Cp (Adelaide) & Ors v Hartford (Holdings) & Anor (No 7) No. DCCIV-01-617

[2002] SADC 81

CP (ADELAIDE) PTY LTD, NICK CHRIS NICOLAOU, MINAS MAKRIDIS, ROBERT WALEED SALLIS & BILL KRITHARAS
v
HARTFORD (HOLDINGS) PTY LTD & COLLIERS JARDINE (NO 7).
[2002] SADC 81

Judge Lunn
Civil

TABLE OF CONTENTS

(The references are to paragraph numbers and not page numbers)

SECTION 1      -       The locations   1-  11

SECTION 2      -       The main players   12-  30

SECTION 3      -       Overview of relevant events   10-123

Events up to 1999  10-  38

Events in 1999  39-  44

The Glenelg Project  45

ACDJ offers to lease  46-  48

Contract to sell Bin 273  49-  50

The 18 February site inspection  51-  52

The Brochure  53

Planning for La Moda and Jooce  54-  56

Hutt St restaurant negotiations  57

Sallis acquiring Anderson’s interest

in the ACP tenancies  58-  59

Sallis and Andvent Pty Ltd  60

Setting up of CP Adelaide Pty Ltd and

its Trust61

Indentures to lease for La Moda and

Jooce62-  63

The 18 May meeting  64

The 24 May meeting and amendments

to the Indentures  65

Termination of Bin 273 contract  66

Work towards CP taking the tenancies  67-  70

The 15 June meeting  71-  72

The Business Plan  73-  74

Introduction of Kritharas into the

Venture75

The 12 July inspection  76-  77

Preparation of the Finance Application  78

Dealings about base building variation

costs79-  83

The 24 July meeting  84

The Application for Finance  85

Ultimatum to execute the Indentures

and their execution  86-  88

Arrangement with the National Bank  89

Variations in the beneficial interests in

CP and the Trust  90-  93

Setting up of La Moda and Jooce and

their openings  94-  97

Fit-out contributions  98

Execution of Bank documents  99

La Moda and Jooce in September 2000             100-106

Subsequent trading  107

Set offs for base building variations                   108

Complaints to Hartford  109

Negotiations  110

Advertising, promotion and signage                  111-113

Preparatory steps by plaintiffs for

litigation114

Further signage  115

Closure of La Moda and Jooce  116

Federal Court action  117-118

Food Court after closure of La Moda

and Jooce119-121

Early stages of this action  122

Anderson gaoled  123

SECTION 4      -       This action  124-138

The affidavits of the plaintiffs and

their witnesses  128-130

Scope of the pleadings  131-132

Privilege claim for Sallis’ time

records133-138

SECTION 5 - Beneficial interest of Anderson in the

tenancies139-152

SECTION 6      -       Credit of the natural plaintiffs  153-185

Sallis162-172

Nicolaou173-178

Kritharas179-183

Makridis184-185

SECTION 7 - The other witnesses and the witnesses not

called186-205

Credibility of Rentis  186-189
         The other witnesses  190-197

Witnesses not called – Jones v

Dunkel points  198

Failure of the defendants to call

witnesses  199-200

Failure of the plaintiffs to call

Anderson  201-205

SECTION 8      -       CP’s liability for the base building

variation costs  206-211

Ceiling credits  211

SECTION 9-       Misleading conduct of the defendants

through misrepresentations  212-322

Introduction – the law  212-216
         The Coffee Club  217-225
         Rentis being able to sell the businesses
a dozen times  226-228
         No risks to the plaintiffs  229
         David Jones’ café and juice bar  230-236
Exclusivity and competition from other
businesses in the ACP  237-241
         Traffic flow of 7,000-8,000 people each
day  242-254
         Signage  255-257
         Advertising, marketing and promotion             258-263
         “Kill the Myer Food Court”  264-268
         Takings of La Moda, Jooce and the Food
Court  269-271

Unique, best and most successful food

court  272-286

500 seats to be in the common area of the

Food Court  287-291

Excellent locations for La Moda and

Jooce  292-297

Experienced operators for the Food

Court  298-302

Anticipated cost of the fit-outs  303-305

Visibility from North Terrace  306-308

Payment of the fit-out contributions                  309
         Miscellaneous representations  310-321
         Findings about actionable, misleading
conduct  322

SECTION 10     -       Inducement and reliance  323-337

The Law  323
From the misleading conduct of Hartford         324-329
From the actionable, misleading conduct
of Colliers and Rentis  330-337

SECTION 11             No disclosure statements under the RACL Act 338-349

No assignments to CP  338-339

No disclosure statements given to CP               340

Contents of disclosure statements if given       341-346

Defence under s12(6) 347

Relief under s12(5) 348-349

SECTION 12 Defendants’ claim of contribution for

co-ordinate liability  350-356

SECTION 13 Reduction of damages under the TPA for

other causes of the losses  357-381

Poor management – disproportionately

high wage cost ratios  363-368

Poor management – inadequate

Advertising  369

Poor Management – coffee prices  370-372

Inadequate capital base for CP  373-318

CP’s failure to employ competent

managers379

Conclusion380-381

SECTION 14             Other causes of action and claims for relief               82-391

SECTION 15             Issues on the defendants’ contribution notices          392-398

Colliers agency for Hartford  392-395

Obligation to give disclosure statements

to CP396-398

SECTION 16 Quantum of damages under the TPA 399-418

The Law399

CP assessment  400-404

Assessments for natural plaintiffs –

general matters  405-408

Nicolaou409-410

Makridis411-412

Kritharas413-415

Sallis416-418

SECTION 17             Summary of orders  419

SECTION 1

The locations

1. Prior to August 2000 there was a large David Jones department store at 44-58 Rundle Mall, Adelaide.  In the eastern side of its basement was a large retail area known as the “Food Hall” (“the old Food Hall”).  It predominantly sold gourmet takeaway foods.  It contained two areas in which customers could buy prepared meals, snacks and drinks either to consume in that area or to take away, but it did not contain a food court.[1]

   [1] My findings about these two areas in the old Food Hall are based on the evidence of Denise Comanetti, a former employee in that building.  Numerous other witnesses who gave vague and generalised evidence significantly under-estimated the extent of the eat-in trade there.

2. On the eastern wall of that Food Hall were pasta and oyster bars, each about five to six metres in length, in front of which were sixteen to twenty stools for the use of customers.  These bars sold light gourmet-type meals, such as pasta, oysters, sandwiches, baguettes, muffins, coffees, tea and wine, but not fresh fruit juice.  At the northern end of that Food Hall was a coffee bar in front of which were twelve stools and nearby were two or three tables surrounded by eight to ten stool-type chairs.  This coffee bar sold gourmet sandwiches, muffins and pastries and coffee, tea and juices, but not fresh fruit juices.  Neither area in the old Food Hall had the appearance of a café.  It was usually busy and hard for customers to obtain a chair to sit down and consume food or drink there.

3. In August 2000 David Jones closed its former department store and opened a new department store nearby in a brand new building at 100-106 Rundle Mall.  The whole of this new building was known as the Adelaide Central Plaza (“the ACP”).  It had five storeys including a basement.  The David Jones department store occupied parts of the basement, ground and first floors and the whole of the second and third floors.  In the basement, ground and first floors there were about 52 shops which were let out to other tenants.  About 26 of these tenancies were in the basement.

4. The only area in the basement let to David Jones was that which was occupied by its new Food Hall (“the new Food Hall”).  It was about 30-40% larger in area than the old Food Hall.  It contained a sizeable café area which comprised a number of tables and over fifty chairs plus a bench against a side wall.  It sold a similar range of prepared foods which could be eaten in the café as the old Food Hall but no alcohol.  In addition there was a juice bar which sold fresh fruit juices.  There was also waiter service at the tables which was not available in the old Food Hall.[2]  The size, set up and style of the café in the new Food Hall was significantly different from the coffee bar and the pasta/oyster bars in the old Food Hall.

   [2] These findings about the café in the new Food Hall are also based on the evidence of Denise Comanetti.  There was no evidence from anyone directly involved with setting up or running this café and it had been substantially changed by the time this case was being prepared for trial.

5. Near the southern end of the basement was a set of escalators for traffic coming down from the ground level Rundle Mall entrance of the ACP (“the southern escalators”).  In about the centre of the basement was another set of escalators coming down from the David Jones store on the ground floor (“the central escalators”).  Between these two sets of escalators, and in the middle of that part of the basement, was the Coffee Club which, with its surrounding seating, occupied about 220 square metres.  It sold light meals, coffees and other beverages, but not fresh fruit juice.  It had seating for about ninety customers.  It was the first place that sold beverages, snacks and light meals which people saw as they came down the southern escalators from the Rundle Mall entrance.  It was not a restaurant and it had only limited facilities for preparing cooked food.

6. On the southern end of the basement, and behind the southern escalators, was Rech’s Jewellers.  On the eastern perimeter around from Rech’s Jewellers was Tandy’s Electrical Store, a newsagent and a home ware store.  On the western perimeter moving around from Rech’s Jewellers were a chemist, a hairdresser and a watchmaker.  Immediately to the west of the central escalators, and adjacent to them, was a kiosk-type shop selling mobile phones.  The central escalators and this kiosk substantially obscured the view of people in the southern end of the basement of what was to the north of the central escalators and the phone kiosk.

7. The new Food Hall was almost immediately east of the central escalators and extended much further to the east than any of the other basement tenancies.  Immediately to the north of the Food Hall on the eastern perimeter of the basement was a Turkish Café called “Ali Gems” and immediately to the north of that on the eastern perimeter was an Italian Café known as “La Moda”.  Opposite Ali Gems on the western perimeter of the basement was a bakery café known as the Black Fig.  Next to it to the north was a seafood café known as the Breakwater. (These four cafes are referred to as “the four cafes”.)  La Moda was 138 square metres in area and contained tables and forty one seats.  Ali Gems, the Black Fig and the Breakwater were each of similar size to La Moda and contained some tables and seats for their customers.

8. Immediately to the north of La Moda was a narrow walk way and then spread out in a horseshoe shape around the edge of the northern end of the basement were nine Food Court shops.  The first of these to the north of La Moda was the Jooce Beverage Bar (“Jooce”) which sold fresh fruit juices, coffee, alcoholic drinks, baguettes and cakes.  It was about 40m² in area.  The next shop was PJs Burger Box which sold hamburgers and next to it was the Copenhagen Ice Cream Shop.  At that point in the north eastern corner of the basement was the only other public entrance to the basement.  It consisted of two escalators coming down from the North Terrace entrance to the ACP on the ground floor and these escalators were separated by a wide staircase which went up from the ground floor.  The shop to the west of this entrance was Michelle’s Patisserie, which sold bakery items, then the Genki Roll, which sold Japanese food, then the Mandarin Express, which sold Chinese food, then Chilli Jam which sold Thai food, then Executive Sandwiches which sold baguettes and sandwiches and then Roshans Noodle Bar, which sold Indian food.  There was then a narrow walk way and to the south of that was the Breakwater Café.

9. From immediately north of the central escalators, and in the open area formed by the horseshoe of the Food Court shops, were tables, benches and 348 seats.  These seats were in addition to those which were in the four cafes and those which surrounded the Coffee Club.  These tables and seats were for the use of patrons of the nine Food Court shops and for customers who bought food in the four cafes but did not utilise the seats within those cafes.

10. The area of the basement north of the central escalators was referred to as the Food Court[3].  The Food Court was given the name “Feast on Rundle” or just “Feast”. 

