Cookson v Khneiger (NO. 2) - [2012] SADC 109

District Court of South Australia
(Civil)
COOKSON v KHNEIGER & ANOR (NO. 2)
[2012] SADC 109
Judgment of His Honour Judge Brebner
31 August 2012
CONTRACTS - PARTICULAR PARTIES - VENDOR AND PURCHASER - DISCLOSURE OF MATERIAL FACTS
Plaintiff purchased a Cafe from the defendants. In contravention of statutory obligations male defendant did not disclose proposed adjacent building works which adversely affected trade.
Held: Defendants liable to compense plaintiff for true value of business and loss of opportunity to achieve greater profits.
Land and Business (Sale and Conveyancing) Act 1994; Fair Trading Act 1994; A New Tax System (Goods and Services Tax) Act 1999; Trade Practices Act (Cth) s82, referred to.
Cookson v Khneiger and Anor (2008) SADC 97; Browne v Dunn (1893) 6 R 67; Precision Plastics Pty Ltd v Demir (1975) 132 CLR 362; R v Birks (1990) 19 NSWLR 677; R v Rajakama (No 2) 2006 15 vr 592; Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1; Crosthwaite v Corporation of the City of Elizabeth (1989) 1951 SASR 105; Reid v Kerr (1974) 9 SASR 367; Kuhl v Zurich Financial Services Australia and Anor (2011) 276 ALR 375; Kelly v The Queen (2004) 218 CLR 216; Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd ACN 087011541 [2008] FCA 1591; Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; Parkdale Custom Built Furniture Pty Ltd v Puxu Ltd (1982) 149 CLR 191; Butcher v Lachlan Elders Realty Pty Ltd (2004) 218 CLR 592; ACN 068691092 & Anor v Plan 4 Insurance Services Pty Ltd & Ors [2012] SASCFC 25; Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193; Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82; RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164; Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd (1997) 69 SASR 288; Marks v GIO Australia Holdings (1998) 196 CLR 494; Johnson v Berez (1998) 166 CLR 356; Brown v Dream Homes SA Pty Ltd (2008) 102 SASR 93; Kizbeau Pty v WG & B Pty Ltd (1995) 184 CLR 281; Kenny & Good Pty Ltd v MGICA (1992) Limited (1999); Henville v Walker (2001) 206 CLR 459; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (22002) 210 CLR 109; Spencer v The Commonwealth (1906) 5 CLR 418; Forston v Commonwealth Bank of Australia and Anor (2008) 100 SASR 162, considered.

COOKSON v KHNEIGER & ANOR (NO. 2)
[2012] SADC 109

This is a claim for damages said to have been caused by contraventions of the Land and Business (Sale and Conveyancing) Act 1994 and the Fair Trading Act 1994 (the LBSCA and the FTA respectively).
The plaintiff purchased a café business from the defendants. Some six months later a major construction project commenced on premises immediately adjacent to the café (the project, the apartments project or simply the apartments). The work interfered with the ambiance of the café and with access to it. Turnover and profits declined. Some months later another construction project also commenced in the near vicinity of the café (the second project). Profits declined still further. The plaintiff’s rent fell into arrears. The landlord distrained and the plaintiff ceased trading.
The defendants had provided the plaintiff with the disclosure statement required by the LBSCA. The statement was signed by both defendants. The statement assured the plaintiff that the defendants were not aware of “any written notice served on the landlord or licensor, or any other circumstance that may positively have a significant adverse effect on the business.” (the assurance).
It is the plaintiff’s case that the defendants knew of the proposal to build the apartments at the time they gave the assurance, that the knew that construction of the apartments might have a significant adverse financial effect on the business if the project went ahead, that they well knew that the assurance was false at the time that they gave it and that they thus contravened both the LBSCA and the FTA. It is also the plaintiff’s case that she has suffered prejudice and financial loss as a result of the defendant’s contraventions.
To the contrary, it is the defendant’s case that they knew nothing about any proposal to build the apartments when they gave the assurance, that they thus did not contravene either Act, and that even if they did so, the plaintiff did not suffer any relevant prejudice or loss as a result.
The plaintiff’s claim succeeds. There will be judgment for the plaintiff in the amount of $54,000. My reasons are as follows.
Background
The trial is a retrial. In Cookson v Khneiger and Anor (2008) SADC 97 another judge of this Court found in favour of the plaintiff. The defendants appealed. In Khneiger v Cookson [2009] SASC 203, the Full Court ordered a retrial. For convenience, some passages of these reasons are adapted from the reasons of Kourakis J (as he then was) in the Full Court.
Issues
The fundamental factual issues are whether the plaintiff has proved that at the time the defendants gave the assurance they knew of the proposed project and recognised its potential financial effects on the businesses and, if so, whether the plaintiff relied on the assurance, and again if so, whether she suffered prejudice and loss as a result.
Throughout these reasons I will use expressions like “proved”, or “satisfied”, or “I find” and whenever I do I will be meaning proof, satisfaction or findings on the balance of probabilities.
The café itself, the parties and the day to day operation of the business
The café traded as “Café Purple”. It is situated on Austin Street Adelaide. Austin Street is L shaped. It runs directly south from the southern side of North Terrace. It then turns at right angles and runs east towards Pulteney Street. The north / south section extends for a short distance further south from the right angle to the entrance to the Renaissance Arcade. The arcade consists of two sections. The first section runs south from Austin Street to Rundle Mall. The second section runs west from Pulteney Street and intersects with the first section at right angles before continuing to Charles Street to the east. The arcade has four entrances. The first opens onto the southern extension of Austin Street. The second opens onto Rundle Mall adjacent to the Richmond Hotel. The third opens onto Pulteney Street and the fourth opens onto Charles Street.
The Arcade contains a number of strata titled units. The various units were owned by a number of different entities. The café was housed in one of these units and both the defendants and the plaintiff in turn leased the unit from its owner. The landlord also owned other units within the arcade and he retained property managers to collect the rents and to attend to any negotiations with the various tenants including the parties themselves.
The café is situated on the eastern side of the southern extension of Austin Street adjacent to the northern entrance to the arcade. The postal address of the café was said to be 29 Renaissance Arcade Adelaide, or 46 Austin Street Adelaide. The two addresses are significant.
The John Martins (as it was then called) car park is situated on the western side of the north/south section of Austin Street. The car park is multi-storied. The University of Adelaide and the University of South Australia are both situated on the northern side of North Terrace. At some relevant times the café’s patrons included people who worked at the Universities, John Martins, within the arcade itself or on Rundle Mall.
The plaintiff is a Ms Cookson. By the time she purchased the café she had some 20 years’ experience in the hospitality industry, mainly in hotels. She was also qualified to lecture in hospitality. Her only experience of operating her own business was when she owned a shoe shop when she was in her twenties. The café was the first business of its kind that she had ever operated but she had extensive experience in running hotels.
The defendants are husband and wife. Mr Khneiger originates in Syria. He has accountancy qualifications in that country. He met and married his wife in Syria and they came to Australia in 1980. He has extensive experience in operating cafes and also in the building industry. The defendant’s purchased the café in 1996.
Initially both defendants worked in the café. After about 18 months the male defendant spent less time in the café and more and more time working in the building industry leaving the day to day running of the café to his wife. For practical purposes, and from about early 2000 onwards, two of the defendants’ daughters, being a Mrs O’Brien and a Mrs Mattiazzo, took over the running of the business. From then on the male defendant would visit the café early most mornings and then go and occupy himself with his building work. After O’Brien and Mrs Mattiazzo took over the running of the business the female defendant would only go to the café if an emergency arose. Notwithstanding these arrangements, the male defendant remained the principal of the business for all relevant purposes and, as the female defendant said, he generally handled the business side of the café.
Evidence
The café is within the Adelaide City Council district. The council maintains computerised records of the names and addresses of all property owners and occupiers within its district.
From 24^th February 2000 onwards the male defendant’s name and address was recorded by the council as J Khneiger, Café Purple, 46 Austin Street, Adelaide 5000.
As of the end of 1999 management of the group of strata units (the units) which included the unit occupied by the café was in the hands of property managers who were acting as agents for Elders Property Managers.
According to the male defendant, any correspondence he received from Elders was addressed to him at Shop 29, Renaissance Arcade.
The male defendant said that during 1999 he and his wife discussed selling the business. The reasons he advanced for why they were contemplating doing so do not, on their face, invite suspicion. He said that towards the end of 1999 he had discussions with two agents about selling the business but that nothing came of if.
In early 2000 an employee of Elders named Jones took over the management of the units. As of January 2000 the defendant’s rent was in arrears. Mr Jones said that he would have attended the arcade at least once a week and he said that he had a number of dealings with the male defendant over the ensuing months.
In particular, Mr Jones said that he first met the male defendant in January 2000. He said that he spoke to him about his arrears. He said that the male defendant raised some concerns with him about maintenance in Austin Street to the west of the café. He said that the male defendant sought a rent reduction because he had been cleaning and maintaining this area. He said that he told the male defendant that the area was the Council’s responsibility and that a reduction in rent would not be forthcoming. Mr Jones said that the male defendant raised this topic with him on a regular basis.
Mr Jones went on to say that from then on he spoke to the male defendant on a weekly basis. He said that he collected rent and arrears from the café until his tenure as manager came to an end in about September or October 2000. He said that he “predominantly” collected the rent from the male defendant and that he observed him working behind the counter on almost every occasion that he visited the café.
Mr Jones also said that during the early stages of his tenure as manager the defendant introduced him to his wife and their daughters.
In March 2000 an application for development approval to construct 89 apartments on top of the car park to be known as Martin Towers was registered with the Development Assessment Committee of the council.
A Mr Hutchins was involved in assessing the application.
Mr Hutchins said that in early July 2000, and in conformity with its obligations, the council compiled a list of names and addresses of property owners or occupiers in the area of the proposed development who might be effected by the apartments if development approval were to be granted. He said that the names and addresses which were placed on the list would have been sourced from the council’s records. He said that the names of those people or entities who were to be notified about the proposed development were then highlighted.
Mr Hutchins said that a common form letter (the letter) was then generated and addressed to each individual or entity whose name had been highlighted. He said that each letter would have been addressed to the mailing address “in the system” however; he could not say if the addresses in the system were the same as those on the list. He said that each letter would have been printed and then checked against the list and ticked off on the list. He said that all of the letters would have been printed at the same time and that the names of the addresses would also have been checked against the list at the same time. He said that each letter would then have been signed and placed in an envelope and then into an internal council mail system for ultimate collection by Australia Post. He said that compilation of the list would have been completed by the 6^th of June 2000.
