequently let the fourth floor to an escort agency and permitted its (illegal) use as a brothel. The lessor’s actions were regarded as a derogation from grant constituting a repudiation of the lease.

Dealing with the issue

170 Naturally in approaching the non-derogation from grant cause of action, the fact that Carpet Fashion has failed in its section 52 case is highly significant. The non-derogation from grant case requires that there be taken as a given the fact that Carpet Fashion is not shown to have entered into the lease by misleading or deceptive conduct. Hence all reliance upon alleged wrongdoing in the form of pre-contractual representations must be put to one side and the issue is determined upon the basis that the lease represents the binding contract.

171 Clearly the issue requires to be determined taking into account the whole of the facts, matters and circumstances thrown up by the evidence. However it is pertinent at the threshold to note clause 27.12 of the lease which expressly provides that the exercise by the lessor of the relocation notice procedures does not constitute a derogation from the grant of the lease.

The precise term

172 During the final hearing Carpet Fashion submitted that the relevant term for present purposes was "that the lessor will not during the term of the lease and option, if exercised, alter the type of tenant mix or the type of products sold in the Centre”: [“the specific implied term formulation”]. Overview Submissions [24]

173 On it becoming apparent that the Summons, albeit including a pleading that "there was a term implied that Forma would not derogate from the grant of the lease" ["the general implied term formulation"] [paragraph 19], had not pleaded the specific implied term formulation, Carpet Fashion was granted leave to amend the summons accordingly.

Forma's submissions

174 Here again, in my view Forma’s submissions are generally of substance and they are, in a number of instances, simply adopted in findings which follow.

The specific implied term formulation

175 Forma submitted in relation to the specific implied term formulation, that such a term would not be implied because:

(1) it is not so obvious that it goes without saying;

(2) it is not clearly expressed; and

176 In my view it is sufficient for present purposes to uphold the third of these submissions. A careful examination of the lease makes good the proposition that the term for which Carpet Fashion contended would not be implied because it is contradicted by express terms of the lease.

Gissing v Gissing

177 The lease expressly provides for the lessor to determine the tenant mix of the Centre as it sees fit. Clause 8.2 of the lease provides:

“The right to conduct a business of the kind referred to in Item 9 [ namely, the retail sale of carpets and floor coverings ] is not exclusive to the Lessee and the Lessor may permit other persons to conduct in or from the Centre such businesses as it thinks fit notwithstanding that any such business is similar in whole or in part to the business permitted to be conducted in the Premises. Provided that the Lessor shall not in any circumstances permit more than one [other] specialist floor covering business (excluding ceramic floor tiles) within the Centre at any time.”

178 I accept that Carpet Fashion has thereby agreed that “the Lessor may permit other persons to conduct in or from the Centre such businesses as it thinks fit”, subject to the limited proviso in the second sentence of clause 8.2. That agreement, I accept, contradicts the implied term contended for.

179 Clause 8.3.1 of the lease provides in part:

…

180 In other words, and as Forma has submitted, the plaintiff has agreed that it did not rely on (among other things) the “nature” and “quality” of other occupiers of the Centre when it took its Lease. Whilst that term would have had no weight in relation to the Trade Practices Act misleading and deceptive conduct claim [the inducement to enter into a contract by misleading and deceptive conduct will outflank/render inoperative the exclusion or disclaimer provided for in the contract], the term clearly has significant weight coming into its own once the lease is shown to have had binding legal effect. Hence Carpet Fashion's agreement that it did not rely on (among other things) the “nature” and “quality” of other occupiers of the Centre when it took its lease, also contradicts the implied term now contended for.

181 Clause 17 of the lease provides in part:

The Lessor reserves the following exclusive rights, exercisable at any time and from time to time:

17.1 To increase or reduce the area of the Land comprising the Centre or to sell, transfer, lease, mortgage, encumber or otherwise deal with any of the Land from time to time comprising the Centre;

17.2 …

17.3 …

17.4 To effect alterations or additions or to enlarge, vary or reduce the Centre (other than the Premises) and in so doing (but without limiting the above) to do any one or more of the following:

17.4.1 construct new buildings or improvements on the Land;

17.4.2 renovate, refurbish, reconstruct, modify or extend the existing buildings or improvements;

17.4.3 change the location or layout of the Common Areas or the nature or location of the facilities;

17.4.4 …

17.4.5 …

and in so doing may temporarily during the course of works interrupt the water, gas, electrical, air conditioning or other services and access to the Premises. In exercising any such rights the Lessor will reasonably endeavour to cause as little inconvenience to the Lessee as is possible in the circumstances and will not unreasonably interfere with the conduct of the Lessee’s business and the estate or interest of the Lessee under this Lease will be subject to all such reservations;

17.5 The Lessor reserves the right at any time and from time to time to name or create a logo or change the name or logo of the Centre and the Lessee will not make any claim for compensation in respect thereof;

17.6 …

17.7 …

17.8 …

17.9 …

17.10 …

17.11 The Lessee will not make any demand or claim for compensation or institute any proceedings in respect of the exercise by the Lessor of any one or more of the Lessor’s rights under Clause 17.

