Eastern Garden Pty Ltd v Sangster & Ors No. Scciv-02-701

EASTERN GARDEN PTY LTD v SANGSTER & ORS
[2004] SASC 45
Civil

VANSTONE J: The dispute between the plaintiff company and the defendants arises from certain negotiations and agreements in relation to premises on the corner of Hutt Street and Gilles Street, Adelaide, utilised for a café business.
The plaintiff, a member of the Karidis group of companies, is the owner of the premises. The first defendant, Mr Howie Sangster, was a shareholder and the only nominated director of Niprust Pty Ltd (“Niprust”), which later became Tribecca Pty Limited (“Tribecca”). On 17 May 2000, following negotiations with the financial manager of the plaintiff company, Mr Theo Kaldis, he signed a written agreement with the plaintiff company in the nature of an Agreement to Lease relating to the premises. I shall refer to that document as P1. It contained, among other provisions, a guarantee of the payment of rent and the performance of the balance of the lessee’s obligations, and an agreement to execute a formal guarantee, which Mr Sangster also signed. The initial term of the proposed lease was seven years. The lessee was expressed to be “Howie Sangster and/or nominee”. A copy of a blank standard lease used by the plaintiff was provided to Mr Sangster along with P1. At that time the building within which the tenancy was to be housed was under construction. In about mid September, the rights under P1 were, apparently by informal arrangement, assigned to Niprust, which was nominated as the lessee. Several amendments were made to the terms of the proposed lease including the starting date, which became 15 November 2000. Some, but not all, were recorded on P1 itself. On 11 December 2000 Niprust became Tribecca Pty Limited.
In mid November the café business – also called Tribecca – opened. The business was run by Mr Sangster. Although the Agreement to Lease contemplated that a Memorandum of Lease in the form of that which had been provided and directors’ guarantees would be executed, no further document was signed.
The second and third defendants, Dr Simon Stone and Ms Gail Holmes, are the other shareholders of Tribecca. Neither has ever been appointed directors of the company.
At the commencement of his final address, Mr N Morcombe QC, who appeared for the plaintiff, abandoned the plaintiff’s claim against the third defendant, Ms Holmes. Both Ms Holmes and her husband Mr Allan Holmes had given evidence as part of her case. He also abandoned any case based on estoppel, which had been claimed against the second and third defendants.
The café business did not prosper. At the end of 2000 and the beginning of 2001 it was becoming apparent that the business was in difficulty. It had opened a little later than originally planned, and had apparently not positioned itself so as to be able to take advantage of the busy Christmas period. There was a need for the business – which did not run an overdraft – to be provided with further funds by the shareholders. In December 2000 and April, May and July 2001, Dr Stone and Ms Holmes provided between them, in equal shares, an additional $120,000 by way of loan funds. Over this period Dr Stone, and indeed Mr Allan Holmes (representing his wife Gail) became more involved in the affairs of the company. They began to attend meetings with Mr Sangster, at which strategies to improve the business were discussed. At one point Dr Stone and Mr Holmes met with Mr Gerasimos Karidis, the chairman of the Karidis group, and Mr Kaldis, in an attempt to deal in some way with the growing problems. No resolution was reached. On 8 October 2001 Tribecca vacated the premises surreptitiously. It was not until 15 April 2002 that the plaintiff secured a new tenant and, even then, the rent payable was significantly less than that contemplated pursuant to the terms of P1.
The plaintiff by its suit, seeks to put itself into the position it would have enjoyed had Tribecca complied with the terms of P1.
The plaintiff’s cases against Mr Sangster and Dr Stone are different, and, in the case of the latter, not easy to follow. The plaintiff acknowledged during the proceedings that it had no contractual relationship with Dr Stone. That is to be contrasted with the situation in relation to Mr Sangster, against whom the principal cause of action is in respect of his guarantee of the performance of P1 by the lessee, eventually Tribecca.
Mr Sangster’s defence amounted to a claim that he was induced to enter into the contract by misleading and deceptive conduct on the part of the plaintiff. I set out the most relevant parts of his defence as filed.
25. During March, April and May 2000, Gerasimos Karidis, on behalf of the plaintiff, made a series of representations (“the Representations”) to the first defendant which were designed to and which did induce the first defendant to execute the Agreement to Lease.
PARTICULARS
25.1Gerasimos Karidis on behalf of the plaintiff advised the first defendant that he would make application to the Adelaide City Council to obtain approval for the construction of a protuberance on the footpath adjacent to the Premises to accommodate 45 alfresco diners as part of the proposed restaurant facility to be developed by the first defendant or his nominee.
25.2Gerasimos Karidis on behalf of the plaintiff advised the first defendant that he would use his “influence” with the Adelaide City Council to ensure the protuberance was built and the 45 seat alfresco dining facility was approved.
25.3Gerasimos Karidis on behalf of the plaintiff advised the first defendant that he would ensure that any costs associated with the protuberance and the approval of the alfresco dining facility would be paid for by the plaintiff.