    [3] In some documents the Food Court was defined to exclude the four cafes in that northern area, but unless I indicate to the contrary the term “the Food Court” in these reasons means all of the cafes, shops and seats to the north of the central escalators.  Care needs to be taken to distinguish between “the Food Court” and “the Food Hall”: there are several instances in the evidence and the documents of these terms being confused.

11. Reference was also made to other food courts in the Central Business District of Adelaide.  The principal one was the nearby Myer Food Court, in the basement of the Myer building, which had about 30 shops excluding Café Centrum.  I accept the evidence of Mr Howis that it had about 600 seats, although Rentis said it was about 900.  Others were the City Cross Food Court in the City Cross Arcade, the Southern Cross Arcade, in the Southern Cross Arcade, the City Centre Food Court, near the corner of Rundle Mall and Pulteney Street, and the Gallerie Food Court which had closed before the ACP opened.  Apart from the ACP Food Court, the Myer Food Court and the Gallerie Food Court the other food courts were at ground level.  None of the other food courts had licences to sell alcohol.

    SECTION 2

    The main players

12. Lou Rentis has been an associate director of retail leasing with the second defendant, Colliers Jardine SA Pty Ltd (“Colliers”), in Adelaide since 1990.  Colliers are leasing agents for commercial property, but do not act as agents for selling businesses.  In 1983 Rentis had obtained a degree in Business Management majoring in marketing.  Since 1990 he has specialised in leasing out retail premises particularly in Rundle Mall, and has been colloquially known as “Mr Rundle Mall”.  However, he had no experience in setting up, or marketing tenancies in, food courts.  His earnings from Colliers comprised a base salary with commissions for leases successfully negotiated.

13. Jeffrey Anderson[4] had been involved for many years in the café/nightclub scene in Adelaide.  In particular since about 1990 he had set up and established in various places in and around Adelaide a number of “Cafes Buongiorno”, run them for a time and then sold them off.  He was reputed to have made substantial profits in establishing, running and selling off cafes and was regarded as having a golden touch.  He had also been involved in a number of nightclubs, taverns and wine bars.  He had considerable experience and expertise in the design, fitting out, staffing and operating of cafes.  In 1997 he had, with a partner, established the Bin 273 Wine Bar (“the Bin 273”) at 273 Rundle Street, Adelaide.  He had never previously been involved in a food court. 

    [4] In some documents his Christian name was shown as Geoffrey.

14. Anderson and Rentis first met in about 1990 when Rentis negotiated the lease of the premises at Norwood which became the first Café Buongiorno.  Thereafter they became friends in a business context.  Rentis regularly frequented the Bin 273 while Anderson ran it.  Rentis found premises for various businesses Anderson was establishing and Anderson referred other leasing business to Rentis.  In 1997 Rentis took a 10% interest in Café Buongiorno at Mitcham which Anderson was establishing and disposed of this interest at a profit when Anderson subsequently sold it.  Later Anderson arranged for Rentis to take an interest in the new Café Buongiorno at West Lakes, but ultimately it was only marginally profitable for him.

15. The plaintiff, Nick Nicolaou, is a chartered accountant in public practice as a partner in the firm of Luestner & Associates (“Luestners”).  At the relevant times Luestners had either two or three equal partners, one of whom was Nicolaou, and in addition employed five accountants and two support staff.  Its offices are at Magill.  It specialises in providing business services to small and medium enterprises.  Nicolaou is married.  He owns his home jointly with his wife but subject to a substantial mortgage.

16. Nicolaou had known Rentis for about twelve to fifteen years and had been his personal accountant since about 1985.  Rentis introduced Nicolaou to Anderson.  Although Nicolaou never became Anderson’s personal accountant he did work for Andvent Pty Ltd (“Andvent”)[5] apparently at the instigation of Anderson.

    [5] See paragraph 60 below.

17. The plaintiff, Minas Makridis, holds a Batchelor of Science Degree in Building Technology and since 1985 had carried on business in Adelaide in designing and project managing various commercial, retail and industrial projects through a company, Caramug Corporation Pty Ltd (“Caramug”).  Until late in 2000 he and his wife jointly owned their home subject to a mortgage.

18. Makridis and Rentis had been close friends since their school days.  They saw each other frequently.  When leasing out commercial premises Rentis often referred the new tenants to Makridis for him to assist them in setting up and fitting out their premises.

19. In about 1998 Rentis introduced Makridis to Anderson.  In December 1999 Anderson introduced Makridis to Nicolaou in relation to the Glenelg project.[6]  He had previously heard about him from Rentis.

    [6] See paragraph 45 below.

20. The 4^th plaintiff, Robert Sallis, is a legal practitioner who has practised in Adelaide since 1977 principally in the field of commercial litigation.  From 1993 until October 2001 he was in the in-house counsel at the firm of Andersons[7].  He is married with four children, but he separated from his wife in December 2000.  He and his wife own the former matrimonial home at Linden Park which is subject to a mortgage.  Sallis did not know any of the other plaintiffs, Anderson or Rentis until the events to be related in Section 3.

    [7] It has no connection with Jeffrey Anderson.

21. The 5^th plaintiff, Bill Kritharas, was born in Greece and migrated to Australia when he was aged eighteen.  He speaks fluent English.  He says he can read, but cannot write, very well in English.  In the ten years after he came to Australia he was involved in various cafes and sandwich bar businesses with his brothers.  In 1973 he set up a coffee lounge at the Arndale Shopping Centre at Kilkenny which he ran for thirteen years.  He was then involved in various other coffee lounges and food retail businesses.  In 1998 he established, and worked in, a baguette shop in Gawler Place, Adelaide, which he sold at a profit in February 2000.  He is married and his wife owns their home.  He is a director of Kritharas Nominees Pty Ltd which is the trustee for the Kritharas Family Trust.

22. Kritharas first met Makridis when he employed him in early 1998 to design and set up the baguette shop in Gawler Place.  Thereafter they became friends and discussed business matters together.  Kritharas first met Rentis when Rentis became a customer of the baguette shop.  Prior to the events to be related in Section 3 Kritharas had not known Nicolaou or Sallis.

23. Luke Kouzapa runs Kouzapa Financial Services, which operates as a finance broker in Adelaide.  That business employs Peter Clasholm as a lending manager.  Kouzapa had known Nicolaou for about fifteen years and Luestners referred some of their clients to Kouzapa Financial Services when they needed to raise finance.  I infer Anderson knew Kouzapa and had had some dealings with him.

24. At all material times the 1^st defendant, Hartford (Holdings) Pty Ltd (“Hartford”) has been the owner of the land on which the ACP is constructed.  Originally it was a subsidiary of David Jones Ltd.  As will be related later, the Precision Group bought all of its shares but the legal owner of the ACP did not change.

1. Shaun Bonett and Ross Makris are the directors, and apparent controllers, of the Precision Group.  Once the sale of the shares had been agreed upon, they, and particularly Bonett, were regarded as the controllers of Hartford and the ACP.

2. PDF Savill (“Savills”) is a land and business agent.  It apparently effected the sale of the shares in Hartford to Precision.  It is the property manager appointed by Hartford for the ACP.  Its property management is carried out through a division or subsidiary of it called “Byvan”.

3. Michael Vaughan is employed by Byvan as the manager of the ACP.  He had an office in the basement of the ACP near the Food Court.

4. Fiona Buchanan was the part-time marketing manager for the ACP from late September 2000 until 26 February 2001.  She was employed by Byvan.

5. Cowell Clarke are a firm of solicitors in Adelaide who acted for the Precision Group in its acquisition of Hartford and then for Hartford in leasing out the tenancies in the ACP.  Tony Britten-Jones is a principal in that firm who had the ultimate responsibility for the conduct of the legal work for Hartford.  David Dew was an associate in that firm who assisted him.

6. Barry Phillis & Associates were the project managers appointed by David Jones for the construction of the ACP.  They were also the tenancy co-ordinators for Hartford for supervising the fitting out of the tenants’ premises in the ACP.

   SECTION 3

   Overview of relevant events

7. The contents of Section 3 are taken largely from the documents and generally do not deal with the matters which were primarily in issue.  Insofar as it contains conclusions on disputed matters I find them proved for the reasons set out in Sections 6 and 7.

   Events up to 1999

8. Towards the end of 1997 David Jones announced its intention to build a major new retail store on the ACP site.  In late 1997 Rentis on behalf of Colliers approached David Jones offering their services for any retail leasing opportunities in the new ACP and to assist with advice on the tenancy design and mix and planning issues.  On 16 February 1998 Colliers submitted to David Jones a leasing and consultancy proposal for the ACP project.  It was based on all the leasing activity being managed by Rentis with support as required from other Colliers’ personnel.  It referred to a proposed food court in the basement and stated:

   “Given that the proposed basement Food Hall will be competing with existing Food Halls in the Myer Centre, City Cross, Southern Cross Arcade, Gallerie and City-Centre Arcade, we have to provide this development with a point of difference.”

   By 2 March 1998 David Jones had appointed Colliers as the sole exclusive leasing agent for the consultancy and retail leasing of all speciality shops in the proposed ACP.  (Colliers were never involved in whatever arrangements were made for David Jones itself to occupy a substantial part of the ACP building, but only with the letting of the remainder of that building to third parties.)  A fee of $10,000 was agreed for “the first stage leasing advice”.  The final leasing agreement was not executed between David Jones and Colliers until 19 March 1999.  Colliers effectively commenced work on the project from about March 1998.  Under the final agreement Colliers were entitled to a fee of $450,000 if all the tenancies were leased by the opening date and with bonuses payable if the annual rents payable under all of the leases exceeded a specified amount.  If David Jones terminated the agency a termination fee of $200,000 was payable to Colliers.  It was always anticipated that the ACP would open for business on 31 August 2000, and that date was never varied.

9. Hassells Architects were designing the new ACP for David Jones.  Hansen Yuncken was employed by David Jones as the builder.  Rentis liaised with Hassells and the property managers in David Jones about the configuration of the various proposed shops within the ACP and a desirable tenancy mix.  He was grateful to be involved in the early planning stages and had considerable influence on what was finally settled upon as the design of the building, the layout of the individual shops and the desired tenancy mix.  A tenancy mix was sought which would be consistent with the upmarket image of David Jones.  It was hoped other retailers would be attracted to the tenancies in the expectation of some “coat-tail” trade from the David Jones clientele.  Rentis was excited, confident and enthusiastic about the project, and always remained so.

10. The particular expertise of Rentis lay in the field of leasing retail shops and particularly in fashion.  He did not hold himself out as an expert on food courts.  David Jones retained interstate experts on food courts, being Francis Loughran from Victoria and Mary Brandon from Sydney (“the consultants”).  They advised on the design and tenant mix for the Food Court.  It was agreed that it should be an upmarket Food Court with particular appeal to office workers and the clientele of David Jones.  Accordingly, there was considerable emphasis upon the shops selling quality and gourmet food and their fit-outs being of a higher class than in other food courts.  While children were not to be discouraged there were to be no particular attractions for them, and franchises such as McDonalds, Subway, Wendy’s and the like were not to be accepted as tenants.  The point of distinction between this Food Court and the other food courts in Adelaide CBD was to be that this would be more upmarket and thus appeal to a higher class of patrons.  Loughran and Brandon were familiar with similar upmarket food courts in Melbourne and Sydney and sought to translate what had worked there into this Food Court.