17.12 … .”

[emphasis added]

182 In express terms, clause 17.4 permits very substantial alterations of and additions to the Centre by the lessor and clause 17.5 expressly permits the lessor to change the name or logo of the Centre at any time. Those provisions are, I accept, only consistent with an agreement between the parties that the lessor would have the right, exercisable at any time, to ‘rebadge’ the Centre – that is, change its name, change its appearance and (when read with clause 8.2 and 8.3.1 set out above) change its tenant mix and the ‘character’ of the Centre at its discretion.

183 Clause 27 of the lease describes the “Relocation Notice” procedures and provides in part:

27.1 “The Lessor is entitled at any time during the Term to relocate the Lessee to alternative premises (“New Premises”) within the Centre where:

27.1.1 the Premises are required by the Lessor for the extension, renovation, refurbishment or redevelopment of the Centre; and

27.1.2 the Lessor presents current plans for the refurbishment, redevelopment or extension of the Centre which directly or indirectly affect the Premises;

27.1.3 the New Premises are, in the Lessor’s opinion, reasonably suitable for the Lessee to conduct its business according to the Permitted Use.

27.2 …

27.3 …

27.4 …

27.5 …

27.6 …

27.7 …

27.8 …

27.9 …

27.10 …

27.11 The Lessee agrees that under no circumstances is the Lessor under any liability for any loss or damage suffered by the Lessee at any time (including, without limit, loss of profits or economic loss) as a result of or directly or indirectly arising in any way out of the relocation of the Premises or the location, profitability, suitability or any other matter in respect of the New Premises and the Lessee releases the Lessor from all liability in respect of such loss or damage.

27.12 The Lessee agrees that the exercise by the Lessor of its rights to relocate the Lessee to the New Premises does not constitute a derogation from the grant of this Lease or a breach of the covenant for quiet enjoyment contained in this Lease.”

184 Clause 27.1.1 expressly provides that the lessor may extend, renovate, refurbish or redevelop the Centre, including the plaintiff’s premises. The effect of the clause (when read with the lease provisions referred to above) is clear – as Forma has submitted, it entirely contradicts the implied term alleged by the plaintiff.

185 Clause 27.12 as earlier mentioned, expressly provides that the exercise by the lessor of the relocation notice procedures does not constitute a derogation from the grant of the lease.

186 The plaintiff has not sought to litigate the proposition that the conditions in clauses 27.1.1, 27.1.2 and 27.1.3 were not satisfied.

The general implied term formulation

187 Approaching the matter in terms of the general implied term formulation that the lessor would not derogate from the grant of the lease [cf Harrington & Anor v Harrington Services Pty Ltd supra], the court’s finding is that for the same reasons, the conduct of Forma is not shown to have constituted a breach of any such term.

188 Further Forma’s decision to redevelop the Centre did not render Carpet Fashion’s premises unfit for their use as a carpet and floor coverings shop because:

(a) The decision to redevelop did not itself have any physical or proved financial effect upon the operation of Carpet Fashion’s business;

(b) The proposed relocation of Carpet Fashion’s premises within the redeveloped Centre would have provided them with equivalent floor space in the same building and on the same level from which they had always traded. There was nothing suggested or required by Forma that would have prevented Carpet Fashion operating precisely the same shop, selling precisely the same goods in precisely the same way, in the redeveloped Centre;

(c) The proposed tenant mix of the redeveloped Centre was quite consistent with (and an appropriate context for) a retail outlet selling carpets, rugs and other floor coverings. It was, in any event, certainly not a trading context that would have rendered Carpet Fashion’s premises ‘unfit’ for the purpose of the retail sale of carpets and floor coverings; cf Mr Leyshon’s opinions about the very advantageous retailing opportunities for the plaintiff at the redeveloped Centre
(d) There was no physical interference with Carpet Fashion’s business.

