Foong Nominees Pty Ltd v Han Investments Pty Ltd - [2006] WADC 87

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: FOONG NOMINEES PTY LTD & ANOR -v- HAN INVESTMENTS PTY LTD [2006] WADC 87

CORAM: O'BRIEN DCJ

HEARD: 23 26 MAY 2004

DELIVERED : 16 JUNE 2006

FILE NO/S: CIV 2638 of 2004

BETWEEN: FOONG NOMINEES PTY LTD (ACN 007 905 535)
First Plaintiff
KAREN FOONG
Second Plaintiff
AND
HAN INVESTMENTS PTY LTD (ACN 074 318 371)
Defendant

Catchwords:

Licence to use premises and operate business - Terms of the licence - Whether agreement and/or clauses used pursuant to s 7 or s 9 of the Commercial Tenancy (Retail Shops) Agreement Act 1985 - Whether unconscionable conduct pursuant to s 51AA of the Trade Practices Act 1974 (Cth) - Counterclaim by licensor for repairs and maintenance

Legislation:

Commercial Tenancy (Retail Shops) Agreement Act 1985 s 7 and s 9

Trade Practices Act 1974 (Cth) s 51AA

Result:

Plaintiffs' claim dismissed
Counterclaim partly successful

Representation:

Counsel:

First Plaintiff                :     Mr A Metaxas
Second Plaintiff            :     Mr A Metaxas
Defendant:     Mr A J Aristei

Solicitors:

First Plaintiff                :     A Metaxas & Co
Second Plaintiff            :     A Metaxas & Co
Defendant:     Carlo Primerano & Associates

Case(s) referred to in judgment(s):

ACCC v CG Berbatis Holdings Pty Ltd & Ors (2003) 197 ALR 153
Bonham-Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd; Equuscorp Pty Ltd v Codd; Equuscorp [2004] HCA 55
F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507
Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd, unreported; SCt of WA; Library No 970604; 13 November 1997

Case(s) also cited:

Blomley v Ryan (1956) 99 CLR 362
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
G & E Avakoumides v Commonwealth Funds Management Ltd (2004) NSWSC 711
Wigan v Edwards (1973) 47 ALJR 586

O'BRIEN DCJ
Introduction

This case involves a dispute about an agreement to grant a licence to use premises and a restaurant business; the terms of the agreement; and the assignment of the licence. The two people involved are directors of the litigant companies. Each is a very hard working immigrant to Australia and each has made a big contribution to their adopted country by running Asian restaurants and thereby enriching our understanding of their cultures. I suspect that the dispute between them has arisen partly because of their informal way of doing business and perhaps partly because language difficulties have prevented a prudent examination of the legal documentation and its terms.
I consider it a great shame that some resolution of their dispute short of litigation has not been achieved. Since mid 2001 when the dispute began, the parties have been embroiled in lengthy negotiations, for the most part through lawyers.

Summary of relevant documents

Han Investments Pty Ltd leased premises at 245 William Street, Northbridge ("the premises"), from Breslin Pty Ltd ("Breslin") by lease dated 12 June 1997.
Han Investments owned the business known as Chef Hans Café ("the café") and operated the café from the premises. Mr Ian Han was a director of Han Investments and owned and operated several other restaurants under the name "Hans Café" or similar. Some of these restaurants were licensed to other operators for a licence fee.
The second plaintiff is Ms Karen Foong, the sole director and shareholder of the first plaintiff, Foong Nominees Pty Ltd. Ms Foong and Mr Han met socially in Adelaide on occasions in the early 1990s. Ms Foong ran a Chinese restaurant and Mr Han also operated restaurants there. They discussed whether Ms Foong would be interested in operating the café.
Ms Foong came to Perth on two occasions in early 1999 to inspect the café and view its operations.
Ms Foong decided to take a licence from Mr Han for the café. The exact amount of the licence fee is in dispute.
By a document dated 1 May 1999 called "Agreement for Use of Premises and Restaurant Business" ("the first licence") Han Investments granted a licence to Foong Nominees to use the premises and operate the café. The term was for three years with an option for another five years. These terms coincided with the terms of the lease from Breslin to Han Investments.
A "special condition" of the first licence provided "security bond of fifty thousand dollars ($50,000) paid on 1 May 1999 will be returned back to the guarantor when the lease expires (with no interest)" ("the bond"). The guarantor was Ms Foong's daughter, Nicole Foong, who actually paid the bond on 30 April 1999.
In mid 2001 Ms Foong informed Mr Han that she wished to sell the business. During the course of negotiations a dispute arose as to alleged arrears of the licence fee. Thereafter followed negotiations between the parties through their respective solicitors. Mr Han was represented by Mr Raymond Tan of Tan and Tan and for the most part, Ms Foong was represented by Taylor Smart.
By letter dated 1 February 2002, Nicole Foong exercised the option to renew the licence for five years. Her authority to do this is not clear but the parties do not take issue with a valid exercise of the option. Thereafter, there were negotiations about the amount of the licence fee for the five year period. The issue concerning the arrears of licence fee had still not been resolved.
On 12 September 2002 the parties executed a document called "Agreement for use of premises and restaurant business located at 245 William Street Northbridge" ("the second licence"). This granted a licence to Foong Nominees to use the premises and operate the café for a five year period. The licence fee was $130,000 per year payable weekly in the sum of $2,500 plus GST.
Clause 6 of the second licence provided that Foong Nominees could not assign the licence without the prior written consent of Han Investments provided that Han Investments could not unreasonably withhold its consent if, inter alia:
"6.1.4 All ... moneys payable under this Licence shall have been paid and there not then be any existing unremedied breach of the covenants conditions and stipulations contained in this Licence …".
Clause 4.3.1 Foong Nominees covenanted in the second licence to keep all fixtures, fittings, plumbing etc to the standard required by Han Investments from time to time, and in any event, to ‑
"keep and maintain the condition of repair and decoration of the premises to at least the standard as at the commencement date (12 September 2002) as soon as possible replace any fluorescent light tubes or light globes which may become worn out or broken and as soon as possible renew any broken glass".
Although Nicole Foong was not a party to the second licence, a handwritten "special condition" provided the "Security bond of fifty thousand dollars ($50,000) paid on 1 May 1999 will be returned to the guarantor when the lease expires (with no interest)". It seems to be the parties' intention that Ms Foong as the named guarantor in the second licence, and not Nicole Foong, would receive the bond on completion of the term of the licence. The $50,000 paid by Nicole Foong on 1 April 1999 was retained as the bond pursuant to the second licence.
The second licence was regarded by the parties as evidencing the option to renew the licence provided for in the first licence. However, it is not expressed in terms as such. On its face, it appears to be a fresh licence. Ms Foong was named as the guarantor. For reasons expressed later, I find that the second licence operated as the option to renew under a variation of the licence fee.
It would appear there was some difficulty in relation to the liquor licence for the café. To resolve this problem, Han Investments sub‑let the premises to Foong Nominees by a sub‑lease expressed to commence on 1 February 2002 but stamped on 17 July 2003 ("the sub‑lease"). Ms Foong was guarantor for Foong Nominees.
In the meantime, Mr Han was attempting to find a purchaser of the business on Ms Foong's behalf. Sarak Som, his wife Reth Sok and their children Saray and Saveth Som ("the Som family") indicated an interest.
In November 2003, Foong Nominees assigned the licence to the Som family ("assignment of licence"). In the undated, written assignment of licence, cl 8(e) to cl 8(g) provided:
"(e)Han Investments 'holds a deposit which belongs to Foong Nominees Pty Ltd and which was paid pursuant to [the first licence]';
(f)'Foong Nominees Pty Ltd acknowledges that a sum of $50,000 is owed to Han [Investments] being arrears of licence fees accrued from the date of the [first licence]' ;
(g)'Han [Investments] and Foong Nominees mutually agree to release each other from any claims for their respective claims for $50,000 in respect of the deposit and arrears. This agreement will be sufficient as evidence of their mutual release from each other in respect of the claims against each other' ('the mutual release clause')."
Some observations on cl 8(e) to cl 8(f) are necessary.
As to cl 8(e), the "deposit" (that is, the bond) of $50,000 did not "belong" to Foong Nominees. Nicole Foong had paid the bond as guarantor for the first agreement. That accounts for the wording of cl 8(g). The parties appeared to regard the $50,000 as the property of Foong Nominees and this trial was litigated on that basis.
As to cl 8(f), the evidence which I discuss below does not support a finding that as at 12 September 2002 Foong Nominees were in arrears in the sum of $50,000. As far as I can ascertain, the arrears were only $42,000.
By a sub‑lease stamped on 1 December 2003, Foong Nominees assigned the sublease of the premises to the Som family.
In cl 2.5(a) of the sub‑lease, Foong Nominees covenanted to keep and maintain the premises clean and in good sanitary condition and to comply with relevant named statutes.
In cl 2.7 Foong Nominees covenanted, inter alia, to maintain, replace, repair and keep the premises, fixtures, fittings, plumbing, air‑conditioning, plant and machinery in "good, clean and substantial repair and condition".
By an agreement to purchase a business, date 8 January 2004, Foong Nominees sold the goodwill, the plant and equipment, stock in trade and all licences connected with the café to the Som family for $50,000. This was subject to the assignment of the lease.

