Commercial Management Services (SA) Pty Ltd v Glen Searles Real Estate Pty Ltd & Anor - [2005] SADC 8

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
COMMERCIAL MANAGEMENT SERVICES (SA) PTY LTD v GLEN SEARLES REAL ESTATE PTY LTD & ANOR
Judgment of His Honour Judge Kitchen
9 February 2005
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Contract in writing for sale and purchase of vendor’s right to manage properties comprised in a rent roll – vendor’s right to manage contained in individual agreements with property owners the terms of which prohibited assignment of vendor’s right without written consent of owner – whether by the terms of the contract with the purchaser, vendor warranted that it would obtain the owners consent to assignment. Collateral agreement – term of principal contract precluded reliance upon any collateral agreement between, or representation by, the parties – whether purchaser precluded from claim to enforce the collateral agreement; observations upon the effect of purchaser abandoning application to amend statement of claim to allege actionable misrepresentation.
Misrepresentation Act 1972, s.8; Land and Business (Sale & Conveyancing) Act 1994, s.35, referred to.
NP Generation Pty Ltd v Feneley (2001) 80 SASR 151, applied.
Moore v Collins [1937] SASR 195; Helstan Securities Ltd v Hertfordshire County Council (1978) 3 ALL ER 262; Sellars v Adelaide Petroleum (1994) 179 CLR 332; Wenham v Ella (1972) 127 CLR 454; C. Czarnikow Ltd v Koufos (1969) 1 AC 350; Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23, considered.