11. The original suggestion was that the Food Court should be called the “David Jones Food Court”, but David Jones would not agree to this.  Mary Brandon then came up with the name “Feast on Rundle”, which was the official title given to the Food Court.  However, there was always a problem with people at large not associating the name “Feast on Rundle” with the basement of the ACP.

12. In June 1998 Loughran prepared a set of recommended menus for the various cafes and shops in the Food Court so that while exclusivity would not be granted to any shop or café for all the products which they sold, there would be a minimisation of menu duplications.

13. Part of Rentis’ strategy for leasing the Food Court shops was to seek to have some well-known and respected Adelaide restaurateurs agree to take up tenancies in the Food Court in the hope that other prospective tenants would be encouraged by the presence of these well-known people in the tenant mix also to become part of the Food Court.  To this end he targeted Anderson, David Chow of the House of Chow and Sammy Klementou of Sammy’s Seafood Restaurant at Glenelg.  His initial approach, probably as early as about March 1998, was to Anderson so as to give him the pick of the tenancies.  Although Anderson had previously told Rentis that he was not interested in food courts, he nevertheless did respond to these overtures from Rentis and quickly became enthusiastic about the prospects for him of tenancies in such an upmarket Food Court.  By June 1998 Anderson had indicated a willingness to take the tenancies which were designated as a licensed Mediterranean café, which subsequently became La Moda, and an espresso café/beverage bar, which subsequently became Jooce.  On 23 June 1998 Anderson wrote to Rentis:

    “............. I hereby confirm my acceptance of your terms and conditions relating to my leasing of both the proposed tenancies .......... I look forward to being part of this exciting new development and can assure you that our operation will be of the very highest standard, in fit-out, product, service and ambience.”

    At some early stage Anderson also expressed interest in taking the tenancy in the southern end of the basement which, although then smaller, later became the Coffee Club, but at that stage David Jones would not agree to another café/coffee shop being so close to its Food Hall.  (Later it did so.)  At some early stage of the negotiations Anderson proposed that the beverage bar should hold a liquor licence so that it could sell any alcohol to be consumed in the common area of the Food Court.  It was ultimately agreed that subject to the four cafes each being able to sell five white and five red wines the beverage bar would be the only seller of alcohol in the Food Court.  Anderson apparently regarded this right to sell alcohol as significant and a source of considerable potential profit.  It was also negotiated at some stage that none of the other eight shops in the Food Court should be permitted to sell espresso coffee without the permission of the proprietor of the beverage bar, although it was not agreed that there would be any particular restrictions upon any of the four cafes selling coffees.

14. After June Rentis was away for some time, but upon his return on 26 October he wrote to Anderson confirming the general terms upon which he could have the two tenancies which became La Moda and Jooce.  In November 1998 Anderson expressed interest in leasing in addition a proposed restaurant on the ground floor of the ACP but ultimately he did not pursue it.  This ultimately became the “Air Restaurant”.  On 27 November 1998 Rentis wrote to Anderson informing him that David Jones had accepted in principle the offers which had been made for him to have the two tenancies and, subject to final documentation being completed, the tenancies would not in the meantime be offered to anyone else.

    Events in 1999

15. In early 1999 there appears to have been some significant changes to the design of the area which later became Jooce.  On 4 March 1999 Rentis again wrote to Anderson setting out the proposed terms for the leases of each of what became La Moda and Jooce and seeking his confirmation of these terms prior to the preparation of formal agreements to lease.  Anderson countersigned these letters indicating his approval, although in respect of the Jooce letter he inserted a term of “exclusive alcoholic beverages” and increased the landlord’s contribution towards the fit-out costs from $25,000 to $30,000.  On 8 March Rentis forwarded these offers to David Jones for their acceptance.  On 17 March he wrote to Anderson indicating that the offer for La Moda was accepted and that the offer for Jooce was approved in principle but stated:

    “The landlord will also agree to a limited exclusivity on the sale of alcoholic beverages.  This exclusivity will only apply to Food Court shops 1-9 and not include cafes 1, 2 and 3 nor (4) .........  Exclusivity will also not apply within the David Jones Food Hall tenancy.”

    There is no document recording Anderson’s response to this counter proposal about Jooce, but from the documents executed subsequently it appears that it was accepted by him.  From 17 March 1999 it was accepted by all parties that Anderson had secured these two tenancies, albeit that further documentation would ultimately be required.

16. Rentis was continuing his efforts to lease out the other shops and cafes in the Food Court.  His approach to Klementou had been rejected.  He had spoken to David Chow who had indicated he personally was not interested, but he referred the opportunity to some of his associates.  In April 1999 Rentis commenced negotiations with Steven Tsimiklis who ran Pepper’s Espresso Bar in the nearby Regent Arcade about leasing what became the Black Fig.  Hassells were continuing to produce revised plans for the ACP.  In March 1999 the plans for the common area of the Food Court showed it contained 510 seats.  In late May Rentis opened negotiations with the Coffee Club Franchising Pty Ltd in Queensland about it leasing an area in the ACP outside the Food Court.  These negotiations continued for a considerable time.

17. On 16 June 1999 a company, ACDJ Pty Ltd (“ACDJ”), was incorporated. The initial director and secretary was Van Stevens, who was then the accountant for Anderson. Anderson apparently informed Rentis that ACDJ would be the vehicle through which he would conduct his two tenancies. On 16 July Rentis sent to Anderson four offer to lease documents for each tenancy showing ACDJ as the tenant and requesting their execution and payments of deposits of $6,750 and $3,166. He also enclosed the speciality shop fit-out guide which was a substantial document prepared on behalf of Hartford setting out numerous requirements about the fitting out and the conduct of the leased premises. As its drafting was not then completed, I infer that it was not accompanied by what later became the Food Court fit-out supplement, which laid down additional requirements for the Food Court shops. Also enclosed with those letters were disclosure statements in the form of Regulation 5 under s12 of the Retail and Commercial Leases Act 1995 (“the RACL Act”)[8].  These two disclosure statements (“the ACDJ disclosure statements”) were signed by Rentis and were addressed to ACDJ.  They stated that Hartford was not prepared to give ACDJ an assurance that the tenancy mix would not be altered to ACDJ’s disadvantage by the introduction of a competitor.  They also stated that ACDJ would be liable for capital expenditure for fitting out the shops and providing fixtures, plant and equipment as set out in Attachment “D”, but there was no Attachment D.[9]  Attached to these disclosure statements was a plan of the basement showing each of the shops in it and bearing a notation of “proposed tenancy mix” which stated, inter alia, that Shop J, which later became part of the Coffee Club tenancy, was “food”.  On 4 August Rentis replaced the offers to lease and disclosure statements with revised documents, but the changes were not apparently significant. 

    [8] Prior to 1997 it was called the Retail Shop Leases Act 1995.

    [9] It is unclear whether the fit-out manual was intended to be the Attachment D, but as stated in paragraph 208 below it did not contain sufficient information to comply with the RACL Act.

18. Anderson delayed in having ACDJ execute the offers to lease.  By this time he was in serious trouble with the Australian Taxation Office.  He had been the subject of a major taxation investigation which had revealed that over a number of years in café businesses which he had controlled he had failed to deduct PAYE tax from employees’ wages totalling about $308,000 and he had failed to file tax returns between 1992 and 1997 for a number of his café businesses whereby he had avoided paying tax of about $456,000.  He had not kept proper financial records and in some instances he had kept two sets of accounts for various businesses, one being correct and the other to deceive the Taxation Department.  It was a major exercise to construct the true records of these businesses and that task was only completed in about mid 2001.  He was prosecuted for indictable offences of defrauding the Commonwealth and failing to file tax returns.  I infer that the committal proceedings for these prosecutions would have been on foot by at least August 1999.  On 30 September 1999 Justice Bleby in the Supreme Court made an ex parte Order under the Commonwealth Proceeds of Crime Act 1987 requiring the proceeds of the sale of Bin 273 to be paid to the Official Trustee and restraining any dealing in the property at Burnside which was Anderson’s home.[10]  On 8 November 1999 Anderson was first arraigned in the District Court and pleaded not guilty to all the charges.  Mr Parr of Knox & Hargrave was his solicitor.  He had retained Ms Shaw QC and an expert forensic accountant on Anderson’s behalf in pursuit of the defence of the charges.  It seems likely that at this time, and until well into 2001, Anderson entertained a vain hope that he could escape conviction.  On 9 December 1999 Justice Bleby made a further inter partes Order, inter alia, restraining Anderson from dealing with any of his properties or that of any company controlled by him without the consent of the Commonwealth DPP.  By the latter part of 1999 Anderson must have realised that he was likely to have to pay a very substantial sum to the Taxation Department and would have to raise considerable moneys to pay for his defence to the criminal charges.  His general circumstances at the time strongly suggest that he had little liquid resources available to him.  This lack of liquid resources, and the constraints of the Supreme Court Order, indicate he had little scope legitimately to embark on new business ventures.  While Rentis and Nicolaou each had some general knowledge that Anderson was having major problems with the Taxation Department it is unlikely that they knew anything like the full extent of his difficulties until early in 2000.

    [10] Although there is no direct evidence of it, I infer that Anderson was then seeking to raise money by selling Bin 273, and apparently had then effected a sale of it, but that sale was never completed.

19. In August 1999 Rentis commenced to negotiate with Hulia Yesil for her to become the tenant of Executive Sandwiches.  He was still continuing with his negotiations with the Coffee Club.

20. On a date which was not the subject of evidence, but which was probably in the latter part of 1999, the Precision Group entered into its agreement with David Jones to purchase the shares in Hartford, but with settlement not being completed until about 18 May 2000.  From this time in 1999 Bonett became the defacto controller of Hartford although he was only appointed to be a director on 20 April 2000.  In December 1999 there was some prospect that Colliers’ agency for the leasing of ACP might be cancelled by Bonett, but it was confirmed by the Precision Group, albeit with a variation of Colliers entitlement to commission.

    The Glenelg Project

21. Rentis had referred Anderson to premises which Colliers were seeking to lease in the old Town Hall at Glenelg.  Anderson became interested in setting up a wine bar and restaurant there (“the Glenelg project”).  Few dates were given in evidence about this project, but it seems to have come to a head in late 1999.  A company, PH Glenelg Pty Ltd, was formed to take up the lease and a trust was established to conduct the business.  Anderson sought to include his friends and associates in it presumably to assist in raising the necessary finance.  Rentis agreed to take a 30% share and Nicolaou a 25% share.  Over time other persons were brought in by Anderson and his own share was reduced to 20%.  Nicolaou, Rentis and others became directors of the company PH Glenelg Pty Ltd, but not Anderson.  Makridis was employed as the fit-out designer and project manager, but he did not take up any beneficial interest in the business or become a director.  At some point in time, which is impossible to identify on the evidence, but which was likely to have been further into 2000, Rentis lent $25,000 to Anderson on the security of his shares in this Glenelg project.  The loan was not repaid and all of Anderson’s shares were transferred to Rentis in satisfaction of it who in turn divested himself of some of them to other persons.  No documents relating to this loan or the share transfer from Anderson to Rentis were put into evidence, but Rentis claimed they had been documented, at least to some extent, by Nicolaou.  The establishment of the Glenelg Wine Bar and Restaurant proceeded in parallel with that of La Moda and Jooce, but there were substantial delays and the Glenelg project did not open until 31 October 2000.