During the trial, at which he represented himself, Mr Sangster modified these contentions. He acknowledged (t/s 432-434) that nothing was said by way of representation as to the protuberance – as it was called – by Mr Karidis or Mr Kaldis at any time prior to August 2000. Mr Sangster said that in August, Mr Karidis had said he would use his influence with the Adelaide City Council to get a protuberance of the desired size approved, but Mr Sangster understood it could not be guaranteed. He said: “… I had no right to expect him to guarantee it” (t/s 437).
Furthermore, Mr Sangster agreed that in his discussions with Mr Karidis regarding the protuberance, Mr Karidis did not speak in terms of an area to seat 45 patrons. Mr Sangster agreed that that figure came from himself, having been provided by his own architects, rather than from the plaintiff. He accepted that no numbers were discussed between himself and the plaintiff (t/s 438). In January 2001 Mr Sangster learned that the outdoor area would only be large enough to accommodate about 21 seats.
Still further, soon after the completion of his examination in chief, Mr Sangster drew attention to paragraph 25.3 of his Defence and indicated that it was incorrect. It was deleted by consent.
In this way Mr Sangster’s Defence altered. At trial, he ultimately relied not on any oral representation by Mr Karidis or anyone else on behalf of the plaintiff, but rather on the presentation, prior to May 2000, by Mr Karidis of a brochure (Exhibit 1D1A) depicting the proposed building with an outdoor area on the Hutt Street side containing umbrellas, tables and chairs and seated patrons. Mr Sangster said that from this brochure and from some plans drawn at the plaintiff’s instance by an architect named Psaltis in May 1999 and provided to Mr Sangster during the first few months of 2000, his own architect produced sketches of the proposed café, both interior and exterior. From the brochure and the Psaltis plans, Mr Sangster’s architect apparently calculated, using the Adelaide City Council’s formula, how many patrons could be seated within the proposed area. That process yielded a figure of 45. The Psaltis plans were not produced at trial.
Even leaving aside the variation between Mr Sangster’s pleadings and the evidence, it seems to me that his case of misleading and deceptive conduct fails at the first hurdle. Given Mr Sangster’s understanding that the footpath was no part of the demised premises and that a grant of a licence by the Adelaide City Council was needed before it could be utilised by the business and further, given Mr Sangster’s concession that no specific representation on this topic was made to him on behalf of the plaintiff at any time before August 2000, his claim that he was induced to enter into P1 on the basis of the depiction in the brochure is a weak and unpersuasive one. While I can accept that it was the reasonable expectation on all sides that the Adelaide City Council would be co-operative to a greater or lesser extent, it seems to me that if the use of such an area was as critical to Mr Sangster’s original plan as he maintains, then as an experienced businessman he would have ensured that the Agreement to Lease was conditional upon it, or, at the very least, required that the plaintiff do all it could to ensure it was established and that it made provision for meeting any necessary payment. In addition, one would have expected to see records of negotiations about the outdoor area and communications with the Adelaide City Council by either the plaintiff or Mr Sangster prior to the execution of P1, rather than as late as August.
I accept that Mr Sangster’s business plan dated March 2000 assumed such an area:
The concept includes a distinctive café, deli and bar facility the gross area of which is approximately 250 square metres sufficient to accommodate 85 diners inside the premises. Additionally an Alfresco area exists on the adjacent footpath for tables and chairs where another 45 people can be accommodated. (Exhibit P10A)
However, in my view, such expectation as Mr Sangster might have had as to this matter was not justified. I find that the brochure Exhibit 1D1A was no more than a promotional tool, no doubt utilised by the plaintiff for purposes which went far beyond this particular tenancy. It is not a sufficient basis for Mr Sangster’s claim of misleading and deceptive conduct. The same can be said of the Psaltis plans which I have not seen.
The only other defence to the action put forward by Mr Sangster relates to complaints that the plaintiff failed to comply with specific terms of P1 or with concessions it made subsequent to the execution of P1, such as the commencement date of the lease, payment for floor finishes and an agreed rent reduction. It seems to me that these matters have relevance only to variation to the terms of P1 before its assignment and as to why Mr Sangster determined not to sign the Memorandum of Lease in due course.
In addressing the claim against Dr Stone it is convenient to set out that part of the Statement of Claim which encapsulate the causes of action against him. I note that the paragraphs which precede this part contain a number of factual assertions which have not been made out.
BREACH OF THE AGREEMENT TO LEASE
17.    Tribecca has refused to execute the said Memorandum of Lease contrary to the terms of agreement referred to in subparagraphs 8.4 and 13.1 hereof in consequence of which the plaintiff has suffered loss and damage;
18.    Sangster, Stone and Holmes have refused to execute the said Deeds of Guarantee contrary to the terms of agreement referred to in subparagraphs 8.2 and 13.2 hereof in consequence of which the plaintiff has suffered loss and damage.