COMMERCIAL MANAGEMENT SERVICES (SA) PTY LTD v GLEN SEARLES REAL ESTATE PTY LTD & ANOR
[2005] SADC 8

By an agreement in writing, dated 29 March 1996 (the contract), the plaintiff (as purchaser) agreed to purchase from the first defendant (as vendor) for the sum of $150,000 the first defendant’s right, title and interest in and to a commercial property management rent roll, various plant and equipment and the first defendant’s interest as tenant, pursuant to an agreement for lease, of premises situated at 416 King William Street, Adelaide.
In this action the plaintiff claims damages for breach of representations and warranties allegedly made and given by the second defendant, as the agent of the first defendant, to induce the plaintiff to enter into and complete the contract; alternatively the plaintiff claims damages for the alleged failure by the first defendant to obtain the consent of property owners to the assignment to the plaintiff of the first defendant’s rights in the commercial property management rent roll.
The plaintiff’s name was formerly Cliff Holdings Pty Ltd. At all material times Terrence Greer Kavanagh (Mr Kavanagh) was a director of the plaintiff. The first defendant’s name was formerly Commercial Management Services (SA) Pty Ltd. At all material times the second defendant (Mr Searles) was a director of the first defendant.
As part of the contract, the first defendant agreed to, and did, “transfer” to the plaintiff the name Commercial Management Services (SA); on completion of the contract the corporate parties changed their respective names to their present names.
The business of the first defendant was to act, for a fee, as the agent of owners of premises to receive rents payable by tenants of the premises and to manage the premises. In a typical case the appointment as agent for, and the terms of its agreement with, an owner of premises was in a standard form, adapted to the particular case, published by the Building Owners and Managers Association Limited and titled “Management Agency Agreement”; the individual agreements between an agent and an owner are known, and were referred to in these proceedings, as BOMA management agreements. Relevantly the standard form of BOMA management agreement provided for, inter alia,
·a fee payable to the agent per calendar month as a percentage of the gross income per calendar month derived by the owner from the particular premises;
· the period for which the agreement was to operate (the term);
·the right of either the agent or the owner to terminate the agreement during the term by giving 90 days notice;
·the continuation of the agreement on a month to month basis after the expiration of the term;
·the termination of the agreement upon the owner ceasing to be the owner of the premises the subject of the agreement;
·the agent not assigning its interest in the agreement without the written consent of the owner;
By the contract between the plaintiff and the first defendant the commercial property rent roll is identified to consist of the premises listed in the first schedule to the contract. The recitals to the contract provide:
“(1)   The vendor is the owner of and entitled to all of the rights in relation to the commercial property rent roll which consists of the properties described in the first schedule(‘the rent roll’) and the plant and equipment described in the second schedule.
(2)    The vendor is the occupier of premises situate at 416 King William Street Adelaide pursuant to an agreement to lease dated the 25^th day of September 1995, upon the terms set out therein.
(3)    The vendor has agreed to sell the right to manage the rent roll (‘the commercial property management rent roll’) to the purchaser, together with the plant and equipment and, to assign the agreement to lease, on the terms and conditions herein contained.”
Prior to the execution of the contract the first defendant wrote a letter dated 13 March 1996 addressed to Mr Kavanagh. It was signed by Mr Searles as a director of the first defendant. It is Exhibit P3.
By its amended Statement of Claim the plaintiff alleges:
“6.In order to induce the plaintiff to make and complete the said contract and pay the said sum of one hundred and fifty thousand dollars the second defendant as the agent of the first defendant represented to the plaintiff and in consideration of its doing so warranted:
(a)     that the first defendant was the owner of and entitled to all of the rights in relation to the commercial property Rent Roll which consisted of the properties described in the first schedule to the said contract and the plant and equipment described in the second schedule to the said contract.
(b)    that the first defendant would obtain the consent of all the owners of the said properties to the assignment to the plaintiff of the management agency agreements relating to their several properties.
(c)    that the properties were secured on a B.O.M.A. Management agreements for periods ranging from 1-3 years.
7.The said representations and warranty were made by and are to be inferred from:
(a)     a letter from the first defendant to Mr Terry Kavanagh as a director of the plaintiff dated the 13^th day of March 1996.
(b)    the recitals numbered 1, 2 and 3 of the said contract.
8.The plaintiff was induced to and did make and complete the said contract and pay the said money by and on the faith of the said representations and warranty.
9.The plaintiff has since discovered and the fact is that:
(a)     some of the agreements had already expired by the 29^th day of March 1996.
(b)    various other agreements were of a much lesser balance of term than one year.
(c)    the first defendant failed to obtain the consent of the various owners to the assignment to the plaintiff of the various management agreements.”
The plaintiff claims $84,781.56 damages being the total of fees for thirteen BOMA management agreements which the plaintiff alleges it lost, or was deprived of, by reason of the alleged breach of the representations and warranties pleaded by it, or by reason of the first defendant’s alleged failure to obtain the consent pleaded by the plaintiff.
By their amended Defence the defendants, in substance, deny the alleged representations and warranties or that the plaintiff relied on any such alleged representations or warranties. They allege it was agreed that Mr Kavanagh would approach each property owner to obtain consent to the assignment by the first defendant to the plaintiff of the relevant management agreements, and that the plaintiff failed to retain the services of Mr Gary Millar, (Mr Millar), as a consequence of which Mr Millar enticed the owners of some premises, the subject of BOMA management agreements assigned to the plaintiff, to transfer their business to Mr Millar’s new employer. The defendants further say that the plaintiff is estopped from relying on any of the alleged representations or warranties by reason of paragraph 17 of the contract which provides:
“This agreement contains the entire agreement between the parties with respect to its subject matter and supersedes and prevails over any prior agreement, covenant or understanding (if any) between the parties and no further or other terms or agreements are deemed to arise between the parties by way of collateral or other agreements by reason of any promise, representation, warranty or undertaking (if any) given or made by either party to the other on or prior to the execution of this agreement and the existence of any such collateral or other agreement is hereby denied.”
As to that defence, the plaintiff relies, in Reply, on s8 of the Misrepresentation Act, 1972 and, or alternatively, s35 of the Land and Business (Sale and Conveyancing) Act, 1994.
Until in the month of September 1995, Mr Searles was employed by Brock Partners Real Estate (Brocks) to manage that part of Brocks’ business comprising a large number of BOMA management agreements with owners of premises. Mr Millar was also employed by Brocks in similar tasks. In September 1995, at Mr Searles’ instigation, Brocks sold to the first defendant the BOMA management agreement property management business and thereafter, until the events the subject of these proceedings, the first defendant conducted that business, employing Mr Searles and Mr Millar.
Mr Kavanagh and Mr Searles had been acquainted with each other for many years through common membership of the Masonic movement, and were friends. In 1996 Mr Kavanagh was a real estate agent working from his home.
As part of his Rotarian activities, Mr Searles arranged to travel to the United States in April 1996 for some weeks. In about January or February 1996 Mr Searles asked Mr Kavanagh if he would be interested in looking after the commercial property management business while Mr Searles was in the United States. Mr Kavanagh said he would be interested. Mr Kavanagh’s evidence is that he had had some four years’ experience in commercial property management.
In March 1996, Mr Kavanagh and Mr Searles met by chance in a stationer’s shop. Mr Kavanagh said he told Mr Searles he had recently derived $100,000 from the settlement of the sale of a property and Mr Searles suggested that Mr Kavanagh might purchase the first defendant’s property management business. Mr Kavanagh expressed interest and Mr Searles said he would put some figures together for Mr Kavanagh and prepare an agreement.
Approximately one week after the discussion at the stationers, Mr Kavanagh and Mr Searles met again when Mr Searles handed to him a form of agreement for him to look at. Mr Kavanagh said that he took the agreement to a friend who was experienced in selling businesses, obtained advice from him and subsequently requested Mr Searles to delete from the form of agreement a provision which Mr Kavanagh called the disclaimer clause.
The letter dated 13 March 1996 (Exhibit P3) opens by referring to discussions had on (which is not disputed) 12 March 1996 between Mr Kavanagh and Mr Searles. Mr Kavanagh said he could not remember whether the discussions were before or after Mr Searles gave him the draft agreement. The letter includes the following paragraphs:-
“The properties are secured on the BOMA Management Agreement for periods ranging from one to three years, however, you are aware of the clause relating to severance with 90 days notice, however, as discussed we may be able to delete that clause, when renegotiating terms with the client.
There are 26 properties and one strata management held by 20 clients with a total of 117 tenants.
…….
Confirming the thoughts of yesterday’s discussion we would see an assignment with the rights to management and the name of Commercial Management Services if so secured as a business name, thus continuing the current influence of the company but without any restrictions on the modus operandi.”
Mr Kavanagh’s evidence is that prior to the date of the letter he had not known of, and had never seen in any form, a BOMA management agreement and neither was he shown, then or subsequently, by Mr Searles any such agreements. Concerning the matter of the assignment of the rights to management, Mr Kavanagh said :-
“A.I was most particular in asking Mr Searles as to the – to make sure that all the assignments were in place prior to my taking over, because he had previously mentioned to me that when he bought the property management portfolio, he had lost a number of properties, which had been taken by another property manager due to the fact that the property management agreements had not been assigned, or for whatever reason this person had –
HIS HONOUR
Q.You told us Searles had earlier told you when he, Mr Searles, bought the business, the management of properties, some of the management agreements had not been assigned.
A.That’s correct.
Q.You went on to say.
A.One of the other property managers had approached the owners and managed to sign them up on his own behalf. Therefore, I was most concerned that –
OBJECTION: MR HOILE OBJECTS
MR HOILE:No-one is interested in what his concerns were. Presumptions or concerns are not relevant, particularly as they are not pleaded.
HIS HONOUR: I will hear them as part of the narrative.
XN
Q.Your concern was.
A.That all the assignments were in place prior to my taking over.
Q.What, if anything, had Mr Searles said on this meeting of 12 March in relation to this assignment of these rights.
A.He said that he would get all the assignments.”
Mr Kavanagh said that after he received the letter dated 13 March 1996 he met Mr Searles a couple of times and discussed the matters the subject of the letter, on one occasion visiting with Mr Searles, over the space of two and a half hours, some of the twenty six premises, but he did not enter any of the premises or speak to either the owner or tenant of them. He said that between the date of the letter and 29 March 1996, the date on which the contract was signed, he, on four or five occasions, “queried … as to what the state of play was with regard to the assignments and was told” by Mr Searles “that it was all in hand”. The plaintiff paid the purchase price on 29 March 1996; on the same day Mr Kavanagh and Mr Searles went to the offices of ASIC where they effected the change of name of the two companies. Mr Kavanagh’s evidence is that he and Mr Searles then went to the Office of Consumer and Business Affairs where Mr Searles notified that office of the change to the name of the first defendant, Mr Kavanagh “did the same thing too” and also made application on behalf of the plaintiff for a land agent’s licence. Mr Kavanagh’s evidence of what he said occurred at the Office of Consumer and Business Affairs was challenged by the defendants who called employees of that office to give evidence. I will deal with that topic later in these reasons.
Mr Kavanagh said that on 29 March 1996 he spoke to Mr Millar and told him that the plaintiff would employ him but, in the short term, at a reduced salary until he (Mr Kavanagh) knew where the plaintiff stood; Mr Millar told him, or conveyed, he was “not happy”. The plaintiff also employed Ms Ann Dixon (Ms Dixon) as office manager, the same position she had held with the first defendant.
The plaintiff went into possession of the business on 1 April 1996. The plaintiff, Mr Kavanagh said, had no “confirmation” at that time that any of the property owners had consented to the assignment of the management agreements and he took no steps to look for the agreements - he was engaged in familiarising himself with the business operation and visiting the managed properties he had not previously seen - but on 15 April 1996 the first of a number of facsimiles, each from a different property owner, arrived at the plaintiff’s premises, all of which were to the effect that “the assignments were not being entered into”. Mr Kavanagh said that on the following day, Mr Miller came to him and told him he was working for Brocks and that he wanted to take files away.
Falland Property Group owned a number of shopping centres, the premises of which were identified, in Schedule 1 of the contract, to be included in the commercial property rent roll purchased by the plaintiff. Mr Gilbert Falland (Mr Falland) is the chief executive office of that group. The plaintiff called him to give evidence.
Mr Falland identified Exhibit P2 as an undated form of BOMA management agreement by which his group appointed Brocks as the group’s agent in relation to four named shopping centres for a term expiring on 31 March 1998. Mr Falland thought the agreement had been entered into in 1995. He said that thereafter Mr Millar was the person at Brocks, as he had been for several previous years, who managed the group’s shopping centres, until, as Mr Falland recalled, the first defendant took over Brocks’ duties; although Mr Falland was unsure whether there was a formal consent to that assignment, Mr Millar as an employee of the first defendant administered the agreements.
Without objection, Mr Falland related that in April 1996 he was informed by, he believed, Mr Millar that the ownership of the first defendant was to change and Mr Millar was not to continue with the new management; that latter matter was of concern to Mr Falland and on 15 April 1996 he sent two facsimiles, which were received by the plaintiff, the first requiring an answer by 2pm on 15 April 1996 that the first defendant’s rights pursuant to the BOMA management agreement had not been sold; the second, sent after 2pm, informed the plaintiff that Brocks had been “confirmed/appointed” to manage the shopping centres, effective immediately, and requested that all documents and trust moneys relating to those centres be surrendered to Brocks.
Mr Falland said that were Mr Millar, in whom he had confidence, to have remained in the plaintiff’s employment he would have seriously considered continuing with the plaintiff as the group’s property manager.
John Vincent Blunden (Mr Blunden) is a director of Blunden Investments Pty Ltd (Blunden Investments) the owner of premises in Union Street, Stepney. He was called by the plaintiff. He identified, as part of Exhibit P8, a BOMA management agreement, dated 23 March 1995, between Blunden Investments and Brocks appointing Brocks as the agent in relation to the Stepney premises for a term expiring on 31 March 1996.
Mr Blunden said that in 1995 he agreed to the assignment to the first defendant of Brocks’ rights under the agreement. Then (as he thought) a few days before 17 April 1996 he was informed, possibly by Mr Millar, that the agent’s rights under the BOMA management agreement “had been delegated”; he had received no request concerning such an assignment. He sent a letter, dated 17 April 1996, by facsimile to the first defendant, which was received by the plaintiff. The letter is Exhibit P11; it states, inter alia, that Blunden Investments had not been consulted to obtain consent to the assignment and required confirmation by 12 noon on 18 April 1996 that the first defendant had not sold its rights under the agreement, failing which the agreement would be terminated. By a second letter, dated 18 April 1996, also part of Exhibit P11, Blunden Investments informed the first defendant that, with immediate effect, Brocks had been appointed as the agent for the Stepney premises, and that all files, documents and trust moneys were to be handed to Brocks, to be collected by Mr Millar.