What the parties claim

Reimbursement of cash payments

Foong Nominees claim that after the execution of the first licence, Foong Nominees and Han Investments made a verbal agreement in effect that in addition to the payment of the licence fee of $2,500 per week, Foong Nominees would pay the cash payment if the turnover of the business exceeded $25,000 per week (statement of claim par 15).
Foong Nominees claim that the agreement relating to the cash payment was made without consideration and it was the written first licence which entitled Foong Nominees to all of its rights in respect of the premises and the café and no further rights were granted in consideration of the cash payment.
In par 16 Foong Nominees also claim that the agreement relating to the cash was void as it was in contravention of s 9 of the Commercial Tenancy (Retail Shops) Agreement Act ("the RSA") "insofar as it was key money or a payment the purpose of securing consent to the assignment of the sub‑lease of the premises".
By pars 18 and 19 of the statement of claim, Foong Nominees pleads in the alternative that in or about April 1999 Foong Nominees and Han Investments agreed that they would enter into the first licence agreement and "further verbally agreed that [Foong Nominees] would pay [Han Investments] $1,000 per week in cash when and if the turnover of the business exceeded $25,000". I assume the reference to the $25,000 relates to the weekly turnover of the café.
Foong Nominees claim that the agreement for the "additional [cash] payment" was in contravention of s 7 of the RSA and void by reason of [Foong Nominees] having failed to make a written election to pay "turnover rent".
At the outset, I observe that the evidence does not support a factual finding as to the time of the agreement about the cash as claimed in either pars 15 or 18 of the statement of claim.
In fact, the evidence establishes that during negotiations for the first licence, and before it was executed, it was agreed between Mr Han and Ms Foong that Foong Nominees would pay a total licence fee of $3,500 per week. $1,000 would be paid by cash ("the cash") and $2,500 would be paid by cheque. The written agreement did not incorporate the agreement relating to the cash payment.
It was on this factual basis that the case was litigated.
On these bases, Foong Nominees therefore claim the sum of $114,000 being the total of the cash payments which it paid pursuant to the first licence.
In its defence, Han Investments plead that the actual agreement between it and Foong Nominees was partly oral and partly written. The oral component related to the cash payment and the written first agreement related to the $2,500 per week component of the licence fee.

Bond: Unconscionable conduct

Further, the "plaintiffs" claim the sum of $50,000 being the bond which was paid by Nicole Foong on 30 April 1999. The pleadings do not make it clear whether the claim for the $50,000 is made by Ms Foong or Foong Nominees. I assume that it is Foong Nominees that makes the claim given cl 8(e) of the assignment of lease.
In any event, the basis of the claim in par 13 is that Han Investments refused to consent to the assignment of the licence [to the Som family] unless the "plaintiffs" agreed to forfeiture of the bond and this constituted unconscionable conduct as defined in s 51AA of the Trade Practices Act 1974 (Cth) ("TPA").
The unconscionable conduct is claimed to arise because Han Investments, through Mr Han, was aware that Ms Foong, as the operator of the café, required hospitalization for her knee condition and further knew that because of this, she was unable to continue to operate the business and therefore had no choice but to assign the licence. As Han Investments refused to give consent to assign the licence unless she agreed, in effect, to repay the alleged arrears of the licence fee, Ms Foong had no choice but to agree to the mutual release clause in the assignment of licence. In other words, Han Investments took advantage of her state of health.
In its defence, Han Investments pleads that it was entitled to refuse its consent to the assignment of licence as there were arrears of the licence fee (the cash payments) and un‑remedied repairs which constituted breaches of the second licence.

Bond: Void as contrary to s 9 RSA

Further, the plaintiffs claim in par 14 of the statement of claim that the provision in the assignment of the second licence in November 2003 that the bond would be forfeited to Han Investments in satisfaction of arrears due by Foong Nominees "was void insofar as it was consideration paid for the consent to assignment of the sub‑lease for the premises in contravention of s 9 of the [RSA]". The "sub‑lease" is the sub‑lease stamped on 17 July 2003 made between Breslin, Han Investments (sub‑lessor), Foong Nominees (sub‑lessee) and Ms Foong as guarantor (see par 7).
On these two bases, the plaintiffs claim the amount of the bond ($50,000). Han Investments denies these claims.

The counter claim

Han Investments counterclaims that Foong Nominees was in breach of the cl 4.3 of the second licence or alternatively pursuant to cl 2.5(a) and cl 2.7 of the sub-lease by failing to keep the premises and equipment in the agreed state of cleanliness and repair. The claim is for the sum of $51,920 being the cost of repairs, or alternatively for damages for breach of the second licence.
Alternatively, Han Investments claim an order the amount of $51,920 or any assessed damages be set‑off against the moneys claimed by the plaintiffs.

The factual issues for determination

The main factual issues for determination include the following:
•The nature and actual terms of the first agreement between Foong Nominees and Han Investments including ‑
(i)the agreed licence fee;
(ii)if the licence fee included a cash payment –
whether it was dependent on turnover and how the parties agreed to determine it would cease;
•Whether Foong Nominees were in arrears of the licence fee when the assignment of licence was executed and if so, by how much.
•The circumstances in which Ms Foong signed the assignment of licence.
•Whether the premises and equipment required repair, replacement or maintenance on execution of the assignment of the licence. If so, the cost of such.