19.    Tribecca, Sangster, Stone and Holmes failed or refused to inform the plaintiff of the change in shareholding referred to in paragraph 10 hereof contrary to subparagraph 8.6 hereof in consequence of which the plaintiff has suffered loss and damage.
PARTICULARS
19.1The defendant concealed from the plaintiff the identity of Holmes and Stone.
19.2Had the plaintiff been informed of the shareholding in paragraph 10 hereof it would have required Holmes and Stone to execute the said guarantee prior to Tribecca entering into possession of the said Premises.
MISLEADING AND DECEPTIVE CONDUCT
20. Further, or in the alternative Tribecca, Sangster, Stone and Holmes engaged in conduct in trade or commerce that was misleading or deceptive or likely to be so in contravention of Sections 51A and 52 of the Trade Practices Act 1974 and Section 56 of the Fair Trading Act 1987.
PARTICULARS
20.1The plaintiff repeats the contents of paragraph 19 hereof.
20.2The omission to so inform the plaintiff of the change in shareholding constituted the misleading and deceptive conduct by silence.
21. In respect of the contravention by Tribecca of Sections 51A and 52 of the Trade Practices Act referred to in paragraph 20 hereof, Sangster, Stone and Holmes and each of them:
21.1Aided, abetted, counselled or procured the said contravention contrary to Section 75B of the said Act.
21.2Were directly or indirectly knowingly concerned in or party to the said contravention.
21.3Were deemed director of Tribecca and knew or should have known that the plaintiff would not have permitted Tribecca to enter into the premises without guarantees having been executed by all persons in authority in Tribecca.
Paragraph 18 of the Statement of Claim complains that Mr Sangster, Dr Stone and Ms Holmes refused to execute Deeds of Guarantee. In respect of Mr Sangster, this aspect of the claim adds little, if anything, to his guarantee of P1. It is suggested that this refusal was contrary to an express term of the Agreement to Lease whereby Mr Sangster would require “such shareholders and persons in authority in Tribecca to provide personal guarantees for the performance of the lease”. I find that there was no such express term. Mr Sangster did agree to procure guarantees from “All directors” under clause 4 of P1, but he was the only director of Tribecca. His agreement had no impact on Dr Stone.
It is suggested that Dr Stone was a de facto director of Niprust/Tribecca and that he would answer the description of a director provided in s 9 Corporations Law 2001 as it then stood. A great deal of argument was advanced to make good that submission. The expanded definition of “director” which appeared in s 9 Corporations Law under the heading “Dictionary” does not purport to have any effect beyond the operation of that Law: s 6. There was no attempt in Exhibit P1 to import the Corporations Law definition of “director”. Indeed Mr Kaldis gave evidence that when he filled out and executed P1 on behalf of the plaintiff, it was not within his contemplation that the word director would bear other than its usual meaning.
In the end it does not seem to me to matter. Even if Dr Stone was at some stage effectively acting as a director – which I would be slow to find at any stage and would not find at all in 2000 – it would not advance the plaintiff’s claim. My view as to that would be similar even if Dr Stone’s name had been inserted in P1 as a proposed guarantor. In such a circumstance, had he failed to provide a guarantee, that would have given rise to a right in the lessor not to proceed to a Memorandum of Lease, but would not have created rights against Dr Stone. The obligation to provide directors’ guarantees and to execute the lease fell on Niprust/Tribecca as the assignee of P1 and arguably on Mr Sangster as guarantor of P1. The Agreement to Lease did not impose any obligation directly upon Dr Stone or Ms Holmes.
The Statement of Claim further asserts that the failure to execute the guarantees was also contrary to the matters pleaded in paragraph 13 of that document, which reads:
13. The plaintiff permitted Tribecca to enter into possession of the said premises upon the express basis that:
13.1the Memorandum of Lease was executed by Tribecca and returned to it within 14 days;
13.2Tribecca’s directors, shareholders and persons in authority in Tribecca would execute a guarantee in writing, guaranteeing the performance of the obligations of Tribecca under the lease;
It is true that P1 required execution of a Memorandum of Lease and Guarantee, but that was only from directors and furthermore, it was not linked to delivery of possession of the premises. In fact, Mr Kaldis gave evidence undermining the thrust of that pleading:
Q. Was there some reason why you allowed the tenant into the premises prior to execution of the memorandum of lease and guarantee; is that a normal way for you to operate.
A. It is; our policy is, once a tenant has signed an agreement to lease and has a disclosure statement, we have a contractual agreement in writing, and we are quite happy for them to commence work and enter the premises.
Accordingly, paragraph 18 is only made good in relation to Mr Sangster.
In paragraph 19 of the Statement of Claim the plaintiff alleges a failure by Tribecca and the defendants to inform the plaintiff of a change in the shareholding of Tribecca, which the plaintiff contends amounts to both a breach of contract and misleading and deceptive conduct.
Insofar as the agreement P1 is concerned the basis of that claim is found in clause 25. It relevantly reads as follows:

25.

LESSEE’S
ACKNOWLEDGE-
MENT

The Lessee acknowledges that:

…

·     in deciding whether or not to accept this offer, the Lessor is relying on the accuracy and comprehensiveness of the information about the Lessee provided by the Lessee to date (the “Information”);

·     if any of the Information changes materially or becomes incomplete, the Lessor must be notified immediately in writing; and

·     …

The plaintiff further relies in this context on clause 2.5.2 of the Memorandum of Lease, Exhibit P2, which, as mentioned, was never executed, and which was not relied on in the relevant section of the Statement of Claim.
2.5.2where the Lessee is a company (other than a company the voting shares of which are listed on a recognised Stock Exchange in Australia) there shall be deemed a transfer of assignment of this Lease requiring the consent of the Lessor if:
(a)    the issue of any share or the transfer of the legal or beneficial ownership of or in any share in the issued capital of the Lessee or the ultimate holding company of the Lessee alters the effective control of the Lessee; or
(b)    any change alters the effective control of the board of directors of such company; or
(c)  any variation or change of the Articles of Association of such company varies the rights attaching to any of the issued shares in such company;
It is necessary to establish what information about the Lessee was provided to the plaintiff prior to and after the execution of P1.
The genesis of the Agreement P1 was in discussions between Mr Karidis and Mr Sangster. Mr Kaldis was drawn into those discussions by Mr Karidis and, quite soon, assumed the carriage of the matter on behalf of the plaintiff. In the early stages a possibility of the plaintiff company being an equity partner in the café business was discussed. For example, that was discussed on 13 March by Mr Karidis, Mr Kaldis and Mr Sangster and it was still under consideration on 20 March, 22 March and in mid April. By early May that idea seems to have died away. Certainly by the time P1 was signed by Mr Sangster it was understood by all that Mr Karidis would not be an investor. At least by 7 August Mr Kaldis was aware that the lessee would be Niprust and in a letter to the “Commissioner, Liquor Licensing” Mr Kaldis described Mr Sangster as “[t]he director of the lessee company”. Mr Kaldis said he was given that information by Mr Sangster after he requested it for the purpose of preparing the lease.
Two documents were admitted into evidence in which Mr Sangster notified Mr Kaldis of the name of Niprust and its company secretary, its director (himself), their addresses and the address of its registered office. Mr Kaldis said that Mr Sangster had told him that he was “in the process of setting up a corporate vehicle for the business and the lease documentation” and he took this as being Mr Sangster “keeping us up to date”.

