Cavuoto v Commonwealth Bank of Australia - [2010] SADC 44

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CAVUOTO v COMMONWEALTH BANK OF AUSTRALIA
[2010] SADC 44
Judgment of His Honour Judge Muecke
31 March 2010
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - SILENCE AND CONCEALMENT
Purchase of lease of snack bar business in Rundle Mall building owned by the Commonwealth Bank, which bank approved the purchase as lessor - initial plaintiff sought and obtained some finance from the Commonwealth Bank to effect the purchase - the lease expired about two and a half years after purchase - lease not renewed as the bank decided to sell the building - claim that the failure of the bank to inform the plaintiff as leasee of the business that the lease may not be extended was misleading and deceptive.
Held: Claim dismissed - counter-claim allowed in part.
Trade Practices Act 1974 s 52; Fair Trading Act 1987 s 56, referred to.
Henjo Investments Pty Ltd & Ors v Collins Marrickville Pty Ltd (1988) 79 ALR 83, 93, 95; Demagogue Pty Ltd v Ramensky & Anor (1992) 110 ALR 608, 610; Arbest Pty Ltd & Ors v State Bank of New South Wales Ltd (1996) ATPR 41-481, 41-972, 41-979, considered.

CAVUOTO v COMMONWEALTH BANK OF AUSTRALIA
[2010] SADC 44
Introduction and pleadings

This is an action whereby the plaintiff Maria Cavuoto claims damages against the Commonwealth Bank of Australia. The plaintiff claims damages as the trustee of the Cavuoto and Melisi Trust established on 23 May 2003 (“the Trust”).
The plaintiff’s action against the Bank concerns the purchase of a business by Michaelangelo (called Michael) Cavuoto in March 2003. The business was Pippo’s Espresso Coffee and Snack Bar (“Pippo’s”). The Business Sale Agreement was between the vendor “Taddeo Pty Ltd ACN 069 753 073 as Trustee for The Taddeo Family Trust” and the purchaser “Michael Cavuoto and or Nominee(s)”. The vendor’s agent was “Versace Services Pty Ltd” and the description of the business was “Leasehold Snack Bar”. The business premises were at 135 Rundle Mall, Adelaide. The purchase price was $122,500 which sum was expressed to be for goodwill and plant and equipment. The date of possession was expressed to be on 30 June 2003 at the close of the day’s trading and on completion of the stocktake. The settlement date was stated to be on 1 July 2003. The Business Sale Agreement appears to be signed by Michael Cavuoto on 6 March 2003, and his signature is witnessed by a Pasquale Versace of Versace Business Services Pty Ltd. The Agreement appears to be signed on 14 March 2003 by Angelo Taddeo as Director for Taddeo Pty Ltd as Trustee for the Taddeo Family Trust. Mr Versace appears also to have witnessed Mr Taddeo’s signature.
The Business Sale Agreement contained a page headed “SPECIAL CONDITION 1”. That concerned tenure of the business premises. The first of two items on that page relates to “Transfer of Existing Lease”. That condition provided that the agreement was subject to and conditional upon the vendor obtaining or causing to be obtained the consent in writing of the landlord (namely Commonwealth Bank of Australia of 48 Martin Place, Sydney, NSW) on or before the date of possession. Para 2 sets out the existing term of that leasehold interest. The term of the leasehold interest was five years commencing on 26 June 2000. The then current rental was also set out.
The other item on that page is headed “New Lease”. I shall return later to that condition. It is important.
By Statement of Claim filed in this court on 29 January 2007 Michael Cavuoto, as Trustee of the Trust commenced proceedings naming Taddeo Pty Ltd as the first defendant, Mr Taddeo as the second defendant and the Bank as the third defendant. It was not disputed at the trial that Maria Cavuoto was substituted both as the Trustee of the Trust and as plaintiff in the action after Michael Cavuoto died on 19 May 2007. Accordingly, Maria Cavuoto was the plaintiff when the trial commenced before me.
On 15 December 2008 a “Notice of Discontinuance” was filed in this court on the plaintiff’s behalf. By that notice the plaintiff wholly discontinued her action against Taddeo Pty Ltd and Mr Taddeo. On the same day, 15 December 2008, a Certificate of Readiness for Trial was filed on behalf of the plaintiff and the Bank. The trial commenced before me on 6 May 2009.
The plaintiff’s case at trial consisted of an opening by her counsel, Mr Ross‑Smith. During that opening a Book of Documents was tendered and became Exhibit P1. That tender followed the extraction by Mr Ross-Smith of certain documents from that folder. One document extracted was an affidavit sworn by Michael Cavuoto before his death. I was told that Michael Cavuoto swore that affidavit before proceedings were instituted against the three defendants, including the Bank. It was sworn on 30 August 2005 in support of an application for pre-action discovery. Mr Howard, of counsel for the Bank, objected to my receiving that affidavit. Before I ruled on that objection I was informed that the application to tender it was not made in respect to certain paragraphs of it. They were paras 10 to 12 inclusive; para 18; and paras 25 to 43 inclusive. Further, no application was made to tender the exhibits referred to in the affidavit. Following submissions I admitted the affidavit as Exhibit P2. The paragraphs admitted were paras 1-9 inclusive; paras 13 to 17 inclusive; paras 19 to 24 inclusive; and para 44. The exhibits to the affidavit were not admitted. Another document that was in the folder that became Exhibit P1 was a single page document originally found at p13 of the folder that became Exhibit P1. It is headed “POSITION PAPER”. Mr Howard objected to my receiving that document. After hearing submissions I admitted that document as Exhibit P4.
Upon the admission of that document as an exhibit Mr Ross-Smith closed the plaintiff’s case. The plaintiff’s case therefore relied upon any admissions in the pleadings and upon the documents tendered as Exhibits P1, P2, and P4. (Exhibit P3 were some subpoenaed documents which were marked for identification. They did not become an exhibit.)
Before I consider the documents and the defendant’s case I refer to some aspects of the pleadings.
On 10 October 2007 an Amended Statement of Claim was filed. Most amendments replaced the existing words “the Plaintiff” with the name “Michaelangelo Cavuoto”. The only other change was the addition of certain particulars to para 22.2 of the Statement of Claim.
During his opening Mr Ross-Smith informed me that certain paragraphs in the Amended Statement of Claim were no longer relevant to the plaintiff’s claim against the Bank. He told me that I can ignore those paragraphs. The paragraphs that I was told I could ignore were paras 16-21 inclusive, and paras 23-26 inclusive. Mr Ross-Smith also informed me during his opening that the plaintiff was not relying at trial on the pleading in paras 39 and 47 of the Amended Statement of Claim. He said that those claims, based upon a pleading that the Bank owed the plaintiff a duty to advise or, alternatively, to caution, were not to be relied on. Mr Ross-Smith also informed me that para 50 of the Statement of Claim was not relevant to the plaintiff’s action against the Bank. Finally, Mr Ross-Smith advised me that the plaintiff at trial made no claim under para 2 in the plaintiff’s prayer for relief. He said that there was no claim for “Other damages”, and the plaintiff sought only what was expressed to be “the Plaintiff’s Losses” in para 49 of the Amended Statement of Claim.
The allegations in the Amended Statement of Claim that up until 23 June 2003, being the date of the Sale of the Business subsequently described in the pleading, Mr Taddeo was the owner of the business trading at 135 Rundle Mall Adelaide South Australia, which business traded as Pippo’s are admitted by the Bank. The Bank also admits that Taddeo Pty Ltd was the lessee of the premises at Rundle Mall pursuant to a Memorandum of Lease Registered No 79592482 dated 28 June 1995 which lease was extended by a Memorandum of Extension of Lease dated 1 May 2001 (“the Extension”). The Bank refers in its Defence and Counterclaim filed 10 May 2007 to certain terms of the Extension.
In the plaintiff’s Amended Statement of Claim certain facts are alleged under a heading “Negotiations for the Purchase of the Business – Conduct of the First Defendant” and under a heading “Business Sale Agreement – the Contract”. These allegations (in paras 5-15 inclusive) were not included in the paragraphs of the Amended Statement of Claim Mr Ross-Smith informed me were not relevant to the plaintiff’s claim against the Bank. The Bank’s Defence did not plead to these allegations, presumably because they alleged no facts against the Bank.
I set out these paragraphs because I consider them important:
Negotiations for the Purchase of the Business – Conduct of the First Defendant
5     In or about late February or early March 2003 Michaelangelo Cavuoto became aware that the Business was for sale by the Vendor.
6     In or about late February or early March 2003 Michaelangelo Cavuoto in his capacity as trustee of the Trust at the time approached (Mr) Taddeo and asked why the Business was being sold to which (Mr) Taddeo stated the following words or words to the following effect;
“We are selling the business because my family are getting tired of the business and my wife is ill”.
7     In or about late February or early March 2005, Michaelangelo Cavuoto communicated with Pat Versace (“Versace”) of Versace Business Services (“VBS”) about the sale of the Business (“the Negotiations”). Versace of VBS was the agent of and represented the Vendor concerning the sale of the Business.
8     Michaelangelo Cavuoto established from Versace during the Negotiations that the Lease with the Vendor had approximately two and a half years remaining before it expired.
9     During the Negotiations Michaelangelo Cavuoto enquired whether the Bank would provide a further five (5) year lease for the Premises. Versace stated the following words or words to the following effect,
“I would have to ask, but I could not see any problems with that.”
10     During the Negotiations Versace also stated the following words or words to the following effect;
“There should be no problems in getting an extension of the Lease for a further 5 years.”
Following the Negotiations, it was agreed between Michaelangelo Cavuoto and Versace as the representative of the (Taddeo Pty Ltd) that Michaelangelo Cavuoto would purchase the Business for $122,500 plus stock, with settlement to be at the end of June 2003.
11     Consequent upon the Negotiations Michaelangelo Cavuoto and (Taddeo Pty Ltd) agreed that Michaelangelo Cavuoto would purchase the Business for $122,500 plus stock, with settlement on that purchase at the end of June 2003. That agreement was subsequently recorded in a contract for the Sale and Purchase of the Business (“the Sale Contract”).
Business Sale Agreement – the Contract
12     Before the Sale Contract was signed Versace said to Michaelangelo Cavuoto the following words or words to the following effect;
“You should not have any troubles in getting a 5-year term with the Commonwealth Bank, but at this stage the Commonwealth are not prepared to negotiate that as it is some two and a half years away”.
13     Neither Versace as agent for (Taddeo Pty Ltd), nor (Taddeo Pty Ltd) informed Michaelangelo Cavuoto at any time before Michaelangelo Cavuoto entered into the Sale Contract that there was a prospect that the Bank would not provide to the Plaintiff a lease for a further 5 years (from June 2005 to June 2010).
14     The Sale Contract was executed by Michaelangelo Cavuoto on 6 March 2003 based upon the representations made by (Taddeo Pty Ltd) through Versace as described in paragraphs 8, 9, 10, and 12 of this pleading (“the Representations”) and believing them to be true and relying upon them.
15     The settlement for the sale of the Business occurred on 23 June 2003 (“the Settlement”).
I now set out some allegations from the plaintiff’s Amended Statement of Claim that were admitted by the Bank in its Defence. The pleadings that fall into that category are as follows:
Plaintiffs Dealing with the Third Defendant – Conduct of the Third Defendant
27     In or about late February or early March 2003, Michaelangelo Cavuoto contacted Scott Wooley of the Bank (Scott Wooley being Michaelangelo Cavuoto’s personal Banker and also his business Banker) for a business loan for the purchase of the Business (“the Loan Application”). The Bank by Scott Wooley indicated that they would approve a loan advance of $50,000 (“the Advance”) to Michaelangelo Cavuoto in his capacity as trustee of the Trust (at the time) for the purpose of the purchase of the Business (“the Business Loan Approval”).