    ACDJ offers to lease

22. Anderson invited Rentis to take a share in ACDJ, but he declined and suggested Anderson approach Nicolaou and Makridis.  On 7 December 1999 at a meeting at the Glenelg Town Hall, where they were inspecting the site for the Glenelg project, Anderson first spoke to Nicolaou and Makridis about them taking up an interest in the businesses which would become La Moda and Jooce in the ACP Food Court.  Nicolaou agreed to become the accountant for ACDJ and to take up a 50% interest, although he claimed it was then intended that other investors would be found for part of that 50%.  Makridis agreed to take a 10% interest.  This left Anderson with a 40% interest.

1. On 22 December 1999 the registered office of ACDJ was changed to Luestners’ offices at Magill and Anderson, Makridis and Nicolaou were appointed to be  the directors of the company and Nicolaou to be its secretary.  On that day Nicolaou wrote to Rentis informing him of the new directors of ACDJ, that its shareholding would be in the proportions of Anderson 40%, Makridis 10% and Nicolaou 50% and that the company would be acting as the trustee for the ACDJ Unit Trust.  Such a trust deed was executed and dated 17 January 2000 which recorded the respective beneficial interests of the three directors as previously stated.

2. On a date which is unclear, but which was probably on or after 22 December 1999, Anderson, on behalf of ACDJ, executed the two offers to lease which Rentis had sent him in August and receipts on behalf of ACDJ for the two ACDJ disclosure statements.  He also personally executed a guarantee to Hartford of ACDJ’s obligations under the offers to lease, but such guarantees were not given by the other directors.  There is no evidence that ACDJ paid the deposits which had been requested in the letter of 16 July or that any further demand was made for their payment.  Rentis had received these executed offers to lease by 23 December when he forwarded them to Finlaysons, who were then the solicitors for Hartford, with instructions to prepare the formal documentation for both tenancies.  On 29 December Finlaysons sent letters to Nicolaou enclosing two indentures of agreement to lease for La Moda and Jooce respectively and requesting payment of sums on account of anticipated legal fees and stamp duty.  ACDJ never executed these, or any, indentures.  Nicolaou and Anderson discussed their contents on 13 January 2000.

   Contract to sell Bin 273

3. By early 2000 Anderson had major problems in continuing the operation of Bin 273.  It only held a liquor licence for a restaurant which apparently did not allow it to operate as a nightclub or a wine bar.  Objections were being taken by the Adelaide City Council and neighbours about the activities at Bin 273.  On 20 January 2000 his company applied to vary the conditions of the liquor licence.  He retained solicitors and a Queen’s Counsel for various pending court hearings.

4. Anderson had listed the business of Bin 273 for sale, coincidentally through Savills.  Sallis was looking for a business venture to earn money to fund his children’s college educations.  He had little in the way of unencumbered assets, but he had good earnings as a lawyer.  He investigated the purchase of Bin 273 and in the course of the negotiations he first met Anderson.  On 15 February 2000 he entered into a contract for the purchase of the Bin 273 by himself or a nominee for a price of $400,000 with settlement scheduled for 3 April 2000.  He paid a deposit of $1,000 on 23 February.  The contract contained a number of special conditions including the purchaser receiving approval for borrowings of $300,000 within thirty days and the vendor having to provide financial details within seven days with Sallis having the right to terminate the agreement if he was not satisfied with them.  The contract was also subject to the vendor, 273 Rundle Street Pty Ltd, providing vendor finance of $100,000 interest free repayable at $1,000 per week for 100 weeks, which sums were to be paid directly to Anderson.  Sallis claimed that this contract was really no more than an option.  On 23 February 2000 Sallis had a company, Binmede Pty Ltd (“Binmede”) incorporated, of which his wife was the sole director, which was to be used as his vehicle for the purchase of Bin 273.  On 24 February Bonnins solicitors, acting for Sallis, made an application to the Liquor Commissioner for the transfer of the liquor licence of Bin 273 to Binmede.  After negotiating this contract Sallis became quite friendly with Anderson.  He learned something of Anderson’s problems with the Taxation Department and of his consequent need to divest himself of various business interests.  Sallis saw this as a possible opportunity to benefit himself on a “fire sale” of these business interests.

   18 February site inspection

5. Although Nicolaou and Makridis had taken up shares in ACDJ, they had not committed themselves to provide any of the substantial finance which was required for fitting out and setting up the two shops.  As far as Nicolaou was concerned at that point he had risked no more than the moneys payable for his shares.  Rentis was requested to speak to them about the venture.  On 17 February 2000 Nicolaou, Makridis, Anderson and Rentis met at Pepper’s Espresso Bar in the Regent Arcade where Rentis spoke about the ACP Food Court (“the 17 February meeting”).  On 18 February Rentis continued the discussions with those three when he took them through the partially constructed basement although the shops were then not set out (“the 18 February site inspection”).  On 22 February Nicolaou wrote to Finlaysons a two page letter seeking eight amendments to the proposed indentures of lease.  The detail of the amendments sought suggest that Nicolaou, and probably Anderson, had closely read the indentures.  Finlaysons forwarded the letter to Rentis and to Cowell Clarke as by then Cowell Clarke were about to take over from Finlaysons as the solicitors for Hartford in leasing out the ACP.  There was no suggestion in the letter that ACDJ could not, or would not, honour its legal obligations under the offer to lease agreements.

6. In February 2000 Bonett had conducted the negotiations which led to leasing the pharmacy in the basement to “My Chemist”. The disclosure statement under s12 of the RACL Act for this tenancy was prepared by Cowell Clarke, but was signed by Rentis on 21 March 2000. It gave exclusive rights to My Chemist to conduct a pharmacy in the ACP.

   The Brochure

7. In about February 2000 about 5,000 copies of the Food Court brochure were printed (“the Brochure”).  This was a glossy high-classed publication which had been prepared by Colliers for the purpose of attracting tenants for the Food Court.[11]  The contents of the Brochure had been approved by David Jones before its publication.  The plans contained in it were taken from drawings prepared by Hassells.  It included a plan of the ground floor which showed a restaurant adjacent to North Terrace.  The plan in it of the basement showed a Shop J 18m² in area about halfway between the southern and the central escalators.  The legend described it as a speciality shop.  This was part of the area which subsequently became the Coffee Club.  The area which became the Black Fig was shown on the plan as two speciality shops.  The plan only had three cafes to the north of the central escalators.  Rentis usually carried these Brochures with him and freely distributed them.

   [11] There was another similar brochure for the ordinary retail shops in the ACP.

   Planning for La Moda and Jooce

8. Although there was no certainty that they could raise the necessary finance for ACDJ to set up La Moda and Jooce, in February and March each of Anderson, Nicolaou and Makridis did a significant amount of work towards being in a position to open La Moda and Jooce on 31 August 2000 if the project could be financed.  On 24 February Makridis and Nicolaou met with Phillis and Loughran to discuss the set up of La Moda and Jooce and of the Food Court generally.  Makridis had started putting together ideas for how La Moda and Jooce should be set up and fitted out.  Anderson submitted a detailed proposal for an Italian Renaissance design for the café which he suggested should be called “Michaelangelos”, but it was not acceptable to Hassells.  On 9 March Phillis sent Loughran’s design recommendations to Makridis.  On 16 March Makridis met with Phillis and Hassells to review the schematic designs and there was a further such meeting on 30 March.  Makridis was having regular meetings with Anderson about the details of the fit-outs and the designs.

9. On 9 March 2000 the Coffee Club executed an offer to lease its premises and paid a deposit cheque.  By the beginning of April Rentis believed he had at least verbally agreed tenancies for Michelle’s Patisserie, Executive Sandwiches, Mandarin Express, Chilli Jam, Genki Roll, Royal Copenhagen, Jooce, La Moda and Ali Gems.  In addition to doing design and project management work on Jooce and La Moda Makridis had also been employed to do the fit-out, design and project management for setting up Mandarin Express, Chilli Jam, Executive Sandwiches and Rech’s Jewellers. 

10. On 14 March Cowell Clarke replied to Nicolaou’s letter of 22 February to Finlaysons agreeing to some of the amendments sought,  but not to others.  On 20 March Dew telephone Nicolaou to discuss the amendments in dispute and Nicolaou told him that he would call him back after he had consulted his client.  Presumably, he meant Anderson and he then discussed it with him.  On 27 March Dew again telephoned Nicolaou and believed he had negotiated a resolution of all of the amendments in issue.  On 14 April Dew sent a letter to Nicolaou confirming what had been agreed and enclosing two sets of revised indentures for lease for execution by ACDJ and all of its directors.

    Hutt St restaurant negotiations

11. At about this time Sallis was investigating another business opportunity relating to a restaurant in Hutt Street.  He established a company, Sallmede Pty Ltd, of which he was the sole director, as the vehicle for this transaction if it proceeded.  He showed some of the business records of the previous restaurant in the premises to Anderson and obtained his advice about setting up and operating a new restaurant there.  On 17 April he conferred with the solicitor for the landlord of those premises.  The negotiations dragged on, but no terms of a new lease could be agreed.  Sallis finally withdrew from the negotiations on 9 August 2000.

    Sallis acquiring Anderson’s interest in the ACP tenancies

12. Shortly prior to 11 April Anderson proposed to Sallis that he should take over his entitlements in the proposed businesses of La Moda and Jooce.  Sallis expressed interest.  It was not intended Sallis should pay anything to Anderson for being given this opportunity.  At 9.30am on 11 April Sallis and Nicolaou met for the first time when Sallis attended at Nicolaou’s office to discuss Sallis becoming involved in the venture.  Sallis insisted that if he was to become involved the vehicle for the venture had to be a new company and not ACDJ.  Nicolaou agreed to this.  At 5pm that day Nicolaou met with Anderson and Rentis at Bin 273.  Anderson told the others there that because of his problems with the Taxation Department he could not proceed with the venture but that Sallis could take up his interest in it.  Nicolaou informed Anderson and Rentis of his agreement with Sallis that a new company should take up the leases instead of ACDJ.  Rentis responded that he could not say whether it would be acceptable to Hartford or not and told Nicolaou to put his request in writing.

13. On 12 April Nicolaou wrote to Rentis a letter which contained the following:

    “RE: ADELAIDE CENTRAL PLAZA – LEASES TO A.C.D.J. LTD

    We refer to the proposed leases for (La Moda) and (Jooce) to the above company of which Mr. Geoffrey Anderson is a Director and Shareholder.

    You are no doubt aware of Mr. Anderson’s current position and legal problems with the Australian Taxation Office.  Because of his predicament, Mr. Anderson has resolved that he cannot become involved in the ownership of any new business venture.  This includes the café and beverage bar in the Adelaide Central Plaza.

    The other parties involved also agree with him and to continue under the current structure will result in numerous problems.  The A.T.O. currently has a court order preventing him in dealing with any of his assets (this includes future assets).  Mr. Anderson’s view is that this position could continue for a number of years.  We should point out however, that Mr. Anderson will be retained under a management agreement to oversee the set-up of the businesses and once trading commences, he will manage all operational aspects of the café and bar.  His involvement will ensure the success of the businesses.

    It is therefore proposed that a new company and trust structure be established to enter into the lease agreements in accordance with the same terms and conditions as the original lease proposals.  The Directors and Shareholders would be as follows:-

    (1)    Nick Chris Nicolaou – 50% interest ........

    (2)    Minas Makridis – 10% interest ........

    (3)    Robert Waleed Sallis – 40% interest .......

    Mr. Sallis is a barrister and practices with Andersons (Solicitors).  He is financially sound and has substantial asset-backing.