The evidence does not disclose that Mr Sangster ever specifically informed the plaintiff of the identity of Niprust’s shareholders or of the number of shares held by himself or anyone else. It was clear to the plaintiff that Mr Sangster would need equity partners, but notwithstanding the provision of the information referred to above, no request was made to Mr Sangster for further information. I accept that Dr Stone may have met both Mr Kaldis and Mr Karidis at the premises in the period leading up to the opening, in circumstances such that it was clear to them he was, at least, an investor.
The position as to the shareholding in Niprust was as follows. It seems that Niprust was bought by Mr Sangster as a shell. The shareholders had been persons by the name of Martin and there was a significant delay in removing their names from the record.
While Dr Stone was committed to the project from before the time when P1 was signed, the recording of that fact in writing, and of Ms Holmes’ commitment, did not keep pace with those developments. A Shareholders’ Agreement embodying a re-issue of shares was executed on 11 November 2000. According to its terms, both Dr Stone and Ms Holmes were to subscribe for and be issued with 50,000 shares in Niprust, for which they would pay $50,000. Mr Sangster was to be issued with 27,000 shares on payment of $27,000 and a further 23,000 shares upon completion of the premises on time and on budget.
However, as at 7 December 2000 when Messrs Thomson Playford, solicitors instructed by the plaintiff, sent to the plaintiff a company extract relating to Niprust, whilst Mr Sangster was shown as the sole director (and secretary), members of the Martin family were still shown as owning all the shares.
In fact the names of the new shareholders of Niprust – by now Tribecca – were not notified to ASIC until 8 February 2001, when an annual return (Exhibit 2D3) was filed. Dr Stone and Ms Holmes were shown as holding 20,000 shares and Mr Sangster was shown as holding 10,000.
As far as the evidence shows, the plaintiff only became aware of the actual shareholdings in Tribecca because on 22 June 2001 its solicitors, Griffins Lawyers, sent to it documents obtained from the Liquor Licensing Commission which contained current information in respect of the shareholdings. It does not appear that the plaintiff had particularly sought that information either then, or at any earlier stage. Only at that time did the plaintiff seek guarantees from Dr Stone and Ms Holmes in respect of the lease.
In this course of events I can see no basis for the plaintiff’s claim that there was any breach of clause 25 of P1. Far from relying on representations of Mr Sangster as to the shareholdings in Niprust/Tribecca, the plaintiff never sought nor obtained from Mr Sangster, or anyone else, any information as to that matter until much later, when it was clear that the venture was in financial trouble.
His failure to do so was not really surprising. The printed form of clause 4 of P1 provided as follows:

4.

GUARANTORS

Name:

Address:

Name:

Address:

If the Lessee is a company, the personal guarantees of directors and shareholders are required.