28     In accordance with the Business Loan Approval the Bank Gave Michaelangelo Cavuoto the Advance (“the Business Loan”).
29     The Business Loan was for a term of 10 years and secured by registered mortgage (“the Mortgage”) over the Plaintiff’s residential property situated at 2 Flinders Parade, Newton, South Australia.
Furthermore it was alleged in para 30 of the Amended Statement of Claim that, pursuant to “the Sale Contract”, Michael Cavuoto paid the purchase price for the business being in the amount of $122,500 plus stock; and he executed an assignment of the Lease of the Premises being the Lease with the Vendor. As to those allegations the Bank admitted that Michael Cavuoto accepted an Assignment of the Lease of the Premises as extended by the Extension pleaded by the Bank in para 2 of its Defence. That was an extension dated 1 May 2001, which included terms to which I shall refer later.
In the Amended Statement of Claim the plaintiff further alleged as follows:
Attempts to Renew the Lease
31     On 6 September 2004 (Michaelangelo Cavuoto) caused a letter to be forwarded to Colliers International as agents for the Bank requesting an extension of the Lease for a further 5 years and in anticipation of the Bank extending the Lease.
32     On 13 October 2004 the Defendant (sic) was advised by Colliers International as follows:
“The Bank has now confirmed that it is still considering the potential sale of its holdings in Rundle Mall and, as such, is unable to commit to a lease extension beyond your June 2005 expiry.”
33     On 6 April 2005, Colliers International as agents for the Bank advised (Michaelangelo Cavuoto) that the Bank intended to sell the Premises.
34     The Premises were sold in June 2005 and the sale thereof settled in September 2005 or thereabouts.
35     The new owner of the Premises refused to grant (Michaelangelo Cavuoto) an extended lease for the Premises.
As to those allegations the Bank admitted that the plaintiff, on 6 September 2004, sought an extension of the Lease from Colliers International as agent of the Bank but otherwise denied the allegations in para 31. The Bank admitted the plaintiff’s allegations in paras 32 to 34 inclusive. The Bank did not plead to the plaintiff’s allegation in para 35.
Finally, on the pleadings, I refer to the Bank’s Counterclaim filed with its Defence on 10 May 2007. At that time Michael Cavuoto was the plaintiff in the action against the then three defendants. Michael Cavuoto died about a week later. By its Counterclaim the Bank claimed against Michael Cavuoto and “the Second Defendant by Counterclaim, Maria Antoinetta Cavuoto”. The Bank set out the following facts and basis of the counterclaim:
12     On 16 June 2003 the Bank provided financial accommodation to the Plaintiff in the form of a Better Business Loan in the sum of $50,000 (“the Advance”), the terms and conditions of which are more particularly set out in an undated Terms Schedule and the Bank’s Usual Terms and Conditions for Business Banking Facilities. The advance was secured by a Mortgage Registered No 9649139 dated 3 June 2003 (“the Mortgage”) over the Plaintiff’s residential property at 2 Flinders Parade, Newton, South Australia being the whole of the land comprised in Certificate of Title Register Book Volume 5357 Folio 368.
13     The Plaintiff defaulted in the payment of moneys due under the terms of the Advance. On 26 February 2007 the sum of $37,455.12 was due and payable by the Plaintiff to the Bank. Letters of demand were signed on behalf of the Bank on 26 February 2007 stipulating that non payment of the amount demanded would result in further recovery action by the Bank.
14     The said letters of demand were served on the Plaintiff and on the Second Defendant by Counterclaim respectively at 2 Flinders Parade, Newton, South Australia on 26 February 2007 by ordinary pre-paid letter post.
15 On 5 March 2007 the sum of $37,455.12 remained due and payable by the Plaintiff to the Bank. Notices Alleging Breach pursuant to section 55a of the Law of Property Act 1936 were signed on behalf of the Bank on that day alleging that the Plaintiff and the Second Defendant by Counterclaim were in breach of the first covenant of the Mortgage and demanding payment of the moneys due at that time within one month.
16     The said Notices Alleging Breach were served on the Plaintiff and on the Second Defendant by Counterclaim respectively on 7 March 2007 by registered post at 2 Flinders Parade, Newton, South Australia.
17     The Plaintiff and the Second Defendant by Counterclaim did not comply with the terms contained in the said Notice Alleging Breach. Notices of Sale were signed on behalf of the Bank on 10 April 2007 pursuant to the terms of the Mortgage.
18     The said Notices of Sale were served upon the Plaintiff and on the Second Defendant by Counterclaim respectively on 10 April 2007 by ordinary pre-paid post at 2 Flinders Parade, Newton, South Australia.
19     The Bank has served all of the Notices required by the Mortgage and the relevant legislation which Notices have not been complied with by the Plaintiff and the Second Defendant by Counterclaim.
20     The amount now outstanding on the Advance by the Plaintiff as Borrower and the Second Defendant by Counterclaim under the first covenant of the Mortgage is the sum of $38,544.47 together with interest accruing at the rate of $15.78 per day.
21     The Plaintiff is further indebted to the Bank in the sum of $31,240 being unpaid rent pursuant to the Lease, the Extension and the Assignment as pleaded in paragraph 9.1 of the Bank’s Defence.
In a Defence to Counterclaim “the Defendants by Counterclaim (“the Plaintiffs”)” admitted the above paras 12, 14, 16, 17, 18 and 19. In the same pleading the defendants by counterclaim pleaded “the following issues, special defences and material facts”. The pleading then sets out:
3     The Plaintiffs rely upon the matters pleaded in paragraphs 1 to 50 inclusive of its Amended Statement of Claim dated 10 October 2007;
4     The Plaintiffs are entitled to set off against the claim made by the Third Defendant the loss and damages suffered by the Plaintiffs as set out in Part 2 of the Amended Statement of Claim;
The evidence
As indicated earlier the plaintiff relied on documentary evidence, including part of an affidavit of Michael Cavuoto sworn on 30 August 2005. In that affidavit the deponent swore that as of 30 August 2005 he was the lessee of the premises at 135 Rundle Mall, Adelaide and was the owner of a snack bar business trading as Pippo’s. He stated that he owned the business in his capacity as trustee of the Trust. His daughter Joanne Melisi and himself were the beneficiaries of the Trust. He then swore to the following:
4     The Commonwealth Bank of Australia (“CBA”) are the registered proprietors of the premises and are our landlords.
5     I purchased the business from Taddeo Pty Ltd ACN 069 753 073 (“the Vendor”) on 23 June 2003.
6     The purchase price of the Business was $122,500 plus stock (“the Purchase Price”). I entered into the business sale agreement with the Vendor on 14 March 2003 (“the Contract”).
7     I entered into the Contract in my capacity as nominee for the Trust.
8     At the time of the execution of the contract, I was aware that the lease between the Vendor and the CBA (“the Lease”) was due to expire on 25 June 2005.
9     I entered into the Contract for the purchase of the Business as a result of representations and conduct by:
9.1the Vendor, including the Vendor’s agent; and
9.2the CBA, its officers and employees.

Michael Cavuoto swore in paras 10 to 12 inclusive as to what the representations and conduct by the vendors and their agents were. Those paragraphs were not tendered before me. Michael Cavuoto then swore as follows:
Representations and Conduct by CBA
13     The CBA is the landlord of the Premises.
14     The CBA are also my financier and provided a loan (“the Business Loan”) to me towards the acquisition of the Business. The CBA are also my personal Bankers beyond that Business Loan.
15     I made an application (“the Loan Application”) to the CBA for the Business Loan in my capacity as trustee of the Trust. Relating to that application I dealt with Scott Wooley (“Wooley”) from the CBA who was my business Banker at the time. Wooley was my business Banker for my existing business with my daughter which was known as the Norwood Snack Bar.
16     I do not have a copy of the application form for the Business Loan but I recall completing the Business Loan application form and returning it to Wooley of the CBA. I borrowed $50,000 from the CBA in my capacity as Trustee of the Trust for the single purpose of purchasing the Business.
17     The Business Loan from the CBA provided to me for the purpose of purchasing the Business for a term of 10 years and is secured by registered mortgage over my residential Property situated at 2 Flinders Parade Newton South Australia. My Daughter was also required to sign a personal guarantee and I also believe that my wife Maria Antoniette Cavuoto was required to sign a personal guarantee.
…
19     At no time in the CBA’s dealings with me did the CBA advise me that they did not propose to extend the Lease or that there was a prospect that the CBA would not renew the Lease. Colliers as agents for the CBA also made similar representations that the Vendors made in relation to the timing for the request for an extension of the lease namely that a request for an extension of the lease for a further five (5) years should be made at a time that was closer to the expiration of the existing term of the lease.
The Sale and Redevelopment of the Site
20     I now know that the building (“the Building”) owned by the CBA which comprises the Premises has been sold and that the purchasers of the Building plan to redevelop the site of the Building.
21     I have received communication from the purchaser of the Building about the redevelopment of my tenure at the Premises a true copy of which communication is now produced and shown to me and marked “MC1”.
22     I am now a monthly tenant of the Premises and do not know how much longer I will be able to remain in the Premises and run the Business but I understand that the purchasers will require me to vacate the Premises before the end of this year.
23     Now that I am a monthly tenant the value of the Business is lost.
The Decision to Buy
24     Had I known that the Lease would not be renewed upon expiry on 25 June 2005, I would not have purchased the Business and I would not have taken out the loan from the CBA. I would have use (sic) the funds from the Norwood Snack Bar to purchase a business that had good tenure and would provide a return on investment.
(Para 18 was not part of the tendered affidavit. Neither were paras 25 to 43 inclusive, nor the exhibits attached to the affidavit.)
The vendor’s agent for the sale of Pippo’s was Mr Pasquale Versace. He was called by Mr Howard to give evidence at the trial. He was not cross‑examined by Mr Ross‑Smith.
Mr Versace told me that in the latter part of 2002 he received some instructions from Mr and Mrs Taddeo on behalf of the company Taddeo Pty Ltd in relation to selling the Pippo’s business. He met with the Taddeo’s and discussed the business at length. They provided him with a Form 2, which was required under the Land and Business (Sale and Conveyancing) Act 1994. He told me that several people who were interested in the business looked at it. They did not “proceed because of the uncertainty of the lease”.
Mr Versace told me that he received advice that Michael Cavuoto was interested in the business. He contacted him and they arranged to meet at Michael Cavuoto’s then business on The Parade, Norwood. He said that that meeting took place on 3 March 2003. During their discussions regarding the business Mr Versace told Michael Cavuoto, as he had told all others who enquired about the business, that there was a guaranteed two and a half years left on the lease and there was a first right of renewal for another five years but that was not a guarantee. He said he told Michael Cavuoto that he knew that the Commonwealth Bank of Australia, who was the lessor of the premises, did not want to release the premises with the incumbent tenant at that time. He said that he gave Michael Cavuoto all the paperwork. Michael Cavuoto took it away to analyse and get back to him.
Mr Versace told me that Michael Cavuoto contacted him again and they arranged to meet again at Michael Cavuoto’s business premises on 6 March 2003 to sign an offer. Mr Versace said that pages 173-205 of Exhibit P1 is the contract to purchase the business of Pippo’s. Mr Versace said that on that day at that meeting Michael Cavuoto signed on page 187 of Exhibit P1 on behalf of the purchaser. Mr Versace inserted the date, 6 March 2003, where Michael Cavuoto signed and he, Mr Versace, witnessed his signature.