Mr Blunden said that were he to have been asked to consent to the assignment, he would have refused because Brocks had been the agent since 1993 and he did not want the management “changed again”.
Mr Kavanagh said that the several other facsimiles he received on 15 April 1996 came within the space of some two hours, and that evening he spoke on the telephone to Mr Searles, who was in the United States, and told him about the facsimiles and the properties he had “lost”; he said Mr Searles responded to the effect he was overseas and unable to do anything about it.
Mr Kavanagh related that during a period of many days after the plaintiff received the various facsimiles he, with Ms Dixon, searched among the documents handed over to the plaintiff on settlement of the contract, discovered BOMA management agreements for some, but not all, of the properties listed in Schedule 1 to the contract and set about contacting the owner of each of the properties.
In cross-examination Mr Kavanagh identified Exhibit D16 as an example of a letter he sent to all of the property owners from whom the plaintiff had not received a facsimile on 15 April 1996, seeking their consent to the assignment to the plaintiff of the property owners BOMA management agreement.
Exhibits P8 and P9 comprise the BOMA management agreements which Mr Kavanagh said he found. For the moment it is sufficient to note that as to some of them no term was specified, or the term had expired before the contract between the plaintiff and the first defendant was completed. As to each of the agreements that had not expired, Mr Kavanagh’s evidence is that “most” property owners would not consent to an assignment, some property owners appointed Brocks (where Mr Millar had gone to work) and some property owners agreed to the plaintiff managing their properties on a monthly basis, or some other basis shorter than the unexpired term. Mr Kavanagh denied there was an agreement with Mr Searles that he, Mr Kavanagh, would approach property owners to obtain consent to the assignment of the BOMA management agreements.
In the letter P3, it is stated:-
“The rent roll is producing an average monthly income of $10,500 as was inspected by you from our banking records, this equating to $120,000 per annum”.
Mr Kavanagh’s evidence is that he relied on that statement. Exhibit P15 comprises a group of documents tendered as part of the plaintiff’s case to show that the plaintiff’s income by way of fees received for managing the properties identified in it for the period April 1996 to March 1997 (inclusive) was $45,134.52, equal to $3,761.21 per month. The same documents show the plaintiff’s fee income for the period May 1996 to April 1997 (inclusive). Mr Kavanagh’s evidence is that the fee income payable under the several BOMA management agreements with the Falland Property Group exceeded, in any one month, the aggregate of the monthly fee income payable under all the other BOMA management agreements the subject of the contract between the plaintiff and the first defendant. The plaintiff’s claim is for $84,781.56, the difference, in the twelve month period April 1996 to March 1997, between the fee income which the plaintiff would have derived under all the BOMA management agreements the subject of the contract and the fee income the plaintiff in fact derived in relation to the properties for the management of which it was retained in that period. It is claimed that thirteen property owners refused to consent to the assignment to the plaintiff of the relevant BOMA management agreements.
In cross-examination Mr Kavanagh was taxed about his employment history. I accept his evidence that, although he knew of the organisation BOMA, he had not seen a BOMA management agreement and did not know of its existence. His experience, I accept, of property management was as an employee of Hillier Parker in relation to large commercial properties in respect of which his employer had its own form of agreement with property owners, although he had never read any such agreement. That employment ceased in about 1991 and Mr Kavanagh went into business for two or three years on his own account as a land agent, working from his home. He described he was semi-retired. His business did not include property management for which, he said, it would have been necessary to have expensive computer programmes.
Mr Kavanagh said that although he was unsure whether the draft agreement for the purchase of the first defendant’s business was given to him by Mr Searles before or after the meeting between them on 12 March 1996, he thought it was probably after that meeting. He agreed the meeting took place in Mr Searles’ office and Mr Searles provided to him information concerning, among other matters, salaries, rent for premises and goods, and income from management fees. Mr Kavanagh said he could not remember Mr Searles declining to provide any record or information which he requested. His evidence is that he did not ask for any records or financial information because there was insufficient time: “Mr Searles was racing off to another Rotary meeting”. His evidence is that the topics concerning the first defendant’s business were discussed in general terms, that he asked Mr Searles to put in writing the information which had been discussed and he then received Exhibit P3.
From his experience as a property manager, Mr Kavanagh knew that information had to be provided to tenants of commercial premises concerning “outgoings” and it was part of the property manager’s responsibility to property owners to prepare and distribute that information, commonly known as “budgets”. Mr Kavanagh said that the preparation of budgets was a time consuming task which would take very much longer for a person who was not familiar with the particular properties. The budgets were required to be completed by 31 May each year, so he asked Mr Searles, who agreed, to prepare the budgets before his (Mr Searles) proposed departure for the United States on 1 April 1996. Mr Kavanagh’s evidence is that Mr Searles failed to prepare the budgets.
Taken to his evidence that he was assured by Mr Searles on four or five occasions before 29 March 1996 that Mr Searles had in hand the obtaining of consent from property owners to the assignment of the BOMA management agreements, Mr Kavanagh said he was devastated, extremely angry and thought he had been defrauded when he discovered on 15 April 1996 that consent had not been obtained. He agreed that neither in the plaintiff’s un‑dated letter to the first defendant (Exhibit D16) sent soon after 15 April 1996, nor in the plaintiff’s Statement of Claim is there an allegation that Mr Searles said he would obtain the consent. Mr Kavanagh’s evidence is that the letter and the Statement of Claim were both prepared by the plaintiff’s solicitor.
Mr Kavanagh said that although it may have been mentioned earlier than at the meeting on 12 March 1996, Mr Searles discussed with him at the meeting that when the first defendant agreed to purchase the rent roll business from Brocks the fact of that purchase became known to other employees of Brocks, one of whom was not to be employed by the first defendant in the acquired business; that employee, as Mr Kavanagh said he understood from Mr Searles, solicited the business of some of the property owners comprised in the rent roll which the first defendant agreed to purchase from Brocks and those owners did not consent to the assignment of the BOMA management agreements with them. Mr Kavanagh’s evidence is that this experience of Mr Searles is the reason why he was concerned to emphasise to Mr Searles the need for consents to assignments to be obtained.
Mr Searles also described himself as semi-retired, employed part-time as a lecturer in property management. By 1994 he had been engaged as a property manager for many years, first in the employment of Elders, then with land agents, banks and other organisation and finally he incorporated the first defendant, the business of which was also property management. In 1994 he took up employment with Brocks to manage its commercial property section; Mr Millar and a person to whom I will refer as “Mr H‑M” were already employed by Brocks in the section, to the management of which Mr Searles was appointed. Brocks’ property management business was conducted on agreements with property owners in the form of the BOMA management agreement.
In September 1995 Mr Searles on behalf of the first defendant agreed to purchase Brocks’ property management business and operate it “in association” with Brocks. Mr Searles identified Exhibit D26 as a draft of an agreement, a later form of which became the contract between Brocks and the first defendant for the sale and purchase of Brocks’ property management business. The purchase price was $180,000. The first defendant became the tenant of premises adjoining those occupied by Brocks, with access into Brocks’ premises by a common doorway.
The first defendant employed Mr Millar, who carried out the same kind of work he had been doing at Brocks, with responsibility for designated properties in the commercial rent roll. The first defendant did not employ Mr H‑M who left the employment of Brocks when the property management business was sold to the first defendant. Mr Searles said Mr H‑M set up his own property management business, approached the owners of those properties for which Mr H‑M had been responsible at Brocks and “influenced” them, before the termination of his employment at Brocks, to appoint Mr H‑M as their agent, the effect of which, Mr Searles said, was to reduce by about $30,000 per year the gross income of the business purchased from Brocks. Mr Searles’ evidence is that $150,000 of the price paid for the purchase of that business was equal to the sum of the annualised fees paid by the owners of the properties comprising the rent roll at the time the first defendant agreed to purchase it from Brocks.