    We should also point out that any guarantee that would have been given by Mr. Anderson is worthless due to his current position.

    It is therefore requested that you convey our position to the owners of Adelaide Central Plaza and to seek approval for our proposal.”

    On 13 April Rentis faxed a copy of that letter to Bonett and told him he had no problem with the request.  There was no formal response to Nicolaou’s letter.  Bonett approved the proposal.  On 2 May Dew spoke to Nicolaou seeking details of the necessary amendments to the documents made necessary by the new arrangement.

    Sallis and Andvent Pty Ltd

14. Anderson and Vic Ventura each held one of the two issued shares in Andvent.  In late January 2000 Nicolaou became the accountant for Andvent.  The company had been established to manufacture and sell pasta products, but its operations had stalled after it ran out of money in setting up its factory.  It had substantial outstanding creditors.  Prior to 14 April Anderson offered to sell his share in Andvent to Sallis for $25,000.  On 14 April Nicolaou prepared a written valuation of each of the two shares in Andvent at $25,000 for the purpose of enabling a transfer of Anderson’s share to Sallis to be assessed for stamp duty.  On 26 April Parr as the solicitor for Anderson sought the approval of the Commonwealth DPP to this sale of Anderson’s share pursuant to paragraph 4 of the Order of Bleby J of 9 December 1999 and on the basis that the whole of the $25,000 was to be applied towards accounting and legal costs for Anderson’s defence to the criminal charges.  On 1 May  Sallis met with Kouzapa for the purpose of making an application for substantial finance for Andvent to enable it to resume its operations.  He had been referred to Kouzapa by either Anderson or Nicolaou.  Sallis’ guarantee was to be offered in support of the borrowings.  A statement of Sallis’ financial position was made out on that day and signed by him on 2 May 2000.[12]  However, the numerous applications for finance by Andvent were all unsuccessful.  On 3 May Parr wrote to Sallis reporting on his negotiations with the DPP and stating that unless he received $25,000 from the sale of his Andvent share Anderson would not be able to obtain further legal advice from him.  The DPP did consent to the sale.  Various Andvent company documents dated 9 May 2000 were signed by Anderson and Ventura transferring Anderson’s share in Andvent to Binmede.  There was also an application by Mrs Sallis on behalf of Binmede for the allocation of a further share in Andvent, a consent of Sallis to act as a director of Andvent and other documents appointing him as such.  For reasons which were not satisfactorily explained in evidence the sale was not completed and the $25,000 purchase price was never paid.  On 2 June 2000 Nicolaou sent to Sallis forms signed by Ventura and Sallis dated 10 May 2000 effecting Sallis’ resignation as a director of Andvent and with a request that Sallis pay the lodgement fee of $60.  While Sallis said that was the end of his involvement with Andvent there is a letter dated 7 September 2000 from Andvent to Kouzapa signed by Ventura which suggests Sallis was then still having some dealings with Ventura about obtaining finance for Andvent.

    [12] More will be said about this form in paragraph 168 below.

    Setting up of CP (Adelaide) Pty Ltd and its Trust

15. The 1^st plaintiff, CP (Adelaide) Pty Ltd (“CP”), was incorporated on 5 May 2000.  Its initial directors were Nicolaou, Makridis and Sallis, its secretary was Nicolaou and its registered office was at Luestners office.  The initial share allotments were 50 to Nicolaou, 40 to Sallis and 10 to Makridis.  Nicolaou arranged for Bonnins to prepare a trust deed for the CP (Adelaide) Trust (“the Trust”) which was executed on 15 May 2000.  CP was the trustee and the beneficial interests under the trust were held by the directors in the same proportions as their shareholdings.  On 12 May Anderson had paid $2,000 into Luestners Trust account for CP which was used in part to pay the cost of CP’s incorporation of $920.  On 25 May Sallis and Anderson each paid $1,000 into Luestners’ Trust account for CP which was applied towards expenses.  On 25 May the name of La Moda was registered as a business name for CP.  At about this time Bonnins solicitors were instructed by CP to apply on its behalf for the liquor licences required for Jooce and La Moda.  Makridis liaised with Bonnins giving them drawings and other information they needed for these licence applications.  For some unknown reason CP did not register the business name of “Jooce Beverage Bar” until 21 June 2000.  There were regular directors’ meetings held for CP, but no minutes or other records were kept of such meetings.

    Indentures to lease for La Moda and Jooce

16. On 9 May 2000 Nicolaou had written to Dew saying:

    “We refer to your letter dated 14 April 2000 and the enclosed Indenture of Agreement to Lease for both shops.

    We confirm that our clients are satisfied with the amendments made in respect of these documents.  However, as previously discussed, our clients have made a request to Lou Rentis ...... that a new company and trust structure be established to enter into the lease agreements.

    Mr Rentis has now confirmed that he has discussed the matter with Shaun Bonett and the building owners have approved our request.

    Subject to you confirming the matter with your client, would you please proceed to re-draft the lease agreements on the following basis. .......”

    There was then a request to change the lessee to CP and to show its directors as Nicolaou, Makridis and Sallis.  On 10 May Dew sent two revised indentures to Nicolaou amended in accordance with his request of the day before.  They included personal guarantees from each of Nicolaou, Makridis and Sallis.  Otherwise they were in the same terms as the indentures previously sent to ACDJ, but never executed.  Nicolaou forwarded the indentures to Sallis apparently for him to satisfy himself about their contents and to raise any legal objections about them.  On Monday, 15 May, which was Adelaide Cup Day, Sallis read the indentures and became concerned about some of their contents, and in particular a failure to confer exclusivity for the businesses of Jooce and La Moda against other businesses in the ACP.  He made a telephone call about this which will be dealt with in more detail in paragraph 165 below.

17. In May Rentis negotiated the lease of PJ’s Burger Box to Peter Stobart.  Makridis and Anderson continued to prepare the designs for Jooce and La Moda.  There were various communications between Phillis and Makridis and by the end of May Phillis was reminding Makridis that the submission to him of the fit-out programs for La Moda and Jooce were due by 31 May but had not been received.

    18 May meeting

18. On 18 May there was a meeting at Bin 273, apparently organised by Anderson, which was attended by Nicolaou, Makridis, Sallis, Anderson and Rentis (“the 18 May meeting”).  It was the first meeting of Sallis with each of Rentis and Makridis.  It lasted for about two hours.  Rentis spoke at length about the Food Court.  It was an important meeting and much more will be said about it later.[13]

    [13] See paragraph 172.

    24 May meeting and amendments to the indentures

19. On 19 May Nicolaou rang Dew and requested a meeting with Dew, Sallis and himself to discuss some ambiguities in the indentures which he indicated included incentive payments and rent-free periods.  That meeting took place at Dew’s office on 24 May and was attended by Dew, Nicolaou and Sallis.  Sallis raised five main objections to the provisions of the indentures plus a few minor matters which were of no consequence, but they showed he had looked carefully at the documents.[14]  Of the five major problems those relating to the rent-free periods, the GST and the fit-outs were not subsequently significant.  The most important matter was that Sallis pointed out that no exclusivity was granted to CP for the businesses of the beverage bar and the restaurant, but he had been told that Jooce was to be the only beverage bar.  The other point was that Sallis wanted the granting of the necessary liquor licences to be a condition precedent for the operation of the indentures.  At the end of the meeting Dew indicated that he would take instructions and let Nicolaou know about the five points.  On 30 May Dew sent an email to Nicolaou intimating that Hartford had agreed to all the amendments except the condition precedent about granting the liquor licence.  He proposed amendments to the indentures to deal with the other points.  In particular a new clause 2.5(d) for each lease was set out dealing with exclusivity.  For La Moda, it read:

    “(d)   Exclusivity

    ......... the Lessor shall allow the Lessee during the term hereof the exclusive right within the Centre Cafes to operate an Italian Café for the purposes of this clause, the Centre Cafes comprise the areas marked ‘C1’, ‘C2’ and ‘C3’ on the plan annexed hereto.”

    On that plan C1 was the Breakwater, C2 La Moda and C3 Ali Gems.  The area for the Black Fig was not shown as a café, but no one apparently ever picked up the point  In the lease for Jooce the corresponding new clause read:

    “(d)  Exclusivity

    .......... the Lessor shall allow the Lessee during the term hereof the exclusive right within the Food Court to operate a fully licensed beverage bar.  The Lessee acknowledges that this clause does not prevent the Lessor from allowing other Food Court tenants from selling any of the beverages that the Lessee is permitted to sell provided that the principal activity of such tenants at the Food Court is not the operation of a fully licensed beverage bar.”

    In clause 1.1 of that lease “Food Court” was defined to mean “that portion of the Centre designated by or on behalf of the Lessor as the Centre Food Court as delineated on the plan annexed to this Lease.”  That plan only showed the Food Court as the nine food shops and the common seating area, but it did not include the four cafes.  On 2 June Nicolaou rang Dew, said he was happy with the documents and needed to make a commercial decision about the beverage bar liquor licence.  He said Sallis had had a quick look at it and was happy, but he wanted to review it over the weekend and he would ring again on Monday.  On Monday, 5 June Dew telephoned Nicolaou who said that Sallis had been tied up all day, but he was meeting with him tomorrow.  On 7 June Dew telephoned Sallis who said he had read the documents on the weekend and he could not fault them, but he wanted to read them one more time on the following weekend because he was very busy in a trial at that time.  He said he would ring Dew on the following Tuesday.  On 13 June Dew telephoned Sallis again who said the documents were fine and Dew said he would send them to him.  On 14 June Dew sent revised copies of indentures containing the proposed amendments to Sallis with a request for their prompt execution and payment of fees totalling $2,260.

    [14] The best evidence of what occurred at this meeting is the handwritten notes of Dew of which Sallis received a copy at the time.  I accept them as accurate.

    Termination of the Bin 273 contract

1. Anderson difficulties with Bin 273 had been going from bad to worse.  On 3 March the Bin 273 had been fined by the Licensing Court for over-crowding.  There were disciplinary proceedings against it pending in the Licensing Court and proceedings had been taken against it in the Supreme Court seeking injunctions to restrict its activities due to alleged breaches of planning conditions.  It was mutually agreed between Anderson and Sallis that the sale agreement of 23 February 2000 should be cancelled and the deposit refunded.  A document to this effect was executed on 26 May 2000.  Sallis then withdrew Binmede’s application for the transfer of the licence of Bin 273 to it.

   Work towards CP taking the tenancies

2. By early June Makridis and Anderson were close to completing the designs and drawings for the fit-outs of both La Moda and Jooce.  Hassells had been insisting on higher quality finishes than Makridis would have ordinarily used.  By this time it was clear that the original estimate of about $250,000 for the fitting out and equipping of both tenancies would be substantially exceeded.  Accordingly, it would be necessary for CP to raise more finance than had previously been envisaged.  On 1 June 2000 Anderson wrote to Makridis saying:

   “It is essential for budgets to be drawn up for possible investors.  Nic & me will draw up sales/profit projections and we need urgently a building budget.  I have located a person who will be able to construct both shops ........ The name of the person is John Tsoubarakis of CTPL. ........ Please contact him immediately ....... and give him set of plans so that he can quote.

   Remember:  Refer to me first before committing (sic) any design or construction or costs. .......”

