Cotrell Pty Limited v D and M Pelle Holdings Pty Limited

[2006] ACTCA 4

COTRELL PTY LIMITED v D & M PELLE HOLDINGS PTY LIMITED [2006] ACTCA 4 (22 February 2006)

EX TEMPORE JUDGMENT

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

No. ACTCA 37 - 2005
No. SC 47 of 2003
Judges: Higgins CJ, Crispin P and North J        
Court of Appeal of the Australian Capital Territory
Date: 22 February 2006

IN THE SUPREME COURT OF THE  )   No. ACTCA 37-2005
  )  No. SC 47 of 2003
AUSTRALIAN CAPITAL TERRITORY  )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN:COTRELL PTY LIMITED

ACN 062 400 837

Appellant

AND:D & M PELLE HOLDINGS PTY LTD

ACN 076 624 792

Respondent

ORDER

Judges:  Higgins CJ, Crispin P and North J
Date:  22 February 2006
Place:  Canberra

THE COURT ORDERS THAT:

1. the appeal is dismissed;

2. the appellant pay the respondent’s costs of the appeal.

IN THE SUPREME COURT OF THE  )   No. ACTCA 37-2005
  )  No. SC 47 of 2003  
AUSTRALIAN CAPITAL TERRITORY  )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN:COTRELL PTY LTD

ACN 062 400 837

Appellant

AND:D & M PELLE HOLDINGS PTY LTD

ACN 076 624 792

Respondent

Judges:  Higgins CJ, Crispin P and North J
Date:  22 February 2006
Place:  Canberra

REASONS FOR JUDGMENT

HIGGINS CJ:

1. On the first point raised by the appellant in these proceedings, namely the question as to whether his Honour should have found that the plaintiff had failed to mitigate its loss, we have regard to the reasons which his Honour gave for rejecting that submission and would agree with them.  It may be that they could perhaps have been more extensively expressed, but nevertheless the essential part of what his Honour has said in respect of that remains, in my mind at least, both apparent and obvious. 

1. Mr Pelle, as the proprietor or the manager of the business, was faced with a serious question once the supermarket, Supabarn, decided to open a full service delicatessen service and that was: should he try and send more good money after the bad that he thought was then the case, or should he just effectively try and negotiate his way out of it as cheaply as possible?

1. The evidence seems to suggest, and it is consistent with his Honour’s findings, that effectively the Pelle company accepted that its days were numbered as a full service delicatessen proprietor in that environment in which they found themselves: an environment, of course, which was a result of breach of contract by the landlord.  Further, there was a choice that the tenant had of either negotiating an end to the lease with the landlord, or breaching it immediately by then leaving.  Realistically, the only option which might have mitigated the loss further than was suggested would have been the latter, but it would be quite a reasonable option for a tenant in those circumstances to negotiate an end to the lease rather than to apparently breach it, even if that apparent breach could be defended.

1. So, for my part, I do not find that there is any substance in the proposition that his Honour should have found that there had been a failure to mitigate loss, and I note in passing that the onus of proving mitigation of loss or failure to do so is something which falls upon the contending party, in this case the appellant.  To my mind the appellant has failed to do that.

1. The second point which Mr Harrison raised was the question of the renewal of the lease beyond 2006, that is, 2006 to 2011.  His Honour found, quite obviously, that there was a reasonable chance of that renewal, assuming that the protected situation of the plaintiff’s business was maintained.  To my mind, the evidence tends to support that, although there had been a dip in the profitability of the business in the 1999 financial year and perhaps extending to some extent to the next year, nevertheless, for the previous year, it was not a loss situation.  The figures tended to pick up from the point of time it commenced and before the Supabarn supermarket decided to enter into the full service delicatessen business.  That seems to me to be a situation in which his Honour’s conclusion that the lease would have been renewed was eminently within his Honour’s discretion so to find and, indeed, imminently justifiable, in my opinion.

1. The third point related to the error which his Honour admittedly made in conflating two figures that Mr Meredith had arrived at in respect of past loss of profit as opposed to future loss of profit.  Mr Meredith, it would seem, intended one figure to encompass both, and his Honour assumed that there was a split between that figure and another figure so as to produce the figure which Mr Meredith intended to be the whole period, and relate that only to the past period.  Admittedly that error was made, but, on the other hand, it has been conceded that it was open to his Honour to find on the other figures presented by the other expert witnesses upon whom he did overtly rely, and a figure of approximately $177,372 would represent the past loss of profits.  This leaves only the question of what his Honour should have allowed for the future loss of profits.  It could not be nothing.  On the basis of the assumption which was made, namely, that the business was generating an average figure, at that time, given its protected status, of $60,000 per annum, his Honour could well have taken a starting point of that over the then succeeding 5 to 6 year period and allowed a figure between $300,000 to $360,000 as a gross figure for loss of future profits.  This figure would, of course, have to be discounted to reflect the commercial reality of likely contingencies and also for the obvious fact that the money was being received or being calculated as a lump sum.  It would need to be discounted for the fact that it was being received immediately instead of over a period of time.

1. If, as Mr Harrison had suggested to his Honour, 20% had been applied, then a figure of more than the $180,000 his Honour awarded would have been at least justifiable.  It may be that that figure I have just mentioned, a 20% discount on $300,000 or $360,000, would have been, for other reasons, inappropriate.