Mr Searles thought that his first conversation with Mr Kavanagh concerning the first defendant’s business was in early 1996 at the stationers when he ascertained that Mr Kavanagh was interested in keeping an eye on the business during Mr Searles’ absence for six weeks in the United States. He said that, next, there was a meeting at his office, when there was discussion about various aspects of the business and he said to Mr Kavanagh “Well, the company is for sale if you wish”; he said he had no memory of how it was that topic arose. Referred to Exhibit D26, Mr Searles said he told Mr Kavanagh that he had paid $150,000 (for the rent roll), informed him of the losses, referring, as I understood, to Mr H‑M obtaining the business of some property owners, and told Mr Kavanagh the price would be “dollar for dollar - $120,000”. Although he was not sure it was on this occasion, Mr Searles said he gave to Mr Kavanagh Exhibit D26 (the draft of the agreement between Brocks and the first defendant), remarking to Mr Kavanagh that it was a document with which he (Mr Searles) was comfortable. Subsequently, Mr Kavanagh informed him he wanted a clause removed from Exhibit D26 (Mr Searles identified it as Clause 8(1)), he agreed with that deletion and gave D26 to his solicitor to prepare the contract.
Schedule 1 to the contract is a table identifying each of the properties on the rent roll, by, inter alia, a numeral and the initials “GS” or “GM” indicating which of Mr Searles and Mr Millar was the responsible manager. Mr Searles said that he and Mr Millar kept in their respective offices the files for the properties which they individually managed. Mr Searles had responsibility for eighteen of the twenty-nine properties listed in the Schedule.
Mr Searles said that there were meetings between him and Mr Kavanagh in Mr Searles’ office subsequent to that on 12 March 1996 during which they spoke about the first defendant’s business records and he offered Mr Kavanagh the opportunity to inspect the records. He said the arrangements which he had to make for his proposed visit to the United States took a lot of his time but he spent time with Mr Kavanagh concerning the plaintiff’s stationery needs and also accompanied Mr Kavanagh to Mr Searles’ bank.
Taken to the topic of the budgets which were required to be prepared by 31 May, Mr Searles said:
“A.As I recall, the discussion centred on two things in the last week and that was budgets and the assignments. As my time was under huge pressure and no doubt his was too, the budgets were the main concern because Terry didn’t have time to orientate himself with the properties to be able to complete those budgets in the short time that we had left before the 29^th. So I understand and I can recall the discussion, suggesting that I would do the budgets, but I couldn’t do both, referring to the assignments.
Q.Do you have a memory as to precisely when that discussion took place in the timeframe between 13 March and settlement.
A.From what I recall, it was in the last week prior to the contract being signed.
Q.You remember that in his evidence, Mr Kavanagh said that on four or five occasions in the lead-up to settlement, he said that on four or five occasions he asked you what was the state of play in relation to the assignments. His evidence was that on each of those four or five occasions, you told him it was all in hand or all in the pipeline, or something to that effect. What do you say about that.
A.I don’t believe I said that, I wouldn’t have said it anyway because it would have been wrong.”
Mr Searles’ evidence is that he remembered going to the offices of ASIC in company with Mr Kavanagh where changes were made to the names of the plaintiff and the first defendant, after completing which he “believed” that Mr Kavanagh told him he would go to the Office of Business and Consumer Affairs “and get his licence”; he said he did not recall going to that office with Mr Kavanagh.
In cross-examination Mr Searles said that he could not remember what discussions he had with Mr Kavanagh at the meeting on 12 March 1996 - he “speculated” they spoke of the rent roll, the management agency agreements, the computer equipment and the staff, “but it was more of a general discussion dealing with the various aspects of the business” and as to the management agreements, he had no memory “apart from suggesting there were agreements” (372).
Concerning the letter he wrote to Mr Kavanagh on 13 March 1996 (Exhibit P3) Mr Searles said that the information in the passages “26 properties and 1 strata management held by 20 clients with a total of 117 tenants … secured on a BOMA management agreement for periods ranging from one to three years” was taken from the screen on the computer in his office which included, among other information, the term of the agreement. I have some difficulty in accepting the accuracy of that evidence. For example:-
· the BOMA management agreement numbered 092 made between Mr and Mrs Kerr and Brocks was for a term expiring on 30 April 1995 commencing “from the date hereof”, but the agreement is undated.
· the BOMA management agreement numbered 018 made between Mr Speakman and Brocks is for a term the expiration date of which is blank, and the agreement is undated.
Both agreements are listed in Schedule 1 to the contract. Mr Searles said he could not recall if there had been any change between 13 March 1996 and the date of the contract in the properties managed by the first defendant. Mr Searles agreed that at the date of the contract the management agreements numbered 089, 092 and 099 had expired and were terminable by the property owner on one month’s notice. (vide clause 1(c) of those agreements.)
Mr Searles said that he was aware that the consent of property owners was required to the assignment to the plaintiff of the first defendant’s rights under the BOMA management agreements. He said he “saw” that the plaintiff assuming the same name as that by which the first defendant was known to the property owners was (as I understood his evidence at transcript 397) a benefit which would make it easier to obtain consents to the assignment. He agreed that between 13 March 1996 and the execution and completion of the contract he did not obtain the consent of property owners to the assignment and he did not instruct or direct anyone else to do so. He said he assumed that Mr Kavanagh had not attempted to obtain the consents. He repeated his evidence that there was a discussion between him and Mr Kavanagh about the matters of the budgets and obtaining consent to the assignments, “But there was no clear decisions, that I can recall, on the matter … it was not decided between the two of us of whom would take that responsibility”. He said he could not recall Mr Kavanagh asking him to ensure that the consents by property owners to the assignments were in place by the settlement date. Asked whether it was possible Mr Kavanagh said that to him, he responded “What was said during that period, anything is possible. All I recall is the fact that we discussed both issues, the budgets and the assignments and indicated that it was little time that I had to do both. It was agreed at that stage that they do the budgets.” (411/412) He said he “disagreed” with Mr Kavanagh’s evidence that he told Mr Kavanagh the obtaining of the consents was in hand or “not to worry about it, it will be okay”, asserting he did not say those things. He agreed there was no agreement between him and Mr Kavanagh that in return for him (Mr Searles) preparing the budgets, Mr Kavanagh would approach the property owners for consent to the assignment. Taken to paragraph 2.1 of the Defence filed by the defendants in which such an agreement is alleged, Mr Searles said that is not his evidence. “As I recall, there was no agreement at the time nor was it suggested that Mr Kavanagh could approach the owner for assignments.”
As to the preparation of the budgets, Mr Searles said he prepared them only in respect of the properties for which he had a responsibility, that is he did not carry out that task in relation to the properties for which Mr Millar had responsibility; he said he used the programme in the computer systems at the first defendant’s premises to prepare the budgets and he left the product of that work in the appropriate part of the computer system where it could be accessed - he does not recall whether he told Mr Kavanagh what he had done concerning the budgets.
The meetings and conversations between Mr Kavanagh and Mr Searles, over a period of a little more than two weeks, took place almost six years before the plaintiff issued the proceedings in this action. It is to be expected that the passage of time has impaired the ability of the witnesses to accurately recall in sequence and in detail the matters about which they gave evidence concerning events in March and April 1996.
Earlier in these reasons I referred to Mr Kavanagh’s evidence that he and Mr Searles went to the Office of Consumer and Business Affairs (OCBA) on 29 March 1996 and what he said occurred there. The substance of Mr Kavanagh’s evidence is that he went to that office for the purpose of making application on behalf of the plaintiff for a land agent’s licence, it being necessary for the plaintiff to hold such a licence in order to lawfully conduct the business purchased from the first defendant. Mr Kavanagh said that as far as he was “aware”, he completed a form of application for a land agent’s licence in the name of the plaintiff, and he thought he completed only one form of application. He said that having completed the form, “information was brought up on the computer ..... and a ..... gentleman there told me I could have a full security licence”. At that time Mr Kavanagh held a security agent’s licence as well as a land agent’s licence. He took the opportunity to complete a form to obtain the “full” security agent’s licence and paid a fee in respect of that licence by cheque, the only fee he paid to OCBA on 29 March 1996. He said he left with OCBA the completed application form for a land agent’s licence - he could not recall whether he was requested to provide any further documents in relation to that application.