Mr Versace told me that page 188 of Exhibit 188 is a page headed “Special Condition 1”. Mr Versace explained that the first part of that special condition under the heading “Transfer of Existing Lease” was there because the offer by Michael Cavuoto was going to be subject to an assignment of the existing lease. He said that was how they always offer a business for sale. As to the second part of the special condition page under the heading “New Lease”, Mr Versace explained that Michael Cavuoto wanted to insert a provision for an additional extension for five years after 26 June 2005. He said that the two men discussed that for a while and Mr Versace repeated to Michael Cavuoto that there was no five year extension on offer. Michael Cavuoto insisted that the contract be signed and presented to Mr Taddeo on the basis that there was an additional condition providing for a further term of five years commencing on 26 June 2005. Mr Versace then completed the bottom half of page 188 of Exhibit P1 and took the contract to the Taddeos. Mr Versace said that the Taddeos refused the offer on the ground that they repeated to him “there is no guarantee of a five year lease being achieved”. Mr Versace said that the Taddeos asked him to approach the Bank to see if they would grant an extra five year lease so that they could accept the offer by Michael Cavuoto if the Bank indicated a willingness to offer an extra five years.
Mr Versace told me that the morning after that, which he said was 7 March 2003, he telephoned a person from Colliers International who was handling the property management of the Bank’s building in Rundle Mall. He had been in touch with that person before, as to the Taddeos wishing to sell the business. He asked whether the Bank would consider granting a further five year extension of the lease. He was told that the person from Colliers would speak to the Bank and get back to him. He said that she did so on 12 March 2003. She rang him in the morning of that day and said she wanted a copy of the Deed of First Refusal, because she didn’t have one of her file. He faxed that to her at about 11 o’clock that morning. She contacted him that afternoon by telephone and told him the Bank at that point in time were not prepared to grant a five year extension, but they would look at it six months prior to the end of the lease.
Mr Versace told me that he then telephoned Michael Cavuoto that same day, 12 March 2003, and advised him what he had been just told. Mr Versace said that Michael Cavuoto told him he would need to think about it and get back to him.
Mr Versace told me that on the morning of 14 March 2003 Michael Cavuoto contacted him by telephone. Michael Cavuoto said that he wanted to proceed and that Mr Versace should meet him at his shop again that afternoon. Mr Versace went to Michael Cavuoto’s shop that afternoon when they discussed the matter again. Mr Versace said Michael Cavuoto was not happy that there was not a five year extension, but he still wanted to proceed. Michael Cavuoto commented that he still believed he was getting a very good buy. He also said he believed he could get a five year lease later on. Mr Versace said that Michael Cavuoto casually said “I reckon I’ll get a five year lease anyway”.
Mr Versace told me that “at that point there we crossed off the additional ‘New Lease’ section and he initialled the top part there”. He explained that Michael Cavuoto had already initialled the bottom of page 188 of Exhibit P1 (on 6 March 2003), but he, Michael Cavuoto, initialled above where the second part of the page was crossed out, “just by the “and’”. I infer from what Mr Versace said that Michael Cavuoto acknowledged by initial the deletion of the “New Lease” condition. Mr Versace said that he then went and presented the offer back to the Taddeos on the evening of that day, 14 March 2003. The contract was accepted and I infer that Mr Taddeo initialled the middle of page 188 of Exhibit P1 adjacent to Michael Cavuoto’s initials, as well as at the bottom of that page.
When asked by Mr Howard, at the end of his examination-in-chief: “Did you ever say to Michael Cavuoto anything along the lines of … you didn’t see any problems with him getting the five year lease from the Commonwealth Bank”, Mr Versace answered “No”.
Mr Versace struck me as a matter-of-fact person with a no-nonsense approach to his evidence and, I would infer, to his work as a selling agent of the Taddeos’ business. He took with him into the witness box what appeared to be an extensive file relating to his dealings in respect of the sale of the Taddeos’ business. He gave his evidence as to conversations he had with various people, and the dates that he had them, in a convincing way. His evidence both as to what was said, and when it was said by various people is consistent with certain of the documentary evidence that was tendered before me. I refer in particular to the dates on the Business Sale Agreement on page 187 of Exhibit P1, the fact that there was a Right of First Refusal for an extension of the lease, and with the fact of and the terms of the Extension to the original lease that I am satisfied and find was signed by Michael Cavuoto. It was also consistent with a Memorandum of Extension of Lease dated 1 May 2001 by which the original lease to the Taddeos was extended by the Bank. It was pleaded by the Bank and agreed on behalf of the plaintiff that “the Extension specifically provided that the term of the Memorandum of Lease shall be extended for five (5) years from the 26 June 2000 upon the same terms and conditions as are expressed or implied in the above Memorandum of Lease except with the variation … (that) ‘3 There will be no right of renewal for any period beyond the term hereby agreed’”.
I find that what Mr Versace told me in evidence was accurate and reliable. He was not challenged on any of his evidence. I make findings of fact consistent with his evidence on the matters to which I have referred. I am also satisfied and find as a fact that Mr Versace never said anything to Michael Cavuoto to the effect that he saw no problem in Michael Cavuoto getting a five year lease from the Bank. I find that that was not said, and that no words like it were said, and I find that Mr Versace told Michael Cavuoto on a number of occasions, and in terms that could not have been misunderstood by Michael Cavuoto, that all that was on offer was a lease that expired in about two years’ time, that an extension of that lease was not on offer, that there was no guarantee from the Bank through the Bank’s agent Colliers that there would be an extension to the lease, and that the Bank was not prepared to grant a five year extension but they would look at it six months prior to the end of the lease. I am further satisfied and find, on Mr Versace’s evidence, that Michael Cavuoto understood all of that and, although he was not happy that he could not get a guaranteed five year extension, he determined to proceed with the contract to buy the lease and the business notwithstanding the fact that he only had a guaranteed two and a bit years left on the lease. I am satisfied and find that Michael Cavuoto said to Mr Versace that he believed he was still getting a very good buy, and that he believed that he could get an extra five years later on. I am satisfied and find that Michael Cavuoto himself believed those two things.
I have earlier reproduced certain parts of the plaintiff’s Amended Statement of Claim. In that pleading it is alleged that Michael Cavuoto communicated with Mr Versace about the sale of the business. He established from Mr Versace that the lease from the vendor had approximately two and a half years remaining before it expired. He enquired of Mr Versace whether the Bank would provide a further five year lease for the premises. He alleged that Mr Versace stated the following words or words to the following effect: “I would have to ask, but I could not see any problems with that”. He alleged that during negotiations Mr Versace also stated the following words or words to the following effect: “There should be no problems in getting an extension of the Lease for a further five years”. He alleged that before he signed the contract Mr Versace said to him the following words or words to the following effect: “You should not have any troubles in getting a 5-year term with the Commonwealth Bank, but at this stage the Commonwealth are not prepared to negotiate that as it is some two and a half years away”. He alleged that he executed the sale contract on 6 March 2003 based upon those representations by Mr Versace, and believing them to be true and relying on them.
I infer that these allegations were included in the plaintiff’s Statement of Claim on the direct instructions of Michael Cavuoto. I have found that Mr Versace said none of those things to Michael Cavuoto, and it was not sought by the plaintiff to prove those matters or anything like them. I have found that Mr Versace made it clear to Michael Cavuoto that he was buying a two and a half year lease with no extension on offer from the Bank. I have found that he was told by Mr Versace that the Bank would not look at a possible extension until six months prior to the end of the lease. I have found that Michael Cavuoto knew that and resolved to enter a contract to buy the business notwithstanding.
I now consider the evidence insofar as it relates to Michael Cavuoto’s dealings with the Bank for the Bank to partly finance his purchase of the business from the Taddeos.
I have already referred to admissions by the Bank to the plaintiff’s allegations in paras 27 to 29 of the Amended Statement of Claim. In particular it was alleged by the plaintiff that “in or about late February or early March 2003, the Plaintiff contacted Scott Woolley of the Bank (Scott Woolley being the plaintiff’s personal Banker and also his business Banker) for a business loan for the purchase of the business.”
In his affidavit sworn 30 August 2005 Michael Cavuoto swore that the Bank was his financier and provided a loan to him towards the acquisition of the business. He swore that the Bank was his personal Bankers beyond the business loan. He swore that he made an application to the Bank for a business loan in his capacity as trustee of the Trust. He dealt with Scott Woolley, and stated that Mr Woolley was his business banker at the time and was his business banker for his existing business with his daughter which was known as the Norwood Snack Bar. He stated that he recalled completing the Business Loan Application form and returning it to Mr Woolley. He stated he borrowed $50,000 from the Bank. He stated that the loan was for a term of ten years and was secured by registered mortgage over his residential property. He stated that his daughter was also required to sign a personal guarantee and he believed that his wife Maria Cavuoto was required to sign a personal guarantee. He swore that at no time in the Bank’s dealings with him did the Bank advise him that they did not propose to extend the lease or that there was a prospect that the Bank would not renew the lease. He swore that Colliers, as agents for the Bank, “also made similar representations that the vendors made in relation to the timing for the request for an extension of the lease namely that a request for an extension of the lease for a further five (5) years should be made at a time that was closer to the expiration of the existing term of the lease”.
Nowhere in his affidavit does Michael Cavuoto refer to any dates on which he had any discussions with the Bank, through Mr Woolley, or when he signed any documents in respect of the borrowing of $50,000 from the Bank.
Mr Howard called Mr Woolley to give evidence at the trial.
Mr Woolley had been with the Bank for 19 years. In early 2003 he was a relationship manager for small business. That involved writing loans, credit applications for home loans and commercial loans. He worked at an office at Level 3, 100 King William Street. He had the Bank’s file with him in the witness box. That was the loan file for Michael Cavuoto.
Mr Woolley told me that there were no records in his file which would assist him to identify when he met Michael Cavuoto. He said that Michael Cavuoto was referred to him as someone who was looking to borrow a certain amount of money to purchase a business. He organised a meeting with Michael Cavuoto in his office. Prior to that meeting he had never met or had any dealings with Michael Cavuoto. He had never had any dealings with Ms Melisi (Michael Cavuoto’s daughter).
Mr Woolley told me that at their first meeting Michael Cavuoto came into the office. They had discussions for probably about an hour. There was a discussion between them by which Michael Cavuoto gave Mr Woolley some background of what he had previously done. He was told that Michael Cavuoto had run a snack bar business in, he thought, the Norwood area. Mr Woolley was told that Michael Cavuoto was only seeking an amount of $50,000 from the Bank. The remainder was coming from the previous business that he had operated. Mr Woolley said that at the first meeting he did not ask Michael Cavuoto to fill out any documents.
Mr Woolley told me that their meeting was a very good, relaxed meeting. He had a good relationship with Michael Cavuoto when they discussed some options for what Michael Cavuoto wanted and what the Bank would require. He asked Michael Cavuoto to provide him with certain information so that they could proceed further.
Mr Woolley told me that at this first meeting he spoke to Michael Cavuoto about security that could be provided for the loan that Michael Cavuoto wanted. He said that conversation “surrounded the specifics of the loan itself”. He said to Michael Cavuoto that if he could provide some residential security it would give Michael Cavuoto greater flexibility in terms of repaying the debt. Michael Cavuoto offered a mortgage over a property. Mr Woolley said he would have conducted searches on the property and would have requested a valuation on it. He in fact obtained a valuation and received that on 21 May 2003.