1. In any event it seems to me difficult to say that in those circumstances the $180,000 which his Honour awarded was excessive, and, that being the case, it seems to me that the award made by his Honour was not tainted by error - certainly the result is not tainted by error.

1. So far as the question of indemnity costs is concerned, in relation to his Honour’s finding, I find no error in the way that his Honour came to the view that an indemnity costs order was appropriate.  Although Mr Harrison did not seek on this appeal to add to his submissions on that, the submissions which were put in writing seemed to suggest that his Honour erred in taking into account the fact that the defendant had made a Calderbank offer and made the same threat that the plaintiff made in respect of the plaintiff’s offer.  I am not quite sure why that was to be regarded, if it was, as not a matter which his Honour could take into account at least as finding that each party was well aware of the intent of the other, if the case went in their favour or went against the other party, to ask for indemnity costs.  It was a case in which the disparity between the two offers would certainly have justified his Honour in making the order which he did.  I can see no error in that and so far as the costs of this appeal are concerned I think, for my part, I am quite happy to hear the parties as to that, but it seems to me that it would be difficult for the unsuccessful appellant to resist an order for costs in the usual terms.  For my part at the moment however, I am simply content to say the appeal is dismissed.

1. The appellant is to pay the respondent’s costs of the appeal.

I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Chief Justice Higgins.

Associate:

Date: 9 March 2006

IN THE SUPREME COURT OF THE  )   No. ACTCA 37-2005
  )  No. SC 47 of 2003  
AUSTRALIAN CAPITAL TERRITORY  )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN:COTRELL PTY LTD

ACN 062 400 837

Appellant

AND:D & M PELLE HOLDINGS PTY LTD

ACN 076 624 792

Respondent

Judges:  Higgins CJ, Crispin P and North J
Date:  22 February 2006
Place:  Canberra

REASONS FOR JUDGMENT

CRISPIN P:

1. I agree with the order proposed by the learned Chief Justice, and with the reasons that his Honour has given. I would add only a few brief comments in addition to what the learned Chief Justice has already said.

1. Firstly, in relation to the duty of the respondent to mitigate damages, it seems to me that the evidence does not demonstrate, as was alleged in the notice of appeal, that his Honour Justice Connolly, failed to have regard to the unanimous evidence of various expert witnesses as to what might have been done in order to enable the respondent’s business to more effectively compete with the delicatessen run by Supabarn Supermarket. The evidence before his Honour did not demonstrate that the respondent acted unreasonably by failing to mitigate its own loss in the manner suggested by the appellant’s experts which would have involved expending further money, perhaps in the vain hope of reducing losses in circumstances where the business was, in the judgment of the respondent’s director, clearly moribund.

1. Secondly, so far as the renewal of the lease is concerned, whilst it is true, as the learned Chief Justice has pointed out, that there was a dip in the profits of the respondent’s business in the financial year ending 30 June 1999, the profits increased substantially in the following year, and again in the year after that.  Furthermore, the respondent exercised its option to renew the lease in July 2001 after those three financial years.  It seems to me it was entirely open to Connolly J to accept the evidence of the respondent’s director and find that it was likely that the lease would have been renewed again. 

1. Thirdly, in relation to the issue of past loss of profits, it does not appear to me that the conflation of figures, referred to by the Chief Justice, has been shown in any way to have vitiated the approach adopted by Connolly J in relation to the calculation of damages.

1. Fourthly, in so far as the estimate of future loss is concerned, I agree with the Chief Justice that it was entirely open to Connolly J to adopt the figure of $100,000.  Indeed, if I may so with respect, if there was any error on his Honour’s part in adopting that figure, it seems to me to have been one likely to have been favourable to the appellant. 

1. For the reasons I have referred to, I would also dismiss the appeal.

I certify that the preceding paragraphs numbered eleven (11) to sixteen (16) are a true copy of the Reasons for Judgment of his Honour, President Crispin.

Associate:

Date: 9 March 2006

IN THE SUPREME COURT OF THE  )   No. ACTCA 37-2005
  )  No. SC 47 of 2003  
AUSTRALIAN CAPITAL TERRITORY  )
  )

COURT OF APPEAL  )

ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN:COTRELL PTY LTD

ACN 062 400 837

Appellant

AND:D & M PELLE HOLDINGS PTY LTD

ACN 076 624 792

Respondent

Judges:  Higgins CJ, Crispin P and North J
Date:  22 February 2006
Place:  Canberra

REASONS FOR JUDGMENT

NORTH J: 

1. I agree that the appeal should be dismissed for the reasons given by the Chief Justice. 

I certify that the preceding paragraph numbered seventeen (17) is a true copy of the Reasons for Judgment herein of his Honour, Justice North.

Associate:

Date: 9 March 2006

Counsel for the Appellant:  Mr C Harrison

Solicitor for the Appellant:  Rigby Cooke Lawyers

Counsel for the Respondent:  Mr B Meagher SC

Solicitor for the Respondent:  Tetlow Tigwell Watch

Date of hearing:  22 February 2006

Date of judgment:  22 February 2006