Mr Kavanagh identified Exhibit D17 to be a form of application by the plaintiff for registration as a land agent, completed by him; it is dated 3 September 1996 and his signature is witnessed by a Mr Bampton, a Justice of the Peace. Mr Kavanagh rejected the suggestion that no application was made by him for the plaintiff on the 29^th March 1996 - he said that was the only reason he went to OCBA on that day. It was put to Mr Kavanagh that Mr Searles did not go with him to OCBA - he answered “No, I was under the impression that two of us went around there ... if you suggest (he did not) I thought he was - in fact I’m convinced he was”.
Graham Phillip Close (Mr Close) is a public servant who has been employed in OCBA for some 18 years, for the last five years as the operations manager in the licensing area. He said that in 1996 it was the practice, and the policy, to not accept an application for registration by a company as a land agent handed to the “front desk” unless the applicable fee was paid or proffered. Were the fee to have been proffered, but required accompanying documents were not provided, the application may have been accepted “over the counter” but it would not have been “processed” until the documents were provided.
Mr Close said that a search of OCBA files in the name of the plaintiff did not locate an application by the plaintiff for registration as a land agent prior to exhibit D17, and there is no record of a payment of a fee for such application before that which was paid in relation to Exhibit D17. He related that there was an application lodged on 29 March 1996 by the plaintiff for a security agent’s licence in respect of which a fee was paid on that date, and, as I understood his evidence, a further fee (of $95) was paid on 5 May 1996 when that licence was issued.
Mr Close acknowledged to there being some errors uncovered by him in reviewing OCBA’s receipt records for 29 March 1996; he described there was a scanning error which resulted in a cheque drawn by another person, or entity, being attributed to the plaintiff’s payment record with OCBA on that date, but Mr Close said OCBA banking records “matched” on that day - I infer he meant that the sum of all the payments received by OCBA equalled the amount banked by OCBA.
Mary Carapetis (Ms Carapetis) has been employed with OCBA since 1995; her present responsibilities are as supervisor of the commercial section which includes the licensing of land agents and security agents.
Ms Carapetis retrieved from archives the OCBA file relating to the plaintiff in order to respond to the subpoena issued by the defendants. When the file was produced to the Court in response to the subpoena, it appeared on inspection of the file that a document or documents had been removed from it, leaving a torn corner still attached to the pin device by which the remaining documents were held. Ms Carapetis explained that when the file was brought to her from archives she inspected the documents on it to ensure that “no other people’s documents accidentally had been filed on this file”, as sometimes happened because of the large volume of documents received and kept by OCBA. On the plaintiff’s file, she discovered that six pages concerning a different licencee had erroneously been placed on the file. They were at the bottom of the pin, so she removed them by tearing them away at a point close to the pin.
The defendants’ principal purpose in calling Mr Close and Ms Carapetis was to support their challenge to Mr Kavanagh’s evidence of what he said occurred at OCBA on 29 March 1996 and, consequently, his credibility as to his evidence of other events that occurred at about that time.
Ms Carapetis’ evidence indicates that the incorrect filing of documents does occur within OCBA, from which I could not be confident that the absence from the plaintiff’s file of a document like that Mr Kavanagh said he left with OCBA controverts his evidence. The absence of any relevant payment record, together with Mr Close’s evidence about the policy of not taking an application unless it is accompanied by payment, tends to show that no application was made on the plaintiff’s behalf as Mr Kavanagh described. However, I am not persuaded I should reject his evidence on the balance of probabilities; no evidence was led concerning how it was an application on behalf of the plaintiff for registration as a land agent came to be made in September 1996. At best, the only inference I am prepared to draw is that Mr Kavanagh was possibly mistaken about what he said occurred at OCBA on 29 March 1996. In reaching that view I have had regard also to the evidence about the cancellation of the plaintiff’s registration as a land agent in June 2003 for its failure to provide an audit report to OCBA; Exhibit D29.
It is significant, I find, that Mr Searles, upon his own version of his conversation with Mr Kavanagh about the “assignments”, spoke in terms of having insufficient time to attend to obtaining those and to prepare the budgets; it is implicit in that evidence that Mr Searles recognised he (or the first defendant) was under an obligation to obtain the consents, but he was pressed for time.
That the first defendant suffered loss in the value of the business it bought from Brocks, because of the activities of Mr H‑M, is not in dispute. I accept Mr Kavanagh’s evidence that this event prompted him to be alert to having the consent of the property owners to the assignment of the BOMA management agreements. It appears to me to be common-sense that the approach to obtain consent would be more conveniently and successfully made by the first defendant, or by Mr Searles on its behalf. Mr Searles, I conclude, believed that Mr Millar would be employed by the plaintiff, at least until Mr Searles returned from the United States when he would be available to be engaged by the plaintiff on a consultancy basis; so much is clear from exhibit P3.
Mr Searles’ view was that the plaintiff’s adoption of the first defendant’s name would make it easier to obtain the consent of the property owners. A corollary of that adoption is the property owners would be unaware, unless told, of an assignment having occurred - to all appearances, particularly with the continued employment of Mr Millar, the outward persona of the manager (name, address, facsimile and telephone numbers) was unchanged; the implication is that the obtaining of the consent could be left until Mr Searles returned - indeed Mr Searles said (T408) “we could still obtain [the consents], there was no time limit apart from the actual contract, we could still obtain them after [the date of settlement]”.
The substance of Mr Searles’ evidence that he told Mr Kavanagh he had too little time to prepare the budgets and to attend to obtaining the consents, was put to Mr Kavanagh in terms that, at the end of the conversation “it was left in effect that you would be the one to follow up on the assignments if you so choose” (T303). Mr Kavanagh denied there was such a conversation – he insisted that he asked Mr Searles on several occasions, to the date of settlement, concerning the obtaining of consents and was told to the effect he had related in his (Mr Kavanagh’s) evidence.
Mr Searles, as he admitted, knew that the consent of property owners was required. Contrary to the allegation in paragraph 2.1 of the defendants’ Defence, Mr Searles said there was no agreement that Mr Kavanagh would approach property owners to obtain consent; there was no arrangement, and neither was it suggested by Mr Searles to Mr Kavanagh, that Mr Kavanagh make such an approach.
The pressures on Mr Searles’ available time before his departure to the United States were such that, in my view, he decided he could not attend to obtaining the consents. I do not accept his evidence that he spoke to Mr Kavanagh of his inability to attend to preparing both the budgets and to obtaining the consents.
Counsel for the defendants submitted that the concept of the consent of property owners being obtained by the date of settlement of the contract was impracticable, and only after settlement could any meaningful approach be made. In my view, it is apparent that Mr Searles was anxious to complete the transaction between the plaintiff and the first defendant before he left for the United States. As recital (3) to the contract provides, the first defendant’s agreement was “to sell the right to manage the rent roll”; the first defendant, as Mr Searles well knew, could not assign its interest under a BOMA management agreement with a property owner without the consent of that property owner. As I have said, in my opinion the obtaining of consents was a task the successful completion of which would be more likely achieved upon an approach by the first defendant; that there were, or may have been, inherent difficulties, of the kind described by counsel for the defendants, in such an approach being made before the completion of the contract does not appear to have agitated Mr Searles’ mind – his own evidence was that he had insufficient time to obtain them.
Both Mr Kavanagh and Mr Searles, in their evidence, referred to the obtaining of property owners’ consent as “the assignments”. I accept Mr Kavanagh’s evidence that he asked Mr Searles to make sure that all the assignments were in place before he took over and that Mr Searles said that he would get all the assignments; I also accept Mr Kavanagh’s evidence that between 12 March and 29 March 1996 Mr Searles informed him the obtaining of the assignments was “in hand”. I reject Mr Searles’ evidence to the contrary.
The defendants submission is that the subject matter of the contract, apart from the goods and the agreement for lease identified in it, is the rent roll, that is the list of the properties and the name of the owners of the them contained in Schedule 1 to the contract. Such a list, as the defendants submitted, is undoubtedly confidential information capable of being bought and sold, or misappropriated; see NP Generation Pty Ltd v Feneley (2001) 80 SASR 151. The submission is that all the first defendant purported to sell was the valuable information contained in the rent roll and that it did not by the written contract agree to obtain the consent of the relevant property owners to the plaintiff assuming the management of the roll. It is argued that the first defendant is not in breach of the contract; it delivered to the plaintiff that which it agreed to sell, namely the information comprising Schedule 1 and, as I infer, the first defendant’s records and documents relevant to the properties in that list.
By the recital (3) to the contract the first defendant “… agreed to sell the right to manage the rent roll (“the commercial property management rent roll”) to the purchaser …”. The rent roll is defined to be “the properties described in the first schedule …”. In paragraph 1 of the operative part of the contract the first defendant “agrees to sell to the purchaser and the purchaser agrees to purchase all that the vendor’s right, title and interest in and to the commercial property management rent roll …”. In my opinion, it is plain that the first defendant was selling not only the information which Schedule 1 disclosed as to the location of the properties and the landlord of each of them, but also the right to manage that which the schedule described. It was entirely admissible and necessary for the plaintiff to lead evidence relevant to the meaning of the words “the right to manage”; it was adduced, and it is not disputed, that the words meant the contractual right of the first defendant, subject to the terms of a BOMA management agreement, to manage for an owner, in exchange for a fee, the property identified in the agreement.
Rights under contracts that involve personal skill or confidence are not assignable; Moore v Collins [1937] SASR 195. Neither the plaintiff nor the defendants made any submission that this principle applied to rights of management like those obtained under a BOMA management agreement. Where the principle of non‑assignability under the general law does not apply “… there is no reason why the parties to an agreement may not contract to give its subject - matter the quality of un‑assignability”, and if the words used by the parties are apt to prohibit assignment by one without the consent of the other then an assignment for which consent has not been obtained may be held to be invalid, as between the non‑consenting party and the assignee, where the condition against the assignment is of such an essential character as to warrant the inference that the non‑consenting party would not have entered into the contract unless assured of strict observance with the condition; Helstan Securities Ltd. v Hertfordshire County Council (1978) 3 ALL ER 262. The evidence of Mr Falland and Mr Blunden, in my view, substantiates that in the case of their respective corporations the condition against assignment without consent was of such a character. However, the plaintiff’s case is not that the assignment of the rights under the BOMA management agreements was invalid, but that the first defendant, being contractually bound to do so, failed to obtain the consent of property owners.
In Helstan’s case, in which the material contract contained a prohibition against assignment without consent, the Court (Croom-Johnson J.) observed that there is no injustice in expecting an assignee to make inquiries as to the existence of such a prohibitory condition. In the present case the plaintiff (through Mr Kavanagh) knew, at the least, that the consent of property owners to an assignment was necessary. There is no express term in the contract to the effect that the first defendant would ensure the consent of property owners was obtained by the date of settlement, or at any time, or that it would at any time take steps to obtain consent. Is it implicit in the written agreement to sell the right to manage the properties identified in the schedule to the contract, that the first defendant would obtain the consent of property owners?
I have already determined that the “right to manage” meant the agglomeration of responsibilities and benefits which the first defendant had in its capacity as the agent of various property owners pursuant to its appointment upon the terms of a BOMA management agreement. That is what the first defendant agreed to sell, the clear purpose and objective of which was to invest in the plaintiff the first defendant’s right, pursuant to the several BOMA management agreements, to manage the properties listed in Schedule 1. But the first defendant could not invest in the plaintiff its rights under a BOMA management agreement without the consent of the relevant property owner; absent that consent the plaintiff obtained no rights as between itself and the owner of the property, and in particular, no right to manage that owner’s property even though it be one of those listed in Schedule 1.
In my opinion, to the extent that it has been proved that a property listed in Schedule 1 was the subject of a BOMA management agreement and that at the date of the settlement of the contract the owner had not consented to the assignment to the plaintiff of the first defendant’s interest in that agreement, the first defendant is in breach of the contract; it failed to provide that which it agreed to sell, namely the right to manage that property.
I am satisfied that at the date of settlement no owner of a relevant property in Schedule 1 had provided such consent. The plaintiff is entitled to damages for the first defendant’s breach.
Upon reaching this conclusion, it is still necessary to deal with the claim that the first defendant is in breach of what counsel categorised as a collateral agreement, namely that by the letter, dated 13 March 1996, the first defendant, to induce the plaintiff to enter into the contract, promised to obtain from property owners their consent to the assignment; there is also the claimed liability of the second defendant for the plaintiff’s loss.
Earlier in these reasons I found that Mr Searles agreed to obtain the relevant consents which he, and therefore the first defendant, knew it was necessary to obtain to give effect to the “assignment of the right to managements”, one of the subject matters dealt with in Exhibit P3. That letter is the first defendant’s letter. Each of Mr Kavanagh and Mr Searles, in their dealings with each other, were representing their respective companies, and I find that Mr Searles’ agreement to obtain property owners consent was made on behalf of the first defendant; there is no suggestion that Mr Searles acted without the authority of the first defendant. The plaintiff (by Mr Kavanagh) was conducting negotiations with the object of entering into a contract with the first defendant - there was no intention on the plaintiff’s part to enter into any contractual relationship with Mr Searles.
I am satisfied that in the context of the letter Exhibit P3, Mr Searles told Mr Kavanagh that the consent of each property owner would be obtained, and he also told Mr Kavanagh, prior to 29 March 1996, that the obtaining of consent was in hand.
As to the first statement, I am not persuaded to accept the plaintiff’s submission that it was an actionable misrepresentation. There are cases where a pre‑contractual statement may be both promissory and a representation, so giving the representee a choice of contract or misrepresentation remedies if the statement induced the representee to enter into the contract: Alati v Kruger (1995) 94 CLR 216. To be actionable as a misrepresentation, however, it must be proved that the representation was of some existing or past fact and that it was false. I am not persuaded that the plaintiff has discharged the onus of proving that the representation, by Mr Searles, that the consent of owners would be obtained was false in the sense that when the statement was made it was untrue or Mr Searles, as the first defendant’s agent, was recklessly indifferent whether it was true or not as an expression of the state of mind of the first defendant at the time the statement was made. The representation was made on or about 12 March 1996 and it appears there was time enough for consent to be obtained by the date of the contract. I therefore find that the first statement was promissory, and it was the subject of a collateral agreement between the plaintiff and the first defendant the consideration for which was the plaintiff entering into the contract. That being the case, neither s8 of the Misrepresentation Act nor s35 of the Land and Business (Sale and Conveyancing) Act (the LBA) is relevant to the first statement.
The second statement, in my opinion, conveyed that the consent of property owners was being obtained in time for the completion of the contract. It may be that Mr Searles thought (as he said in evidence) that the consents could be obtained after the completion date, but I find that is not what his words, to the effect “they are in hand”, objectively meant and as Mr Kavanagh understood them.
The first defendant submits that the plaintiff cannot succeed in its claim against the first defendant for any such breach of a contractual promise or representation; it relies on Clause 17 of the contract, the provisions of which are set out earlier in these reasons.
Clause 17 is wide enough, and precise enough, to exclude the plaintiff from relying on the promise, by way of a collateral agreement, that the first defendant would obtain the consent of each property owner. Clause 17, however, further purports to debar the plaintiff from reliance on a representation made concerning the subject matter of the contract, which would include the statement by Mr Searles that the obtaining of consent was in hand. Section 35 of the Land and Business (Sale and Conveyancing) Act, 1994 provides:
“35. No term or provision of an agreement for the sale and purchase of land or a business prevents a party from claiming or being awarded damages or other relief in respect of misrepresentation in connection with the sale or purchase of the land or business.”