Relevantly, the letter reads as follows:
“Re: Invitation to comment on a Development Application at 215-225 North Terrace ADELAIDE SA 5000.
An application has been received to construct 89 residential apartments above the existing public carpark at the above property, more fully described by plans DA/1072/1999.
You may obtain further information and view plans of the proposal
(immaterial).
Your written comments are invited and will be taken into consideration by Council when it makes a decision on the proposal.
(immaterial).
(immaterial).
Please complete the attached form and forward it to the Chief Executive Officer, GPO Box 2252, Adelaide, 5001, by 5.00pm on 20 July 2000.”
The form referred to was a blank pro forma for any comments.
There is no evidence that there were any car parks in the vicinity of the café other than the John Martins car park. The letter is in simple terms. I am satisfied that any occupiers of premises in the vicinity of the car park who received the letter would have instantly concluded that the letter had been sent to them because they were situated where they might be effected by the proposed development and that as the John Martins car park was the only car park in their immediate vicinity, it must have been the car park concerned.
I am also satisfied that any such person would have also concluded from the letter that approval was being sought to undertake a major construction project and that as the car park abutted Austin Street at least some sections of Austin Street might be transformed into a construction site if the proposed project were to proceed.
The questions of whether the defendants ever received and read the letter and of whether they learned of the proposal from other sources thus assume critical importance.
Copies of each letter were retained in the council’s records. The council ultimately generated a copy of the letter which was said to have been posted to the defendants. It is dated 11^th July 2000 and addressed to J. Khneiger and T. Khneiger, C/- Café Purple 46 Austin Street Adelaide.
The male defendant said that he had no recollection of ever receiving the letter and that if he had he would replied to it. The female defendant said that she did not see the letter at any relevant time.
The male defendant said that the postal address of the café was in fact 29 Renaissance Arcade and not 46 Austin Street. He said that he did not know of any premises in the area which were numbered 46. He said that he did not recall whether he had ever received any correspondence addressed to him at 46 Austin Street.
Mr Hutchins said that the council had no particular system in place for recording mail which was returned undelivered. He said that generally speaking returned mail was placed on the relevant file, or noted on the file and then sent elsewhere. He said that he had checked the relevant files and that he had found nothing which suggested that any of the letters had been returned undelivered. He said that he could not say with certainty that any undelivered letters would definitely have been returned to the council or whether any had in fact been returned which he had not been able to locate.
Copies of the letter were also sent to the property managers. Mr Jones saw the letter on 14^th July. He said that he then hand delivered copies of it to the tenants he was responsible for and that he did so as soon as possible because he believed that the occupiers had what he described as a right of appeal. He said that he delivered a copy of the letter to the café and that he gave it to “whoever was in attendance at the time”.
With regard to the café, he said that he would have told whoever he spoke to that they should read the letter.
The male defendant said that Mr Jones did not give him a copy of the letter.
Mr Jones said that the copy of the letter he received had a pro forma attached to it for comments about the proposed development. He said that on his own initiative, and without any consultation with any of the tenants, he filled out the pro forma on their behalf stating that their issues with regard to the application were that access to the arcade “must not be impeded in any form”, that the property managers must be advised of the dates that any construction work was due to commence and that the tenant’s quiet enjoyment of their premises “must not be disturbed”. On 21^st July 2000 Mr Jones received a letter from the council signed by the council’s urban planner acknowledging receipt of the pro forma.
In evidence in chief, and with reference to the copy of the letter, the pro forma and the council’s letter of acknowledgement, Mr Jones was asked if he had had “any conversations with Mr Khneiger about the topic that is addressed by those three letters”. He said that discussions did occur but that he cannot remember precisely when and that “out of professional courtesy I discuss anything anyone brought up”. His answers in this regard were somewhat vague and unresponsive, as were his answers on the topic of how many times he actually discussed the situation with the male defendant.
The male defendant said that Mr Jones did not discuss the proposed development with him.
On 12^th July 2000 the development application was reported on page 31 of a weekly newspaper called the City Messenger. The relevant article was headed “Two-Tower Apartments Plan over Johnnies carpark” in medium sized type and it occupied about two column centimetres. Relevantly the article stated “Two apartment towers could be built above the John Martin’s carpark in North Tce by the end of 2002. The plan for Martin Towers was lodged with Adelaide City Council last December and are now under public notification”. The article goes on to state that the proposed development extended to 89 apartments.
It is now necessary to go back in time. At some time while Mr Jones was managing the units some significant construction work took place at the southern end of the arcade. The work interfered with access to the arcade from the southern or Rundle Mall entrance. According to Mr Jones the work commenced in about April to June 2000. He said that he did not receive any advance notice of it. He said that the work severely restricted access to the arcade from Rundle Mall. He said he raised the resultant inconvenience with a number of people including the male defendant.

The male defendant said that the work blocked the southern entrance to the arcade and that he was one of those who were inconvenienced as a result. He said that the entrance was closed from about mid 1999 to mid-2000. He said that he received a letter dated 14^th March 2000 from Elders. He said that he then telephoned Elders because the closure was causing him hardship and that he wanted to negotiate some rent relief in order to relieve the financial pressure. He said that the closure had led to a decline in people passing through the arcade and “some people I just lost coming to the shop”. He said that he eventually negotiated a reduction in his rent but that the person at Elders with whom he had dealt was not Mr Jones.
On 9^th September 2000 Mr Jones wrote to the male defendant informing him that the landlord was prepared to waive one month’s rent because of the inconvenience he had suffered because of the closure.
Mr Jones said that he had discussed the possibility of a rent reduction with the male defendant from about the time the work commenced and that he had first discussed the arrears with him after the work had finished. He said he discussed the landlord’s offer with him but that he cannot now recall whether he accepted the offer or whether the arrears were discharged.
The male defendant eventually discharged his arrears in late September 2000. He said he did not receive the letter offering to waive a month’s rent and he said that there were no discussions between him and Mr Jones about the matter and that he did not discharge his arrears in order to obtain waiver of a months rent.
Returning to the sequence of events, and on 24^th October 2000, the proposed development was also reported in The Advertiser. The relevant article appeared on page seven and occupied at least half the page. It was headed “Council backs ugly city apartment block” in reasonably large black type. The article included a sketch of the car park with the apartments built above. Amongst other things the article stated “Adelaide City Council last night granted planning approval for Martin Towers, a $35 million, eight story complex above the already imposing John Martin’s car park. On 28^th October the Advertiser published three letters to the editor in response to the article. These letters appeared on page 21 under the heading “Bizarre decision on flats”.
In about March 2001, a number of strata units including the unit which housed the café were sold at auction. The male defendant bid unsuccessfully for the unit which housed the café. After the auction a Mr Bullock assumed responsibility for the tenants on behalf of the new owner.
On 2^nd May 2001 The City Messenger published an article headed “Transforming North Terrace”. The article appeared on page 5 and it was headed in medium type. The article included sketches of the proposed apartments above the car park and of another development and it stated that “Work on two apartment towers above the John Martin’s carpark in North Tce is expected to start within six months” and that the council had approved the development the previous year.
In 2002 the defendants decided to sell the business for reasons which, on their face, again do not invite suspicion. The male defendant engaged an agent and the business was advertised for sale.
At some time in 2002 the plaintiff became interested in purchasing a business. She eventually became interested in the café. Over a period of about four to six weeks she inspected the business with the agent on about six occasions and she inspected it on her own on about two further occasions. Each of these inspections occupied some 30 to 40 minutes. She said she regarded the business as well presented and she became attracted to it. She thought it appeared to be busy and she thought that the clientele “seemed to be coming from all sides … especially from the uni side, from North Terrace”. She said the agent introduced her to the defendants. She said that she discussed the business with the defendants on about two or three occasions. She said that they did not say anything to her about the apartments. She said that the agent did not give her any information about them either. She said that she eventually informed the defendants that she was interested in buying the business and that she eventually decided to do so.
The requisite documentation was then prepared. In particular the statement of relevant particulars required by s8 of the LBSCA was prepared. Such statements are usually referred to as a Form 2. The Form 2 must be served on purchasers of businesses at least five days before settlement. The assurance set out at [3] was embodied in the Form 2. The defendants signed the Form 2 on 18^th November 2002. They say that as far as they knew the assurance that they gave in the Form 2 was true. They say that at the time they signed the Form 2 they knew nothing about the apartments. They thus say they were not in breach of the LBSCA and that they did not engage in any misleading or deceptive conduct in contravention of the FTA.
The plaintiff was served with a copy of the Form 2. She said that she read it carefully because the purchase price represented a significant amount of money to her. She said that there was nothing in the Form 2 which suggested to her that she should not proceed with the purchase. She said that she relied on the information in the Form 2 when she ultimately resolved to proceed with the purchase. In particular, she said that she read the assurance and that she relied on it. She said that she knew nothing of the proposed development and that if she had known about it she would not have proceeded with the purchase.
The parties signed the agreement for the sale and purchase of the business on 18^th November 2002. The purchase price was $60,000. Stock in trade was valued at $3,000. Settlement and possession were to take place on 9^th December. The plaintiff said that she borrowed about $60,000 in order to fund the purchase.
Settlement took place and the plaintiff commenced operating the café in her own right on 11^th December 2002. The male defendant worked in the café with her for about a week and he introduced her to some of the regular customers.
Mr Bullock said that the first he knew of apartments was when he received a letter dated 31^st March 2003 from the project managers informing him that the builders intended to apply to the council for permission to close Austin Street for the duration of the project.
The plaintiff received a copy of the same letter on 2^nd April 2003. She said that she knew nothing about the apartments before she received the letter. She wrote back to the project managers expressing her concerns.
Barriers and fences were erected on Austin Street preparatory to the construction of the apartments and equipment was soon brought on site. Concrete was first poured on 31^st July 2003. Austin Street became little more than a construction site on the doorstep of the café, the area immediately adjacent to the café became unwelcoming in the extreme and access to the café from North Terrace along Austin Street became restricted.
In June 2003 the plaintiff’s turnover, that is to say her gross sales, dropped significantly below the average monthly turnover she had previously achieved. Her turnover then rallied in July, dropped again in August, rallied slightly in September, dropped in October and again in November and then dropped significantly in December. On 17^th December 2003 the second project commenced on the north east corner of North Terrace and Austin Street and it continued without interruption until early 2005. When work on the second project commenced access to the café from North Terrace along Austin Street was completely closed until June 2004. Work on the apartments went into abeyance shortly after work on the second project commenced. While work on the apartments was in abeyance, the plaintiff’s turnover fluctuated somewhat, but at a much lower monthly average than before work on the apartments began. The re-opening of access to the café from North Terrace roughly coincided with resumption of work on the apartments and neither event had any appreciable effect on the average monthly turnover the plaintiff had been achieving after work on the second project had commenced.