Mr Woolley told me after their first meeting Michael Cavuoto provided him with some documents. He obtained a Form 2, which was “a set of numbers from the previous business owner.” He said it was basically a profit and loss report showing the income and expenditure of the business. Mr Woolley said that document was at pages 225 to 227 inclusive of Exhibit P1. Mr Woolley said that based on that set of numbers he would have looked at putting a loan together for Michael Cavuoto. Mr Woolley said that he also received a personal assets and liability statement from Michael Cavuoto. He identified that as page 125 of Exhibit P1.

Mr Woolley told me that it was he who had to make a decision about whether Michael Cavuoto’s credit application would be approved. For that purpose he used a document entitled “Commonwealth Business Centre Credit Application Decision Sheet”. Mr Woolley said that document commenced at page 116 of Exhibit P1. That document contains his handwriting. He said that when considering the credit application he took into consideration certain numbers that were produced by Michael Cavuoto from the previous vendor of the business (the Form 2) to determine a level of repayment based on those numbers. Coupled with that, he would have determined a term of 10 years based on the residential security that Michael Cavuoto had with the Bank.
Mr Woolley told me that in addition to those matters he also took into account who the owners of the property being offered as security were, what was owed already on the property offered as security, and other assets of Michael Cavuoto. He also had regard to Michael Cavuoto’s business experience. He took into account that Michael Cavuoto had run a similar business previous to the one that he was looking to purchase.
Mr Woolley said that his decision in respect of Michael Cavuoto’s application is on page 119 of Exhibit P1. He said that on that page he has written “approved subject to a formal valuation on Flinders Parade satisfactory Cr check”. Flinders Parade was a reference to Michael Cavuoto’s residence. Mr Woolley said that he himself performed a credit check. Mr Woolley said that page 119 also contained writing (in the middle of the page) that was not his. That indicated that a valuation was requested on 8 May 2003 and was received on 20 May 2003. It indicated that a credit check was ordered and received “OK”. It indicated that a copy of the trust deed was requested. Another note indicated the trust was still being set in place, and would be received the next week. Mr Woolley said he signed page 119 of Exhibit P1 and dated it 8 May 2003.
Mr Woolley identified page 108 of Exhibit P1 as a letter he sent to Michael Cavuoto dated 9 May 2003. In that letter he advised Michael Cavuoto that the Bank was pleased to inform him that it had approved $50,000 to assist the purchase of a snack bar. The letter and attachments (which comprise pages 109 to 113 inclusive of Exhibit P1) set out the terms upon which the loan was approved. The term of the loan was for 10 years.
Mr Woolley told me that he did not discuss with Michael Cavuoto any aspect of the tenure of the business that Michael Cavuoto wished to purchase. He did not do so in the context of the term of the loan sought, or otherwise. Mr Woolley said that at the time he saw Michael Cavuoto he indicated to him that under the security that he offered, the Bank could have offered him a loan over a much longer term than 10 years. He said that 10 years was deemed acceptable by Michael Cavuoto. He was unable to say how the 10 year term was arrived at.
Mr Woolley told me that he received back from Michael Cavuoto the schedule that appears at pages 109 to 110, signed by Michael Cavuoto, but not dated.
Mr Woolley told me that he knew that Pippo’s was in a building owned by the Bank. He knew that at the time he saw Michael Cavuoto and approved his loan. He said that he was told by Michael Cavuoto that the business he wished to purchase was a leasehold business and it would be subject to a lease. He said that he did not discuss with Michael Cavuoto the terms of the lease. He did not discuss with Michael Cavuoto how long the lease had to run. Mr Woolley explained that in some cases, depending on the security offered by a borrower, he might ascertain the term or unexpired term of a lease where a business that was subject to a lease was being purchased. He said that if it was to be an unsecured loan then he would need to look at the lease itself, to see how long was left on it. In the case of Michael Cavuoto, however, where residential property was offered as security, the lease was not required to be looked at.
Mr Woolley told me that Michael Cavuoto did not ask his opinion as to the prudence of him purchasing the business, nor did he ask Mr Woolley’s advice in any respect in relation to his proposed purchase of Pippo’s.
Mr Woolley told me that his duties involved no contact in respect of, or dealings with, the property interests of the Bank. He did not know at the time what divisions or parts of the Bank dealt with the management of the Bank’s own real estate property portfolio. He said that between February and June 2003 he knew nothing about any proposal regarding the Bank’s building in Rundle Mall, he knew nothing in relation to the possible relocation of the branch that occupied part of that building, and he had no knowledge of any intention by the Bank to sell the building.
Mr Woolley identified pages 3 and 4 of Exhibit P1. He said those documents contained his hand writing. He said that those pages were completed by him at about the same time as the Decision Sheet he prepared which commences at page 116 of Exhibit P1. He said that pages 3 and 4 were prepared at about the same time as the page at page 119 of Exhibit P1, which is dated 8 May 2003. He said he would have prepared the document at pages 3 and 4 of Exhibit P1 in the days following his first meeting with Michael Cavuoto. He said that it was “maybe two to three weeks” of when he first saw Michael Cavuoto before he prepared pages 3 and 4, which was at about the same time as page 119 dated 8 May 2003.
On page 4 of Exhibit P1 Mr Woolley wrote the following:
CLIENTS CURRENTY RUN A SNACKBAR IN THE NORWOOD PARADE WHICH RUNS OFF THE MAIN SHOPPING AREA ON THE PARADE. RECENTLY AN INVESTOR HAS PURCHASED THE SHOPS IN THE PARADE AND IN TIME WILL BE DEVELOPING THE EXISTING SITE INTO AN EXCLUSIVE SHOPPING COMPLEX LIKENED TO THE METRO AT UNLEY. SHOPS SUCH AS JAG, SPORTSGIRL ETC WILL BE OPERATING OUT OF THE RE-FURBISHED SITE. MICHAEL HAS SOLD THE BUSINESS IN THE PARADE TO THE DEVELOPER FOR $120,000-. $20,000- HAS BEEN GIVEN TO MICHAEL WITH THE REMAINING $100,000- COMING ON THE SETTLEMENT DATE.
…
ALONG WITH THE MONEY FROM THE SETTLEMENT THE CLIENT HAS REQUESTED AN EXTRA $50,000- TO PURCHASE ‘PIPPOS’ SNACK BAR IN RUNDLE MALL. A FORM 2 HAS BEEN FORWARDED BY MICHAEL AND THE SNACK BAR IS SHOWING HEALTHY PROFITS OVER THE LAST 3 YEARS. MICHAEL BRINGS SIGNIFICANT EXPERIENCE TO PIPPOS HAVING RUN HIS EXISTING BUSINESS FOR MANY YEARS.
- CLIENT EXHIBITS A STRONG BALANCE SHEET
- SERVICING IS ADEQUATE
Mr Woolley agreed that Michael Cavuoto had led him to understand that Michael Cavuoto had been paid for his business by the developer of the site at Norwood. He said he did not recall a lot of his conversation with Michael Cavuoto about Pippo’s, apart from the fact that Michael Cavuoto was very much interested in buying Pippo’s at a good price and was engaging the Bank to see what they could offer. He said that he did not have any discussion with Michael Cavuoto at any time about the length of the lease for the proposed business.
Mr Woolley told me that when dealing with Michael Cavuoto regarding the security that he had offered, he (Woolley) would have come up with some scenarios that Michael Cavuoto may wish to consider depending on the flexibility of his cash flow and what repayment he would have been comfortable with if he proceeded with the loan.
Mr Woolley agreed with Mr Ross-Smith that he would have assumed at the time that Michael Cavuoto would be the owner of the proposed business for 10 years. He agreed with Mr Ross-Smith that there needed to be enough money coming from Pippo’s to meet the Cavuotos’ loan liability. He said, however, that the 10 year loan term was based on the security supplied by the customer and was also based on “the set of numbers” given by the vendor of the business. He said the loan term was more “specifically … surrounding the security provided”. When asked whether 10 years was the longest term discussed with Michael Cavuoto he answered: “No, we could have expanded to even greater than 10”. He agreed, however, that a factor in fixing the amount of the loan and the length of the loan was the capacity, from the new business, to fund the loan repayments. He agreed that it followed from that that he had assumed there would be a business of 10 years or more.
Mr Woolley told me that he would have hoped that the turnover of the business would be such that it would cover the term of the loan and that Michael Cavuoto would have a successful tenure within the business. He said he would assume and hope that Michael Cavuoto had a successful business and that it ran for that period of 10 years. He agreed that if it didn’t, potentially at least Michael Cavuoto would be able to repay the Bank with the proceeds of any sale of the business.
It was put to Mr Woolley by Mr Ross-Smith that because he knew the Bank owned the building and would thereby be Michael Cavuoto’s landlord of Pippo’s, it followed that what he assumed was that Michael Cavuoto would be the Bank’s tenant for 10 years. Mr Woolley replied: “Not necessarily”. He explained that it wasn’t an issue who owned the building at the time. He said that at the time of the loan he didn’t investigate the lease. He said the owner of the property was not of concern to him. He said anybody could own the property, it just happened to be the Bank. He said that he didn’t get involved in the terms of the lease and he wasn’t particularly concerned with who owned the building at the time. It wasn’t something that he as a Bank officer needed to investigate. He agreed that whoever was the owner he would hope that Pippo’s would retain 10 years tenure at the building, for the term of the 10 year loan. He expected so.
Mr Woolley told me that he did not have any discussions with anyone in the Bank as to the Bank’s interests as owner of the building or land. He said that he had nothing to do with the Disclosure Statement from the Bank for 135 Rundle Mall, which statement appears between pages 50 to 58 inclusive of Exhibit P1.
Findings
I have earlier made findings in respect of the evidence of Mr Versace. I do not repeat all of those findings here. Some are relevant to the findings I now make.
I am satisfied and find that up to early 2003 Michael Cavuoto operated successfully a snack bar in the vicinity of Norwood Parade, Norwood. The site which included that snack bar was to be developed and refurbished. Michael Cavuoto sold his snack bar business to the developer for about $120,000. He began looking for a new business and he enquired about Pippo’s on Rundle Mall.
I find that Michael Cavuoto had discussions with Mr Versace and my findings as to those discussions are set out earlier in these reasons.
I find that Michael Cavuoto signed a Business Sale Agreement to purchase the business of Pippo’s on 6 March 2003. I find that he initialled, and by his initial adopted, the deletion of the “New Lease” conditions on SPECIAL CONDITION 1 dealing with the tenure of the business premises. I find that he did that on 14 March 2003.
I find that as at 14 March 2003 Michael Cavuoto knew that he was purchasing a business whose lease with the Bank expired on 25 June 2005. I find that he knew that he had no guarantee for an extension of the lease. I find that he thought he might be able to obtain an extension, but he knew that that was not assured. I find that Michael Cavuoto was also aware as at 14 March 2003 that the lease that he was “buying” with the business provided expressly that “There will be no right of renewal for any period beyond the term hereby agreed” and that he knew that that period expired on 25 June 2005.
I further find that as at 14 March 2003 Michael Cavuoto was aware from his own business experience at Norwood that owners of buildings in respect of which there were leased premises could sell their buildings, develop their buildings in some way inconsistent with existing leases, or seek to lease premises within their buildings in different ways than envisaged by current leases. I find that Michael Cavuoto was aware that a lessor of various premises within a building owned by that lessor could do all of these things at the end of any lease or, if a lease had not expired, negotiations could be had with lessees to buy out those leases which had not expired. I am satisfied and find that both conditions under “SPECIAL CONDITION 1” were consistent with Michael Cavuoto’s understanding as to general business practise as to commercial leases, and they were consistent with his understanding as to the lease for which he was negotiating with Mr Versace in early 2003, up to 14 March 2003 when I find that the contract was made by him on his own behalf and/or for a nominee or nominees. That contract was made with Taddeo Pty Ltd as trustee for the Taddeo Family Trust. I find that that contract was made on 14 March 2003.