That which the first defendant sold to the plaintiff was, as I find, a business for the purposes of the LBA. It follows that Clause 17 of the contract would not preclude a claim by the plaintiff for damages for misrepresentation.
It is objected that the Statement of Claim does not allege as a cause of action any misrepresentation by the first defendant, or by Mr Searles in his personal capacity.
On the second day of the trial, the plaintiff applied to amend its Statement of Claim to plead causes of action, against both defendants, for fraudulent misrepresentation relying on the Misrepresentation Act, and also, as against the first defendant, a claim that the first defendant was in breach of the LBA for an alleged failure to comply with provisions of that Act concerning, inter alia, the provision of a vendor’s statement. The defendants opposed the application. After hearing submissions by both counsel, the hearing was adjourned, ultimately until 2.15pm on that day, so that the plaintiff could produce a draft of the precise amendments it sought to make to the Statement of Claim. On resuming after the adjournment, the plaintiff abandoned the application to amend the Statement of Claim. An application to amend the Reply was, effectively, not opposed; the Reply was amended by the plaintiff adding a reference to s8 of the Misrepresentation Act and s35 of the LBA in its plea to the defendants’ reliance on Clause 17 of the contract.
In light of those events, the plaintiff cannot assert a cause of action against the defendants, or either of them, in misrepresentation founded on the second statement. It follows, in my opinion, that there is no issue before the Court of there having been a misrepresentation by the defendants, or either of them, giving rise to an action based upon the Misrepresentation Act, and there can be no reliance on s8 of that Act; the section does not come into play until it is determined a person has a liability in misrepresentation for the purposes of that Act. Similarly, s35 of the LBA has no effect until an issue of damages or other relief for a fraudulent representation is before the Court. There is no such issue in this case, therefore, s35 is irrelevant.
It is the plaintiff’s case that the collateral agreement between it and the first defendant included (vide the letter Exhibit P3) a warranty that the properties comprising the rent roll were “secured” for periods ranging from one to three years.
In their amended Defence the defendants pleaded (paragraph 2.5)
“Each of the properties subject to the commercial management property rent roll was subject to an agreement in the BOMA form for an initial period of 1-3 years, but terminable by 90 days notice to be given by the owner of any property at any time during the term of the agreement, which was or should have been known to the plaintiff on or before the 29^th day of March 1996.
Particulars
The defendants’ books, agreements, papers, and files were made available to the plaintiff for the plaintiff’s inspection at all times before the 29^th day of March 1996.”
In its Reply, the plaintiff pleaded
“(5)   as to paragraph 2.5 of the Amended Defence the plaintiff:
(a)     Admits that the second defendant informed the plaintiff by letter dated the 13^th day of March 1996 that each of the properties subject to the commercial management property rent roll was subject to an agreement in the BOMA form for an initial period of 1-3 years but terminable by 90 days notice to be given by the owner of any property at any time during the term of the agreement.
(b)    Admits that its director the said Terrence Greer Kavanagh was told by the second defendant only some three or four days before the said 29^th day of March 1996 that the records of the first defendant were available for inspection at which time the plaintiff was engaged in making arrangements for finance, stationery, licence and other matters in addition to which the said Terrence Greer Kavanagh as the director of the plaintiff reposed complete trust in the second defendant because of his long time friendship with him and therefore made no inspection of the said records before executing the said contract.”
There is, then, no issue that the BOMA management agreements were for an initial period “of 1-3 years ... terminable by 90 days notice ...” or that the first defendant’s “records”, including the BOMA management agreements, were available for the plaintiff’s inspection. As to the latter point, Mr Kavanagh’s evidence was that after the events on 15 April 1996 he and Ms Dixon searched for the agreements and located some but not all of them. However, the plaintiff submits that the letter P3 asserts that the properties “are secured” therefore warranting that at the date of the letter each of the properties was the subject of a “current” BOMA management agreement; further, the plaintiff relies on the terms of recital (3) to the contract, by which the first defendant agreed to sell “the right to manage the rent roll” to submit that the right meant an entitlement to earn a commission upon BOMA management agreements, each of which was warranted to be extant on the date of completion, or at the least at the date of the contract, and by reason of the manner in which the price for the rent roll was fixed, it was warranted that each of the BOMA agreements was current for 12 months at least from the date of completion of the contract, although terminable on 90 days notice.
The evidence (Exhibit P31), I accept, is that in five cases (002/076, 090, 091, 092 and 099) the BOMA management agreements with the relevant property owners had expired before the date of completion (1 April 1996) by effluxion of time, and in another case (072) the agreement expired on 30 April 1996.
In my opinion, the terms of the letter did warrant or represent as an inducement to the plaintiff to enter into the contract that at the date of completion of the contract each of the BOMA management agreements was for an initial term “of 1-3 years”, was extant, that is the term had not expired by the effluxion of time, and was terminable by the property owner on 90 days notice. However, by Clause 17 of the contract, the plaintiff is precluded from relying upon such a warranty as a collateral agreement and if it was a representation, the plaintiff makes no claim in misrepresentation, having abandoned an application to plead that as a cause of action.
The plaintiff being precluded from relying on any warranty or promissory representation which is not expressed or implicit in the contract, the issue is whether by the terms of the contract alone, construed in light of its subject matter, the first defendant is in breach of it in respect of those management agreement where:
(a)     the term had expired; or
(b)     the remaining term was for less than a year; or
(c)     the relevant property had been sold by the property owner.
by the date the contract was completed.
I have already found that the first defendant, by the terms of the contract, was contractually bound to obtain the consent of the relevant property owners to the plaintiff having the right to manage the property the subject of a BOMA management agreement.
In all but a few cases, the material agreements were identified in the proceedings. That Mr Kavanagh did not read them, or any of them, before completion of the contract is irrelevant to the issue with which I am presently dealing. Therefore, in relation to the agreements which by the date of completion had already expired or had less than 12 months to run, the first defendant’s right to manage (which it agreed to sell to the plaintiff) was nevertheless to be found in the relevant agreement and by the contract the first defendant was bound to obtain the property owner’s consent to the plaintiff obtaining that right, but that is all it was bound to do; by the contract the first defendant did not warrant that the BOMA management agreements, which I have found were a subject matter of the contract, had not expired or would remain on foot for any particular period. Nevertheless, that which the plaintiff should have obtained, the right to manage, but did not because of the first defendant’s breach, is to be identified from each of the relevant BOMA management agreements. By the contract the first defendant agreed to provide to the plaintiff the advantage of the right to manage, with the opportunity to earn fees from that management: “... there can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity.” Sellars v Adelaide Petroleum (1994) 179 CLR 332, 349.
In my opinion, the plaintiff’s damages are to be assessed on the basis that, on the completion date, each of the property owners had consented to the assignment so that the plaintiff became entitled to the same rights as those of the first defendant pursuant to the relevant BOMA management agreement.
Of course, the right to manage did not mean that for the balance of the unexpired term of a particular agreement there would be an uninterrupted stream of fees on collected rents - during the term
·    the property owner may have ceased to be the owner of the property, in which case the entitlement to commission ceased.
·    the property owner (or the agent) may have terminated the agreement on 90 days notice given at any time, in which case the entitlement to commission would cease at the expiration of the notice.
·    the premises may become vacant, in which event no commission would be earned during the period of the vacancy.
Further, the cessation of Mr Millar’s employment with the plaintiff gave rise to a risk that the owners of the properties for which Mr Millar had been responsible, would follow him notwithstanding the earlier consent to the assignment.
As to those agreements where the term had expired by the date of completion of the contract, the agreement continued until terminated by the property owner or the agent upon one month’s written notice.
The general principle for the assessment of damages “is that ‘where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed’”: Wenham v Ella (1972) 127 CLR 454 at 471 per Gibbs J. citing Robinson v Harman (1848) 1 Exch. 850 at 855 per Parke B. That principle is subject to the limitation stated in Hadley v Baxendale (1854) 9 Exch. at 354 that the damages which the innocent party ought to receive should be such as may fairly and reasonably be considered to arise naturally or to have been in the contemplation of the parties at the time the contract was made. As to that limitation, Gibbs J, in Wenhams’ case, referred to the meaning of it given by Lord Reid in C. Czarnikow Ltd v Koufos (1969) 1 AC 350 at 385.
“The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such a loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.”
There are difficulties in assessing the plaintiff’s loss, but as Barwick CJ observed in Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 at 26 “... a tribunal of fact must do the best it can in assessing damages”.
In my view, there should also be brought into account the loss of the plaintiff’s opportunity (because there was no assignment) to negotiate for a new agreement with the property owner in those cases where the term of the agreement had expired before the completion of the contract. Further, in my view, even in the case of the management agreements where the term had expired by the date of the contract there is evidence that property owners, before April 1996, had been content to let the agreement continue on a monthly basis during the first defendant’s management. That is a matter to which regard should be had in assessing the plaintiff’s damages.
The plaintiff claims damages in relation to the thirteen properties listed in paragraph 10 of the Statement of Claim. The defendant’s submission is that if the court were to find that the first defendant is liable to the plaintiff for breach of contract, by failing to obtain the consent of property owners, then whether or not the term of a particular agreement in paragraph 10 of the Statement of Claim expired before or after 1 April 1996 damages should be assessed, as (broadly) the fees the plaintiff would have received if the property owner had given 90 days’ notice, counted from 17 April 1996 (the date the plaintiff wrote to each property owner), determining the agreement.
I do not accept that as being a sound basis upon which to assess damages. It assumes, in the case of each management agreement, that even if the property owner had consented to the assignment by the date of the contract the property owner would have subsequently terminated it by notice.
As I observed earlier in these reasons, the monthly fees which could be earned pursuant to the BOMA management agreements with the Falland Group exceeded in aggregate the monthly fees payable by all the other property owners. The Falland Group agreements (019-022 inclusive) yielded to the first defendant fees, as a percentage of the rents, averaging $4,354.37 per month in the period January to March 1996 inclusive (Exhibit P12). At the date of completion, the term of the Falland Group agreements was until 31 March 1998, that is 24 months remained from the date of completion of the contract. Had the Falland Group consented to the assignment, the plaintiff would have had the opportunity to earn fees totalling $104,504.88.