The evidence

By way of preliminary comment, I observe that Mr Han spoke and understood English. Ms Foong had access to an interpreter and from time to time it was necessary for the interpreter to explain a word or expression or to interpret a whole question. Both Mr Han and Ms Foong did not have an extensive vocabulary and had a simple method of expressing themselves as might be expected from those whose first language is not English. I have set out some passages from the transcript where my recitation of their evidence might indicate a more sophisticated method of expression by the witnesses.
Ms Foong testified that at their first meeting in Perth to discuss the café, Mr Han told her the "rental expenses" would be $2,500 per week for him and $2,000 per week for the landlord (Breslin). He told her that the business was very good but that he was unable to show her the books. She said that she needed to think about the proposal and discuss it with the family.
A week later, Ms Foong returned to Perth and again discussed the matter with Mr Han. At that time he told her that the turnover of the café was $25,000 per week and that she would have to pay $1,000 cash. Ms Foong testified:
"Mr Han said the business very good. He said, 'You will make good money but you need to pay a thousand dollars in cash in the top' and I say, 'It's a lot of money to pay already'. But he said, 'Look, take it or leave it, you know,' and then I say, 'Okay'. I said, 'I want to pay a thousand cash because I want to get out of tax' and he said 'I want to get out of tax too'." (T30)
Presumably, Ms Foong meant by this comment that she wished to minimise or evade the payment of tax. She was not asked to explain the comment. I cannot see how the payment of the cash would assist Ms Foong "to get out of tax".
When asked how Mr Han would know the turnover was $25,000 per week, Ms Foong stated:
"He's clever man. He drive up to my shop every day. Yes, every day drive up to my shop and he talk to my manager, talk to the staff. I got nothing to hide". (T49)
…".
Other evidence from Ms Foong on the issues includes:
"Was the written agreement to say anything about the thousand dollars a week? --- No.
Did he say why not? --- Just that he don't want to pay the tax because it's not on the book. (T30)
…
He say, 'Look, the business very good. Over 25,000 you make good money so I need, $1000 cash …
Look, the business very good and probably over - well over $25,000. You will make really good money and then I need $,1000 cash, because if I put all in the paper we pay too much tax'. (T48)
…
So based on what you said was the agreements to turnover, he didn't ask for any documents to be given to him to prove what the weekly turnover was going to be, did he? --- I used the same vegetable shop or the butcher, and when he looks at my book he will know my expenses and he will know my business running - how do I put, and also every day he drives around my shop and he knows my business. (T48-49)
…
Mr Han never came to see you. In the two years that you were paying him, he never came to see you about looking at your books for turnover, did he? --- No." (T50)
As I understand Ms Foong’s evidence, she agreed to a licence fee of $3,500 per week but only if the turnover was of or over $25,000 per week. The effect of her evidence is that she would pay $2,500 per week if the turnover dropped below $25,000.

Mr Han does not dispute that the written agreement was for a licence fee of $2,500 per week to be paid by cheque and that Ms Foong would pay the cash. However, he denies that the cash was to be paid only if the turnover exceeded $25,000 per week. Mr Han agreed that he told Ms Foong that the turnover was $25,000 per week but he said that told her that she would have to verify that herself.
He said that in 2001 Ms Foong asked him to reduce the licence fee by $1,000 per week as she "had no money" and the business was "not good enough". Mr Han said he told her that:
"Is not our agreement if business good or not good. We don't guarantee you about the business."
That comment may be relevant to the issue of whether Mr Han made a representation as to the turnover.
Mr Han's wife also participated in running some aspects of Han Investments' businesses. She was present for some of the discussions between Mr Han and Ms Foong.
Mrs Han's evidence about the negotiations for the licence fee essentially supported Mr Han’s account.
On Mr Han's account the reason why he wanted the cash payment was because he ran several restaurants and had difficulty from time to time with the licensees paying their licence fees by cheque. Sometimes they would not pay and sometimes cheques would bounce. In order to ensure that he had sufficient funds and to pay his outgoings, he wanted $1,000 per week to be paid in cash. Mrs Han supported this and explained the cash was needed to "ensure the cash flow for bank repayments". She said Ms Foong "was happy". Mr Han denied he mentioned "cash flow" to Ms Foong but I have doubts whether he understood the line of questioning. In any event, nothing turns on it.
Mr Han denied that he told Ms Foong that the cash arrangement was to minimise tax. Mr Han claims that he paid tax on the total of $3,500 per week paid by Ms Foong. There is no evidence to the contrary.
Mr Han did not tell his solicitor, Mr Raymond Tan, about the cash component. Mr Tan testified that he was aware of the verbal agreement for the cash payment. However, the evidence does not establish when he became aware of that. (T272)
If the cash payment was incorporated into the first agreement with a provision that $2,500 would be paid by cheque and $1,000 would be paid by cash, this would secure the result which Mr Han said he wanted and reflect what he claims was the actual agreement between the parties.
When asked why there was a difference between the agreement and the written first licence, Mr Han said:
"At that time I not recall and just sign the Document and didn't look at it.
That paragraph there goes on to say payments of $10,833 per month ? --- But our discussion's about $3,500 a week, right, and I just not wonder what is the figures here because they calculation by month and that I'm not aware about it. That's my mistake.
Well, does that amount then represent the amount that was agreed to be paid between you? --- Yes, but not agreed between us, with Karen Foong, is not that amount, but it's $,3500."
It would seem that both Ms Foong and Mr Han signed the first licence agreeing to a licence fee, which was not their actual agreement.
Ms Foong testified that she paid the cash for two years. She said that the business was then unable to afford the payments and she needed to sell her apartment to pay the cash. At that stage she said she was lucky if the café was turning over $20,000 to $21,000 per week.
Some correspondence between the parties' solicitors is of some relevance in shedding some light on what the parties' intentions were when coming to an agreement on the licence fee.
By letter dated 16 July 2001 to Tan and Tan, Taylor Smart informed of Ms Foong's instructions that she was unable to agree to "the increase in the business lease agreement from $2,500 per week to $3,500 per week" as she "… has experienced a downturn in the revenue from the business …". Further, "[A]ny payments made … in addition to her legal obligations of $2,500.00 per week have been on the basis that the business is in a position to make the extra payments. Due to the nature of these payments, your client had never had a legally enforceable right to sue for them". (D3/11)
After some further correspondence between the parties' solicitors, by letter dated 31 July 2001 (D3/16), Tan and Tan wrote to Taylor Smart advising that the defendant "… will argue that the original document evidenced a payment of $2,500 but the agreement was varied to $3,500 by mutual agreement". Mr Tan testified that these were Mr Han’s instructions. However, if that extract is taken at face value, it indicates that the original agreement was for $2,500 per week and there was a mutually agreed variation. Neither Ms Foong nor the defendant testified that this was the case. In my view, either Mr Han gave imprecise instructions or Mr Tan misunderstood his instructions or Mr Tan used an inaccurate choice of words to explain the agreement. In that letter, Tan and Tan request payment of $4,000 being four weeks arrears of the weekly $1,000 cash payments.
This correspondence may be an example of the respective parties giving imprecise instructions to their respective solicitors. I doubt this was intentional. It probably reflects the difficulty each had in explaining their understanding of the negotiations. I refer to it for the sake of completeness.