I am satisfied and find that Michael Cavuoto saw Mr Woolley of the Bank for the first time in the latter half of April 2003. I find that was the first time the two men had met. I find that Michael Cavuoto saw Mr Woolley for the first time after 14 March 2003, after he had concluded the contract to purchase the business of Pippo’s. That contract was not conditional on Michael Cavuoto obtaining finance to complete the purchase. The only condition relevant to Michael Cavuoto or his trust was the condition that the Bank as lessor would consent in writing to the transfer of the existing lease. (Neither Michael Cavuoto or anyone on behalf of the purchaser gave a guarantee or indemnity.)
I make the above findings on the evidence of Mr Woolley, on the contemporaneous documents that he prepared, and on the affidavit of Michael Cavuoto, Exhibit P2. I make them notwithstanding the Bank’s admission that it was in or about late February or early March 2003 that Michael Cavuoto contacted Mr Woolley of the Bank for a business loan for the purchase of the business. Admissions in pleadings, whilst normally relevant and persuasive, cannot override evidence which I am satisfied proves something different to what is admitted. Mr Woolley’s evidence was that he prepared pages 3 and 4 of Exhibit P1 and a Credit Application Decision Sheet appearing from pages 116 to 121 at the same time. I find that he prepared pages 114 and 115 of Exhibit P1 at the same time also. Those two pages were tendered together with pages 116 to 121 as one document in Exhibit P1. I find that Mr Woolley signed those pages in two places and that he prepared and signed them on 8 May 2003. That finding is consistent with the date on the letter and attachment sent to Michael Cavuoto, which documents comprise pages 108 to 113 of Exhibit P1. The letter is dated 9 May 2003. Mr Woolley’s evidence was that he prepared all those documents shortly after he saw Michael Cavuoto for the first time. He allowed maybe 2 to 3 weeks between the preparation of those documents and when he saw Michael Cavuoto for the first time. Michael Cavuoto’s affidavit, Exhibit P2, and the plaintiff’s Statement of Claim is to the effect that Mr Woolley was Michael Cavuoto’s personal banker and his business banker, and his business banker in respect of his existing lease at Norwood with his daughter in respect of the Norwood snack bar. I find that Mr Woolley never met Michael Cavuoto before he saw him for the purpose of providing a loan in respect of Pippo’s. I find that Mr Woolley had never seen Michael Cavuoto or his daughter prior to seeing Michael Cavuoto for the first time, and I find that that was no earlier than about mid-April 2003. That was, of course, after 14 March 2003 when Michael Cavuoto had signed a contract to purchase the lease for Pippo’s.
I am satisfied and find that Michael Cavuoto, when he initialled the deletion of part of “SPECIAL CONDITION 1” on 14 March 2003, was confident that his bank would fund the relatively small borrowing he needed to complete the purchase. I find that he knew that he had significant security to offer against a relatively modest loan of $50,000, and he thought that his standing with the Bank was sufficient, with the security he had to offer, to raise the $50,000 necessary to complete the purchase.
I am satisfied and find that when Michael Cavuoto met Mr Woolley for the first time to discuss an advance of $50,000 he did not tell Mr Woolley the term of the lease of Pippo’s. I find that Mr Woolley did not ask. I am satisfied and find that Michael Cavuoto did not tell Mr Woolley because he (Michael Cavuoto) knew the position as to the lease and he knew the Bank’s position as to the lease. He knew that the Bank had already indicated to him through Mr Versace that it would not commit to a further period of 5 years and would not consider doing so until about 2 years hence. Further, I am satisfied and find that Michael Cavuoto did not seek any advice from Mr Woolley as to the advisability or otherwise of his purchasing the lease for Pippo’s. I find that Michael Cavuoto knew he had signed a contract to purchase the business, he had decided that he was getting a good deal, and he thought that he could get an extension of the lease. I find that he did not want, nor did he seek, commercial advice from Mr Woolley. He just wanted a loan of $50,000 from his bank to complete the purchase of a business he had already contracted to buy. That was a contract he was committed to and wished to complete.
I am satisfied and find that the Bank advanced $50,000 to Michael Cavuoto as approved by Mr Woolley. I am satisfied and find that at the time Mr Woolley approved the loan he had no idea what the Bank’s intentions were in respect of the lease of Pippo’s. I am satisfied and find that he made no enquiries as to that because he did not consider it relevant in the circumstances of the finance required by Michael Cavuoto and the security he offered for it. I find that Mr Woolley assumed that Michael Cavuoto had sufficient security of tenure for Pippo’s to meet the repayments of the loan given to him by the Bank, or that he could repay the Bank it’s loan from any proceeds he might achieve from any future sale of the business. I am satisfied and find that Mr Woolley’s discussions with Michael Cavuoto as to the term for the loan of $50,000 bore no relationship in either man’s mind to the then existing assured tenure of Michael Cavuoto for Pippo’s. I am satisfied and find that Michael Cavuoto indicated to Mr Woolley that a 10 year term for the business loan he sought was suitable to him and his wishes. I consider it important and relevant that a period of 10 years was a period that Michael Cavuoto did not expect to achieve by way of a lease of Pippo’s when he signed the contract and when, after that, he discussed the matter with Mr Woolley. The contract Michael Cavuoto initially wanted to sign envisaged an extension for a period of 5 years from 26 June 2005, that is until 25 June 2010. The sum that he borrowed from the Bank was for 10 years from the date that any part of the loan from the Bank was funded by the Bank. That presumably was, at the latest, when settlement on the business of Pippo’s occurred. The sale agreement provided for that to be on 1 July 2003. I assume that it occurred on that date although there is no direct evidence as to that. Ten years from 1 July 2003 would have expired on 30 June 2013, a date well after 25 June 2010.
(There is some evidence that the Trust traded as Pippo’s in the financial year ending 30 June 2003. That is some evidence that Michael Cavuoto ran the business before 1 July 2003. That evidence appears in Exhibit D7 which notes sales of $11,328.27, with a net profit of $1,016.27 for a period in that year.)
There is a paucity of evidence as to trading for the Trust at Pippo’s from 1 July 2003. The only direct evidence I have is Exhibit D7. That document includes a Trading, Profit and Loss Statement, for the year ended 30 June 2004. There is no trading information after 30 June 2004. In particular, I have no information regarding trading at Pippo’s by the Trust between 1 July 2004 and a date after September 2005 or thereabouts, when the sale by the Bank of the building containing Pippo’s was settled. I do not know when the new owner of the premises refused to grant the plaintiff an extended lease for the premises.

As earlier indicated Michael Cavuoto and Mr Woolley received a Form 2 in the first half of 2003 for trading for the business that was purchased by Michael Cavuoto. That trading statement was for 3 financial years up to 30 June 2002. That part of the Form 2 that comprises the trading statement for the last 3 financial years that I find was given to Michael Cavuoto by Mr Versace and that I find Michael Cavuoto gave to Mr Woolley contains no trading information subsequent to 30 June 2002. I find, however, that Mr Versace gave Michael Cavuoto some turnover/sales figures for the period from 1 July 2002 to 29 September 2002. They appear on page 236 of Exhibit P1. I find that Michael Cavuoto’s signature appears at the bottom of that page, that it is witnessed by Mr Versace and that Michael Cavuoto signed it on 6 March 2003. The previous page of Exhibit P1 contains a schedule which I find informed Michael Cavuoto of staff details for the snack bar at the time of his inquiries to purchase it and when he did. For the financial year ending 30 June 2002 Pippo’s apparently had gross sales of just over $800,000. Wages and salaries were paid in the sum of $172,155. “Proprietor’s wages (FAMILY)” were paid in the sum of $88,883. Total wages then were $261,038. There was a net profit before tax of $120,138. By comparison, the Trust traded for the full financial year ending 30 June 2004 with sales of just under $660,000. Salaries and wages is recorded at $137,469 which is about half of all salaries and wages paid in the financial year ending 30 June 2002. The Trust trading document shows a net loss of $364.80 for the year ending 30 June 2004.
In his final address Mr Howard drew to my attention some documents tendered on behalf of the plaintiff during the trial. Page 286 of Exhibit P1 indicates that by fax dated 23 September 2003 Michael Cavuoto sought to increase regular payments made to the Bank in respect of 3 loans the Bank had made to him. The fax is addressed to John Fisher of the Bank. By reference to that and other documents in Exhibit P1 I am satisfied and find that Michael Cavuoto sought and obtained from the Bank approval to increase his repayments to the Bank by an amount of about $700 per fortnight which took his repayments to about $4,000 per month. There is no indication that that changed from September 2003 during the time that the Trust operated Pippo’s.
By letter Michael Cavuoto faxed to Colliers International and dated 6 September 2004 (Exhibit P1, page 289) Michael Cavuoto referred to the lease over 135 Rundle Mall, Adelaide “which expires on 25 June, 2005”. Michael Cavuoto then wrote:
I wish to continue to occupy the premises after the expiry date, and accordingly request that we begin formal discussions as soon as possible.
It is not clear when this letter was received by Colliers. It seems to have been faxed to someone on 9 September 2004 and the fax header to Colliers has part of a date “24/11” on it. In any event Colliers International wrote to Michael Cavuoto on 13 October 2004 (Exhibit P1, page 290). Colliers referred to his letter of 6 September 2004 and apologised that it had not been responded to sooner. Colliers wrote:
The Bank has now confirmed that it is still considering the potential sale of its holdings in Rundle Mall and as such is unable to commit to a lease extension beyond your June 2005 expiry.
The writer then went on to refer to the rent review under the lease that would effect from 26 June 2004.
By letter dated 6 April 2005 (Exhibit P1, page 326) Colliers wrote to Michael Cavuoto. The following was stated:
As a matter of courtesy, we advise on behalf of the Commonwealth Bank of Australia that the above premises (being 135 Rundle Mall Adelaide) will be marketed for sale in the coming weeks. We confirm that the sale of the premises will not affect the current status of your lease and we trust there will be minimum inconvenience, if any.
At least on 5 May 2005 135-139 Rundle Mall Adelaide was advertised for sale. The advertisement indicates that it was “First Release” (Exhibit P1, page 319).
By letter dated 28 June 2005 Peregrine Corporation wrote to the proprietor of Pippo’s (Exhibit P1, page 327). The subject was “Lease Expiry”. The letter stated:
Peregrine Corporation has recently purchased the property at 135-139 Rundle Mall, Adelaide. There are plans currently underway for a complete redevelopment of the site, including the premises from which Pippos Café currently conducts its business from.
As your lease has already expired on June 23^rd 2005, we hereby give you notice that you may only continue to trade from 135-139 Rundle Mall on a monthly basis only.
We would be pleased to extend our assistance, if required, to facilitate your relocation into alternate premises. We would be more than pleased to meet in person to discuss.
There was certain evidence at the trial that predated (and postdated) Michael Cavuoto’s negotiations for the purchase of Pippo’s and his seeking of a business loan from the Bank. The plaintiff maintained that this evidence was important to her case. This evidence can conveniently be divided into two categories. Firstly, there was evidence of the Bank’s intentions with the building it owned at Rundle Mall Adelaide. Secondly, there was evidence of the Bank’s alleged knowledge as to recent trading experiences of the Taddeo Trust at Pippo’s.