The same method of calculation, using the unexpired term and the monthly average of fees, produces

Property Code

Name

Aggregate of Possible Fees to End of Term

Plaintiff received fees

072

McDonough

$        235.47

$   446.82

096

Butterworth

$     3,394.32

$   150.09

107

Dryga

$     1,281.87

$   104.68

110

Belosevic

$    26,712.00

$1,429.53

102

Yipp & Lau

$     3,640.05

$    nil

TOTAL

$    35,263.68

$2,131.12

Add Falland Group

$ 104,504.88

$4,455.61

TOTAL

$ 139,768.56

$6,586.73

As to the remainder of the properties included in the plaintiff’s claim (paragraph 10 of the Statement of Claim)
(a)090 owned by Blunden. The term of this agreement expired on 31 March 1996. It therefore continued month to month thereafter. The average fees were $626.10 per month. The plaintiff in fact received fees of $2.79.
(b)101 owned by Pal Properties. The term of this agreement was to expire on 31 July 1998. On 3 June 1996 the plaintiff received a letter (MFI P13) from Pal Properties to the effect that the property had been “taken over by new proprietors”; the letter also purports to confirm that Mr Searles had been told in February 1996 that “the property management would (sic) with your company would cease on the settlement of the deal”. Mr Searles (T427) said that he had been told before 29 March 1996 there were discussions about an internal sale. He denied being told that a sale had occurred or anything to the effect that the first defendant’s management would cease on “the deal going through”. The author of the letter was not called. I am not satisfied that the first defendant knew, on or before the date of the contract, that Pal Properties no longer owned the property and I do not accept the plaintiff’s submission that the first defendant had a contractual obligation to inform the plaintiff of a possibility the property might be sold. The plaintiff cannot succeed upon a claim for damages with respect to this property. The plaintiff, in fact, received fees of $1,150.00.
(c)091 owned by Holyoak. The term of this agreement expired on 31 March1996. It therefore continued month to month thereafter. The average fees were $113.55 per month. The plaintiff in fact received fees of $168.54.
(d)092 owned by Dr Kerr. The term of this agreement expired on 30 April 1995. It therefore continued month to month thereafter. The average fees were $88.66 per month. Mr Kavanagh said he knew the owner and he was told by the owner, on a date after 1 April 1996, that the property had been sold to a partner of the owner by an agreement entered into prior to March 1996 and that this information had been made known by the owner to the first defendant.
Mr Searles’ evidence is that this property was one of those for the management of which Mr Millar was responsible. He said he was not aware that prior to 29 March 1996 there was a contract for the sale of this property. Mr Searles was referred to Exhibit P27, comprising an exchange of correspondence in July 1996 between the solicitors for the parties. To an allegation in a letter from the plaintiff’s solicitors, dated 8 July 1996, that:
“the agreement with respect to the (Kerr) property expired on 30 April 1995 and there was a long standing agreement to sell to the tenant as at 1 July 1996”
the first defendant’s solicitors replied:
“the position concerning the agreement to sell to the tenant was disclosed in the relevant file. Your client should have been aware of this as a result of his inspection.”
Mr Searles said he does not recall inspecting any of the first defendant’s files between 29 March and 1 April 1996 and he did not inspect them thereafter. He said the information in the letter from the first defendant’s solicitors “would have to have been advised to me from Mr Gary Millar who was managing the file”. Exhibit P27 was tendered without comment, or objection. In those circumstances the content of the letter from the first defendant’s solicitors constituted an admission of the truth of that which is reproduced above; it is to be inferred that the first defendant knew that, at the latest, Kerr would cease to be the owner of the property on 1 July 1996. However, I infer that if the plaintiff had inspected the first defendant’s files it would have been aware of the owner’s agreement with his tenant; in the absence, as I have found, of any actionable warranty or misrepresentation that this property had not been sold, in my opinion, the fact of the sale does not sound in damages. The plaintiff received fees of $262.32.
As I observed earlier, the management agreements with the Falland Group constituted a substantial part of the business purchased by the plaintiff. Each of those properties was managed by Mr Millar; he also managed the properties 090, 072, 107, 091 and 092. The owners of those properties, who chose to engage Brocks, did so at Mr Millar’s instigation. However, were the first defendant by the date of the contract to have obtained the consent of property owners to the assignment to the plaintiff’s agreements, I see no reason to suppose that any property owner would have terminated that owner’s agreement, except in accordance with the terms of the agreement, even if Mr Millar had solicited their business after the date of the assignment.
The plaintiff, on its approaches to owners, was able to obtain an appointment by twelve property owners and, as I understand Mr Kavanagh’s evidence, the plaintiff retained its position as agent although in all but two cases the appointment was on a monthly basis. From that evidence I infer that the plaintiff, by Mr Kavanagh, was competent to successfully discharge the duties involved in the management services it provided.
The plaintiff presented its case on the basis that by the first defendant’s breach of contract, the plaintiff suffered loss and damage equal to 12 months fees which it could have earned but for the breach; that basis for assessment is founded on the method by which the component of the price for the purchased rent roll was calculated, that is 12 times the monthly fees being received by the first defendant for management of the properties listed in Schedule 1 to the contract. Consistent with the authority of Czarnikow (supra), in my view the first defendant, at the date the contract was entered into, knew, or reasonably should have known, on the information it had that the plaintiff would derive no benefit from the management agreements the consent of the owners to the assignment of which was not obtained by the first defendant, or was not subsequently obtained by the plaintiff. In my opinion, the plaintiff’s quantification of its claim is a basis by reference to which to assess damages. However, the simple arithmetical calculation put forward by the plaintiff is not justified by the evidence. It ignores the departure of Mr Millar from the plaintiff’s employment, and other events to which I have referred affecting some of the agreements listed in paragraph 10 of the Statement of Claim.