The two projects were entirely unrelated and were undertaken by different entities. The second project commenced without any notice whatsoever being given.
I will return to the apparent relationship between the plaintiff’s turnover and the progress of the two projects later in these reasons.
From about the time when work on the apartments commenced, the plaintiff saw less and less of some of her regular customers from the University. In all the circumstances this is hardly surprising.
From about March or April 2004 onwards the plaintiff only paid half of her rent as it fell due. She said that this was because her returns were down by a “few thousand” a month and because she thought that the landlord should bear some of the loss.
Eventually the landlord demanded the balance of the rent through Mr Bullock. He also informed the plaintiff through Mr Bullock that he was not prepared to grant her any reduction in her rent unless he received some form of relief from the council. On 14^th March 2005 the plaintiff received a letter from Mr Bullock demanding $11,718.06 in rent currently due, or in arrears, and demanding $2,260.25 for electricity to 1^st February 2005.
The plaintiff did not meet these demands. She said she was in no position to do so. She said that she thought she had done everything she could to save the business, that she had had no desire to be in breach of her lease and that “if I could have thought of another way to go without I probably would have done it”.
On 31^st March 2005 the landlord issued a warrant to distrain in the amount of $13,978.31. The warrant was served on the same day and the plaintiff vacated the premises. She said she did not take any plant and equipment or stock with her.
The male defendant said he eventually noticed that the café was closed. He said that he contacted Mr Bullock, that one thing led to another and that he eventually re-opened the business in about April 2005. He said that he paid the landlord $10,000 in order to resume occupancy of the premises. He said that he then operated the café for about a year and that he then sold it for $37,000 because one of his daughters wanted to start a family.
Knowledge
It is the plaintiff’s case that the defendant’s must have learned of the proposal to build the apartments from the letter, from Mr Jones, from reading about it in The Advertiser or The Messenger, or by word of mouth or by any combination of these means, that they would inevitably have formed the belief that the project might well have a significant effect on the amenity of the café to the detriment of its profitability if it went ahead and that they thus gave the assurance in contravention of both the LBSCA and the FTA.
A preliminary submission
In reliance on the rule of practice propounded in Browne v Dunn (1893) 6 R 67, as applied in Precision Plastics Pty Ltd v Demir (1975) 132 CLR 362, counsel for the defendants, Mr Brohier, submitted that the plaintiff was bound by some of the evidence which the defendants and some of their witnesses had given because her counsel had allowed the evidence to pass unchallenged in cross-examination.
To the contrary, counsel for the plaintiff, Mr Ross-Smith submitted that both the defendant’s and the witnesses concerned had been given ample opportunity to provide their explanations in chief and that therefore there was no obligation on him to issue any challenges. Additionally, he submitted that his failure to put certain aspects of the plaintiff’s case to the defendants and the witnesses concerned did not preclude him from contending that those aspects of the plaintiff’s case had been properly established and ought to be accepted.
Determination of Mr Brohier’s submission involves the identification of the evidence in question and how it was dealt with both in examination in chief and in cross-examination and also a consideration of the authorities concerning the practical application of Browne v Dunn and the consequences of any non-compliance with the rule.
It was at all times the plaintiff’s case, as pleaded and opened, that the defendants, or at least one of them, had learned about the proposed development by one or more of the means identified above. At all times it was the defendant’s case that they knew nothing about the proposed development from any of these sources and they gave evidence to that effect.
There is no doubt that Mr Ross-Smith did not challenge the defendants directly about their evidence in this regard in the sense that he did directly put to them that they had in fact learned of the proposed development by one, or a combination of, these means.
It was also at all times the plaintiff’s case, again as pleaded and opened, that the defendant’s gave the assurance either well knowing that the landlord had been notified of the proposed development in writing, or well knowing of the proposed development by other means and well knowing that if it were to proceed it might well have a significantly adverse effect on the business.
Again, there is no doubt that Mr Ross-Smith did not put to them that they gave these assurances with any of these states of mind.
It will be more convenient to identify the evidence which Mr Brohier submits must be accepted later in these reasons.
The starting point in considering Mr Brohier’s submission is Browne v Dunn itself where at 70-71 Lord Herschell LC said:
… it seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross-examination showing that the imputation is intended to be made, and not to take his evidence and pass it by as a matter altogether unchallenged, and then, when it is impossible for him to explain, as perhaps he might have been able to do if such questions had been put to him, the circumstances which it is suggested indicate that the story he tells ought not to be believed, to argue that he is a witness unworthy of credit. My Lords, I have always understood that if you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity of making any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with witnesses.
…
… but it seems to me that a cross-examination of a witness which errs in the direction of excess may be far more fair to him than to leave him without cross-examination, and afterwards to suggest that he is not a witness of truth, I mean upon a point on which it is not otherwise perfectly clear that he has had full notice beforehand that that there is an intention to impeach the credibility of the story which he is telling. Of course, I do not deny for a moment that there are cases in which that notice has so distinctly and unmistakeably given, and the point on which he is to be impeached, is so manifest that it is not necessary to waste time in putting questions to him upon it. All I am saying is that it will not do to impeach the credibility of a witness upon a matter on which he has not had any opportunity of giving an explanation by reason of their having been no suggestion whatever during the course of the case that his story is not accepted.” (Emphasis added)
In R v Birks (1990) 1990 19 NSWLR 677 at 696 Gleeson CJ accepted that the rule was a rule of professional practice. The purpose, ambit and application of the rule have been considered in many cases over the years including Birks itself.
In R v Rajakama (No 2) 2006 15 VR 592 at 606 Redlich JA said:
A party is obliged to give appropriate notice to the other party and its witnesses, usually by cross-examination of such witnesses, of any imputation that the first party intends to make against the other party or their witnesses concerning their conduct relevant to the case or a parties’ or a witness’s credit. (Emphasis added)
In Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1 Hunt J conducted a detailed examination of the rule and of many the authorities considering its application. At 22-23 his Honour said:
A challenge made to the evidence of a witness in the course of a final address may take place in various ways. The opposing party may ask the tribunal of fact simply to disbelieve that evidence; if he has led evidence in direct contradiction of the evidence of that witness he may then ask the tribunal of fact to accept the evidence of his own witness in preference to the witness in question; or he may point to other evidence in the case, led by either party, which tends either to contradict the evidence of that witness or to destroy his credit. There are many reasons why it should be made clear prior, to final addresses and by way of cross-examination or otherwise, not only that the evidence of the witness is to be challenged but also how it is to be challenged. First, it gives the witness to deny the challenge on oath. … Secondly, it gives the party calling the witness the opportunity to call corroborative evidence which in the absence of such a challenge is unlikely to have been called. Thirdly, it gives the witness the opportunity both to explain or to qualify his own evidence in the light of the contradiction of which warning has been given and also, if he can, to explain or qualify the other evidence on which the challenge is to be based.
In many cases, of course, counsel for the party calling the witness in question will be alert to the relevance of the other material in the case to relied upon for the challenge to the truth of the evidence given by his witness or the credit of that witness, and in those circumstances counsel will be able to give his witness the opportunity to deal with that other material in his own evidence in chief. But sometimes quite properly he may not be aware of the other material or of its relevance; or for quite legitimate tactical reasons he may prefer his opponent to be the first to raise the matter, and then deal with in re-examination or (if allowed) in his case in reply. But at some stage during the course of the evidence, the witness must be given a proper opportunity to deal with the material to be relied upon for the challenge. If he has not been given that opportunity during the course of his own evidence, the situation may in some cases be remedied by his recall. Sometimes, particularly in jury trials, a parties failure to give such an opportunity to his opponent at the proper time may in justice require a ruling that a challenge to the evidence of the witness cannot be permitted, or if such a challenge has been made without warning, either the discharge of the jury or an appropriately strong direction to the jury in order to redress the unfairness which results. (Emphasis added)
Hunt J’s analysis of the rule in Allied Pastoral has been accepted and applied in other cases including Crosthwaite v Corporation of the City of Elizabeth (1989) 51 SASR 105.
As can be seen from Hunt J’s analysis, what is required is compliance with the spirit of the rule. As Wells J said in Reid v Kerr (1974) 9 SASR 367 at 373 with reference to Browne v Dunn:
The jurisprudence and practice of the courts does not imperatively require counsel in every case to abide, to the letter, by the general rule laid down by their Lordships; that rule will, I apprehend, yield to special circumstances.
The rule extends to submissions given in closing addresses: Kuhl v Zurich Financial Services Australia and Anor (2011) 276 ALR 375 at [71] Heydon, Crennan and Bell JJ.

The reasons for the existence of the rule were identified in Birks at 668 by Gleeson CJ in these terms:
The central purpose of the rule is to secure fairness in the conduct of adversary proceedings. That consideration provides the best guide, both to the practical requirements of the rule in a given case, and to consequences which may properly flow from its non-observance, including the remedies that are available to deal with a problem so created.
It can thus be seen that it is well settled that procedural unfairness can arise if appropriate notice that certain evidence is not accepted, or that certain submissions might be advanced is not given. As can also be seen, notice need not necessarily be given by cross-examination and that what is required in order to ensure that procedural fairness is accorded to the witness or the party calling the witness is that they are somehow alerted to the fact that the evidence in question is disputed, or that certain proposition might eventually be put.
Plainly the question of whether a failure to comply with the rule is productive of procedural unfairness and, if so, what the consequences or the remedy might be are matters of fact and degree to be determined in the circumstances of the particular case. The reasons of Hunt J in Allied Pastoral Holdings at 23-24 are illustrative of this, as are the reasons of Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services Australia and Another, also at [71] where their Honours say that remedies might include a refusal by the judge to entertain or accept a submission made without notice.
It follows that the threshold question in determining whether any procedural unfairness might have been caused to the defendants or their witnesses is whether they, through Mr Brohier, were on notice that the evidence identified was disputed or that the submissions identified might be made and that Mr Ross-Smith’s failure to cross-examine on the relevant topics is not necessarily determinative of the matter.
That said, there is no doubt that it would have been better if Mr Ross-Smith had cross-examined on the relevant topics and, in my view, he should have done so.
As I have said, Precision Plastics was at the forefront of Mr Brohier’s submissions.