Findings: The first licence

Counsel for the plaintiffs submitted that the written agreement evidenced the totality of the terms of the agreement between Han Investments and Foong Nominees including the amount of the licence fee and that Han Investments was bound by the terms of the written agreement. He relied on the authorities of Equuscorp Pty Ltd v Glengallan Investments Pty Ltd; Equuscorp Pty Ltd v Codd; Equuscorp [2004] HCA 55; Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336.
However, in my view, without examining in detail the reasons, those authorities are distinguishable on the facts from the present case. For example, in Equuscorp the issue was whether the "operative agreement" was an oral agreement which had preceded the written agreement, which was inconsistent with the oral agreement. That case was not dealing with the situation as in the present case where (as I find) the first licence agreement was partly oral and partly in writing.
In Maybury the Court held at par 6:
"Once an agreement is made in writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their obligations. If it is established that the writing was intended to contain only part of a fuller agreement it may be otherwise."
In this case, the plaintiffs have not satisfied me that the written first licence was the full expression of the obligations of the parties.
I am of the view that the actual agreement between the parties in 1999 was partly oral and partly written. It is not clear why the parties proceeded in this way. It is not possible to resolve whether either or both Ms Foong and Mr Han thought they might minimise their tax or whether Mr Han’s stated reason for the payment arrangement was the motive.
In my view, the terms of the actual agreement included that there would be a licence fee of $3,500 per week with $2,500 payable by cheque and $1,000 payable by cash. Mr Han did not tell his lawyer about the cash component and therefore the first licence agreement only reflected a licence fee of $2,500, which in turn reflected Mr Han's instructions to his lawyer.
I am not satisfied that the cash component was to be paid only if the turnover exceeded $25,000 per week.
My reasons for this view are as follows.
There is no documentary evidence as to the turnover of the business in 1999 or at any time thereafter. There is no evidence that Ms Foong made independent or other inquiries as to the turnover of the café.
Given the evidence of Ms Foong, there were practical difficulties in Mr Han determining whether the turnover fell below $25,000. Even if the agreement was based on trust, there is no evidence as to how the parties would determine and agree that the cash component would no longer have to be paid. Ms Foong's explanation as to how Mr Han would determine the turnover of the café is at best extremely naïve or at worst, false. Although not specifically stated by Ms Foong, I infer from her evidence that she would simply tell Mr Han that the turnover had dropped below $25,000 per week and the cash payments would stop. On Ms Foong's account, Mr Han would know this to be the case because he drove past the café and could see the number of customers therein and used the same vegetable supplier and butcher and he knew her business. On Ms Foong's account, even given a large degree of trust between the parties, the agreement relating to the cash payment being dependent on turnover is so nebulous and uncertain as to be unbelievable especially given the large amount involved.
Accordingly, I find that the actual agreement between the parties was that there would be a weekly licence fee of $3,500 with $2,500 to be paid by cheque and $1,000 to be paid by cash independent of the turnover of the cash.
Ms Foong's counsel submits that the verbal agreement relating to the cash payment was made without consideration and is void as contrary to s 9 RSA. However, as I have found, the cash payment was a term of the licence, the consideration is the licence to use the premises and operate the business. The actual agreement was partly in writing and partly oral.

Key money: was the agreement for the cash payment void?

The relevant provisions in the RSA concerning the payment of key money are as follows.
Section 3(1) defines key-money as:
"(a)money that is to be paid by, or at the request or direction of, a tenant
(b)…
by way of a premium or something of a like nature in consideration of the granting of, or agreeing to grant, a lease or the renewal of a lease or the consenting to an assignment of a lease or the sub-leasing of the premises the subject of a lease;"
Section 9(1) provides:
"(1)Subject to subsection (2), a provision in a retail shop lease to the effect that the landlord or a person claiming through him is entitled to, or may require from the tenant
(a)key-money; or
(b)…
…"
Section 9 further provides that the amount paid may be recovered in a court of competent jurisdiction as a debt due.
Whether an identified provision in a lease is or is not key money must be determined by reference to all the facts: F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290 at par 72.
This component of the plaintiffs' claim appears to be dependent on a factual finding as pleaded in par 15 that in May 1999 after the execution of the first licence agreement, Foong Nominees and Han Investments made a verbal agreement in effect that in addition to the payment of the licence fee of $2,500 per week, Foong Nominees would pay an additional sum of $1,000 per week in case if the turnover of the café exceeded $25,000 per week.
As I have already pointed out, the evidence does not support this claim in fact. Neither Ms Foong nor Mr Han testified that the discussions about the cash payment took place after the first licence agreement was executed.
In any event, there was no evidence as to the market value of the licence to use the premises which might assist in determining whether the cash constituted a premium. I have found that the cash payment was not payable by reference to the turnover of the café. I have found that the first licence agreement was partly oral and partly in writing. I am unable to determine on the evidence why this was the case. In all the circumstances, I cannot therefore make a finding that the cash payment key money as defined in the RSA.

Was the cash paid to secure the assignment of the sublease?

The plaintiffs also claim in par 16.2 of the statement of claim that the cash payment constituted "a payment for the purpose of securing consent to the assignment of the sublease of the premises" and was therefore void under s 9 of the RSA.
Paragraph 16.2 of the statement of claim does not make sense. Paragraph 7 refers to the sub‑lease as being the sub‑lease which was executed on 17 July 2003. There is no evidence that the sub‑lease was even considered until it was suggested by Taylor Smart to Tan and Tan in their letter dated 25 June 2001. The sub‑lease was proposed because of perceived difficulties with the liquor licence. The assignment of the sub‑lease to the Som family arose only after Ms Foong had stopped making the cash payments, indicated that she wished to sell the business and after protracted negotiations relating to the eventual assignment of the licence which was agreed sometime in 2003. There is no evidence that it was in the contemplation of the parties when the agreement for the cash payment was made, that there would be a sub‑lease, let alone an assignment of it. Accordingly, it can hardly be claimed now that the cash payment agreement was made "for the purpose of securing consent to the assignment of the sub‑lease of the premises".