On 22 January 2002 the Bank received an email from Colliers Jardine. By that email the Bank was informed that Colliers had received a formal request from the tenant of Pippo’s to enter into a new lease commencing 27 June 2005 for 5 years. The Bank was told that the purpose of that request was to provide some security of tenure for the snack bar with a view to selling the business in the near future. Colliers noted for the Bank that a lease of the requested length would “obviously assist with any intention of the Bank to sell the property”. They recommended the inclusion of a redevelopment clause to allow some flexibility for any potential purchaser (presumably of the Bank’s building). Colliers said further that “should the CBA not be desirous to commit to such a long term request granting the tenant a first right of refusal over the space may achieve an acceptable compromise”.
On 12 February 2002 the Bank wrote to Colliers saying this:
As we discussed the bank is not clear on its intentions at this stage with its future intentions with this property.
However I would consider giving this Sub tenant (café) the “First Right of Refusal” over the sub-tenancy.
Colliers was asked to look into the matter with a legal department and let the Bank know what the implications are for the Bank. On the same day, 12 February 2002, Colliers wrote to a legal department and, inter alia, asked:
Is it possible to produce a document (First Right Of Refusal) that would provide the tenant with a level of comfort as well as retaining the bank’s flexibility with the future use of this property?
The Taddeos were given a First Right Of Refusal. Pages 83 to 85 inclusive of Exhibit P1 is a Deed to that effect. It is signed by Taddeo Pty Ltd and the Bank. It is not dated but there is a facsimile header containing the date 4 March 2003.
On 9 May 2002 Colliers sent an email to the Bank. They informed the Bank that another tenant of their building at 135 Rundle Mall (that is not Pippo’s) had formally requested a new lease when the then current lease expired on 31 May 2002. Colliers recommended offering a new lease which it said would contain the appropriate redevelopment clause. In reply on the same day the Bank said to Colliers:
Considering the current situation with the above branch and the feasibility of selling it vacant possession or as a going concern Until a strategy is worked out it would be best to not lock the bank in with any deal. So it would be my suggestion to place them on monthly holdover.
On 28 May 2002 the Taddeos wrote to the Bank regarding their “lease extension”. That letter is page 79 of Exhibit P1. The Taddeos stated that they had been at Pippo’s for 7 years and for the past 2 years their business had been “running at a loss”. That was the reason why for over the past 2 years they had written on many occasions about their lease extension. The Taddeos continued:
To date, we still have had no formal answer to what will be happening. Since our situation is not good, we believe that we cannot keep business afloat for too much longer and so we are requesting for a lease extension so that we may sell our business instead of closing down.
We work very long hours over the 7 day trading week, and to be honest, we are burnt out. Therefore a speedy reply would be grateful to our situation. We have waited patiently for 2 years for a reply about the extension and unfortunately our situation cannot allow us to wait much longer. We hope that things would not come to unfortunate ends, but as requested for on many occasions, we need to have a formal answer about our lease extension.
Colliers wrote to Mr Taddeo by letter dated 3 June 2002. Colliers referred to letters received from the Taddeos dated 21 January 2002 and 28 May 2002 in regard to their request for an Extension of Lease over the tenancy at Pippo’s. The Bank wrote:
We confirm that the current Extension of Lease between the Commonwealth Bank of Australia (the Lessor) and Taddeo Pty Ltd (the Lessee) will expire on 25 June 2005 with no further right of renewal.
We further confirm that our client is not prepared to negotiate a New Lease commencing on 26 June 2005 at this time.
Notwithstanding the above, we are pleased to offer to the Lessee (subject to final Bank approval) a Right of first Refusal over the current tenancy, and enclose herewith a formal Deed (in duplicate) to secure this right.
Please execute the enclosed document where indicated and return same to this office.
By email dated 10 May 2002 Colliers wrote to the Bank regarding Pippo’s and another tenant at the Bank’s building in Rundle Mall. In respect of Pippo’s Colliers wrote this:
Taddeo Pty Ltd trading as “Pippos Café” have a lease in place until 25 June 2005. Taddeo have requested a further term of 5 years from 26 June 2005 in order to provide greater security of tenure as they attempt to sell the business. However due to the banks uncertainty with the future of this site we are proposing that a First Right of Refusal is offered. This does not commit the bank to a further term but allows the termination of the tenancy at the banks discretion, while providing the tenant some comfort should the bank not require the property as the tenant will have the first option to lease the premises.
It appears that on 27 June 2002 the Bank instructed Colliers to proceed with a new lease for a tenant of their Rundle Mall building that was not Pippo’s. The Bank asked Colliers to ensure “that the relevant demolition clauses are included in the new lease”. The Bank indicated that it would like to proceed with a 2 + 3 year lease.
On 9 March 2003 Colliers emailed the Bank about Pippo’s. The Bank was informed that Colliers had been notified by the Taddeos’ agent (which I find was Mr Versace) that a sale to a prospective purchaser had fallen through. The Bank was informed that that agent had been receiving more interest in the business and that he had been asked whether the Bank would be interested, in principle, in negotiating a new lease with the new owners should a sale take place. Colliers asked the Bank to let them know under what circumstances, if at all, the Bank would be interested in negotiating a new lease. Mr Versace’s evidence at the trial takes up the story from there as to this particular aspect of it.
On 9 May 2003 the Bank approved a loan to Michael Cavuoto to purchase Pippo’s.
On 17 June 2003 Colliers informed the Bank that the business of Pippo’s had been sold and following the Bank’s approval the lease had been assigned to the new owner. Colliers referred to the Bank’s obligations in relation to a Disclosure Statement to the new owner. Colliers sought verification that an attached Disclosure Statement was acceptable to the Bank under the section “Plans for the Centre”. Colliers referred to their “understanding that we are currently sourcing alternative space for the Bank due to O,H&S matters”. The writer from Colliers stated, however, that she was “not sure if there are any concrete plans for this site”. The property agent for the Bank replied on the same day, 17 June 2003. The writer said, inter alia: “I am unaware of the plans to relocate that you refer to. Did this come from Debrah Woodall? I have copied her in assuming that this is the case”.
On 19 June 2003 the person who wrote the email to which I have just referred sent this to Colliers: “I am not aware of any plans to renovate, redevelop or extend this property at this point in time. Regards.”
On 9 July 2003 the Bank’s property agent wrote to Colliers regarding another tenant of the Bank in their Rundle Mall building. That tenant may have gone into liquidation. Colliers were asked to pursue that tenant if it “has walked”, and then wrote: “We should terminate the tenancy and market the space for re-letting however as a monthly tenancy only as we may be selling the asset in the next 6 to 12 months”.
On 5 September 2003 the Bank wrote to Colliers regarding the leasing of premises that were not Pippo’s. The Bank wrote this, inter alia: “The Bank wishes to lease the premises for a 6 month term with no option, but with the provision for the tenant to remain on a month-to-month basis after this term”.
Finally, as I have earlier referred to, Colliers wrote to Michael Cavuoto on 13 October 2003 saying, inter alia: “The Bank has now confirmed that it is still considering the potential sale of its holdings in Rundle Mall and as such is unable to commit to a lease extension beyond your June 2005 expiry”.
I am satisfied and find that the various emails and correspondence just referred to were sent by the people to whom I have referred and were received by the recipients referred to. I find that Colliers were at all times dealing either with the Bank’s property managers, being that division of the Bank that deals with and manages the Bank’s property, or with Mr Versace as the Taddeos’ agent in respect of the sale of Pippo’s.
I am satisfied and find that there was no policy within the Commonwealth Bank in 2002 or in 2003 whereby officers that were concerned with dealing with and managing the Bank’s real estate property interests routinely copied correspondence relating to those matters to the retail and commercial lending division of the Bank.
Discussion and Conclusions
The Plaintiff’s Claim
As identified earlier in these reasons the plaintiff’s Amended Statement of Claim alleges certain representations made by Mr Versace on behalf of the vendor of Pippo’s business. The plaintiff alleges that the contract executed by Michael Cavuoto on 6 March 2003 was based upon those representations. It was alleged that Michael Cavuoto believed those representations to be true, and he relied on them. It was alleged that they were untrue, and that they were misrepresentations (Amended Statement of Claim, para 22).
In the plaintiff’s pleading against the Bank in the Amended Statement of Claim it is alleged that the Bank owed a duty to Michael Cavuoto to disclose either that the lease for the premises would not be extended, or that it was uncertain for any reason whether the lease for the premises would be extended. It is alleged that at no time before the Bank’s agreement to make the advance of $50,000 or the execution of the business loan documents, or the execution of the Sale Agreement or the settlement thereon did the Bank advise Michael Cavuoto that it did not propose to extend or renew the lease, or that there was a prospect that it would not renew or extend the lease for a further 5 years. It is alleged that the Bank’s silence in respect of these matters constituted conduct of the Bank which was in contravention of s 52 of the Trade Practices Act 1974 and s 56 of the Fair Trading Act 1987. It is alleged that the silence of the Bank was in the course of trade and commerce (being the Business Loan Transaction); it was misleading or deceptive or likely to mislead or deceive; it misled or deceived Michael Cavuoto; and it was such to cause loss and damage to the plaintiff within the meaning of ss 82 and 87 of the Trade Practices Act 1974 and ss 84 and 85 of the Fair Trading Act 1987. It is pleaded that had Michael Cavuoto known that it was at least uncertain that the Bank would extend the lease for the premises to about the same period as the business loan then Michael Cavuoto would not have entered into the sale contract, or taken out the business loan, or given the mortgage. It is pleaded that had the Bank complied with its duty to disclose either that the lease would not be extended or that it was uncertain for any reason whether the lease would be extended then Michael Cavuoto would not have entered into the sale contract or taken out the business loan or given the mortgage. Finally, it is pleaded that if the Bank had not breached the Trade Practices Act 1974 and the Fair Trading Act 1987 by its silence Michael Cavuoto would not have entered into the sale agreement or taken out the business loan or given the mortgage.
As a result of what was said to be the wrongdoing of the Bank it is alleged that the plaintiff suffered certain losses. It is said by the plaintiff that her losses are to be quantified on the basis that the sale contract, the business loan and the mortgage would not have been entered into. She claims the sum of the purchase price for the business ($122,500); the amount paid for stock of the business ($12,524.30); the stamp duty on the purchase price ($4,324); the plaintiff’s conveyancing fees ($495); and costs for the assignment of the lease ($318). The sum of those, the amount of $140,161.30, was claimed. That claim was reduced at trial but I shall come to that later.
The plaintiff relied upon the affidavit sworn by Michael Cavuoto on 30 August 2005 for a number of these allegations. As to the allegation of reliance by Michael Cavuoto the plaintiff relied on para 24 of Michael Cavuoto’s affidavit, Exhibit P2. That paragraph reads:
24. Had I known that the Lease would not be renewed upon expiry on 25 June 2005, I would not have purchased the Business and I would not have taken out the loan from the CBA. I would have used the funds from the Norwood Snack Bar to purchase a business that had good tenure and would provide a return on investment.
I received this affidavit over Mr Howard’s objection. Whilst it is evidence before me the weight that I accord to it, and to para 24 in particular, is a separate matter. The objection taken by Mr Howard included that fact that he was unable to cross‑examine Michael Cavuoto on his affidavit and, in particular, on para 24. I shall return to this matter after I set out some aspects of Mr Ross-Smith’s opening of the plaintiff’s case.