An important issue in Precision Plastics was how long the plaintiff had intended to remain in employment but for an injury she had suffered. In examination-in-chief she said that she had intended to work until she was 55 years of age. Her evidence on this topic passed unchallenged in cross-examination. With regard to the apparent breach of the rule of practise, Gibbs J (as he then was) said at 370-371:
If it had been intended to suggest that she had not been speaking the truth she should have been cross-examined on this matter so she might have had an opportunity of explanation (cf Browne v Dunn), but she was not in fact cross-examined on her answer. The respondent’s evidence that she intended to work until she reached the age of fifty-five was not inherently incredible. She had in fact been engaged in employment for most of the time during which she had been in Australia before the accident, and had only given up employment when it was necessary to care for her child. In these circumstances, in my opinion, the jury, acting reasonably, were bound to accept her evidence, uncontradicted and unchallenged in cross-examination, that she had the present intention of working until she reached the age of fifty-five.
Of the other members of the Court, at 364 Barwick CJ was of the view that the jury were not bound to accept the respondent’s evidence in this regard, McTiernan J did not consider the issue, at 372 Stephen J agreed with Gibbs J and at 372 Murphy J’s views are unclear. The approach taken by Barwick CJ seems to foreshadow the current trend towards a more flexible approach.
In reliance on the reasons of Gibbs J, Mr Brohier submitted that evidence which passed unchallenged by Mr Ross-Smith must be accepted unless it is inherently incredible and that it was not. For the purposes of the submission I will assume that the evidence in question is not inherently incredible.
There is no suggestion in the reasons of Gibbs J that there was any evidence which had the capacity to prove that the plaintiff did not in fact intend to work until she was 55, or that she was otherwise put on notice that her evidence in this regard was disputed. In these circumstances it was imperative that notice should be given, by cross-examination or otherwise, that her evidence was not accepted so as to give the opportunity to explain her stated intentions and pre-empt the submission which was ultimately made. As will be seen, that was not the situation in this case.
In my view Mr Brohier’s reliance on the reasons of Gibbs J is an oversimplification which seeks to elevate what was, on proper analysis, nothing more than the application of the rule to the facts of Precision Plastics into a rule in its own right. Indeed it is necessarily implicit in Hunt J’s reasons in Allied Pastoral at 23 that he was of the same view. The submission thus stands to be determined in accordance with the principles identified above.
The threshold question in determining each aspect of the submission thus becomes one of whether adequate notice was given that the particular evidence was disputed, or that a particular submission might ultimately be made thus giving the defendant’s and their witnesses the opportunity to make their explanations.
This brings me to the discrete aspects of the evidence of the plaintiffs and their witnesses which Mr Brohier submits must be accepted.
First, the evidence of the defendants that they had not received the letter or that they had read about the development in The Advertiser or The City Messenger was not challenged.
As set out, the plaintiff’s case was and always had been that the defendants had learned of the proposed development by one of the means identified. They and Mr Brohier were on clear notice from the pleadings and the opening that this was so. The plaintiff led detailed evidence about the letter and the newspaper articles and from Mr Jones with a view to establishing either as a matter of inference, or directly in the case of Mr Jones, that the defendants would have been well aware of the proposed development at all relevant times and also with a view to rebutting in advance any assertions which the defendants might make on these topics if they chose to give evidence. The defendants and Mr Brohier were thus on clear notice that any evidence which the defendants might give to the effect that that they did not know about the development from one or more of the sources identified was in dispute. The notice which was given necessarily carries with it the implication that any explanations that might be forthcoming would also be disputed. That they were in fact on notice can be inferred from the detailed explanations which were elicited from them in evidence-in-chief about the letter, other correspondence they had received and sent to the council, the newspapers, Mr Jones and about hearing about the proposed development from any other source.
It is thus difficult to see how strict compliance with the rule of practice might have given the defendants any further opportunities to provide any further explanations about the letter and the newspapers over and above what they said in chief, or that it might have opened up any relevant lines of re-examination.
In these circumstances, cross-examination on the topics identified was not essential to ensure procedural fairness and Mr Ross-Smith was thus ultimately entitled to point to the evidence which suggested that the defendants were in reality well aware of the proposed development and to submit that they should not be believed on this issue.
Secondly, the motive which the defendants gave for putting the café on the market also passed without challenge. Again it is difficult to see how cross-examination might have given the defendants the opportunity to say anything further on the topic. In any event, and as I understand him, Mr Ross-Smith did not challenge their evidence in this regard in his final submissions and so his failure to cross-examine on this topic could not have been productive of procedural unfairness in any event.
Thirdly, Mrs O’Brien, Mrs Mattiazzo, Mr Bullock and two tenants of the arcade named Mr Gentilecore and Mr Holding were not were not cross-examined so as to suggest that they had learned about the development by word of mouth.
Mr Gentilcore, Mr Holding and Mr Bullock were not asked in chief if they had heard about the apartments by word of mouth. Given that the defendants were on notice of what Mr Brohier described as “the gossip plea” it is somewhat surprising that they were not. Mrs O’Brien said that she had no knowledge of the proposed development and it is thus necessarily implicit in her evidence that she did not hear of it by word of mouth. Mrs Mattiazzo said that she had heard nothing about it.
Mr Ross-Smith did not submit that any of these witnesses should not be believed on this topic and so the failure to cross-examine again cannot be productive of procedural unfairness.
Fourthly, the defendants, Mr Gentilecore and Mr Holding were not cross-examined so as to suggest that they had received the letter which Mr Jones said that he had copied and provided to the occupiers.
Again it is difficult to see how cross-examination of the defendants would have provided them with the opportunity to say anything over and above what they said on the topic in chief and so again the failure to cross-examine was not, in the circumstances, productive of procedural unfairness.
Again Mr Gentilecore and Mr Holding were not asked any questions on this topic in chief. Plainly Mr Brohier was on notice that Mr Jones’ evidence in this regard might be relied on. In the final analysis Mr Ross-Smith did not suggest that Mr Gentilecore and Mr Holding had received copies of the letter from Mr Jones. In these circumstances procedural unfairness does not arise and I am simply left with no evidence from them on the topic.
Finally, the defendants were not cross-examined so as to suggest that they gave the assurance knowing of the proposed development and knowing that if it proceeded it might have a significantly adverse financial effect on the business.
Yet again, the pleadings and the opening were more than adequate to put Mr Brohier and the defendants on notice that it was the plaintiff’s case that if it was established that the defendants gave the assurance in the knowledge that the project might go ahead, then it could be inferred that they gave it with the requisite states of mind.
There was thus no possibility of procedural unfairness. Mr Brohier’s submission fails accordingly.
Was a copy of the letter posted to the defendants and was it delivered?
As set out, the council created a list of people who might be affected by the proposed development. The names of those who were to be notified were then highlighted on the list. When letters addressed to the highlighted names were printed the names were ticked off. The letters were then signed, placed in envelopes addressed to the address noted on the list and placed in the council’s internal mail system for ultimate collection by Australia Post.
A copy of the list was tendered. Over 150 names and addresses are highlighted and ticked. The names J Khneiger and T Khneiger are both highlighted and ticked. Their address is given on the list as 4/46 Austin Street Adelaide. A number of other names with addresses given as Renaissance Arcade are also highlighted and ticked.
The male defendant had sought rent relief through Elders because of hardship he was experiencing as a result of the closure of the southern entrance to the arcade. It is plain from a number of letters which he wrote to the council in 1999 and 2000 that he was alive to the possibility that any interference with access to the area might have a significant financial impact on the café. It is also plain from much of the correspondence between him and the council that he was prepared to raise issues which concerned him with the council.
As can be seen, the council appear to have taken some care to ensure that letters were in fact sent to the people or entities whose names were highlighted on the list. If the procedures outlined by Mr Hutchins were in fact being followed, then the tick which was placed next to the defendants names on the list would indicate that a copy of the letter was in fact printed and addressed to them. Although some allowance must be made for the possibility of a mistake having occurred, the care with which the council were apparently approaching the task of ensuring that notice was given to those who might be affected by the project satisfies me that the defendants’ copy of the letter was in fact prepared.
If a copy of the letter addressed to the defendants was in fact prepared, the possibility that it, and indeed some other letters, somehow became separated from the others and were not ultimately collected by Australia Post seems remote and there was no evidence that this did in fact happen or about how it might have happened. In all the circumstances, I am satisfied that the copy of the letter addressed to the defendants was in fact posted.
As set out, the defendants’ copy of the letter was addressed to them at C/- Café Purple, 46 Austin Street Adelaide. As also set out, the male defendant said that there was no such address. The question of whether any letter addressed to the defendants at Café Purple, 46 Austin Street would be likely to be delivered to the café thus arises.
The council’s records contain copies of a number of other letters which were said to have been sent to the male defendant or to both defendants. These letters were variously addressed C/- Café Purple, 46 Austin Street, C/- Café Purple, Austin Street, 23 Austin Street, C/- Café Purple, Austin Street (Shop 29 Renaissance Arcade) and Café Purple, Shop 29 Renaissance Arcade, 23 Austin Street.
The records also contain copies of a number of permits which the council issued to the café from time to time. The address on the face of the permits is 46 Austin Street. The records further contain invoices addressed to the male defendant at Café Purple, 46 Austin Street.
The male defendant gave his address either as Shop 29, Renaissance Arcade or 23 Austin Street in various letters he sent to the council. He said that he gave the address of Shop 29 Renaissance Arcade because the number of the café was 29 and the number 29 can be seen above the door of the café in a photograph which was tendered. He said that he gave the address of 23 Austin Street in at least one letter he sent to the council because it was the building address and not the shop address and also because of council requirements.
The male defendant said that he received correspondence from the council addressed to 29 Renaissance Arcade and he also said that he received a letter from the council which was addressed to him at 23 Austin Street.
For the purposes of demonstrating that any correspondence addressed to the male defendant at Café Purple, 46 Austin Street was likely to be delivered to the café in the ordinary course of events, Mr Ross-Smith called an employee of the council named Mr Battersby.
Mr Battersby had access to the council’s files and records relating to the issues of permits and licences to businesses such as the cafe. Copies of a number of letters which were said to have been sent to the male defendant at Café Purple, 46 Austin Street relating to what were described as outdoor dining permits were tendered. Copies of documents which were to be filled in and returned to the council were said to have been enclosed with some of these letters. Documents bearing the male defendant’s name in handwriting which had apparently been returned to the council in response to these letters were also tendered, as were copies of a number of permits which were ultimately issued.
Mr Ross-Smith, submitted that it could be inferred that someone at the café had received the letters addressed to 46 Austin Street which related to the permits and responded to them by sending the relevant documents back to the council thus demonstrating that correspondence addressed to the male defendant at Café Purple, 46 Austin Street would be likely to be delivered to the café in the ordinary course of events.