Breach by Foong Nominees

Given that I have decided that the agreement made in 1999 included the oral term that Foong Nominees pay the cash, and my decision that there was consideration for the cash and that the agreement was not void, I find that Foong Nominees has breached the first licence by not paying all the cash payments under the first licence.
However, notwithstanding the acknowledgment in the assignment of licence that Foong Nominees owed $50,000 in arrears, I find it more likely than not that the arrears were in the sum of $42,000 as evidenced by the correspondence between the parties' solicitors to which I have referred.
It is necessary to outline in some detail the negotiations about the licence fee in the second licence and for the assignment of the licence as this evidence impacts not only on that issue but also on this issue of how the mutual release clause came to be in the assignment of licence and why Ms Foong signed it.
Ms Foong testified that she approached Mr Tan and told him that she wanted to sell the business. She told Mr Tan about her knee condition and that she was in pain, unable to walk and that she was unable to continue paying the rent as there was no business. Ms Foong testified that Mr Tan initially told her that she did not have an interest to sell but that he would talk to Mr Han.
Ms Foong said that Mr Han came to the café and she told him she had a painful knee and showed him the x‑rays. She told Mr Han that she could not work, that she was getting old, the business was "not there" and she needed to sell. Mr Han said to leave the matter with him and he left.
Ms Foong said she initially had keyhole surgery which did not resolve the problem. In May 2004 she had a knee reconstruction. As to her recovery, Ms Foong was asked:
"After the surgery in hospital, how long was it before you were up and about, mobile, without any assistance? --- More than a year. One year. I was with crutch and probably after one year I slowly walk one step and start to walk."
The café opened seven days a week and traded from 10 am until 10 pm.
Ms Foong testified that at the café she was on her feet ten hours each day. She did not have any family members to help her. Her role at the café was not explored in great detail. She described herself as the "manager" of the café.
As I understand her evidence, it was that she had over‑sight of the staff but she did not take any part in operations of the café such as cooking, waiting tables or cleaning.
There were between 12 and 20 part‑time staff at the café.
Her son, John, worked at the café when it opened, and in 2003 worked part‑time when he wanted to.
Ms Foong testified that it was essential for her to be at the café.
Mr Som and his wife, Ms Seth, testified that one or both were at the café between 10 and 14 hours a day, seven days a week. It is clear that they ran the café as a family business with their children. On the other hand, the evidence is that Ms Foong appeared to run the café as a manager with employees fulfilling duties such as taking orders, waiting on customers, cooking and cleaning. Her evidence in this regard was very scant. I do not doubt that she worked long hours, seven days a week. Given the evidence of Ms Foong and Mr Som and Ms Seth, it appears that the café was the type of business where it was necessary to have a responsible person on site for all opening hours and for some time either side of opening hours. Understandably, the Som family were in a more favourable position as they ran the café as a family business and there were four of them available to cover a family member who might be absent for a particular reason.
Foong Nominees relies on the above outline of evidence in support of the claim that Han Investments engaged in unconscionable conduct in the signing of the assignment of lease.
Ms Foong was the sole director and shareholder of Foong Nominees at all relevant times. There was no cogent evidence that she could not have engaged a person to fulfil her role if she needed to take time off for medical treatment.
On Ms Foong's account, Mr Han offered to assist her financially and her response was: "So I say, 'It doesn't matter what you get, it doesn't matter because I got a lot of bill to pay' ".
The totality of her evidence is that she had also experienced a down turn in the business, had no family member to rely upon, she was "getting old" and could not "handle it anymore".
According to Mr Han, he told Ms Foong that "she could get out from the lease, not renew the option, if she want to, but she doesn't want to. She want to renew the lease". However, Foong Nominees exercised the option to renew the licence in February 2002 and Ms Foong continued to run the café. There is no evidence why Ms Foong chose to exercise the option to renew the licence.
I have outlined the evidence about the operations of the café as the plaintiffs claim of unconscionable conduct by Han Investments is based on its knowledge of Ms Foong's commitment to the café.
It would seem that from mid 2001, there were negotiations between Foong Nominees and Han Investments about the licence fee. A selection of correspondence between the parties’ solicitors was tendered. This is by no means complete and provides a sketchy account of the negotiations about the arrears of the licence fee, the licence fee in the second agreement and the assignment of the licence. Unfortunately, the oral evidence falls far short of completing the account.
Between around mid 2001 and 12 September 2002 when the second licence was signed, the focus of the negotiations appears to have been the amount of the licence fee for the five year period the subject of the option.
All negotiations appear to have been conducted between the respective lawyers.
It would seem from correspondence between the lawyers that Mr Han wanted a licence fee of $3,500 per week and Ms Foong was only prepared to pay $2,500 per week for the five year period. Ultimately, it was agreed that the licence fee would be $2,500 per week plus GST. This was a minor variation of the licence fee provided for in the first agreement where GST was included.
In my view, the appropriate way to characterise the second licence agreement is the exercise of an option with a variation in the licence fee. This was the intention of the parties. No witness explained why the second licence was drafted in its terms rather than a document which would refer to the exercise of the option and a variation of the licence fee.
However, some light on the issue emerges in a letter from Taylor Smart to Tan and Tan dated 25 June 2001 which proposed that:
"(i) the liquor licence with respect to the business be transferred to Foong Nominees;
(ii)there be a sub‑lease of the premises to Foong Nominees;
(iii)a new agreement be entered into for Foong Nominee's 'Lease' of the business."

A reason for drafting the second licence in its terms as a fresh agreement rather than as the exercise of an option may have been because the liquor licence had not been transferred to Foong Nominees. It is not clear from the evidence, but I infer from the correspondence between the parties' lawyers and the oral evidence, that as the liquor licence had not been transferred to Foong Nominees, there was a belief that this put Breslin, Mr Han and probably Ms Foong in jeopardy of breaching the relevant legislation. This was probably the reason for the sub‑lease and the assignment of the sub‑lease to the Som family.
During the course of the negotiations various proposals were put by each party. As previously mentioned, the evidence on this issue is not comprehensive.
By letter dated 15 February 2002 to Taylor Smart, Tan and Tan advised that "unless arrears of licence fees are paid, the franchise renewal will not be granted. The franchise fee arrears are in relation to the reduced franchise fees your client has been paying since the disputes arose" (P12). Mr Tan agreed that the reference to "franchise " fee should be read as "licence" fee.
Mr Han denied that he instructed Tan and Tan to send this letter in its terms. He said the use of the word "Franchise" was inappropriate. Further, he said that, in effect, he could not prevent the exercise of the option. In any event, Foong Nominees had already exercised the option on 1 February 2002.
Whatever the status of this letter, the ultimatum was not repeated in later correspondence.
There would appear to be various offers and counter offers to resolve the impasse. By letter dated 1 May 2002, Taylor Smart wrote to Tan and Tan proposing terms for a "new agreement" for the "lease of business and premises". The proposal included a deed signed by all parties releasing Ms Foong "from any liability which may exist for past rental payments". Further, on execution of the specified documents, Ms Foong:
"agrees to the release of $42,000 to [Han Investments]. These moneys are to come from the $50,000 held on trust by [Han Investments] as a deposit for the agreement. Accordingly, amendment also needs to be made to the Lease of Business and Premises Agreement altering the deposit amount from $50,000 to $8,000".
There is no evidence about this letter. However, it would seem to suggest that Ms Foong had instructed her solicitors that she was prepared to acknowledge a liability to pay arrears in the sum of $42,000. By facsimile dated 1 May 2002 following a telephone conversation (about which there is no evidence), Taylor Smart informed Tan and Tan that Ms Foong withdrew her offer to pay $42,000 to the defendant.
For reasons unknown, Taylor Smart then ceased to act for Ms Foong.
By letter to Ms Foong dated 26 June 2002, Tan and Tan included proposals that the defendant would sign a new licence agreement:
"for $2,500 plus GST per week for a period of five years; that the sum of $42,000 be released from trust to 'pay off' all arrears; that a deed releasing 'both parties from making claims regarding past licence fees which were disputed' ".
Ms Foong then engaged RM Legal as her solicitors. By letter dated 31 July 2002, RM Legal informed Tan and Tan that a new agreement was not required but that Ms Foong would agree to a variation "so that the GST is reimbursed upon the amount of the $2,500.00 licence fee" and that Han Investments would "waive any purported claim for $42,000".
In the end result the second licence was executed on 22 September 2002. The licence fee was agreed at $2,500 per week plus GST. The issue of the arrears had not been resolved.
The issue of the assignment of the licence then became the main focus of the negotiations.