In opening Mr Ross-Smith said this case is a trade practices case. He disavowed reliance on the pleading relating to any duty of care the Bank owed the plaintiff. (He later said that there was no case sought to be made on the Bank’s Disclosure Statement.)
Mr Ross-Smith put the plaintiff’s trade practices case in various ways. He said that the plaintiff’s case was that at the time Michael Cavuoto had dealings with the Taddeos over the purchase of the Pippo’s business the Bank was undecided about what it would do with its building. He said the possibilities at that time were that the Bank could keep its building and continue to let out the space, including the space of Pippo’s. It could renovate or rehabilitate the building to keep interference with the tenancies down to some (but a limited) degree. Or, it could sell it. He said that during Michael Cavuoto’s discussions with the Bank (that must mean Mr Wolley) what the Bank does not do is to tell Michael Cavuoto that it did not yet know what it was planning to do with its building and it didn’t tell Michael Cavuoto that one its options was to sell the building or substantially to renovate it so that the tenancy would not be available, and it did not convey to Michael Cavuoto that in either of those cases he would no longer be able to occupy the tenancy space and would not have any income from the business from which he could source the loan payments which were over a period of 10 years. He said that what was not conveyed to Michael Cavuoto by the Bank was the possibility of the sale of the building, and that if the Bank either sold it or significantly renovated it then Michael Cavuoto’s business would be lost and it would have no value because there would be nothing to sell to another purchaser.

Mr Ross-Smith opened on the basis that the plaintiff’s case was also that the Bank did not tell Michael Cavuoto what it knew about the financial circumstances of the business. That was what the Taddeos had written to the Bank in May 2002 from which the Bank, at the time Michael Cavuoto negotiated his loan from them, knew there was a significant difference between what they had been told by Mr Taddeo and what was in the Form 2 documents. He said on the plaintiff’s case “it would be madness for Michael to buy a business and commit himself and his trust to a 10 year loan if he understood that there was a real chance that his business would be finished by June 2005, some two years into a loan term”.
Mr Ross-Smith, in opening, said that on the plaintiff’s case there were things that Michael Cavuoto did know. He said that he knew that a 10 year lease for the snack bar premises was not guaranteed. He knew from the document itself that the lease expired in the middle of 2005. Mr Ross-Smith said that it was “a convenient way to express” his case that Michael Cavuoto knew that a lease past 2 years was not guaranteed. That is, that Michael Cavuoto knew that he was not guaranteed anything after June 2005. Further, he knew he had the benefit of a Deed of Right of First Refusal, so he had an apprehension of what might go wrong. He said that on the plaintiff’s case “that apprehension which is reasonable was that what might go wrong is that the Bank would sell the building and that the Bank would significantly rehabilitate the building and so the tenancy wasn’t available to him. He knew that for some other reason he could speculate at least, he might not be given a new lease”.
Mr Ross-Smith said that the plaintiff’s case was that Michael Cavuoto “was entitled to assume that because of his good relationship with the Bank and because of what’s contained in the Deed of First Right of Refusal, by far … the likely reasons for not remaining as a tenant, would be the Bank either sold it or rejuvenated the building”. He said that on the plaintiff’s case Michael Cavuoto “had a reasonable expectation that those two things didn’t happen and he would get a new lease”.
Mr Ross-Smith said that the plaintiff’s case was that the Bank was contemplating the sale of the building earlier than February/March 2003, or about the same time anyway. He said the plaintiff’s case was that at that time the branch manager “says nothing about these things at that time when the loan application’s being made. This is for a 10 year loan for a premises owned by the Bank which the Bank is at least turning its mind to selling, as a possibility, it may or it may not but it’s turning its mind to it”. He said that the fact of that possibility is not articulated by the bank manager or anyone else from the Bank to Michael Cavuoto.
Mr Ross-Smith said that on the plaintiff’s case even if the Bank had said something shortly after the purchase of the business by Michael Cavuoto that he might not be a tenant very long because there was a chance the Bank would sell the building and if that had been said early enough, Michael Cavuoto could have rescued his position by selling the balance of the term to somebody else and then moving on and buying a more suitable business and at least recover some of his purchase price. He said that by the time it was conveyed to Michael Cavuoto that the Bank was definitely going to sell its building, it was too late because there was nothing left of the term effectively, and therefore nothing to sell. So there was the complete loss of the investment.
It is unfortunate for the plaintiff that Michael Cavuoto could not give evidence at the trial. The fact of the matter is that he did not give evidence at the trial although I received part of an affidavit that he had sworn in August 2005. That was about 2 months after he was advised that as his lease expired on 23 June 2005 he was only permitted by the new owners of the building to continue to trade at Pippo’s on a monthly basis only. He was still in the business on a monthly tenancy at the time he swore his affidavit on 30 August 2005.
In his affidavit Michael Cavuoto said that “had (he) known that the Lease would not be renewed upon expiry on 25 June 2005, (he) would not have purchased the Business and (he) would not have taken out the loan from the CBA”. He said he would have used the funds from the Norwood snack bar to purchase another business which had good tenure and would provide a return on investment.
I can accept that had Michael Cavuoto known that the lease would not be renewed upon its expiry on 25 June 2005 he would not have purchased the business and taken a loan to do so. As I understand the plaintiff’s case, however, it is not suggested by the plaintiff that the Bank knew that it would not renew the lease of Pippo’s upon its expiry. That is not the plaintiff’s case because there is no evidence that the Bank knew in early 2003 it would not do so. I infer from the documents that the Bank (or at least some officers within the Bank) wanted to leave its options open as to what the Bank might do with its building in Rundle Mall in the future. I am satisfied that some officers of the Bank had that view in 2002 and in early 2003. Any owner of significant commercial property which is used to produce income from leased premises within a building on the property could and would contemplate, as theoretical possibilities, a variety of different options by which they could use such a property and building or profitably dispose of such a property and building. Whether any particular option is more attractive than another might depend on how an owner may wish to market such a property. It will be a matter of judgment as to whether a higher price would be obtained for a building on certain land where there are solid and long leases in place with reputable and paying lessees. Alternatively, it may be assessed that a building might best be disposed of where only short term leases are in place so that prospective purchasers would be attracted to the building because there are greater opportunities to use the building in ways different than the way it was currently being used.
I am satisfied and find that in this case the Bank (or at least one “arm” of the Bank) did not, either in 2002, 2003, 2004 and the early part of 2005, wish as owner of the building in Rundle Mall to commit itself to long leases because it had made no decision as to whether or not to sell the building and, if it was to be sold, how it might be marketed for sale. I am satisfied and find that the Bank wished to keep its options open and therefore did not wish to commit itself to long leases before it had determined what it would do with its building. That included a consideration of what it would do with a branch of the Bank that occupied part of the building
I am satisfied and find that at all times from the year 2002 to the middle of 2005 inclusive, the Bank had not determined to sell its building and the Bank had not determined that it would not renew any lease, including the one for Pippo’s. I am satisfied and find that it was within the contemplation of the Bank (or at least the property arm of the Bank) that one of a number of possibilities was the sale of that building or renovations to it. I am not satisfied, however, that it necessarily follows from that that it was within the contemplation of the Bank that it would only market the building for sale, if it was to do that, with short term leases or monthly leases. I find that the Bank was still to determine that question, if indeed it determined to sell the building and the land on which it stood.
In a real sense the plaintiff’s case came down to this: Was the Bank’s conduct, in failing to inform Michael Cavuoto that one possibility that was open to the Bank was to sell its building, or do something else with it, such that Michael Cavuoto may not be able to conduct his Pippo’s business from the building after 25 June 2005, misleading or deceptive conduct by silence, that caused Michael Cavuoto loss by his reliance on that silence.
I am satisfied and I find that Michael Cavuoto was aware of that possibility and that he was aware of the possibility that he would not be able to conduct the Pippo’s business in the Bank’s building on Rundle Mall after 25 June 2005. I have already identified some of my reasons for so finding. Michael Cavuoto had already had experience of being bought out by a developer in a previous business he occupied at Norwood. I am satisfied and find that Michael Cavuoto knew and was aware of that possibility when he decided to initial the deletion of the 5 year extension which he had originally asked to be inserted in the contract for the purchase of the business after he was told by Mr Versace that the Bank were not prepared in March 2003 to grant or guarantee a 5 year extension but would look at the matter 6 months prior to the end of the lease. I am satisfied that Michael Cavuoto knew that one possibility was that the Bank was looking at all its options, including the sale or redevelopment of the building. I am not prepared to infer from para 24 of Exhibit P2 what Michael Cavuoto would have done had he been told by the Bank of the possibility of the sale of the building at some future time and of the possibility that that might mean that he would obtain no lease past 25 June 2005. First, para 24 does not address that question. It addresses a question as to what Michael Cavuoto would have done had he known the lease would not be renewed upon expiry on 25 June 2005. Secondly, Michael Cavuoto swore to what is contained in para 24 at a time when he was still operating Pippo’s. He swore that paragraph on the basis, as I have earlier found, that he instructed his solicitors that he entered into the contract relying upon comments by the vendors’ agent Mr Versace about him having no problems in getting an extension of the lease for a further 5 years, which allegations I reject. I have found that those pleaded representations were not made to Michael Cavuoto, and accordingly I reject the plaintiff’s case as pleaded that Michael Cavuoto executed the sale contract based upon those representations which he believed to be true and upon which he relied, and which were not true. I am not satisfied of any of those matters. That is, I am not satisfied that the representations alleged by the plaintiff as having been made by the vendor of the business, or its agent Mr Versace, were made. It follows that Michael Cavuoto could not have relied on them believing them to be true.
Even if I am wrong in my finding of what Michael Cavuoto knew and understand about the possibilities open to the Bank at the expiration of his lease, I would not find it misleading or deceptive for the Bank not to say to Michael Cavuoto that one option the Bank had was to sell the building, or do something else with it, which might have the effect that he could not operate the business past its then expiry date. When considering whether a defendant has, by silence (which is the plaintiff’s case), conducted itself in breach of the Trade Practices Act1974 and the Fair Trading Act 1987 I have to have regard to the whole of the circumstances. (see, for example, Henjo Investments Pty Ltd & Ors v Collins Marrickville Pty Ltd (1988) 79 ALR 83, 93, 95; Demagogue Pty Ltd v Ramensky & Anor (1992) 110 ALR 608, 610; Arbest Pty Ltd & Ors v State Bank of New South Wales Ltd (1996) ATPR 41-481, 41-972, 41-979.) If I consider that the Bank, for the purposes of this action, includes the Bank in all its divisions and through all its officers then the Bank was not silent. Michael Cavuoto was told by Mr Taddeo’s agent Mr Versace, when the request was made by Michael Cavuoto for Mr Versace to find out the Bank’s attitude to an extension of the lease, that the Bank would not at that time agree to an extension past the expiry date of the lease of 25 June 2005. I find that Michael Cavuoto was told by Mr Versace that that information had come to Mr Versace from the Bank or its agent. I find therefore that the Bank was not silent in its conduct towards Michael Cavuoto. I do not consider that it was either misleading or deceptive for the Bank not to explain further, or at all, why it would not agree at that time to an extension of the lease past its expiry date.
In addition to the above, I have found that Michael Cavuoto signed the contract to purchase the Pippo’s business sometime before he approached the Bank and spoke to Mr Woolley. (I have also found that Michael Cavuoto and Mr Woolley did not know each other before that time.) It necessarily follows that I reject that part of the plaintiff’s claim that alleges that Michael Cavuoto relied on anything the Bank, through Mr Woolley, said to him or did not say to him. When Michael Cavuoto saw Mr Woolley for the first time to seek a loan to complete a purchase to which he had already committed, the die, as it were, had been cast. Michael Cavuoto could hardly have relied on anything Mr Woolley said or didn’t say to execute a contract that he had executed some weeks before.