   In April 2000 there had been discussions between Makridis and Kritharas about Kritharas setting up a new juice bar in Topham Mall, but it had not come to anything.  Makridis knew that Kritharas was still looking for a new business venture in which he could invest money and obtain employment.  By early June Makridis had discussed with Kritharas whether he would be interested in investing money in CP and being employed as the manager of both La Moda and Jooce.  On 13 June Sallis mentioned to Dew that there was a new manager who may become an equity partner, which was a reference to Kritharas.

3. In early June Rentis leased the mobile phone kiosk by the central escalators to Strathfield.  This caused Hartford to reduce the number of seats in the Food Court to 348.  Rentis was not expressly informed of this reduction in the number of the seats for the common area of the Food Court.

4. By June 2000 arrangements were well in hand for the opening and the launch of the ACP on 31 August.  Savills employed Lange Hill Marketing to plan and organise numerous special events, promotions and advertisements surrounding the launch to bring the ACP to the public attention at a cost of $362,230 (including GST).  Each of the tenants of the ACP was being required to pay an opening levy of 5% of its annual rent towards the cost of the launch in addition to other ongoing marketing levies which were required by the terms of their leases.  Hartford contributed $87,230 to the opening promotion, but it was not obliged to contribute to the ongoing advertising.  Separately David Jones was spending over $1 million on advertising the opening of its new store.

5. CP was continuing to act as if it would be the tenant of Jooce and La Moda even though it had not yet made any legal commitment to lease them, and it was not in a financial position to do so.  In early June Luestners’ staff had begun to do some work for the formal Business Plan which would be needed for any application by CP to borrow moneys.  However, it does not appear that its preparation was regarded as a matter of urgency.  On 14 June Nicolaou and Anderson, and possibly Makridis, attended a 1½ hour meeting at Savills to discuss matters relating to the tenancies.  Makridis had still not completed the final drawings for both tenancies.  On 15 June Phillis sent him a fax stating that his final documentation was required immediately and that he must target 15 July as the latest date upon which to start the construction of the fit-outs.  On that same day Vaughan wrote to Rentis expressing his concern that the ACP would not be ready for opening on 31 August “as legal documentation, fit-out plans and approvals are not far enough advanced.”  On 19 June Phillis faxed Makridis saying that the building was then ready for the fitting out to begin and reminding him there were only 72 days left until the opening.

   15 June meeting

6. On 15 June there was a meeting at Makridis’ office which was attended by Nicolaou, Makridis, Sallis, Anderson and Rentis (“the 15 June meeting”).  The letter from Cowell Clarke of 14 June and the enclosed indentures, referred to in paragraph 65 above, were discussed at that meeting, but the plaintiffs were not prepared to sign them without having first obtained approval for the borrowing of the necessary moneys.  The plaintiffs present also referred to not having the necessary Council planning consent and Licensing Court approval.  On that day $1,100 was paid out from CP’s account in Luestner’s Trust account to Bonnins for liquor licence fees.  On 19 June Nicolaou and Makridis each paid $400 into that trust account which was their first monetary contributions to the expenses of CP.

7. Not surprisingly, on 20 June Dew telephoned Nicolaou inquiring about the execution of the indentures by CP.  Nicolaou told him that Makridis had already signed them and they were with Sallis but he was busy.  He said he would sort it out shortly.  Makridis had not signed them.  On 22 June Dew wrote to Nicolaou a letter which contained:

   “......... Based on the planned 31 August 2000 Opening Date, we confirm that your agreed 56 day fit-out period commences on Thursday, 6 July 2000.  Notwithstanding this, our client invites you to commence your fit-out works prior to this date.

   To co-ordinate the commencement of your fit-out, would you please contact ...... Barry Phillis ....... As you are aware, your fit-out will need to comply with the procedures and criteria laid down in the Speciality Shop Fit-Out Manual and the Food Court Fit-Out Supplement which was provided to you by Mr Lou Rentis ..... at the same time as the formal Offer to Lease. .........”

   After several unsuccessful attempts to contact him, Dew spoke by phone to Sallis on 28 June.  Sallis told him CP still needed to obtain licensing and planning approvals, and finance.  He said he was not prepared to sign the indentures until the application for finance had been approved, but he would take a risk on the other two.  He said that the broker had yet to lodge the finance application, but he expected written approval by Friday, 14 July.  He said he would get the other directors to sign the indentures and send them to him to be held pending approval of the finance.  (That did not happen.)  Sallis said he was committed to the venture subject to obtaining the finance approval.  On 30 June Makridis sent the final drawings for La Moda and Jooce to Phillis who in turn sent them onto Hassells and various sub-contractors for the builder whose works would be affected by their contents.  On 30 June Dew wrote to Nicolaou pointing out that fees totalling $14,866 were required under the offer to lease documents and requesting payment within 21 days.

   The Business Plan

8. During June weekly sales and cash flow projections had been prepared for La Moda and Jooce.  They had been compiled principally by Anderson, but with some input from Nicolaou and he had checked them.  The sales projections showed weekly income for La Moda of $11,209 and Jooce of $9,660.  The cash flow projections for September 2000-August 2001 showed wages of $180,284 and a nett profit of $56,561 for La Moda and wages of $94,276 and a nett profit of $159,484 for Jooce.[15]  These projections were seen and approved by Makridis and Sallis in about late June.  They were attached to an undated and unsigned Business Plan of CP (“the Business Plan”) which was prepared by Nicolaou and his staff.  When it was completed is unclear but it was sent by Nicolaou to Kouzapa under cover of a letter dated 7 July 2000.  Relevant parts of the Business Plan read as follows:

   [15] On these projections Jooce was to be much more profitable than La Moda.

   “1.     OUTLINE

   The Company has entered into an agreement to lease two premises in the lower ground floor of the newly developed Adelaide Central Plaza .......

   The lower ground floor will consist of upmarket speciality stores selling a diverse range of high quality products and a food court which will be referred to as ‘Feast on Rundle’.  This food court will again be upmarket and offer licensed dining facilities.

   The make-up of the food court is as follows:-

   ·4 licensed cafes (limited licence to sell 5 reds/5 white wines only)

   ·9 food court shops (each specialising in different cuisines)

   ·1 coffee club kiosk (non-licensed)[16]

   [16] This reference to the Coffee Club is very significant.  See paragraph 219 below.

   The tenants which will be operating in the Food Court include such well known businesses as Sammy’s Seafood, House of Chow and Ottermans.

   For further details on the tenant mix and the overall concept of the Food Court, (including projected traffic numbers) please contact Mr Lou Rentis of Colliers ........

   2.     BUSINESS OPERATION

   The two premises to be leased by the Company and the type of operations are as follows:-

   ·Mediterranean/Italian Café ....... trading as ‘La Moda Expresseria’ ........

   This will be one of the four licensed cafes (limited to 5 reds/5 white wines only) and will offer a wife variety of Italian foods and beverages (refer to attached extract of lease with respect to permitted use detailing the menu).  The café will have seating capacity of approx. 80 people and will offer table service.

   ·Fully licensed beverage bar ........ trading as ‘Jooce Beverage Bar’ ...........

   This business is one of the food court shops and the only outlet that will be allowed to sell a full range of beer, wine and spirits, etc.

   ........ The concept is that clientele will buy their meals from other food outlets and if alcohol is required, will purchase from the beverage bar.

   A full range of other beverages will also be available, including freshly squeezed juices, coffees, teas, etc, together with fruit salads, cakes and light snacks. ...........

   ............

   4.     COMPANY STRUCTURE

   (1)    Shareholders     -       Nick Chris Nicolaou (50%)
     Robert Waleed Sallis (40%)

   Minas Makridis (10%)

   (2)    Directors   -       as per shareholders.

   (3)    The Company acts as trustee for C.P. (Adelaide) Trust, being a fixed discretionary trust, the ownership being proportionate to the shareholding in the Company.

   5.     MANAGEMENT

   The set-up and operations for both businesses will be managed by Geoffrey Anderson, who has had extensive experience in establishing and operating cafes, restaurants and wine bars ...........  He will oversee all aspects of management.  Nic Nicolaou, who is a practising chartered accountant, will manage the financial affairs of the Company.  The Company will also be appointing shop managers for both the café and bar to undertake day to day management operations .............

   6.SET-UP COSTS

   (Note: all costs inclusive of GST unless otherwise indicated)

   ‘La Moda Expresseria’

   ...............

   Total$265,528

   Less GST  $24,138

   NET  $241,390

   ............

   TOTAL INVESTMENT   $266.377

   ‘Jooce Beverage Bar’

   ............

   Total  $156,120

   Less GST   $14,193

   NET$141,927

   ............

   TOTAL INVESTMENT  $161,491

   7.FINANCE REQUIREMENTS

   (1)    In summary, the cost of setting-up the Café & Beverage Bar will be in the vicinity of $430,000.

   ..............

   Total Investment (exclusive of GST)  $427,868

   It is proposed to finance plant & equipment with hire/purchase loans (ie, net of GST) as follows:’

Amount	Term	Residual	Repayment
Café	$210,000	5 years	20%	$3,775/month
Beverage Bar	$120,000	5 years	20%	$2,156/month
330,000

Therefore, shareholders will be funding approximately $100,000 from personal sources in relation to the total investment.

(2)    The Company is also requesting an overdraft facility of $30,000 to cover the initial trading period and in particular the GST payable on the set-up costs of approximately $40,000..........

8.     CASH FLOW PROJECTIONS (refer attached)

(1)    GST has been excluded from cash flow calculations.  Due to the nature of the business, the net effect of GST will be cash-flow positive, but obviously, this net amount will be allocated for payment to the ATO.

.............

(5)    Sales have been calculated on a conservative basis, using detailed analysis of daily customer numbers and sales per head on different types of meals/products for each day of the week. ..........

Café	Bar
Total serves per week	1820	3675
Average base sales per week	$11,209	$9,660

............

(6)    Gross Profit Margins

-Café: 67% of sales

-Beverage Bar: 71% of sales ............

The above average margins are consistent with industry averages for the type of businesses.

(7)    Wages

Café:- Chef, Cook & Kitchen Hand $1300/week

- Casual Staff 99 hours/week @ $16.84 (casual rates =(1667/week

- Management $500/week

Bar:           - Casual Staff 78 hours/week @ $16.84 = $1313

- Management $500/week

The staffing levels above have been calculated on the basis of coping with busy trading months, ie. Weekly wages are the same even during the slower trading periods.  In reality, there will be reduced costs over this period.  Further savings will also be made when full-time or permanent part-time staff are to be employed.

With respect to management, because of location of both businesses (ie. adjacent), more than likely, one manager to oversee both, therefore further costs savings to result.”

Also attached to the Business Plan were extracts from the proposed leases about the menus of Jooce and La Moda and the Brochure about the Food Court.  There was no reference to Kritharas in the Business Plan.

1. On 3 July Makridis received the papers from CTPL with the final costs for the fit-out work of about $300,000.[17]  It is likely that this figure was needed before the Business Plan could be completed.

   [17] Some of the items quoted for were subsequently deleted.