The assignment of the licence

Notwithstanding the execution of the second agreement, Ms Foong still wished to sell the business.
Mr Han testified that he told Ms Foong that he would consent to Foong Nominees assigning the licence if she could find a suitable buyer. He did not want the licence assigned to someone who was not qualified to run a restaurant. He said in the middle of 2003 he met with Ms Foong and told her:
"If you agree to pay us the debt, the one you owing us, we prepared to find a buyer and we can do a change. She quite happy to do that at that time."
After negotiations were concluded with the Som family for the licence to be assigned to them, there were two meetings in Mr Tan's office. Present at each meeting were Mr Tan, Mr and Mrs Han, Ms Foong and one of her daughters and the Som family.
Mr Han testified that Ms Foong was "happy" with the arrangement that she repay the arrears with the bond and that the Som family pay her $50,000 for the business. He said that before the meeting he asked Mr Tan if he should reimburse the bond by cheque and have Ms Foong then repay the arrears. Mr Tan advised him that the "agreement" (presumably the assignment of lease) would be "fine".
After the first meeting, Mr Tan prepared the assignment of lease and the parties met again in his office to sign it. The sub‑lease was signed sometime later.
Ms Foong testified that Mr Tan told her that Mr Han would not consent to the assignment of the licence unless the $50,000 bond paid by Nicole Foong pursuant to the first licence was forfeited.
Ms Foong testified that she had to go to hospital to have her operation, she was unable to run the business, and agreed to forfeit the bond in order to secure Mr Han's agreement to the assignment of licence. Ms Foong testified that she told Mr Tan that she was being taken advantage of and that she signed the assignment of licence because she had no choice.
Mr Tan said that he was "most concerned" that the mutual release clause was in the assignment of lease and that "everybody understood it".
The issue for determination is why Ms Foong signed the assignment of licence which contained the mutual release clause. It is not clear whether Ms Foong received specific legal advice about the assignment of licence. However, as early as June 2002, she had made an offer through her solicitors that "arrears" of $42,000 be deducted from the bond. I infer that she would have received legal advice about this offer. Even if she disputed her liability to pay the claimed arrears, she was then prepared to come to a commercial resolution of the dispute.
In all the circumstances, I find that it was essentially a commercial decision to assign the licence, perhaps precipitated by Ms Foong's knee condition and perhaps by the on-going dispute about the arrears of the licence fees. However, I find that the knee problem was not the sole or even predominant reason for her decision to get out of the business. There was no evidence about the reason for exercising the option to renew. If she was in such a dire state, it is curious to say the least why Foong Nominees exercised the option to renew the licence. The only inference I can draw from this is Ms Foong wanted to gain some financial advantage by selling her interest in the business and that unless Foong Nominees exercised the option to renew, it would not have an interest to sell. The option was renewed notwithstanding the on going dispute about arrears of the licence fee. In my view, the exercise of the option was a purely commercial decision.
Doing the best that I can with the evidence, I find as follows. I have already found that the actual agreement between Han Investments and Foong Nominees was for a licence fee of $3,500 which was independent of turn over. Ms Foong admitted ceasing payment of the cash component of the licence fee in June 2001. Given that, Han Investments was entitled to refuse its consent for Foong Nominees to assign the licence as there were arrears of the [cash component] of the licence fee pursuant to cl 6.1 of the second licence.
It is my view that regardless of the merits of the dispute over the arrears of licence fee, Ms Foong was prepared to sign the assignment of lease containing the mutual release clause knowing the consequences, having received legal advice at least from June 2002 on the issue.
I am not satisfied on the balance of probabilities that Ms Foong's knee condition had any bearing on the refusal to give permission to assign the licence unless the arrears were paid.
I cannot see anything untoward in the conduct of Han Investments through the actions of either Mr Han or Mr Tan. Han Investments was clearly within its rights to refuse consent to assign the licence pursuant to cl 6.1 of the second licence. In all of the circumstance, I do not consider the refusal to consent to the assignment of licence unless the arrears were paid was unreasonable. Han Investments may have driven a hard bargain but it was entitled to do so given its legal right under the second licence.

Unconscionable conduct

Was the refusal of Han Investments to consent to the assignment of the licence unless the plaintiffs agreed to the mutual release clause unconscionable conduct?
The pleadings do not identify the remedy sought by the plaintiffs if the conduct were to be found unconscionable. The last thing that Ms Foong would want is for the assignment of licence to be set aside. It is not pleaded that the mutual release clause should be set aside. The pleadings simply make the claim that Han Investments' conduct was unconscionable.
Section 51AA TPA provides:
"(1)A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.
(2)…".

Unconscionable conduct: the law

For present purposes, the relevant case law on the scope of TPA s 51AA and what constitutes unconscionable conduct can be summarised by the common approach taken by the parties in ACCC v CG Berbatis Holdings Pty Ltd & Ors (2003) 197 ALR 153 (as approved as far as it went by the High Court) as outlined at page 171 as follows:
" …
(2)The reference in s 51AA to 'the unwritten law' includes a reference to the principles of equity as developed by Australian courts exercising equitable jurisdiction concerned with 'unconscionable' conduct and in particular (but not limited to) the principles stated in such decisions as Blomley v Ryan (1956) 99 CLR 362 (Blomley) and Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; 46 ALR 402 (Amadio), Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491 at 502 [23]; 169 ALR 324 at 334‑5. In accordance with such decisions, whatever else the section covers, it includes the case of a party to a contract who was in such a debilitated condition that there was not 'a reasonable degree of equality between the contracting parties', Longmate v Ledger (1860) 2 Giff 157 at 163; 66 ER 67 at 69 where 'the [party's] condition was sufficiently evident to those who were acting for the [other party] at the time to make it prima facie unfair for them to take his assent to the [impugned transaction]'. Blomley (1956) 99 CLR 362 at 428 per Kitto J. As was said in Evans v Llewellin (1787) 1 Cox 222 at 340; 29 ER 1191 at 1194 'though there was no actual fraud, it is something like fraud, for an undue advantage was taken of [the] situation'. Further, 'the principle applied is not one which extends sympathetic benevolence to a victim of undeserved misfortune; it is one which denies to those who act unconscientiously the fruits of their wrongdoings: Blomley (1956) 99 CLR 362 at 429.
(3)The factors relevant to determining whether the conduct of a party was unconscionable in the circumstances of a given case cannot be comprehensively catalogued. They may include the wealth or poverty of the party seeking relief, that party's means and access to independent assistance and advice, as well as the party's age, state of health, infirmity to body and mind, Blomley (1956) 99 CLR 362 at 405, 415. See also Amadio (1983) 151 CLR 447 at 474; 46 ALR 402 at 423, and also financial and other circumstantial pressures. Blomley (1956) 99 CLR 362 at 415. It is not enough that the weaker party has suffered a hard bargain. There needs to be some special disadvantage that renders the consequences of enforcing the parties' legal rights unfair to the point of offending conscience when all the circumstances are considered."