However, and in this regard, the council records disclose that there was a degree of duplication in relation to the correspondence about the permits and the records also contain copies of other letters relating to the permits which were addressed to the male defendant at Café Purple, Austin Street (29 Renaissance Arcade).
Mr Brohier submitted that the responses to the letters relating to the permits might have been prompted by the letters which were addressed to Café Purple Austin Street (29 Renaissance Arcade) and that Mr Ross-Smith’s submission must fail accordingly.
The possibility that the responses were in fact to the letters addressed to Austin Street (29 Renaissance Arcade) is not inherently implausible and there is nothing which unequivocally demonstrates that any of the responses were in fact responses to correspondence addressed to 46 Austin Street. On balance, Mr Ross-Smith’s submission cannot be accepted.
As set out, at least one letter addressed to Café Purple, 23 Austin Street was in fact delivered to the café. As the male defendant sent at least one letter to the council stating his address to be 23 Austin Street, he must have expected that any correspondence addressed to him at 23 Austin Street would, in the ordinary course of events, be delivered to the café and find its way to him. Indeed he said that he had in fact received correspondence addressed to Shop 23 and correspondence simply addressed to 23 Austin Street.
As can be seen from the various photographs and plans which were tendered, both sections of Austin Street are relatively short. As can also be seen, there are relatively few business premises on either section. There was no evidence that there were any other cafes on Austin Street and none can be seen in any of the photographs. The male defendant said that the nearest cafés were on North Terrace and that there had once been another café in the arcade itself. The photographs of the café itself depict the words ‘Café Purple’ painted on the windows in relatively large and easily discernible letters.
If correspondence addressed to Café Purple, 23 Austin Street, or shop 23 Austin Street was in fact delivered to the café, and could be expected to be delivered, it becomes plain that references on correspondence addressed to the café to Shop 29, or to Renaissance Arcade, were not essential pre-conditions to the correspondence being delivered.
In all the circumstances, I am satisfied that any person who went to Austin Street armed with the address Café Purple, 46 Austin Street, would find the café without any difficulty whatsoever, that they would do so in a matter of minutes and that they would be satisfied that the café was the business they were looking for irrespective of the fact that the number 29 was above the door. This being so, and in the absence of any evidence to the contrary, I am also satisfied that in the ordinary course of events, and notwithstanding the male defendant’s evidence that he has no recollection of ever receiving any correspondence addressed to 46 Austin Street, a postman with a letter addressed to Café Purple, 46 Austin Street would deliver it to the café irrespective of whether or not he regarded the number 46 to be the café’s correct address.
The council records show that copies of the letter were generated and addressed to Mr Gentilcore and Mr Holding. The names “A Gentilecore and G Gentilecore” and the business name F.B. Holding and Son P/L are highlighted and ticked on the list. Both Mr Gentilecore and Mr Holding say that they did not receive their copies of the letter.

I have already dealt with the fact that they were not cross-examined to suggest otherwise. Both of them were plainly honest. If they might be reliable, then the possibility that notwithstanding the findings I have made about the preparation and posting of the letter addressed to the defendants and the address of the café, the defendants did not receive the letter is increased accordingly.
However, in assessing this possibility, the possibilities that Mr Gentilecore and Mr Holding might be mistaken, or that they might not have received their copies of the letter whereas the defendants nonetheless received theirs must also be considered.
Mr Gentilcore operated a hairdresser’s salon in the arcade in close proximity to the café. He and the defendants were acquainted and he patronised the café. He said that he was not particularly interested in what happened on Austin Street and that he did not take much notice of the work on the apartments when it ultimately commenced. He said that he had little recollection of the second project.
Mr Holding conducted an optometry practice which was also in close proximity to the café. He too became acquainted with the defendants by patronising the café. He said he received a letter from the developers informing him that there would be some disruptions in the area and he said that road closures were of concern to him. He said that as of 2000 one of his staff would deal with any business related correspondence and that sometimes such correspondence would be referred to him. He said that his business name was FB Holding & Son Pty Ltd and the council records contain this name. He said that if the letter had been addressed to the business he would have expected that it would have been passed on to him but that it might not have been. He was shown a copy of the letter and he said that as it did not mention road closures it would not have been of much interest to him.
There was no evidence about when Mr Gentilecore and Mr Holding were first asked whether they had received their copies of the letter however, it seems reasonable to assume that it was not until after the proceedings were instituted some time in 2005.
Given that Mr Gentilecore had no interest in what was happening on Austin Street and given that Mr Holding said that the letter would not have been of much interest to him, the possibility that each of them had in fact received the letter, saw that it was of no interest to them, put it aside, and then forgot about it and ultimately formed the mistaken belief that they had never received it cannot be overlooked. Similarly, the possibility that Mr Holding’s staff did not pass the letter on to him cannot be overlooked either.
In considering the significance of the evidence of Mr Holding and Mr Gentilecore, it must be borne in mind that the defendant carries no onus, but notwithstanding this, and in all the circumstances, their evidence that they did not receive copies of the letter is attended by such a degree of uncertainty such that cannot call the inferences I have drawn at [119] and [134] into doubt.
Accordingly, I am satisfied that a copy of the letter was addressed to the defendants, posted and delivered to the café.
Mr Holding was asked to read the letter while he was in the witness box.
With respect to the letter, and with apparent reference to the proposed development as it is mentioned in the letter, Mr Holding said that it was not a road closure letter and that he … “certainly knew what was going on and there had been a lot in the press about it all, so it was common knowledge.” The potential significance of this evidence is self-evident and it is a topic to which I will return.
Did the defendants read the letter after it was delivered?
Mrs O’Brien said she has no recollection of ever seeing the letter after it must have been delivered to the cafe. Mrs Mattiazzo was not asked if she had ever seen it.
The male defendant said that he was spending little time at the café as of when the letter would have been delivered. He said that he would go there in the morning to help his wife and then go elsewhere and do other things. He said that he would occasionally return to the shop to lock up when the café closed for the day. He said that the mail would arrive between 10am and 11am and that the postman would place it on a bench inside the shop. He said that if his daughters received the mail Mrs O’Brien would check the invoices and either pay them by cheque or seek instructions from him. Importantly, he said that if she received something “she’s not sure of, she have to contact me and ask me about it” and that if his family received anything they did not understand they would refer it to him. In this regard he said that it is likely that he would have known about any letters which were delivered to the café which were addressed to him personally or to Café Purple. He said he did not retain correspondence he received from the council.
Mrs O’Brien said that the mail would be opened when it came in. She said that either she or her mother would sign cheques to pay the smaller invoices and that invoices for larger amounts would be referred to her father. Mrs Mattiazzo said she had nothing to do with the mail.
There is no suggestion that the letter contained an invoice and it does not relate to any ordinary everyday aspect of the business. Rather, it relates to a contingency which the defendants might well wish to address. The subject matter of the letter thus took it out of the ordinary making it likely that it would have been referred to the male defendant. The male defendant’s evidence that his daughter brought the letter from Elders of 14^th March 2000 to his attention supports this conclusion in that if she referred the Elders letter to him, it is likely that she, or indeed anyone else, would have brought the letter itself to his attention.
The female defendant’s evidence that she did not receive the letter and Mrs O’Brien’s evidence that she has no recollection of ever seeing the letter plainly bear on the possibility that the letter was never delivered.
In this regard, the possibilities that the male defendant simply opened the letter himself and did not tell anyone about it, or that the female defendant or Mrs O’Brien opened the letter, saw that it was not routine correspondence and passed it on to the male defendant without digesting its contents cannot be overlooked. In all the circumstances, the evidence of the female defendant and Mrs O’Brien, and for that matter, the evidence of Mrs Mattiazo cannot call the inferences I have drawn at [143] into doubt.
Accordingly, I am satisfied that the letter was delivered to the café and, given the evidence about the prevailing practices for dealing with the correspondence, I am also satisfied that it is probable that it was brought to the attention of the male defendant and read by him.
For obvious reasons I cannot be so satisfied in relation to the female defendant.
Did either of the defendants learn of the proposed development from the newspapers?
The male defendant said that the café sold The Advertiser but that it did not provide copies for patrons to read. He said that he would sometimes scan the headlines but he never had the time to read further. He said that he did not normally have it delivered to his home except when he took up discount promotional offers from time to time. The fact that he had The Advertiser delivered on occasions does however; suggest that he had at least some interest in reading it. He said that although The City Messenger was delivered to the café he never read it and that he would invariably put it in the bin. He said that he did not read any of the articles in The Advertiser or The City Messenger about the proposed development or its ultimate approval.
The female defendant said that when she was in the shop she never had time to sit down and read the paper and that The City Messenger always went straight into the bin.
Both Mrs O’Brien and Mrs Mattiazzo said there were no newspapers provided for customers to read. Mrs O’Brien said that The City Messenger went straight into the bin and Mrs Mattiazzo has no recollections whatsoever of it.
As can be seen, the development was not front page news in either The City Messenger or The Advertiser and it was not reported on a regular basis. With the possible exception of the half page article which appeared on page 7 of the edition of The Advertiser of 24^th October 2000, the coverage about it was far from prominent and might easily be missed.
Although I think that it is possible that the male defendant might have read about the development in either The Advertiser or The City Messenger, the fact that the project received little prominence, the fact that copies of The Advertiser were not made available to patrons and the fact that The Messenger carried no front page coverage renders it unlikely that he did so.
There is no apparent reason to reject the female defendant’s evidence that she did not have time to read newspapers.
Accordingly, I am not satisfied that either of the defendants read about the development in either of the newspapers.
However, and that said, it is inherently probable that at least some of the regular customers, including some of the other occupiers of the arcade would have read at least some of the newspaper articles about the development. In this regard Mr Holding’s evidence that “… there had been a lot in the press about it, so it was common knowledge” is again telling.
Did Mr Jones inform the plaintiff about the proposed development?
As set out, the male defendant said that Mr Jones did not notify him about the apartments either verbally or in writing. Mr Jones said that he spoke to the male defendant on a regular basis. The male defendant said that he had little, if any, personal contact with Mr Jones and that he had “probably just vaguely seen him in the arcade” and that his daughter had mentioned Mr Jones to him on one occasion and that he thought he knew that he was from Elders. He qualified this by saying that he spoke to Mr Jones however; he could not remember where, when or what about other than that Mr Jones told him that he was from Elders.
The male defendant’s evidence about his contact with Jones was a trifle vague and inconsistent and he gave the impression that he was trying to distance himself from Jones.
Much of Mr Jones’ evidence was reconstruction based on what he would have done if he had followed his usual practices. What he said he would have done, or what he said that he did in fact do, would have been best practice in the prevailing circumstances and I have no doubt that Mr Jones genuinely believes that he did what he says he did.