   Introduction of Kritharas into the venture

2. During the latter part of June discussions had continued between Makridis and Kritharas about Kritharas becoming involved in the venture as an investor and a manager of the businesses.  On 4 July Kritharas approached the National Bank, which was his banker, seeking a loan to Kritharas Nominees of $100,000 for him to invest it with CP in the businesses of La Moda and Jooce.  On either this occasion, or shortly afterwards, he gave a copy of the Business Plan to the Bank and signed it to authenticate its contents for the Bank.  There is a document dated 5 July 2000 which is  headed “Share offer for Jooce Beverage Bar and La Moda Expresseria ...... preliminary draft” which is likely to have been heads of agreement for the negotiations between Kritharas and CP.  It provided, as became the case, that he would receive a 10% share in both businesses for $100,000, he would be a joint borrower (ie guarantor) for approximately $330,000, he would receive a gross salary of $1,000 per week and would become a director of CP.  In the evening of 5 July there was a meeting at Bin 273 attended by Nicolaou, Makridis, Sallis, Anderson and Rentis (“the 5 July meeting”).  It is likely that the introduction of Kritharas into CP on the terms just mentioned was discussed at that meeting.  At this, and the subsequent meetings, Rentis was urging the plaintiffs to commit themselves to the venture as soon as possible.  On the morning of 6 July Sallis telephoned Dew and reported on matters which had presumably been discussed at the meeting on the previous evening.  He indicated there was now no issue about Council approval or the liquor licences.  He said the finance application had been delayed awaiting the plant and equipment quotation, that Nicolaou would give the figures to the finance broker that day and there should not be a problem about finance.  He said it should take about two weeks for the written finance approval and that $100,000 of equity finance to be contributed.  (This was presumably a reference to the arrangements with Kritharas.)  On about 8 July Nicolaou left for a holiday in Queensland and was not scheduled to return until about 22 July.  This effectively meant that CP could not enter into any finance arrangements or the indentures of lease until after his return.

   The 12 July inspection

3. On 7 July there was a meeting at Makridis office between himself, Kritharas and Rentis (“the 7 July meeting”) when Kritharas first discussed Jooce and La Moda with Rentis.  On 12 July (“the 12 July inspection”) Rentis showed Kritharas, with Makridis also being present, the almost completed basement of the ACP and pointed out to him where Jooce, La Moda and other tenancies were to be.  Makridis took the opportunity to look at other Food Court tenancies where he was working on the fit-outs.  On 14 July Kritharas took Makridis and Rentis to lunch at Gauchos’ Restaurant (“the Gauchos’ lunch”) at which they discussed the venture.  Prior to 26 July Kritharas consulted each of his accountant, his lawyer and a Business Centre about him entering into the venture.

4. On 7 July Phillis had offered Makridis the option of CP constructing its own ceilings in the tenancies provided the mechanical and fire services works were carried out by the builder’s sub-contractors.  On 10 July Makridis wrote to Phillis indicating that CP would do its own ceilings.  There was no mention in this correspondence of any credit to CP for undertaking these ceiling works.  On 8 July Phillis sent a reminder to Makridis that there was only 7 weeks to go before the opening.  At about this time Rentis finalised the arrangements for leasing Roshans Noodle Bar which meant that the ACP was fully let provided CP entered into legally binding leases.

   Preparation of the finance application

5. In about mid July Clasholm of Luke Kouzapa & Associates commenced preparing the application for CP to obtain its finance.  On 11 July he saw Makridis and obtained details of his personal financial position and on 13 July he saw Kritharas for a similar purpose.  He did not see Sallis for that purpose, but used the statement of Sallis’ financial position dated 2 May 2000 which had been prepared for the unsuccessful Andvent finance applications.  He also prepared a document setting out Nicolaou’s personal financial position apparently from other matters in which that information had been supplied, but he could not see Nicolaou about it as he was in Queensland.  Kouzapa & Associates did not act with any degree of urgency in preparing or lodging the finance application.

   Dealings about the base building variation costs

6. The plans and designs submitted by Makridis for each of Jooce and La Moda necessitated changes being made by the builder to various facets of the structures of the tenancies such as air conditioning, fire sprinklers, public address system, air conditioning ducts, plumbing fixtures, electrical fixtures, telephone fixtures, etc.[18]  Such changes to the structure of tenancies were called “base building variations”.  In July and August a considerable amount of work was done by Phillis and the builder’s sub-contractors to design and effect the necessary base building variations for all of the tenancies in the ACP.   The evidence of precisely what was done and when it was done is unclear, and to some extent is in dispute.  It will be dealt with in Section 8.  The necessary base building variation works for La Moda and Jooce were carried out by Hansen Yuncken.  There was no suggestion that any delays in the fitting out of La Moda and Jooce were attributable to any problems with the base building variation works.  There is a major dispute on the liability of CP to pay Hartford for these works.

   [18] These changes were necessary because the configuration of the fit-out of the tenancy meant it was necessary to move various facilities from their standard positions or to supply or delete others.

1. He was distressed from early October onwards, but this was in part related to the Coffee Club which did not result from the misleading conduct of Hartford.  His wife also became distressed and that exacerbated his distress.  The distress impaired his relaxation and social life.  It became worse after the relevant period.  Again I will make an allowance for this non economic loss in my award for him below.

2. Kritharas had not been employed between when he sold the baguette shop in February 2000 and when he commenced preliminary work for setting up La Moda and Jooce in August 2000.  Up until July he had been looking for another suitable business to set up or buy as an owner/operator and apparently he had been living off his capital.  Since the closure of Jooce and La Moda in March 2001 he and his wife have been unemployed and receiving Social Security benefits of $322 per fortnight.  It appears that he has not obtained employment since March 2001 in part because he has needed to be available on numerous occasions to assist Sallis and Costi in pursuing this action.  His past history was that he did sometimes have casual work in between buying and selling the various businesses which he operated.  If he had not been the manager of La Moda and Jooce, it is likely that he would before the end of the year 2000 have invested in some other business as an owner/operator at some profit to himself.  It is unclear whether, if he had not obtained such a business, he would have become entitled to non refundable Social Security benefits in the relevant period.  There is some chance he could have obtained casual employment in that period.  He would have had no other significant income in that period apart from what he earned from employment.  I assess his non economic loss and a capital sum for his loss of earning capacity at $6,000, but it is to be reduced by 50% to $3,000.

3. I do not award any damages to him based on the $100,000 which he invested in the CP Adelaide Trust.  The assessment of damages for CP is to cover the re-establishment of its capital base including this $100,000.  There was no evidence, or submissions, about any consequential loss to Kritharas flowing from his liability to repay the $100,000 borrowed by the Kritharas Family Trust from the National Bank.  It appears that at least some of the repayments to the Bank have been made by Kritharas Nominees Pty Ltd on some undisclosed arrangement with Kritharas.

   Sallis

4. Sallis first became concerned in early October 2000 when the traffic downturn became apparent.  He gave very general evidence of being angry, upset and distressed, but some of it resulted from the defendants’ denials of the plaintiffs’ allegations, which denials in part I have found were justified, and in any event apparently did not occur until after the relevant period.  I will make a small allowance for his non economic loss in the award below.

5. From early July until early October 2000 Sallis spent very little time on the affairs of CP.  He claimed from early October until the end of December he had spent an average of about 20 hours a week in the Food Court.  Much of this time he said was spent observing what was going on and talking to people there about it because he was so worried about the downward trend.  While I accept he spent a significant amount of time there, I cannot accept that it was an average of almost 3 hours a day for 7 days a week.  In any event it was unreasonable for him then to have spent that much time there.  However, I assess his loss of earning capacity for his involvement with CP in the relevant period primarily by a comparison of his gross earnings in these months with those from earlier periods.

6. During the relevant years he carried on legal practice as the in-house counsel for Andersons on an arrangement whereby he received 50% of the gross fees received each month for his work.  His income before tax from Andersons was $77,475 in the 1997 financial year, $84,961 in the 1998 financial year and $127,398 in the 1999 financial year.  In 2001 financial year he received $38,767.  However, the major part of this would have been earned in the last half of the 2000 calendar year because once he started work on the current litigation in January 2001 it became almost a full time occupation for him.  As stated in paragraph 170 above Sallis did not give a satisfactory explanation about why his earnings for the 1999 financial year were not a true reflection of his earning capacity in that year.  If his earnings in the 2001 year were largely attributable to work done before 31 December 2000, his earnings for the 1998, 1999 and 2001 years form a reasonably consistent pattern, with those for the 2000 year being out of the ordinary.  It is likely that if he had not been involved with CP and this litigation his earnings before tax would have been in the vicinity of about $90,000 for the 2001 financial year.  Although he paid virtually no tax in the 2000 and 2001 financial years because of off sets for major losses in share trading, if he had paid tax on the income which he lost in the relevant period it would have been largely at the highest marginal rate of about 48 cents in the dollar.  If he had not utilised his share trading losses to obtain tax benefits in those financial years, he could have carried them forward and obtained the benefit of them in subsequent years.  Accordingly, in fixing a capital sum for his loss of earning capacity it is proper to deduct an amount of almost the amount of the tax payable at the highest marginal rate, but with some allowance for a deferment of the benefit of the share trading losses.  I assess his non economic loss and a capital sum for his loss of earning capacity for the relevant period at $12,000, but it is to be reduced by 50% to $6,000.

   SECTION 17

   Summary of orders

7. For these reasons there will be orders as follows:

   1.Declaratory judgment for CP against Hartford with an interim assessment for $242,694 plus interest.

   2.Further consideration on the plaintiffs’ loss resulting from the proceedings by the National Bank adjourned to a date to be fixed.