Unconscionable conduct: the evidence

The evidence relating to the consent or otherwise of Han Investments to the assignment of the licence is not particularly clear. The evidence is that Han Investments knew that Foong Nominees wished to assign the licence from as early as in or around June 2001. At one stage, Mr Han told Ms Foong that if she paid the arrears of the licence fee, he would agree to the assignment. In all of the circumstances, this was a reasonable position to adopt. The café was still turning over about $20,000 per week. Whilst Ms Foong operated the café, she was in a better position to pay the arrears. Although there is no direct evidence about Ms Foong's capacity to pay the arrears in the absence of the Som family buying the business, it is reasonable to infer that this was the case given that Ms Foong's evidence was that she had to sell her apartment to pay the cash payments.
It was Mr Han who located the Som family as potential assignees. He was at all times willing to agree to the assignment. No member of the Som family testified that the assignment was contingent on Ms Foong or Foong Nominees paying the arrears.
Mr Tan prepared the assignment of lease. It appears that it was Mr Tan's suggestion that the mutual release clause was inserted in the assignment of lease to secure the repayment of the arrears. Given Ms Foong's financial position as she communicated it to Mr Han, Mr Han would be rightly concerned about the assignment of the licence and the repayment of the arrears in the absence of some mechanism to secure repayment of the arrears.
The fact is that Mr Han was entirely within his rights under the second licence to refuse consent to the assignment given the arrears. In effect, the mutual release clause provided the mechanism for repayment of the arrears. By signing the assignment of lease, Ms Foong was released from her obligations under the second licence (which she wanted) and also repaid the arrears (which she owed). If it were so necessary for Ms Foong to extricate herself from the licence, she could have quit the premises after the first licence expired. Instead, she chose to exercise the option to renew.
There is no suggestion that Ms Foong did not understand the consequences of the mutual release clause. In fact, the evidence is to the contrary. There is no evidence that Ms Foong would otherwise offer to pay the arrears. In fact, apart from her offer through her solicitors in their letter dated 1 May 2002 (see above) she always denied any liability to pay the arrears.
The practical consequence of the plaintiffs’ contention is that Han Investments, having been requested to agree to something they were entitled to refuse, were acting in contravention of the TPA by imposing a condition on their agreement. The same sort of situation arose in Berbatis (supra), see Gleeson CJ at 155
It is not the situation that Ms Foong claims that there was a disabling circumstance which affected her judgment in her own best interests. She claims that Mr Han knew of her knee condition and her need for medical treatment and further knew that she had to assign the licence to receive the medical treatment. The burden is on Ms Foong first to establish this factual situation and then, if established, to go on to establish that it constituted unconscionable conduct.
I am not satisfied that Mr Han knew the exact nature of Ms Foong's medical condition or that she needed to assign the licence in order to receive it. Given that Ms Foong's evidence is that in June 2001 she considered that she would have to "sell the business", the exercise of the option to renew the licence flies in the face of that contention.
In all the circumstances, I am unable to find that Han Investments engaged in unconscionable conduct by Mr Han telling Ms Foong that he would not consent to the assignment of lease unless she agreed to the mutual release clause.

Summary of findings relating to the plaintiffs’ claim

I find that:
•The agreement relating to the first licence, and in particular the first licence fee, was partly oral and partly written. This agreement was made before the written first licence was signed. There was therefore consideration for the cash payment.
•The cash payment did not constitute key money pursuant to s 3 of the RSA or a payment for the purpose of securing consent to the assignment of the sublease of the premises.
•The first licence fee was not dependent on turnover and therefore not void pursuant to s 7 of the RSA.
•The bond was not consideration paid for the consent to the assignment of the sublease and therefore not void pursuant to s 9 of the RSA.
•Han Investments did not engage in unconscionable conduct in refusing to consent to the assignment of the licence.
I would therefore dismiss the plaintiffs’ claim for the reasons outlined above.

The counterclaim

Han Investments claim that Foong Nominees breached the covenants to repair outlined in the second licence (cl 4.3.1) and sub-lease (cl 2.5(a) and cl 2.7) as outlined above.
Mr Han did not inspect the café for the purposes of checking compliance with the relevant clauses of the second agreement and the sub‑lease. Mr Han testified that in 1997 when the café commenced operating, all equipment was new and the premises were in good condition. Ms Foong testified under cross‑examination, in effect, that as at 12 September 2002, all equipment was working properly, no painting was required and the premises were clean. It would seem that one or more members of the Som family complained about certain equipment or repair items when they took over the café in January 2004.
There is scant evidence of the condition of the premises at the commencement date of the second licence. Ms Foong said that everything in the café was clean, she had repainted the entire café when she initially took over, she had bought a new ice machine and coffee machine and when she vacated the premises in January 2004, everything was in good condition.

Condition of the premises

Following complaints by the Som family about the condition of the premises and equipment, Mr Han requested Mr Jennings, a shop fitter with the appropriate skill, knowledge and expertise, to inspect the premises and provide a quote on any necessary repair works either on equipment or as maintenance items. As far as Mr Jennings was concerned, the equipment had to be functional and to comply with operating guidelines of the Health Department and other statutory requirements. Mr Jennings said that at the beginning of each year his company would obtain the rates of certain independent contractors which would apply to sub-contracted work, for example, repairs to refrigeration equipment, painting, and replacement of items of equipment. He would measure, say, the ceiling area to be repainted and then apply the relevant subcontractor’s rate for that type of work and add on the profit margin for his company.
Mr Jennings provided a written quotation for the repairs dated 23 January 2004.
Mr Jennings was unable to recall the measurements made of various surfaces to be cleaned and/or repainted; how many smoke detectors or light globes needed to be replaced; how many pieces of equipment required repair or replacing; whether the quote for coordination of pest control was a quote given by his company or a subcontractor. In many other respects, Mr Jennings was unable to give details of the breakdown of costing for certain specific repairs, cleaning or painting. He said that the source material for the quotes was at his office. In this regard, Mr Jennings had been poorly prepared to give evidence.