If Mr Jones had in fact returned the pro-forma to the council after consulting with the tenants, including the defendants, then there might have been some support for his evidence and if he had in fact sent the pro-forma to the council it would have been remarkable if he had not reported back to the tenants after he received the reply from the council. However, as he acted on his own initiative in returning the pro-forma, the fact that the council received it and replied lacks the capacity to provide support for his evidence and renders it less likely that he would have reported what he had done back to the occupiers.
In these circumstances, and although I make no adverse findings about his credibility, I am not prepared to find that Mr Jones’ evidence is sufficiently reliable for me accept him when he says that he told the male defendant about the apartments and that he delivered a copy of the letter to the café.
Did the defendants learn of the proposed development by word of mouth?
The male defendant said that he had about 40 or 50 regular customers who patronised the café up to three or four times a day. He said that most of the other tenants were amongst his customers and that he was acquainted with them. He said that nobody had ever told him about the proposal to build the apartments at any time before he gave the assurance.
The female defendant said that she had not heard about the development and she said that although she would engage in idle conversation with customers, she did not have time to sit down and talk to them at length.
Similarly, neither of the daughters suggest that they were told about the proposed project by anyone at any time before the business was sold.
As has been seen, copies of the letter were apparently sent out and the proposal to build the apartments received some publicity. It is inherently probable that at least some of the tenants received the letter and that at least some of them and some of the regular customers saw at least one of the articles in either The Advertiser or The City Messenger. To this must be added Mr Holding’s evidence that that the proposed development was common knowledge. In these circumstances, it is also inherently probable that the proposed development and its potential effects on business would have been a natural topic of conversation amongst the tenants in the aftermath of the letter being sent out and the various articles published. The hardship which the closure of the southern entrance had caused makes this particularly so. It is also inherently probable that it would be a natural topic of conversation between any regular customers of the café and the proprietor, again at least in the immediate aftermath to it becoming common knowledge.
To this must be added the male defendant’s own evidence that Mr Gentilecore and Mr Holding were also negotiating with Elders about a rent reduction because of the closure of the southern entrance and that the three of them were, according to him, “very close, like friends, we used to talk about everything to do with the Centre (emphasis added). They used to come and ask my opinion. I used to go to them and talk about it. … We encouraged one another to speak to Elder’s real estate about it or the actual landlord when that happened” and, also according to him, they also spoke to some of the other tenants about a rent reduction.
In all of these circumstances, and particularly given Mr Holdings evidence that the proposed development was common knowledge, it is inherently probable that if Mr Holding knew about it, then the male defendant would also have known about it and that he also would have heard about it by word of mouth and, given his experiences of the closure of the southern entrance to the arcade, that he would have recognised its potential implications for the café.
I am thus satisfied that the male defendant would have learned of the proposal to build the apartments by word of mouth well before the assurance was given.
Circumstantial reasoning
The combined force and effect of some of my findings and a number of other discrete items of evidence must also be considered. They are as follows:
·The council appear to have taken some care over sending the letters.
·In the ordinary course of events correspondence addressed to the male defendant at Café Purple, 46 Austin Street, would be delivered to the café and that correspondence such as the letter itself would be passed on to him.
·Over and above the evidence of Mr Gentilcore and Mr Holding, there is nothing which directly suggests that the letter addressed to the defendants was not in fact posted and there is nothing which directly suggests that it was returned undelivered.
·There is nothing to suggest that nobody had ever received their copies of the letter.
·There were about 40 or 50 regular customers who visited the shop more than once a day.
·The male defendant knew the occupiers of the arcade and many of them patronised the café.
·Notwithstanding that I am not satisfied that the defendant’s found out about the apartments from the newspapers, the newspaper articles still amount to an item of circumstantial evidence.
·The male defendant’s evidence about his relationship with Mr Gentilecore and Mr Holding and the latter’s evidence that the development was common knowledge.
The combined force and effect of all of these circumstances also satisfies me that the male defendant must have learned of the proposal to build the apartments well before the assurance was given and that in all probability he became aware of it at around the time that the letter was posted or very soon thereafter. To adapt the words of Gleeson CJ, Hayne and Heydon JJ in Kelly v The Queen (2004) 218 CLR 216 at [70] “There were numerous coincidences operating against (the male defendant), which cannot be explained by postulating his (lack of knowledge of the proposed development) and are only consistent” with him knowing of its existence.
Contra-indicators of relevant knowledge of the proposed development
Mr Brohier submitted that the combined force and effect of what he submitted were indisputable circumstances precludes me from finding that the defendants knew about the apartments before they gave the assurance. In essence Mr Brohier submits that the inferences which can properly be drawn from the evidence led by the plaintiff lacks the capacity to overcome the inferences which, in his submission, support the defendant’s assertions that they knew nothing of the development.
Mr Brohier submitted that it was plain that the male defendant was prepared to actively engage with the council and others about matters which were of concern to him and this is undoubtedly so. It is also undoubtedly so that the male defendant did not mention the proposed development when he wrote to the council in November 2000. All this being so, Mr Brohier submitted that the male defendant’s evidence that if he had in fact received the letter he would have responded to it is inherently plausible and that I thus could not be satisfied that he had received it.
In my view the possibility that the defendant broke his usual pattern cannot be ignored and, although I am not prepared to rely on Mr Jones, the possibility that the male defendant did not write to the council because Mr Jones had told him that he had done so on behalf of the tenants also cannot be ignored.
Next, Mr Brohier pointed to the evidence of the female defendant, Mrs O’Brien and Mrs Mattiazzo that they had not heard anything about the apartments. Plainly their evidence must be considered in the light of all of the evidence and the possibility that the defendant had become aware of the proposal but had not told them about it cannot be ignored.
Next, Mr Brohier submitted that the reasons the defendants advanced for putting the business on the market do not invite suspicion. This is plainly so but the possibility that they knew about the development and were prepared to contravene either or both of the LBSCA and the FTA in order to expedite a sale, or to obtain a higher price than they might otherwise have received also cannot be ignored.
Next, Mr Brohier pointed to the male defendant’s evidence that he bid for the unit which housed the café when it went to auction sometime shortly after March 2001 and he submitted that this was inconsistent with the male defendant knowing about the proposed development. The male defendant did not secure the unit. He was asked what he had bid and he said “I was a bit worried about the set-up so went up only to about 230, 240”. It is thus obvious that he had some concerns about how much the property was really worth.
Next, Mr Brohier pointed to Mr Bullock’s evidence that he was not given notice of the development when he took over management of the units shortly after the auction and that the first he heard of it was when he received the letter from the developer dated 31^st March 2003.
By the time Mr Bullock came on the scene it must have been almost a year at least since the letters were sent out by the council. The apartments would have been stale news by then and the fact that nobody spoke to Mr Bullock cannot, of itself, reduce by any appreciable degree the probabilities that the letter was sent and received by the male defendant, or that the development was common knowledge.

The schedule records the plaintiff’s monthly gross sales from December 2004 onwards and so if an appropriate profit ratio can be selected, then some meaningful estimate of her average monthly profits during that period might be calculated.
As can be seen from the table and the graph, from December 2003 onwards there was little variation in the plaintiff’s monthly turnover apart from upswings in March 2004 and March 2005. It is plain from the table and the graph that there was also an upswing in March 2003 and so these later upswings would appear to be seasonal in any event.
By reference to the schedule and the chart, the plaintiff’s average turnover from December 2003 on can be calculated to be about $10,500. This is some $6,000 per month less than it had been between January and May 2003.
The plaintiff’s average monthly profit ratio from January to May 2003 was about 22%. From June to November it averages out at about 19% and the lowest ratio she achieved during that period was about 15%. This is little less than the average profit ratio she was achieving before June.
As the plaintiff’s turnover was relatively stable after December 2003, and in the absence of anything which suggests otherwise, it seems reasonable to assume that her profit ratio from then on would also have remained relatively stable. The question then becomes one of what was that ratio likely to have been.
Selection of a profit ratio which is likely to be too low would lead to a calculation of average profits which would also be too low and to the potential disadvantage of the male defendant.
Given that there is very little difference between the plaintiff’s average profit ratio up until the end of May 2003 and then from June to November 2003 and given that she achieved a profit ratio of about 20% in October and November, it seems reasonable to assume that she would have continued to achieve a profit ratio averaging about 20% from then on. In all the circumstances, and in order to avoid any possibility of injustice to the defendant, I will proceed on the basis that from December 2003 onwards she achieved the same average profit ratio as she had until the end of May. Although this might possibly be unfavourable to the plaintiff, it obviates any risk of prejudice to the male defendant.
By deducting GST from the average monthly turnover of $10,500 which the plaintiff achieved between December 2003 and distraint and by then applying a profit ratio of 22% to that amount, the plaintiff’s average monthly profits from December 2003 until she went out of business can be estimated to be of the order of about $2,100.
When the plaintiff’s average monthly profits and profit ratio from January to May 2003, her monthly profits and profit ratio from June to November 2003 and her estimated average monthly profits and profit ratio from December 2003 onwards are considered together, it becomes abundantly plain that the business suffered a significant financial downturn in June 2003, that it rallied in July and that its fortunes then went into decline until reaching their lowest ebb in January 2004 and that from then on it continued to trade at a more or less even rate, but that the profits that the plaintiff the achieved were nonetheless significantly less than those which she had enjoyed up until the end of May 2003. Indeed her average profits from December 2003 onwards were down over 35% from the average she had achieved to the end of May of 2003. It is thus little wonder that her rent fell into arrears.
It is also plain that by the end of May 2003 the plaintiff had demonstrated that she was capable of running the business successfully and of achieving reasonable levels of turnover and profit which were not significantly less than those which the defendants had been generating. There was no evidence which suggests that the commencement and continuation of the downturn can in any way be attributed to any shortcomings on her part. I am thus satisfied that neither the commencement nor the continuation of the downturn can be attributed to the plaintiff and that the reasons for their occurrence must lie elsewhere. Similarly, the downturn between June and November 2003 cannot be attributed to the second project because it did not commence until mid December of that year.
The plaintiff attributed the downturn to the commencement of work on the apartments. She described the effects as swift and severe. She said that the number of patrons from the University began to decline. She said the downturn was exacerbated by the commencement of the second project but that the real damage had already been done by then.