My ultimate conclusion is that the plaintiff has not made out her case based on the Trade Practices Act 1974 and the Fair Trading Act 1987, and that her claim should be dismissed.
The Plaintiff’s Losses
I have already referred to the plaintiff’s claim in her Amended Statement of Claim. I asked some questions of Mr Ross-Smith during the trial as to whether there should be any set-off from the plaintiff’s claim to reflect the borrowing of $50,000 from the Bank (which was included in the purchase price of $122,500), or to reflect any benefit the plaintiff may have obtained from operating the business until about September 2005. Mr Ross-Smith agreed that some set-off should be made for the former, but none should be made for the latter. He submitted that there were no profits.
I have already indicated that the evidence as to the trading of the Trust is very limited. There is some evidence that for the financial year ending 30 June 2004 a loss of $364.80 was suffered. There is no evidence as to trading from 1 July 2004 until the ceasing of trading. There is also no evidence as to whether there was any stock or plant and equipment when trading ceased in about September 2005. I have already referred to Mr Howard’s submissions regarding the arrangements Michael Cavuoto made to increase the repayments for three loans he had with the Bank.
During his final address Mr Ross-Smith handed me a document headed “Formulation of Plaintiff’s Losses”. A number of those losses were the same as in the Amended Statement of Claim. There were some additional claimed losses in the document. Also, in addition, was included interest at 4% from the date of commencement of proceedings, said to be 29 January 2007, until 6 May 2009 when the trial commenced. In those respects the document formulated the plaintiff’s losses at the commencement of the trial as the same as at the end of the trial. However, the document handed to me included a “Set off for Business Loan” in the sum of $53,889.51. That sum is the sum certified by an authorised officer of the Bank stating that that was the amount owing by Michaelangelo Cavuoto and Maria Antionetta Cavuoto under Memorandum of Mortgage registered no. 9649139 as at 6 May 2009 (Exhibit D6). The total sum ultimately claimed by the plaintiff was the sum of $104,530.33.
On one view of it the plaintiff’s method of assessing the losses is appropriate if I was to find that Michael Cavuoto would never have entered into a contract to buy the Pippo’s business but for the misleading or deceptive silence by the Bank. That measure of loss may put the Trust in the position as if the business was never purchased. But as the borrowings of $50,000 must be brought into account because that was provided to the Trust by the Bank, so also must be brought into account, at least in principle, any benefit the Trust obtained from operating the business for the period that it did, because it did operate the business for over two and a half years. (In fact it did so for the remainder of the lease.) There is also plant and equipment and stock to take into account. I do not know what the value of plant and equipment was at the beginning of Michael Cavuoto’s tenancy of Pippo’s as goodwill and plant and equipment were not identified separately in the contract. I do not know what plant and equipment was at the end. Whilst stock was stated in the contract to be $10,000, there is no evidence what it’s value was at the end.
Mr Ross-Smith’s submission was that it was for the Bank to prove if the plaintiff gained any benefit from operating the business, and if there was, what benefit, before any adjustment should be made. He submitted that in the absence of any such evidence I would merely be speculating on whether or not any benefit was obtained by the Trust for operating the business for what was about two and a half years. I am not prepared to find on the basis of the Taddeos’ letter to the Bank dated 28 May 2002 that the Pippo’s business was “running at a loss” as at the time of that letter, and had been for some time. To do so would ignore the fact that the Taddeos did not give evidence before me and would necessarily mean that the Form 2 figures for the business provided by the Taddeos in late 2002, early 2003 were false. I am not prepared to find that where the Taddeos have not given evidence and the plaintiff discontinued the action against them. Furthermore, that letter was not tendered as evidence of the truth of matters asserted in it, but only on the basis that it proved what was stated to the Bank.
I am therefore in a position of having practically no evidence as to whether there were benefits to the Trust from Michael Cavuoto operating the Pippo’s business and, if there were, what they were. I have evidence of a significant figure for salaries and wages in the financial year 2003-2004 without knowing who was paid those salaries and wages. I have some evidence of Michael Cavuoto significantly increasing repayments to the Bank which could not have been funded by the Trust from trading profits for the financial year 2003-2004, but might have been from salaries and wages if they were paid to Michael Cavuoto and family members. I do not think that I can ignore those matters and hold that because the Bank did nothing more than they did in evidence before me that the plaintiff should have her damages assessed on the basis that the Trust obtained no benefit from operating the business. I also do not think that I can simply ignore plant and equipment and stock.
Furthermore, if it was the case that the Trust operated Pippo’s for two and a half years without a net profit or without any family members (including Michael Cavuoto) obtaining any benefit from it, one might have reasonably expected that the plaintiff would have sued someone or some body on the basis of a misleading and deceptive Form 2. That was not done; none of that was referred to by Michael Cavuoto in his affidavit of August 2005 when there were, presumably, defendants other than the Banks in contemplation; and the plaintiff later discontinued the action against the Taddeos.
Still further, if the business made no profits, one wonders why Michael Cavuoto wanted to extend the lease, and what goodwill value the business had as at June 2005.
My conclusion is that although, in assessing the plaintiff’s damages, $104,530.33 may be a starting point, that sum would need to be reduced to reflect any benefits obtained by the Trust or associated persons in the operation of the business, and any value the business would have had anyway as at June 2005 if the lease could have continued. Plant and equipment and closing stock would also need to be taken into account. Any such reduction would largely, on the evidence, be a matter of guesswork on unknown circumstances. I am not able to assess that and I do not consider that where I cannot do so, because of the paucity of evidence, I would have to assess the plaintiff’s loss on the basis claimed by her.
The Bank’s Counterclaim

Relevantly, the Bank seeks judgment and orders against the current plaintiff Maria Antionetta Cavuoto. I have earlier set out the facts and basis of the Counterclaim as pleaded in paras 12-21 of the Bank’s Defence and Counterclaim.
I have also earlier referred to the fact that in their Defence to Counterclaim the Defendant’s by Counterclaim, who are described as “the Plaintiffs” (and which includes Maria Cavuoto), admit paras 12, 14, 16, 17, 18 and 19 of the allegations I set out earlier in para 18 of these reasons. The defendants by Counterclaim (including Maria Cavuoto) pleaded what was said to be preliminary issues, special defences and material facts as follows:
3.The Plaintiffs rely upon the matters pleaded in paragraphs 1 to 50 inclusive of its Amended Statement of Claim dated 10 October 2007;
4.The Plaintiffs are entitled to set off against the claim made by the Third Defendant the loss and damages suffered by the Plaintiffs as set out in Part 2 of the Amended Statement of Claim.
Exhibit D6 is a Statement of Account by an authorised officer of the Bank stating that the amount owed by Michaelangelo Cavuoto and Maria Cavuoto under Memorandum of Mortgage registered no. 9649139 as at 6 May 2009 was $53,889.51. (I infer that this sum is the sum originally pleaded by the Bank in para 20 of its Counterclaim, plus additional interest which has accrued since.) The sum of $53,889.51 is the amount owing under the mortgage which Maria Cavuoto signed in respect of the bank loan to the Trust. Such does not seem to be contested on behalf of the plaintiff because Mr Ross-Smith set that sum off against his claim on behalf of the plaintiff.
Mr Howard also sought an order for possession of the property the subject of the mortgage.
Next, Mr Howard sought outstanding and unpaid rent due to the Bank as landlord of the premises from which Pippo’s was conducted by the Trust. Mr Howard submitted that the Bank does not assert any liability on the part of Maria Cavuoto in her personal capacity in respect of unpaid rent. He submitted that she had appointed herself as trustee of the Trust after Michael Cavuoto’s death and she had adopted the proceedings the subject of the trial as plaintiff, as trustee of the Trust. He submitted that she can not have the benefit of the action without accepting the detriment as well. He submitted that she has to accept the ongoing liabilities against any claims in any cause of action in her capacity as trustee. He said that the Bank’s claim in respect of rent, which is for a sum of $31,040, is against Maria Cavuoto in her capacity as trustee of the Trust, but not in her personal capacity. I was told that there is no contest on that sum, which was rent to about the first week of September 2006 when the business of Pippo’s ceased operating.
Mr Ross-Smith submitted on behalf of the plaintiff that to make an order in favour of the Bank against Maria Cavuoto in respect of unpaid rent would be wrong in law and wrong in principle. He first submitted that a rent claim had never been pleaded against Maria Cavuoto, so for that reason alone no order should be made. My understanding during the course of the trial was that all the pleadings became pleadings for and against whoever was the plaintiff at any particular time. That was first Michael Cavuoto as trustee of the Trust and later Maria Cavuoto as trustee of the Trust. Accordingly, I understood para 21 of the Bank’s Counterclaim incorporated what then related to Michael Cavuoto to the current plaintiff, when she was substituted as the plaintiff. That understanding seems to have been adopted by the current plaintiff in the Defence to Counterclaim where the Plaintiffs (plural) are referred to as being the Defendants (plural) by Counterclaim. Where that pleading states that the plaintiffs (plural) plead certain “special defences”, one might have expected a plea of a special defence in respect of the Bank’s Counterclaim against Maria Cavuoto in her capacity as trustee of the Trust. Such a plea is not made there, although others are under the more compendious heading “preliminary issues, special defences and material facts relied upon”. I am not prepared, however, to proceed on the basis that no special defence is made on behalf of Maria Cavuoto in respect of rent. Equally, I will not proceed on the basis that the Bank is not entitled now to submit that it is entitled to an order against Maria Cavuoto in respect of rent.
That leaves, however, the question as to whether I can, at law, make an order against Maria Cavuoto as trustee of the Trust.
The plaintiff’s submission was that Maria Cavuoto was not the trustee of the Trust at the time the Trust incurred a liability to pay rent to the Bank. At that time Michael Cavuoto was the trustee of the Trust and Michael Cavuoto as trustee had a legal liability to pay the rent. It was submitted that that never changed. It was submitted that the appointment of Maria Cavuoto occurred after the end of the lease and after any liability to pay rent. It was submitted that Maria Cavuoto has never incurred a debt to the Bank in respect of the lease.
In my opinion it is not correct to say that Maria Cavuoto’s appointment as trustee occurred after any liability to pay rent. Liability to pay rent which was not paid under the lease occurred when it became due. The liability to pay rent continues until it is paid. The real question in my opinion is whether the liability to pay unpaid rent is a liability properly directed to the estate of Michael Cavuoto, and not to Maria Cavuoto as the replacement trustee of the Trust after Michael Cavuoto’s death.
My opinion is that it is the estate of Michael Cavuoto that is liable to the Bank for the rent that was unpaid and has continued not to be paid. The liability for unpaid rent arose when Michael Cavuoto was alive and was the trustee of the Trust. It is his estate which would be liable to the Bank for unpaid rent, and his estate could seek to be indemnified by the Trust for any judgment against it.
Accordingly, I find that the plaintiff Maria Cavuoto, as trustee for the Trust, is not liable to the Bank for unpaid rent under the lease for Pippo’s.
I would enter judgment in favour of the Bank against Maria Cavuoto in her personal capacity in the sum of $53,889.51. Further, I would make an order in favour of the Bank for possession of the property situated at 2 Flinders Parade, Newton, South Australia, being the land comprised in Certificate of Title Register Book Volume 5357 Folio 368.
I shall hear the parties as to interest after 6 May 2009 and costs.