In cross‑examination, the plaintiffs' counsel did not directly challenge Mr Jennings’ evidence as to his inspection of the premises and assessment of what needed to be done. Rather, he sought to demonstrate that specific items of repair or maintenance could not be given a precise costing.
Some of the items costed constituted an up-grade of existing facilities; for example, the installation of hands free taps rather then replacement with standard taps.
As I understand Mr Jennings' evidence, the quote given would have been subject to negotiation between Mr Han and himself. Mr Jennings testified that a customer might decide not to proceed with some maintenance items and/or decide not to, say, up grade a particular item of equipment. In this regard, I find that the quote given does necessarily represent the final cost to Mr Han of maintenance and repairs.
Mr Han never made a demand on Ms Foong to pay for the repairs or maintenance. The Som family replaced certain equipment and carried out some repairs. However, the evidence of Mr Som and Ms Sok is that they have never asked Mr Han to reimburse them for the moneys expended nor do they intend to do so and they have no intention of commencing legal proceedings to recover the moneys.
The evidence from Mr Som and his son, Saray Som, as to the cost of these was vague to say the least. It was unsupported by documentation save for a cheque butt which indicated that moneys had been paid for a dishwasher. However, there is no evidence as to the reason for this purchase and, more particularly, no evidence linking any fault to Ms Foong.
In this case, in my view, it was necessary for Mr Han to provide a detailed assessment and outline of the work and repairs required to the premises. There is no satisfactory evidence in this regard and certainly no evidence as to the exact cost of remedying the outstanding matters.
The conduct of the defendant's case in this regard is similar to the situation arising in Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd, unreported; SCt of WA; Library No 970604; 13 November 1997, where the Full Court quoted with approval the following dicta in Bonham-Carter v Hyde Park Hotel Ltd (1948) 64 TLR 177 at 178, per Lord Goddard CJ:
"Plaintiffs must understand the fact that if they bring action for damages it is for them to prove their damage: it is not enough to write down the particulars, and, so to speak, throw them at the head of the Court saying 'This is what I have lost; I ask you to give me these damages'. They have to prove it. The evidence in these cases with regard to damages is extremely unsatisfactory".
In my view, it was possible to ascertain with reasonable certainty, if not absolute certainty what items and areas of the premises required replacing and/or repairing and the cost of the specific items. The quotation does not fulfil this requirement in many respects.
First I shall deal with those parts of the quotation where, in my view, there is insufficient evidence to make a finding as to the reasonableness of the claim.
Under the heading of "Cleaning", Mr Jennings quotes:
"Cleaning all work surfaces being walls, floor, ceilings, furniture and fixtures as the premises is (sic) extremely dirty and would not meet health approval $4570".
Mr Jennings worked out this quote by reference to measured wall, floor and ceiling surfaces but was unable to give a breakdown of the specified areas as the relevant documentation was at his office. I am therefore not in a position to make an assessment as to whether the quotation is reasonable.
Under the heading "Maintenance: Builders Works", the quote states:
"Carry out maintenance on the following items, brick nib to front count, lower skirting to walls and areas of damage at table height, repaint all doors and frames, repainting of kitchen ceiling, replace broken drainage to kitchen area, replace broken tiles in kitchen area, replace broken door jams leading into kitchen area, replace exit door in kitchen area, replace smoke detectors (statutory requirement), and re-edge entire front counter wine rack due to damage and chipping - $10,500".
Again, Mr Jennings was unable to give a breakdown of the cost for each item. For example, he testified that he would not be able to engage a tiler for the small job of replacing a few broken tiles unless he paid the full day's rate of $700 which is what a tiler "would charge".
Under the heading "Maintenance: Equipment and Fixtures", specific items are listed. I shall list them and deal with the issue of whether Han Investments succeeds in its claim for the amount quoted:
"Replace tap-wear to existing toilets and kitchen areas being 7 sets (hands free and mixers) - $4,250."
Mr Jennings noted that the taps were leaking and loose and were not of a hands free style. There is no evidence that hands free taps are required in restaurants. There is no evidence that the leaking and loose taps could not be repaired. Accordingly, I would disallow this amount.
"Remove and replace burnt out ice machine at front counter - $3,950".
Mr Jennings noted that the ice machine was not in working condition. Ms Foong stated that she bought a new ice machine which was only about six months old when she left the café. The Som family replaced the ice machine when it broke down a couple of months after they took over the business. There was no explanation as to the cause of the breakdown and to whom the break down was attributable.
"Bench refrigeration – Clean condenser, replace compressor and lights - $2,350".
Mr Jennings noted that the condenser appeared not to have been cleaned, the compressor was no longer holding temperature as required by the Health Department and the lights on the unit were not operational and appeared to have had no maintenance.
"Remove and replace broken glass door to fridge, clean condenser and re-gas compressor – $1,850".
Mr Jennings noted that the refrigerator door was broken and required replacement and the refrigerator was not holding temperature. Mr Jennings believed that if the condenser were cleaned and the motor re‑gassed, the refrigerator would become functional. He noted that these items are usual maintenance items carried out on a yearly basis.
"Check all condensers and gas pressures on all remaining refrigeration equipment - $950".
On the issue of refrigeration, Mr Jennings testified that he would out‑source the refrigeration work. Accordingly, the amounts claimed in relation for repairs to the refrigeration works can only be estimates and not the actual costs which Mr Han would incur if the work were done.
"Maintenance to 2 group coffee machine - $750".
Mr Jennings noted that the unit did not appear to be in working condition, and considered that the boilerplate possibly required replacement. Again, this is an estimation of the cost of the work required without a precise diagnosis of the problem. In any event, Ms Sok testified that the coffee machine broke down after a couple of months as did a lot of equipment. Without a more detailed "diagnosis" of the fault and who caused it, I would disallow this item.
"Repair chest freezers – re-skin tops with stainless steel where damaged - $850".
Mr Jennings noted that the tops of the chest freezers required replacement as they were damaged and coming away from the existing tops, and would be a danger to staff using them. There is no evidence that the present tops to the chest freezers are made from stainless steel, and no evidence as to the cost of repairing the tops with a material which is not stainless steel. I would disallow this item.
"Check all electrical equipment for earth leakage and install RCD breakers as required - $1,650".
Mr Jennings noted that the electrical equipment appeared not to comply with current electrical regulations as RCD's were not present. However, he also testified that he would out-source the electrical work, and there was no evidence of the actual diagnosis of the problem and the actual cost involved in remedying it. I would therefore disallow this item.
"Replace hot water urns at the front counter $650".
Ms Foong said there was nothing wrong with the urns when she left the business. Ms Sok agreed. Mr Som testified that they were leaking and rusty. In the face of the conflicting evidence on this issue, I would disallow this claim.
"Co-ordinate pest control management for tenancy due to cockroaches being visible - $1,550".
There is no actual quotation from a pest control service and Mr Jennings' quote can only be an estimate. I would disallow on this basis.
"Replace all light globes as required - $480".
There is no evidence as to the number of light globes which required replacement. Mr Jennings testified that the usual practice is to replace all light globes whether or not they are working. In the absence of detailed evidence about the number of light globes requiring replacement (which is all that is required under the terms of the relevant repair covenants), I would disallow this item.
Mr Jennings has also claimed under the heading "Management and Administration" the following:
Project management costs - $5,800
Administration costs - $4,500
Mr Jennings testified as to these costs that they are based on labour rates and overheads of his company. The profit is built into the quotation. On equipment, the profit margin is usually between 20 and 25 per cent and on labour, it is up to 42 per cent.
Even though I would allow some items of repairs under the counterclaim, and even though Mr Jennings was, at least to some extent, able to justify the project management and administration costs, the costs claimed relate to the total project as contained in the quotation. In all of the circumstances, I am unable to calculate even a pro rata award in relation to this item, and would therefore disallow the total amount.

Allowable items

The only items which I find have been proved are as follows:
The removal and replacement of the light over the wok burner ‑ $450.
Replacement of filters to the existing exhaust canopy ‑ $900.
Removal and replacement of corroded wall shelving units ‑ $1200.
The evidence supported the condition of the items and the specific costs.
Therefore, I would uphold Han Investments' counterclaim in the sum of $2550.

Summary of decision

I would dismiss the plaintiffs' claim and up hold the counter claim of Han Investments in the sum of $2550.