   3.     Judgment for Nicolaou against Hartford for  $4,000 plus interest.

   4.     Judgment for Makridis against Hartford for $5,000 plus interest.

   5.     Judgment for Sallis against Hartford for $6,000 plus interest.

   6.     Judgment for Kritharas against Hartford for $3,000 plus interest.

   7.     Plaintiffs’ action against Colliers dismissed.

   8.     No orders for the relief sought in the contribution notices.

   9.     I will hear the parties on issues of pre-judgment interest and costs.

   JUDGMENT FOOTNOTES

   LISTED IN ORDER OF APPEARANCE IN JUDGMENT

   1 My findings about these two areas in the old Food Hall are based on the evidence of Denise Comanetti, a former employee in that building.  Numerous other witnesses who gave vague and generalised evidence significantly under-estimated the extent of the eat-in trade there.
   2 These findings about the café in the new Food Hall are also based on the evidence of Denise Comanetti.  There was no evidence from anyone directly involved with setting up or running this café and it had been substantially changed by the time this case was being prepared for trial.
   3 In some documents the Food Court was defined to exclude the four cafes in that northern area, but unless I indicate to the contrary the term “the Food Court” in these reasons means all of the cafes, shops and seats to the north of the central escalators.  Care needs to be taken to distinguish between “the Food Court” and “the Food Hall”: there are several instances in the evidence and the documents of these terms being confused.
   4 In some documents his Christian name was shown as Geoffrey.
   5 See paragraph 60 below.
   6 See paragraph 45 below.
   7 It has no connection with Jeffrey Anderson.
   8 Prior to 1997 it was called the Retail Shop Leases Act 1995.
   9 It is unclear whether the fit-out manual was intended to be the Attachment D, but as stated in paragraph 208 below it did not contain sufficient information to comply with the RACL Act.
   10 Although there is no direct evidence of it, I infer that Anderson was then seeking to raise money by selling Bin 273, and apparently had then effected a sale of it, but that sale was never completed.
   11 There was another similar brochure for the ordinary retail shops in the ACP.
   12 More will be said about this form in paragraph 168 below.
   13 See paragraph 172.
   14 The best evidence of what occurred at this meeting is the handwritten notes of Dew of which Sallis received a copy at the time.  I accept them as accurate.
   15 On these projections Jooce was to be much more profitable than La Moda.
   16 This reference to the Coffee Club is very significant.  See paragraph 219 below.
   17 Some of the items quoted for were subsequently deleted.
   18 These changes were necessary because the configuration of the fit-out of the tenancy meant it was necessary to move various facilities from their standard positions or to supply or delete others.
   19 This date was incorrect but it is unclear whether Sallis then genuinely anticipated it.
   20 See paragraph 76.
   21 Why Nicolaou did not attend is unclear.  He said he had not returned from Queensland but other evidence suggests that he was scheduled to have returned on 22 July.
   22 No formal offer for finance had then been submitted by Kouzapa Financial Services to any financier and there was nothing in the evidence to provide a proper basis upon which Sallis could have had any such expectation.
   23 None of the amounts paid by Makridis, Nicolaou or Sallis on that day appeared to be particular percentages of the $12,519.
   24 This will be dealt with further in paragraph 334, below.
   25 What was said between them will be dealt with further in paragraph 223 below.
   26 I will confine my findings to cappuccinos but the position was similar for most other varieties of coffee.
   27 See paragraph 92 above.
   28 This letter is set out in full because it is as important for what it does not say as for what it does say.  It sets out the problems with the Food Court as the plaintiffs then perceived them to be.
   29 The significance of this will be dealt with in paragraph 154 below.  The statements of Nicolaou and Makridis to Rentis about the Coffee Club and the new Food Hall café may be a slight exception and this will be dealt with in paragraph 223 below.  See also paragraphs 110 above and 157 below on what was said at the 28 November 2000 meeting.
   30 This letter was only tendered as an exhibit in the voir dire hearing to be mentioned in paragraph 134 below.  It was referred to in the evidence in the main trial, but it does not form part of the evidence in that trial of the special arrangements about not charging which existed in respect to Sallis.
   31 In October 2001 he left the firm of Grope Hamilton and commenced practice as Costi & Co.  At every interlocutory hearing before me and at the trial Sallis has appeared in person for himself with Costi appearing as counsel for the other four plaintiffs.
   32 Martin J, 17/8/01, Jud No [2001] SASC 304, unreported.
   33 At that time all parties agreed in the interests of the expedition of the trial that the evidence-in-chief should be by tendering written statements and the only dispute was about the precise terms of the order.  My published reasons are CP (Adelaide) v Hartford (Holdings) (No 2), Jud No [2001] SADC 101.
   34 My reasons were published as (No 4), [2001] SADC 171.
   35 Sallis said at the outset the affidavits would give “a very clear understanding of the plaintiffs’ case.” (T100)  They did not.
   36 The affidavit of Psirris was tendered by the 2^nd defendant in the course of his cross examination.

   37 These papers were marked MFI P33, MFI P36 and MFI P37.
   38 These seven pages were then received as 2D34.
   39 This balance, being pages 8 to 285, were received as 2D37.  What had been MFI P36 and MFI P37 were returned to Sallis.
   40 (1979) 141 CLR 648 at 654.
   41 (1999) 168 ALR 123.
   42 (1938) 60 CLR 336.
   43 (1992) 110 ALR 449 at 450.
   44 Besanko J, 15/2/02, Jud No [2002] SASC 38, unreported.
   45 See paragraph 198 below.
   46 If he had been called I would have had to have warned him about possible self-incrimination and granted him that privilege if he had sought it.  Nicolaou was represented by counsel and did not claim any such privilege.
   47 See also paragraph 332.
   48 He was probably intending to pursue such allegations in the cross examination of Bonett, but he did not get the opportunity as the 1^st defendant did not call him.  I am not prepared to infer any dishonesty or wilful deceit by Bonett merely because the 1^st defendant did not call him.  Sallis made the general allegation, but did not particularise it.
   49 The pleading of those misrepresentations were substantially repeated in the statement of claim in this action.
   50 If such statements had been put in writing by Sallis, legal professional privilege may have attached to them, but it is unnecessary to decide the point.  If the statements showed that their stories had not changed significantly when they heard what was being said by other plaintiffs, the statements could have been tendered to refute the inference which I am now drawing.
   51 See paragraphs 241 and 305.
   52 In this passage he said vivid or vividly five times in speaking of his memory, plus numerous uses of very, which is an example of the superficial rhetoric referred to in paragraph 162 above.
   53 A similar passage appears in Clasholm’s letter of 25 July 2000 to the National Bank as set out in paragraph 85 above.
   54 See paragraph 59 above.
   55 In paragraph 36.7 of his affidavit sworn on 18 November 2001 Makridis stated Rentis had referred to the Brochure at this meeting, but not that it was produced to Sallis.
   56 Paragraph 36 of Makridis’ affidavit said that the representations had been made to Sallis in the presence of Nicolaou and himself.
   57 Makridis did submit an invoice to CP for about $5,000-$6,000 for expenses which he incurred.
   58 Any such arrangement should have been properly minuted and documented because Nicolaou had a conflict of interest in being both a director and a partner in Luestners.
   59 See paragraphs 283 and 318 below.
   60 See paragraphs 223, 233 and 336 below.
   61 She was not put forward as an expert witness.
   62 (1959) 101 CLR 298.
   63 (1988) 48 SASR 536 at 547-8.
   64 Counsel for Hartford opened on the basis that he may call Bonett but he did not.
   65 I infer the dispute between Andersons and Mr Hoban of Wallmans referred to in the passage quoted probably occurred in about mid 2001.
   66 See paragraph 80 above.
   67 See paragraph 80 above.
   68 (1954) 91 CLR 353 at 360.
   69 See paragraph 83 above.
   70 I need not deal with Hartford’s submissions that if it was void the cost could still be recovered on a quantum meruit because such a cause of action was outside its pleadings.
   71 (1982) 149 CLR 191 at 198 per Gibbs CJ.
   72 (1984) 55 ALR 25 at 30.
   73 (1990) 24 FCR 370 at 388.
   74 (1984) 57 ALR 401.
   75 (1983) 50 ALR 231.
   76 (1977) 15 ALR 561.
   77 (1981) 37 ALR 161.
   78 (1977) 73 ALR 233 at 236.
   79 The plaintiffs did not allege any fraud or other criminal conduct in the making of the representations by the defendants and so the “Briginshaw” principle (see paragraph 147 above) has no application here.
   80 Volume 35, paragraph [55].
   81 There may be a slight difference in the onus of proof placed on a representor under S51A(2) compared with that placed on the representor under the equivalent s54(2) of the FTA, but it was not suggested that was material in this case. Insofar as the onus under the FTA is higher I apply that onus in my subsequent findings. See The Laws of Australia op cit [55].
   82 Late in the trial the plaintiffs sought to amend to put it in issue, but I refused to allow the amendment.
   83 The complaints by the plaintiffs were only about the absence of adequate signage and not about any misrepresentations concerning it.
   84 It is not necessary to go into whether David Jones instructed Rentis it would contribute to the costs of such advertising in this period or whether Rentis represented that to the plaintiffs.
   85 No argument was raised, or evidence put forward, that Hartford was impeded in its ability to advertise and promote because some tenants had not paid their levies on time or at all.
   86 In referring to the number of seats in this subsection I do not include the seats within the four cafes.
   87 (1978) 140 CLR 216.
   88 (1980) 33 ALR 394.
   89 16th edition, Art 92 p502.
   90 I ruled against the submission of Hartford’s counsel that it was not required to plead such grounds because in my view Rule 46A.05(2)(b), (c) and (e) required such pleading.
   91 (1992) 175 CLR 514 at 525.
   92 (1991) 171 CLR 506.
   93 (1985) 157 CLR 215 per Wilson J at 236.
   94 (1977) 73 ALR 233.
   95 In drawing this conclusion I have regard to the inference that Anderson, if called, would not have assisted the plaintiffs’ case on this point.  My conclusion applies to the inducement and reliance of each plaintiff and it is not necessary to differentiate between them.
   96 I assume Hartford would have quickly paid the additional $11,725 under Christodoulou’s re-assessment of the base building variation costs if the plaintiffs had replied to the letter of 3 November 2000.
   97 It is unlikely that there was any binding oral contract, but there could have been liability for misleading conduct under the FTA.
   98 27^th edition, volume 1, para 19-050;
   99 6^th Australian edition, para 1735-1736.
   100 (1989) 94 ALR 435.
   101 (1952) 85 CLR 336 at 345 CHECK.
   102 [1968] 3 NSWR 360 CHECK.
   103 (1942) 67 CLR 253 at 262 CHECK.
   104 (2000) 77 SASR 261.
   105 There is also the problem that CP was not incorporated until 5 May and so it could not have been a party to an assignment before then.
   106 While the RACL Act stipulates the time by which the disclosure statement must be given it does not lay down any maximum time before the lease is entered into. If ACDJ had continued to be the prospective tenant the Act would have been complied with by a notice given almost twelve months before the indentures were executed and even though circumstances had changed significantly in that period.
   107 Warnings about the risks involved were contained in each of the guarantees for the lease purchase agreements signed by the natural plaintiffs on 4 September 2000, but it made no difference to their willingness to commit themselves.
   108 They are conveniently summarised in “Stroud’s Judicial Dictionary of Words and Phrases”, 6^th edition, volume 1, pp 898-900.
   109 This amount has since been increased to $40,000.
   110 (1992) 58 SASR 587.
   111 (1995) 66 SASR 284.
   112 CCA, 3/4/02, Jud No [2002] SASC 98, 81 SASR 434.
   113 I need not go into the questions of what relief can be given to the natural plaintiffs under the RACL Act or whether the compensation for any loss from breach of the Act can be reduced for other causal factors contributing to that loss.
   114 Colliers pleaded a similar but not identical issue in its defence.  In their final addresses counsel for Hartford and Colliers divided a number of the issues common to them between them and merely adopted what the other of them had said on that issue.  This issue was dealt with by counsel for Hartford and his submissions were adopted by Colliers.  Although I will only refer to Hartford, my findings apply to both defendants.
   115 (2002) 187 ALR 612.
   116 Hartford made no response to the plaintiffs’ submissions on this topic.
   117 On this topic I need not pursue whether Anderson was also a beneficiary under the terms of that Trust Deed: if he was there is no claim against him for similar reasons to those given for the four natural plaintiffs.
   118 Insofar as the claim for co-ordinate liability is against the natural plaintiffs in their capacities as directors of CP it is against them as fiduciaries qua the Trust and not as claims against them as directors by the members of the company in their capacity as the members.
   119 As with the matter dealt with in Section 12 this issue was dealt with by counsel for Hartford. See footnote 114 above.
   120 (2002) 218 LSJS 68.
   121 (2000) 179 ALR 89.
   122 (2001) 182 ALR 37.
   123 The plaintiffs are most anxious to have judgment in this action as soon as possible.  No one asked me to delay my decision until after the High Court had delivered its decision on that appeal.  If the High Court allows the appeal to it in I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd, that can be a ground of appeal against my judgment or possibly a basis for an application under Rule 84.12.
   124 I do not pretend to have followed or understood all of the calculations in his reports and those of the other accountants.  They worked off some financial records of CP which were not tendered.
   125 That report of Ellery accepted that stock of $12,801 purchased by La Moda had been used by Jooce up to 31 December 2000.  This was a substantial over-estimate but it does not affect the ultimate conclusions.
   126 See paragraph 337 above.
   127 (1990) 94 ALR 445 at 467-9 and confirmed on appeal (1990) ATPR 41-058.
   128 (1984) 57 ALR 167 at 183.

   129 (1991) 174 CLR 64 at 83.