…………………………………………………

…………………………………………………

…………………………………………………

…………………………………………………

Against “Name” Mr Kaldis wrote “All Directors”, thereby amending the printed form. To him the important matter was that the directors of any company to whom the Agreement to Lease should be assigned, would provide guarantees. The following passage of his cross examination by Mr A Harris QC, for Dr Stone and Ms Holmes, illustrates as much:
Q.     Did you do anything as a result of reading this p.2 of the company search of 7 December 2000, did you do anything as a result of learning, apparently, Mr Sangster held no shares in the company; was that a matter of concern to you.
A.     At that point, no, I don’t recall, no.
Q.     And the reason why you didn’t, I suggest, is that the shareholding of the company was not a matter of importance to you, because the agreement to lease limited the obligation to give a guarantee to the directors, correct.
A.     Yes.
Consequently, I find that details of the change to the shareholding in November 2000 did not amount to information about the lessee which was comprehended by clause 25 of P1 and the failure of the lessee to convey that information was not in breach of the Agreement to Lease.
Further, I reject the plaintiff’s assertion that clause 2.5.2 of P2 applied so as to compel disclosure by the proposed lessee or anyone else. Neither the obligations cast by P1 on “Howie Sangster and/or nominee” to execute a lease, nor his execution of the guarantee within P1, nor the taking of possession by Niprust of the premises constituted an agreement in terms of P2. I do not accept the plaintiff’s contention that the provision of a standard lease along with the document P1 to Mr Sangster, followed by his execution of P1, constituted any agreement incorporating the terms of both P1 and P2.
For similar reasons I find that the claim of misleading and deceptive conduct fails.
The plaintiff relies on s 51A and s 52 Trade Practices Act 1974 and s 56 Fair Trading Act (SA) 1987. Section 52 Trade Practices Act provides as follows:
52. Misleading or deceptive conduct
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).
Section 56 Fair Trading Act 1987 is in similar terms but applies to “a person”. The attack on this basis must be against Niprust/Tribecca as it accepted the assignment of the rights and responsibilities under P1. Therefore the Trade Practices Act is the relevant legislation.
I can readily accept that to make out such a claim no intention to mislead or deceive need be demonstrated: Equity Access Pty Ltd v Westpac Banking Corporation [1990] ATPR 40-994; and that there is no rule that the plaintiff’s claim will necessarily fail unless it shows that it took reasonable care of its own interests: Neilsen v Hempston Holdings Pty Ltd & Anor (1986) 65 ALR 302. Further, it is clear that in some circumstances, such as where there is a duty to reveal relevant facts, silence can amount to misleading and deceptive conduct: Henjo Investments Pty Ltd & Ors v Collins Marrackville Pty Ltd No. 1 (1988) 79 ALR 83. But I am far from satisfied that clause 25 could be the basis of an obligation to reveal the change of shareholding and that failure to do so could amount to misleading and deceptive conduct, in circumstances where no information as to the state of the share register had ever been sought or provided.
Furthermore, the reliance on the relevant conduct or silence required to be proved in order to render the conduct actionable (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514) is not made out. That there was no relevant reliance is starkly demonstrated by the plaintiff’s inaction upon being informed (erroneously) on about 8 December 2000 that Mr Sangster was not a shareholder of Niprust and that all shares were held by the Martin family. The plaintiff did nothing to clarify that situation nor to seek guarantees from any of the Martins. As seen, Mr Kaldis frankly acknowledged that his interest was only in the identity of the directors.
Since I am not satisfied of any false or misleading conduct on the part of Niprust/Tribecca, or reliance thereon by the plaintiff, there can be no question of secondary responsibility accruing to the directors or anyone else, as alleged in paragraph 21 of the Statement of Claim.
Consequently the claims made under this heading must fail.
Thus far I have not found it necessary to discuss the evidence of the witnesses in the trial. The evidence itself was largely non-contentious. Although matters of detail and emphasis varied, that was not so in any matter which I have found to be important. In terms of the history of the negotiations leading to the execution of P1 and the course the tenancy and the business took, I found the evidence of both Mr Kaldis and Mr Sangster to be truthful and generally reliable.
I mentioned that a number of allegations in the Statement of Claim were not made out. Not all are important, but I touch on them in any event. I find that the Agreement to Lease was wholly in writing. I find that it was not an express term of the Agreement to Lease that Mr Sangster would procure shareholders to invest money in the business of the café or require such shareholders and persons in authority in Tribecca to provide personal guarantees of the performance of the lease, nor that he would nominate a company to be the lessee of the said land, nor that he would cause Tribecca to execute a Memorandum of Lease and return it within fourteen days, nor that he would advise the plaintiff of any changes in the directors, shareholders or persons in authority in Tribecca, nor that he would cause such directors, shareholders and persons in authority in Tribecca to execute deeds of guarantee of the performance of Tribecca. Further, I find that Tribecca did not ratify the entry into the Agreement to Lease by Mr Sangster as its agent. Neither did Dr Stone nor Ms Holmes ratify the entry into the Agreement to Lease by Mr Sangster as their agent.