The plaintiff said that concrete was first poured for the apartments on 31^st July 2003. She said that this was preceded by a significant amount of preparatory activity which she described as “moving in and getting organised”. She said that in about June or July a plastic barrier was erected at the North Terrace end of Austin Street and double gates were erected across the east – west section immediately to the north of the café. She said that in June, or earlier, a fence was erected from the southern side of the gates extending west across Austin Street and then south along the western kerb of Austin Street. She said that after the fences and the gates had been erected two cranes were positioned on Austin Street immediately to the north west of the café. Some photographs which were tendered show that the amenity of the café and access to it were severely compromised by the barriers, the fences and the cranes and, as I have said, the area on the doorstep of the café became a construction site.
The profits which the plaintiff achieved in June were some $1,500 less than her previous average and they stayed below her previous average from then on. The temporal coincidence between the activities preparatory to the commencement of work on the apartments and the commencement and continuation of the work itself and the commencement and continuation of the downturn in sales and profits leads me to conclude that it is probable that the preparatory activities and then the work itself caused both the initial downturn and its continuation up until the commencement of the second project at very least, and that it did so for the reasons given by the plaintiff.
There can be no doubt that the downward trend in turnover and profits between June and the end of November was of significant proportions.
In this regard, Mr Brohier pointed to the average turnover before June and then to the average from June to November and submitted that there was no significant difference between the two and that therefore the apartments had little or no effect on the business during that period.
The graph says otherwise. The downturn in June was plainly significant. The monthly fluctuations in turnover before June were nowhere near the magnitude of downturn in June and so no clear trend emerges from the fluctuations before then. There is thus no reason to think that the monthly fluctuations before June were caused by anything other than ordinary monthly variations in trade. That being so, it is reasonable to look at the average profits which the plaintiff achieved during that period.
The same cannot be said for the period from June to the end of November. It is plain that a clear downward trend in profits began to emerge after July. Mr Brohier’s reliance on a comparison between the average turnover to the end of May and the average turnover from June to November overlooks or glosses over this obvious trend and the inferences which flow from it. In my view the true position by the end of November is to be found in the comparison between the averages to the end of May and the depth to which the business had sunk by the end of November. This comparison demonstrates that the difference in profits between the averages achieved to the end of May and the profits for November and, for that matter October, are of considerable commercial significance. The submission must be rejected.
It can thus be seen that by the end of November 2003, or immediately before the second project began, the business was in considerably reduced circumstances which were solely attributable to the commencement and continuation of work on the apartments.
I have already found that the defendant had recognised the risks which the plaintiff might be exposed to if the apartments went ahead and that by giving the assurance in the affirmative and by failing to disclose what he knew of the existence and scope of the proposed development he thus subjected the plaintiff to those risks. As can be seen, the risks that he had recognised then ultimately manifested themselves in the form of the downturn in profits attributable to work on the apartments which occurred before work on the second project eventually commenced.
Work on the second project commenced on 17^th December 2003. Work on the apartments then went into abeyance in January 2004 and resumed in about June. Work on the second project continued in the meantime. After the work on the apartments resumed, the two projects continued side by side until completion of the second project in about February 2005. According to the defendant, the work on the apartments was completed in early 2006, which was about when he sold the business for the second time.
Mr Brohier submitted that the second project was the real reason why the business ultimately failed and that the plaintiff had therefore failed to establish causation.
The questions of supervening events and concurrent causes of loss were considered by the High Court in the context of contraventions of s82 of the Trade Practices Act (Cth) in I&L Securities v HTW Valuers (2002) 210 CLR 109. In that case it was held that loss flowing from contravening conduct was indivisible and that the conduct of the contravening party need not be the sole cause of the whole of the loss sustained by the innocent party, but that it must nonetheless be a cause of the loss. In this regard Gleeson CJ said at [33]:
The relevant purpose of the [Trade practices Act (Cth)] was to proscribe misleading and deceptive conduct in circumstances which included those of the present case. In aid of that purpose, the statue provided for compensation, by an award of damages, to a victim of such conduct. The measure of damages stipulated was the loss or damage of which the conduct was a cause. It is not limited to loss or damage of which such conduct was the sole cause. In most business transactions resulting in financial loss there are multiple causes of the loss. The statutory purpose would be defeated if the remedy under s 82 were restricted to loss of which the contravening conduct was the sole cause.
(emphasis added)
It is plain that his Honour did not accept that the contravening party could avoid liability for the whole of the loss and that this is so even when an independent cause was also responsible for some part of it. In this regard Gaudron, Gummow and Hayne JJ also said at [55]-[57]:
If there is a contravention of the Act and, following that contravention, a person suffers loss or damage, it may be possible to identify several features of the history of events as having contributed to the person suffering loss. …
There may be many acts or omissions which may be said to have contributed to the happening of an event. … To search for the single cause of an event is, therefore, to pursue an illusion. And, much more often than not, to speak of the “effective cause” or the “proximate cause” (or to use some similar expression) is to hide important assumptions that are made, or conclusions that are reached, about the attribution of responsibility for particular kinds of act or omission. That is why it is necessary to understand the purpose for making some enquiry about causation. Only when the purpose of the enquiry is known is known is it possible to identify and articulate how and why some circumstances are extracted “out of the complex of antecedent conditions of an event” and identified by the law as a cause of it.
In light of these considerations, it is hardly surprising that it is now well established that the question presented by s 82 of the Act is not what was the (sole) cause of the loss or damage which has allegedly been sustained. It is enough to demonstrate that contravention of a relevant provision of the Act was a cause of the loss or damage sustained.
(emphasis added, citations omitted)
It thus follows that damages are recoverable if a relevant contravention was a cause of the loss sustained notwithstanding that there were “other operative factors”, and that the causal link is only broken if a supervening event is the direct cause of the loss: Henville v Walker at [117] McHugh J.
Section 82 is in identical terms to s 56 of the FTA and the decision in I & L Securities is thus of direct application to the FTA. As loss is a common feature of the remedial provisions of both the FTA and the LBSCA there is no reason in principle or policy why I & L Securities should not apply to contraventions of the LBSCA. It follows that in order to succeed the plaintiff must prove that the contravention of at least one of the Acts was a contributing factor to her losses.
As can be seen from the reasons of Gaudron, Gummow and Hayne JJ in I & L Securities, determination of issues of causation involves identification of the event in question. In this instance the relevant event is the downturn in profits and its continuation until distraint and the relevant question is whether the commencement and continuation of the downturn was attributable, at least in part, to the work on the apartments and thus to contraventions.
Determination of Mr Brohier’s submission thus involves a consideration of the relationship between the contraventions and the two projects and the apparent effects of each project on the business.
As has already been seen, the downturn which commenced in June 2003 and continued through to the end of November cannot in any way be attributed to the second project. After 17^th December 2003 both projects proceeded concurrently until some time in January 2004 when work on the apartments went into abeyance. It is thus probable that the continuation of the downward trend through to the end of December 2004 was attributable to both projects and that the apartments thus continued to be a cause of the downturn through December and into January 2004.
As has also already been seen, the business traded at a more or less even rate from February 2004 until distraint and that both projects proceeded concurrently from mid 2004 when work on the apartments resumed.
The plaintiff purchased the business in reliance on the contraventions. As a result she was thus placed in a position where she was exposed to any risks to her trading position which might manifest themselves in the immediate vicinity of the café. The apartments and the second project ultimately became the manifestations of the risks which the contraventions exposed her to. The contraventions were thus a cause of any effects which either project might have had on her trading position.
Mr Brohier also submits that as nobody, including the male defendant, knew that the second project was scheduled to commence, he cannot be held responsible for any impact which the second project might have had on the business.
However, there is simply no requirement that the event which causes the relevant prejudice, loss or damage must have been foreseen by the contravening party before liability arises under either Act. Similarly there is no requirement that the nature or cause of the prejudice, loss or damage must have been foreseen.
It thus follows that even if I were to accept, which I do not, Mr Brohier’s submission that the second project was entirely responsible for the downturn and the ultimate collapse of the business, the contraventions would nonetheless be a cause of whatever impact the second project might have had on the business because the contraventions were what led to the plaintiff being in the position where she found herself exposed to the potential effects of the second project.
For this reason alone the submission must be rejected.
In any event, the affects on the café of the work on the apartments would inevitably have rendered the business more vulnerable to the effects of the second project in the sense that it is inherently probable that the business would have been better placed to withstand the effects of the second project if it had not first been subjected to the effects of work on the apartments.
It follows that irrespective of whether the second project eventually contributed to the downturn and its continuation, the contraventions nonetheless put the plaintiff in the position where she was at risk not only from the potential effects on the business of the apartments, but they also put her in the position where she was at risk of the apartments rendering her more vulnerable to the potential effects of any other events which might arise than she otherwise would have been. I am thus satisfied that any effects which the second project might have had on the business are causatively linked to the contraventions and for this reason also the submission must be rejected.
It also follows that I am satisfied that the contraventions were a cause of the initial downturn and the reduced profits from June 2003 until distraint in March 2005.
The question of whether the contraventions, or either of them, deprived the plaintiff of the opportunity of achieving greater profits than those which she in fact achieved thus arises.
By the end of May 2003 the plaintiff had demonstrated that she had the capacity to achieve profits averaging about $3,300 per month. Other than the effects on the business of the apartments and the second project there is no apparent reason why she would not have continued to enjoy profits of this order well into the future. The effects of the apartments and the second project thus deprived her of the opportunity to continue to make profits of this order.
The contraventions were thus a cause of the plaintiff being unable to maintain her average profits and they thus deprived her of the opportunity of making greater profits from the business than she actually did.
The plaintiff has thus suffered loss over and above the difference between the true value of the business and the price she paid. Merely awarding her the difference between the true value and the price paid will not provide adequate compensation and she is entitled to compensation for the loss of the opportunity to maintain her average profits provided her losses in this regard can properly be quantified.
Did the plaintiff act unreasonably in her negotiations with her landlord?
Mr Brohier submitted that the plaintiff had acted unreasonably in her dealings with her landlord, that her doing so caused the landlord to distrain and that it was her own conduct and not the manifestations of the contraventions which led to her going out of business.
Determination of this submission involves a consideration of the plaintiff’s negotiations with her landlord.
As 2004 unfolded the arcade was experiencing difficulty in attracting tenants. Given the work which was taking place on Austin Street this is hardly surprising. In January 2004 the plaintiff wrote to the landlord seeking a rent reduction from 1^st March for a period of about 18 months because of the effects that the two projects were having on her profits. She said that the landlord said that he could not do anything for her unless he obtained some relief for himself from the council. On 4^th March 2004 Mr Bullock wrote to the plaintiff informing her that the landlord was prepared to consider offering her a concession if she provided him with certain information about her trading position. The plaintiff did not provide the information sought. On 3^rd December 2004 Mr Bullock again wrote to the plaintiff asking for the information. Again the plaintiff did not provide it.