I am satisfied that the plaintiff took reasonable steps to mitigate its loss by seeking to obtain consent after the events of 15 April 1996.
The substantial component of the damages claimed by the plaintiff concerns the Falland Group and Belosevic Investments; having regard to the term of the management agreements with each of those owners the plaintiff lost the opportunity to earn for a period of 12 months from the date of the contract fees aggregating $61,156.44.
The defendant’s submission on the issue of damages as I observed earlier was (broadly) that the plaintiff’s damages should be confined to fees for 90 days, on the footing that even in the best possible case a property owner was entitled to terminate a management agreement by notice of that length at any time during the term of the agreement. That of course is correct and the existence of the property owner’s right to terminate on such a notice is a factor to be taken into account but it does not, in my opinion, mark out the upper limit of the plaintiff’s damages as the defendants’ submission implies.
In the case of the Falland Group, the person with the responsibility for managing that Group’s properties was, and had been for some years, Mr Millar. Mr Kavanagh, on his own evidence, judged that the fee income for the whole of the rent roll was insufficient to warrant the plaintiff continuing to employ Mr Millar at the remuneration he had enjoyed with the first defendant. There was, as I assessed Mr Falland’s evidence, a significant risk that the Falland Group would follow Mr Millar; however, because of the first defendant’s failure to obtain the Falland Group’s consent to the assignment, the plaintiff was effectively deprived of the opportunity to make a case for the Group to remain with the plaintiff.
The responsibility for the management of Belosevic’s property was with Mr Searles. The term of the agreement expired on 31 March 1999. After 15 April 1996, upon an approach by the plaintiff, Mrs Belosevic consented to the assignment to the plaintiff, but on 2 May 1996 Mr Belosevic wrote stating that he was the owner of the property, that he declined to assent to the assignment and that he had appointed Brocks (Exhibit D23).
As to each of the Falland Group and Belosevic matters, there is no evidence whether or not any of the properties was sold, or became partly or wholly vacant, in the period of 12 months after completion of the contract. If such an event had occurred, it is to be expected the defendants would have adduced evidence of it. From Mr Falland’s evidence I conclude there was a significant risk that upon Mr Millar ceasing his employment with the plaintiff, the Falland Group would have followed him, even if consent to the assignment had been obtained by the date of the completion of the contract. Balancing that against the plaintiff’s more advantageous position if consent had been obtained by the first defendant I assess the risk at 30% and allow this component of the plaintiff’s damages at $36,576.70 less the fees of $4,455.61 received by the plaintiff, namely $32,121,09.
In relation to the Belosevic matter, as I have said this property was managed by Mr Searles. Were consent to have been obtained by the first defendant, it is unlikely Mr Belosevic would have terminated the management agreement during the 12 months after 1 April 1996. I assess this component of the plaintiff’s damages at $8,904 less $1,429.53 the fees the plaintiff received, namely $7,474.47.
Blunden Investments Property was also managed by Mr Millar. The term of the agreement expired on 31 March 1996 having commenced on 23 March 1995. The risk that after consenting to an assignment this property owner would have followed Mr Millar was significant. In this case I adopt the same basis I used in the Falland Group. I assess damages at $5,259.24 less $2.79 received by the plaintiff, namely $5,256.45.
McDonough’s property was also managed by Mr Millar; the management agreement expired on 30 April 1996. Mr McDonough, after giving 30 days notice, appointed Brocks as his agent; I infer that was done at the instigation of Mr Millar. This case is one where I will use the same basis I used in the Falland Group. I assess damages at $1,977.69 less $446.00 received by the plaintiff, namely $1,530.87.
The Butterworths property management agreement was to expire on 31 March 1998. It was a property managed by Mr Searles. Except that, on the defendants’ submission (not challenged by the plaintiff), a fee equal to 90 days notice was received by the plaintiff and Brocks was appointed, in my opinion, this case is no different from the case of Belosevic Investments. The average monthly fees were $141.43 (Exhibit P12). I assess this component of the plaintiff’s damages at $1,697.16 less $568.57 received by the plaintiff, namely $1,128.59.
The Dryga property was managed by Mr Millar. The management agreement was to expire on 31 January 1997, that is less than 12 months from the contract completion date. The average monthly fees were $142.43. As I have said, there was no contractual warranty as to the term of any of the several management agreements. I will assess damages in respect of this matter on the same basis as those for the Falland Group. I fix damages at $1,196.41 less $104.68 the fees received by the plaintiff, namely $1,091.73.
The Pal Properties management agreement was the responsibility of Mr Searles. I reviewed earlier in these reasons the events concerning this property. The property was sold whereupon no further fees were payable. Whether a request made before the date of the completion of the contract would have elicited information concerning the previously concluded sale, and led to some adjustment in the purchase price by the plaintiff was not the subject of any clear evidence. The plaintiff in fact received $1,150 in management fees, the average monthly fees being $500. At best, the plaintiff is entitled to nominal damages which I assess in the sum of $1.
The Holyoak property management agreement expired on 31 March 1996. It was managed by Mr Millar. The defendants’ submitted it should be inferred from Exhibit P13 that this property was sold; there is nothing in my reading of that exhibit concerning the Holyoak property - the exhibit deals only with Pal Properties. I will use the same basis as the Falland Group to assess damages. I assess damages at $953.82 less fees of $168.54 received by the plaintiff, namely $785.38.
Yipp & Lau’s property was managed by Mr Searles. The term of the management agreement was to expire on 30 September 1998. The average fees had been $121.35 per month. Mr Kavanagh’s evidence is that a few days after 1 April 1996 he went to this property and discovered it was “totally vacant”. He identified a document, dated 24 April 1996, signed by Lau consenting to the assignment to the plaintiff of the management rights; he said the other owner, Yipp, would not agree. By a letter dated 5 June 1996 (Exhibit D25) signed by both owners, the “leasing and management agency of (the premises)” was terminated. Mr Kavanagh said that to his knowledge the premises remained vacant until a restaurant was opened no earlier than late in 1996. His evidence is “I was under the impression that the owners may have been managing it themselves”; by “it” I infer he meant the property not the restaurant. When it was that the premises became vacant there is no evidence - Mr Searles said he “could not comment” whether or not they were vacant on 1 April 1996. He said he was “aware” the restaurant “was leaving” and that Brocks were looking for a tenant, but he could not say when it was he had that awareness.
It is the case, as Mr Kavanagh acknowledged, that pursuant to the management agreement no fee was payable by a property owner while the premises remained untenanted; for any service performed by the agent concerning vacant premises, Mr Kavanagh agreed that the agent would have to negotiate with the owner for a fee.
Upon this evidence I conclude that even if Yipp and Lau’s consent had been obtained by the first defendant it is likely Yipp and Lau would have terminated the management agreement after the premises had been vacant for some two weeks; no fees would have been received by the plaintiff. Only nominal damages, which I assess at $1, can be awarded for the first defendant’s breach.
Dr Kerr ceased to be the owner of the property, the subject of the management agreement, on the 1^st July 1996. As I have said there was no actionable warranty or misrepresentation by the defendant which entitles the plaintiff to the damages it seeks. I assess the plaintiff’s damages in the nominal sum of $1.
There will be judgment for the plaintiff against the first defendant in the sum of $49,391.58. The action against the second defendant is dismissed. I will hear the parties as to interest and costs.

Property Code	Name	Aggregate of Possible Fees to End of Term	Plaintiff received fees
072	McDonough	$ 235.47	$ 446.82
096	Butterworth	$ 3,394.32	$ 150.09
107	Dryga	$ 1,281.87	$ 104.68
110	Belosevic	$ 26,712.00	$1,429.53
102	Yipp & Lau	$ 3,640.05	$ nil
TOTAL	$ 35,263.68	$2,131.12
Add Falland Group	$ 104,504.88	$4,455.61
TOTAL	$ 139,768.56	$6,586.73