Remaining Matters

189 There remain two matters for examination.

190 The first concerns the submission by Forma that the alleged derogation from grant in the manner in which Carpet Fashion elected to litigate the proceedings, is no more than the mere declaration of an intention to develop the Centre. The submission is that this is no more than a form of anticipatory derogation from grant and that it was necessary, at the least, for Carpet Fashion to prove in some tangible way, that the proposed relocation would constitute a substantial or material interference with the lessee’s use and for that reason, is to be regarded as rendering the premises unfit for their particular use. Whilst there is some substance in the submission it does not seem to me, in the light of the reasons already given, the submission need be further examined.

191 The second matter concerns the submission by Carpet Fashion that notwithstanding the terms of the lease it is appropriate to infer the existence of an overarching implied non-derogation from grant term. The proposition for which Carpet Fashion contended was that the whole of the facts, matters and circumstances anterior to the entry into of the lease have to be taken into account and that the representations said to have been made by Forma in the negotiations, require the implication of such an overarching term to which the terms of the lease are necessarily subordinated. Such a proposition in my view only needs to be stated to be rejected out of hand. Reasons for this conclusion have already been given.

192 During the course of taking final submissions from Forma and although this matter had never been pleaded or referred to during the final hearing, the Court raised a question concerning the definition of the word Centre in the lease. That definition was:

home renovation, building products exhibition and bulky goods retail centre

193 The Court sought to examine with counsel whether or not this definition in some fashion qualified or limited provisions such as:

· Clause 8.2 where the lessor was expressly granted the right to permit persons other than the lessee to conduct in or from the Centre, such businesses as the lessor might think fit;

· Clause 17.4 or 17.5;

· Clause 27.1 and following.

194 Upon reflection it seems to me that none of these clauses can be read down by reference to the definition of Centre. The entitlement of the lessor to change the name of the Centre, to construct new buildings, to modify or extend existing buildings or improvements and to make the changes to the Centre treated with in clause 17, as well as the reservation to the lessor of the right to permit others to conduct in or from the Centre, such businesses as the lessor might think fit, all make plain that the lessor was not, upon the proper construction of the lease, restricted to ensuring that the Centre never move outside of being a home renovation, building products exhibition and bulky goods retail centre. Further the description was no more than that - a description given at a static point in time, which may be changed, depending as the re-location provisions might be enlivened. The change of name entitlement of the lessor is of particular weight in confirming this construction.

195 In any event the matter was not litigated in terms of any such proposition.

Ultimate finding

196 For the reasons given above Carpet Fashion has not established that having regard to all the circumstances, any reasonably anticipated interference with its use by reason of:

· the relocation notice or

· the circumstances in which the redevelopment and proposals were communicated to Carpet Fashion

The Retail Leases Act 1994

197 Mention has been made of the fact that the parties elected to litigate the proceedings without relying upon this Act in any way. For this reason the effect, if any, of section 7, upon a term providing for non - derogation from grant, whether express or implied, receives no consideration in this judgment. This is a matter which doubtless may fall for consideration on some other occasion in other proceedings.

198 In any event the reasons for decision given above are unlikely to have been different even in the face of any argument based upon the Act.

199 Further my own brief inspection of the Act does not suggest that Forma likely did otherwise than comply with the obligations set out in section 34A. In particular it appears that:

· The Relocation Notice enclosed details of the proposed refurbishment, redevelopment and extension of the Centre (Relocation Notice, clause 1(a))

· The Relocation Notice, dated 1 September 2000 gave Carpet Fashion until 4 December 2000 to vacate (being more than 3 months) (Relocation Notice, clause 1(b))

· The Relocation Notice contained an offer of lease for Shop T58 (Relocation Notice, clause 1(c)) on the same terms and conditions as the existing lease for the unexpired term of the existing lease

· The Relocation Notice notified Carpet Fashions of their right to terminate the lease within 1 month of receipt of the Relocation Notice. (Relocation Notice, clause 2)

· The Relocation Notice notified Carpet Fashions of the fact that if they do not terminate within a month, it would be taken to have accepted the relocation offer. (Relocation Notice, clause 2)

· The Relocation Notice acknowledged Forma’s obligation to pay Carpet Fashions reasonable relocation costs. (Relocation Notice, clause 1(d))

200 Whether or not I be correct in relation to these matters, as I have said it appears that for forensic purposes the parties have elected to litigate without reliance in any way upon the Act. With some hesitation, but conscious of the dictate of the Supreme Court’s Overriding Purpose Rule, the matter has been determined accordingly.