From about May 2004 onwards the plaintiff only paid half of her rent as it fell due. She did not have any arrangement with the landlord permitting her to do so. She said that she did not pay all of her rent because of the downturn and because she thought that landlord could “have stepped up and taken some of the brunt as well”. From then on she fell further into arrears.
On 3^rd December 2004 Mr Bullock wrote to the plaintiff informing her that the landlord might distrain because her rent was some $10,000 in arrears and that the landlord continued to be “unable or unwilling to assist” because she had not provided the information sought.
The plaintiff said that she had not provided the information because the landlord had advised the council that he could not reduce her rent unless he could reduce his own expenses and also because she did not know whether the landlord knew about the proposed development when he purchased the unit which housed the café. She said that even though she had not provided the information, she thought she had discussed the scale of the downturn with Mr Bullock “a couple of times.
On 14^th March 2005 Mr Bullock wrote to the plaintiff demanding payment of arrears of rent in the amount of $11,718.06 and payment of electricity to 1^st February 2005 in the amount of $2,260.25 by 23^rd March 2005. The plaintiff did not meet these demands. She said that she was in no position to pay and that she had unsuccessfully tried everything she could think of to save the business. It is necessarily implicit in her evidence that she was unable to pay because of the downturn and that she had attempted to trade her way through the crisis. The landlord distrained for the unpaid rent. On 31^st March the premises and the café’s plant and equipment were distrained and the plaintiff quit the business.
The landlord made no further demands of the plaintiff after distraint.
According to the defendant, when the business was sold to the plaintiff, the written down value of the plant and equipment after depreciation was $9,364. He said he paid the landlord $10,000 to re-open the premises and a new lease was signed. The amount he paid the landlord was, arithmetically, a significant proportion of the plaintiff’s arrears.
Mr Brohier submitted that there was “a significant chance” that the landlord would have granted the plaintiff rent relief and that he would not have distrained if she had provided the trading information sought, that the plaintiff had therefore acted unreasonably in not providing the information and that this must be taken into account in assessing any loss she might have suffered.
At no stage did the landlord go any further than say that a rent reduction would be considered if the information was provided and at no stage did he indicate that he was agreeable to rent relief in principle, or that relief would be granted if the information was forthcoming. In these circumstances whether or not the landlord might have granted rent relief if the plaintiff provided the information is entirely speculative. The plaintiff thus had no guarantees and it is plain that she had good reason to think that no relief would be forthcoming even if she provided the information. I am thus satisfied that the plaintiff did not act unreasonably.
In any event, the real question is not one of why the plaintiff eventually went out of business; it is one of whether she suffered loss or damage of which the contraventions were a cause. Indeed, and as will be seen, if she had continued to trade her losses would have been greater.
Summary of conclusions on entitlement to compensation
I have concluded that the plaintiff is entitled to compensation for paying more for the business than its true value, for loss of opportunity to purchase a comparable business and for loss of opportunity to make greater profits out of the business than she ultimately did.
What was the true value of the business?
The plaintiff’s counsel did not call any valuation evidence about whether the business would have been worth more or less than the plaintiff paid for it on the assumption that the assurance represented the truth of the matter. Nor did he call any evidence about what it would have been worth on the assumption that approval to build the apartments had been sought. There is thus no direct evidence about the true value of the business. However, the purchase price itself may have the capacity to provide some evidence about what the business was worth on the assumption that the assurance was true.
Value is to be assessed objectively and the “value of what was in fact acquired is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it”: Marks at [49] McHugh, Hayne and Callinan JJ applying Spencer v The Commonwealth (1906) 5 CLR 418. It is to be assumed for these purposes that the vendor and purchaser are dealing at arms length and it follows that “market value is, therefore, the price that a willing purchaser would have to pay a vendor willing but not anxious to sell in order to obtain the land: Forston v Commonwealth Bank of Australia and Anor (2008) 100 SASR 162 at [26] Debelle J, Doyle CJ and Bleby J concurring.
All three parties were acting on the assumption that the assurance was true. The only distinction between their respective states of mind was that the male defendant knew that the assurance was false whereas the plaintiff and the female defendant did not. The plaintiff was in no particular hurry to purchase. The business had been on and off the market for some time and it is thus also not as if the defendants would have been prepared to sell it for less than the business would have been worth if the assurance was true. That is, of course, not to say that the male defendant would not have modified his position later if he had not been successful in selling the business to the plaintiff. I am thus satisfied that the business would have been worth about the $60,000 which the plaintiff paid for it if there had in fact been nothing on the horizon with the potential to effect its future profitability.
It is inherently improbable that any prospective purchaser who had been informed of the proposal to build the apartments would have paid the same amount that the plaintiff did in order to secure the business. Indeed the plaintiff said she would not have purchased it if she had known. Her evidence is inherently probable in this regard and it is also probable that it would have been difficult to find anybody who might have been interested in purchasing the café in the knowledge of the proposed development.
What the business was in reality worth at the time the plaintiff acquired it simply cannot be precisely determined from the evidence which is before me.
Mr Ross-Smith submitted that the business was worthless at the relevant time. He may well be right but there is nothing which enables me properly to make such a finding. Mr Brohier submitted that the business must have been worth something and he pointed to the defendant’s evidence that he re-opened the business shortly after distraint and that he sold it again for $37,500 in early 2006.
At the time the plaintiff purchased the business the extent to which the proposed development would have reduced its value is unknown. Similarly, and in the absence of expert evidence, the relationship between the profits the plaintiff achieved after the work on the apartments commenced and what the business would have been worth at that time is also a matter of speculation.
The same cannot be said for when the male defendant sold the business in early 2006. Work on the second project came to an end at about that time and although work on the apartments continued throughout the year or so that he operated the business it ultimately came to an end at about the time that he sold it again. His profits over that period were itemised in the Form 2 which was prepared for the second sale. Any prospective purchasers were thus in a position to see the kind of profits the business was capable of generating notwithstanding the continuation of work on the apartments.
It can thus be seen that the future prospects of the business were considerably more certain at the time of the second sale whereas its prospects at the time the plaintiff purchased it were in reality speculative and attended by considerable risk and uncertainty. The male defendant was generating greater average monthly profits over the period he operated the business for the second time than the plaintiff was able to achieve from December 2003 onwards. As profits have some bearing on value, it would seem that the business would have been worth more at the time the male defendant sold it for the second time than it would have been worth at any time after December 2003.
Given the uncertainty which in reality surrounded the future of the business as at the time the plaintiff purchased it, it would seem unlikely that a prospective purchaser who knew the truth of the mater would have been prepared to pay any more for the business at that time than the second purchaser ultimately did when the future prospects of the business were attended with less uncertainty.
I am thus satisfied that the business was worth no more than $37,000 at the time the plaintiff purchased it. There will be an award of $23,000 as being the difference between the price paid and the true value of the business. As a matter of commonsense I think that it was probably worth less than this, but the lack of evidence on the topic precludes such a finding.
What is the measure of damages for loss of opportunity to purchase another business?
The plaintiff’s counsel did not adduce any evidence about what the profits of a comparable business might have been and nor was any explanation given as to why not.
That said, it is easy to see why there would be practical difficulties in obtaining such evidence. First, a business which was suitable for the purposes of comparison would have to be identified. Secondly, the owner of the business would have to be persuaded to make his trading information available. Although identifying a comparable business might be relatively simple, whether the operator of the business would be prepared to make his or her trading information available might be problematic.
I do not think much, if any, criticism can be levelled at the plaintiff’s counsel in this regard.
However, there is thus no evidence before me which enables me to make a properly informed calculation.
What is the measure of damages for loss of the opportunity to achieve greater profits?
As set out, the plaintiff was achieving estimated average monthly profits of about $3,300 after GST to the end of May 2003, that by that time she had demonstrated her capacity to run the business successfully and that the subsequent downturn cannot be attributed to any shortcomings on her part. She then achieved profits varying between about $3,350 and about $1,800 between June and November 2003 and then for the 16 months from December 2003 until distraint in March 2005 she achieved average monthly profits of about $2,100.
On the assumption that she would have continued to enjoy monthly profits of about $3,300 if the contraventions had not prejudiced her trading position, her loss of profits can be calculated as the difference between her average profits to May 2003 added to the difference between the profits she actually achieved each month between June and November then added to the difference between the average to May 2003 and the average from December 2003 to distraint multiplied by the number of months she traded over that latter period. By my calculations this amounts to a little over $24,000.
The question of whether she is entitled to any additional compensation for loss of profits which she might have enjoyed if the landlord had not distrained must also be considered.
The plaintiff’s lease over the premises was due to expire on 10^th December 2007. She was not asked how long she had intended to operate the business and she had obviously been doing her best to weather the storm. In the absence of any evidence to the contrary, it is reasonable to assume that she would have continued to trade for the term of the lease. The diminution in her profits attributable to the contraventions was the cause of her inability to meet her obligations to the landlord. The question of what her profit levels might have been from March 2005 until work on the apartments was completed must thus also be considered.
The male defendant achieved greater monthly profits over the year or so that he operated the business than the plaintiff achieved over the final 15 months that she traded. The completion of work on the second project is probably the reason for this. According to his profit and loss statement from 1^st July 2005 to 31^st March 2006, his average monthly profits were just over $3,000 which was a little less than the plaintiff was achieving before June 2003. Whether this was before or after GST is not clear on the face of the statement. As work on the apartments continued after the second project was completed it seems reasonable to proceed on the basis that the work continued to have some effect on the business until the apartments were completed in early 2006. It also seems reasonable to assume that if the plaintiff had continued to trade, her profits would have returned to pre-June 2003 levels reasonably quickly after the work was completed. The precise extent to which work on the apartments impacted on the defendant’s trading figures in 2005 and 2006 and the extent to which it would have impacted on the plaintiff’s profits had she continued to trade over that period simply cannot be determined with precision. In all the circumstances I will assess the compensation to which she is entitled from 31^st March 2005 to 31^st March 2006 at about $600 a month, that being half the difference between her estimated average monthly profits before June 2003 and her estimated average profits after December 2004. Allowing 12 months until work on the apartments was completed this comes to a little over $7,000.
The total amount of compensation for loss of the opportunity to realise greater profits out the business is thus $31,000.
Conclusion
There will be judgment for the plaintiff against both defendants in the amount of $54,000 plus interest.
For reasons which are self-evident, I have had no alternative other than to adopt a broad-axe approach to the assessment of the damages to which the plaintiff is entitled. The reality is that the she is probably entitled to more by way of compensation but the evidence which was ultimately presented was insufficient to allow for a greater award properly to be made.
I will hear the parties as to costs.