I turn back to the question of damages.
To some extent the question of quantum of damages was agreed between counsel and Mr Sangster. The calculation of damages is in part straightforward on account of the fact that subsequent to the premises being vacated by Tribecca, the plaintiff entered into a new agreement to lease. The new rental commencement date was 15 April 2002 and the term was five years with a right of renewal for a similar period. It is interesting to note that the rent payable under the new agreement was not much more than half that payable under the agreement negotiated by Mr Sangster. However, it has not been suggested that the plaintiff has not mitigated its damages.
The new agreement expires (subject to the right of renewal) on 14 April 2007. In the normal course Tribecca’s lease would not have come to an end until 14 September 2007, although it seems that no rental was paid until the period commencing 15 November 2000 and the plaintiff’s case is that the term would not, therefore, have lapsed until 14 November 2007. Accordingly, a comparison of rental which would have been received from Tribecca had the Agreement to Lease been complied with, as against that rental received from the new tenant (which comparison is found in Exhibit P195) takes no account of the period of some seven months towards the end of 2007.
One of the outstanding matters not subject to agreement is whether in calculating the plaintiff’s loss, the appropriate figure for the first two years is the original rental anticipated in Exhibit P1 or the concessional rental allowed for the first two years of the lease, as agreed between Mr Sangster and Mr Kaldis. That question turns on whether or not the concession by the plaintiff was conditional upon performance of the whole contract. Whereas Mr Kaldis claimed it was, Mr Sangster’s evidence was to the contrary. In relation to this matter I prefer Mr Sangster’s evidence. The negotiations concerning it took place in the context of reference to a number of matters which were of concern to Mr Sangster – matters where he alleged a breach of agreement by the plaintiff – including the project being behind schedule, a credit for a ceiling not required and contribution towards floor finishes. In my view, in the absence of the matter being made absolutely clear between the parties, the concession should be interpreted as being unconditional. Consequently what were referred to in the relevant Schedules P195 and 2D7 as the “concessional lease” figures are, in my view, the correct ones.
It is agreed on all sides that it is necessary to apply a discount rate to that part of the award which relates to payments referable to the period from the date of trial to the end of the agreement on account of the fact that the plaintiff will receive a lump sum instead of monthly payments to 2007. As I understand it, Mr Morcombe accepted that the rate suggested by the second and third defendants could properly be utilised.
It is also necessary to deduct the amount of rent actually received from Tribecca. I was told that I would be given a firm figure rather than the estimate of $50,000 put by Mr Kaldis in evidence and by Mr Morcombe during submissions. However that was not done. In those circumstances I propose to allow $55,000 for rent paid.
The other matter of dispute is whether there should be any discount from the lump sum figure on account of contingencies. Mr Harris argued that there should be a discount of between 10% and 20% for contingencies, but no authority was provided. Some allowances are often made in respect of awards of damages where there is uncertainty about the precise loss. Here, apart from some guesswork employed in calculating the likely increases in the new tenant’s rental for CPI increases and market reviews, the only uncertainty relates to the last seven months of the original rental period.
I accept that the current tenant’s business is a very good one. In view of the fact that the rental now being paid is little more than half that to which Mr Sangster agreed when P1 was executed, I find it very likely that the current tenant will exercise its right of renewal at the end of the term. The agreement to lease provides at that time for a “market review”. By that time I consider that the premises will have more than regained the leasing value they had as at May 2000. I consider it very likely that either the current tenant or another will be prepared to pay at least that rental. Therefore, I propose to discount for that contingency for the period 15 April 2007 to 14 November 2007 at the rate of $12,000 per month.
Accordingly I assess damages in the following way. From Exhibit 2D7 I take the figure of $430,230, which is the concessional lease figure, less the rental under the current lease to 14 April 2007. From that I subtract $55,000 on account of the rent actually received from Niprust/Tribecca. That leaves the amount of $375,230. I then deduct the amount of $84,000 for the contingency I mentioned, leaving $291,230. There will be judgment for the plaintiff in that sum as against Mr Sangster.
The plaintiff’s claim against the second and third defendants is dismissed.

[2004] SASC 45

25 February 2004