Short Minutes/Costs

201 The parties are to bring in short minutes of order. Costs may be argued.

I certify that paragraphs 1 - 201
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 5 June 2003

Susan Piggott

Associate

5 June 2003

Last Modified: 06/12/2003

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Citations

Carpet Fashion Pty Ltd v Forma Holdings Pty Ltd [2003] NSWSC 460

Most Recent Citation

Shilkin v Taylor [2011] WASCA 255

Cases Citing This Decision

4

Skiwing Pty Ltd v Trust Company of Australia (Trading As Stockland Property Management) [2006] NSWCA 276

Trust Company of Australia Ltd (Stockland Property Management Ltd) v Skiwing Pty Ltd trading as Café Tiffany's [2005] NSWADTAP 9

Skiwing Pty Ltd v Trust Co of Australia Ltd (No 3) [2004] NSWADT 94

Cases Cited

36

Statutory Material Cited

3

Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127

Kazas and Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd [2002] NSWSC 840

CITATION:	Carpet Fashion Pty Limited v Forma Holdings Pty Limited [2003] NSWSC 460
HEARING DATE(S):	26/05/03, 27/05/03, 28/05/03, 29/05/03
JUDGMENT DATE:	5 June 2003
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Proceedings to be dismissed.
CATCHWORDS:	Leases - lease of shop in shopping centre - representations by lessor as to use of shopping centre - change of use of shopping centre - effect of provisions of lease purporting to exclude liability for any reliance on representations - Trade Practices - Misleading or deceptive conduct - pre-contractual representations as to future matter - reasonable ground for making representations - genuine change of mind - reliance - Trade Practices Act 1974 (Cth) ss 51A, 52 - Non-derogation from grant - implied term - principles upon which term is implied
LEGISLATION CITED:	Fair Trading Act 1986 (NZ), Retail Leases Act 1994 (NSW) Trade Practices Act 1974 (Cth)
CASES CITED:	Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 Australian Development Corporation Pty Ltd v White Construction (ACT) Pty Ltd, Supreme Court of New South Wales, 8 February 1999, unreported Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043 Birmingham , Dudley and District Banking Co v Ross (1888) 38 Ch D 295 Bonnington Castings Ltd v Wardlaw [1956] AC 613 Bowler v Hilda Pty Ltd (1998) 80 FCR 191 Brookteck Pty Limited v Lumocol Australia Pty Limited, Federal Court of NSW, 23 October 1996, unreported Brown v Jam Factory Pty Ltd (1981) ATPR 40-213 Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670 Cox & Coxon Ltd v Leipst [1999] 2 NZLR 15 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 GIO Australia Holdings Limited v Marks (1997) ATPR 41,544 Gissing v Gissing [1971] AC 886 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9 Harrington & Anor v Harrington Services Pty Ltd [2002] 55 NSWLR 618 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) ATPR 40-850 Henville v Walker (2001) 75 ALJR 1410 James v ANZ Banking Group Ltd (1986) 64 ALR 347 Karawi Constructions Pty Ltd v Bonefind Pty Ltd (1993) ATPR 41-265 Kazas & Associates Pty Ltd v Multiplex (Mountain Street) Pty Ltd [2002] NSWSC 840 Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 41-601 Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 107 ALR 291 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Myers v Catterson (1889) 43 Ch D 470 Nelson v Walker (1910) 10 CLR 560 Non-Derogation from Grant" (1964) 80 LQR 244 Non-Derogation from Grant and Tenant Mix" (1998) 6 APLJ 197 Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450 Oraka Pty Ltd v Leda Holdings Pty Ltd (1997) ATPR 41-558 Peech v Best [1931] 1 KB 1 Petera Pty Ltd v EAJ Pty Ltd (1985) 7 FCR 375 Re Creditor Tribunal (1977) 137 CLR 545 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Sydney Harbour Casino Properties Pty Ltd v Coluzzi [2002] NSWCA 74 Toteff v Antonas (1952) 87 CLR 647 Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514 Wilcox v Richardson (1997) 43 NSWLR 4 Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679
PARTIES :	Carpet Fashion Pty Limited (Plaintiff) Forma Holdings Pty Limited (Defendant)
FILE NUMBER(S):	SC 50030/02
COUNSEL:	Mr DL Warren (Plaintiff) Mr RP Lancaster (Defendant)
SOLICITORS:	Robilliard Plowman Herat (Plaintiff) Minter Ellison (Defendant)