H47 Pty Ltd v. Manelmi Pty Ltd
[2008] QDC 83
•21 April 2008
DISTRICT COURT OF QUEENSLAND
CITATION:
H47 Pty Ltd v Manelmi Pty Ltd [2008] QDC 83
PARTIES:
H47 PTY LTD AS TRUSTEE FOR THE H47 TRUST
Plaintiff
v
MANELMI PTY LTD AS TRUSTEE FOR THE MANGIA TRUST
Defendant
FILE NO:
307 of 2006
DIVISION:
Civil
PROCEEDING:
Trial
ORIGINATING COURT:
District Court
DELIVERED ON:
21 April 2008
DELIVERED AT:
Maroochydore
HEARING DATE:
27 February 2008
JUDGE:
K S Dodds, DCJ
ORDER:
1. I give judgment for the plaintiff against the defendant on the defendant’s counterclaim.
I give judgment for the plaintiff against the defendant for $102,663.98 together with interest at 9% on $5854.33 from 10 October 2006 on the plaintiff’s claim against the defendant.2.
CATCHWORDS:
TRADE PRACTICES – Misleading and Deceptive Conduct – representation with respect to future matter – whether contract of lease void
Trade Practices Act 1974 (Cth) s 51A, s 52, s 75B, s 87(2)(a)
COUNSEL:
A Collins for the plaintiff
M Ribeiro for the defendant company (self represented)
SOLICITORS:
Garland Waddington Solicitors & Notaries for the plaintiff
M Ribeiro for the defendant company (self represented)
This proceeding arises out of lease of shop premises on the ground floor in a multi-story development known as M1 located on Duporth Avenue, Maroochydore. Duporth Avenue for convenience may be regarded as travelling north south. It crosses Cornmeal Creek by bridge. The southern side of M1 has frontage to Cornmeal Creek. The eastern side has frontage to Duporth Avenue. Premises were available for lease on the ground floor of M1 along Cornmeal Creek and Duporth Avenue. The levels above ground floor level consisted of residential apartments, also available for lease.
On 24 October 2005 the defendant signed a lease for three years for 64m² of the ground floor of M1 fronting Duporth Avenue. It intended operating a shoe store “Contigo”. On 30 September 2006 it abandoned the premises. On 10 October 2006 the plaintiff terminated the lease. The plaintiff’s claim (being pursued) is for rent due and unpaid under the lease until the premises were re-let. It has abandoned other claims originally made.
The plaintiff is not the lessor which entered into the lease. That was a company Metro Maroochydore Pty Ltd (Metro). On 19 January 2006 Metro executed the lease. The commencement date of the lease is shown as 22 December 2005 which is the day according to the evidence of a director of the defendant, Mr Ribeiro, he was able to commence trading.
An agreement to lease had apparently earlier been executed by Metro and the Defendant. It was not before me. It appears it was probably executed sometime between 8 September 2005 and 24 October 2005.
The plaintiff became the registered proprietor of the land containing M1 on 17 February 2006. It appears both Metro and the plaintiff are part of what has been described as the Reed Property Group. But there is no contract of lease between the plaintiff and the defendant.
In the statement of claim, the plaintiff is described as the successor in title to Metro and the owner of the land upon which is M1. It claimed that on 19 January 2006, the defendant as lessee entered into the lease with the plaintiff as lessor. In the defence, this was denied because the defendant signed a lease on 24 October 2005 which provided that the lessor was Metro. In its reply and answer the plaintiff admitted that on 24 October 2005 the defendant entered into a lease which provided that the lessor was Metro and asserted that by reason of the plaintiff becoming the registered proprietor in fee simple of the land the plaintiff became the lessor and the defendant as lessee remained bound by the terms and conditions of the lease. This was denied by the defendant in its reply. It asserted it inaccurately described the legal consequences of the ownership of the fee simple.
This debate in the pleadings is a sterile one because the covenant to pay rent is enforceable by the plaintiff, the registered proprietor of the land as it touches and concerns the material property. As observed above, the plaintiff has abandoned the other claims in the statement of claim.
The defendant’s substantive defence relied upon the Trade Practices Act 1974 (the Act). It alleged that Metro, through one Hayley Donnelly, its duly authorised agent acting within her authority and by letter of 6 September 2005 to the defendant, engaged in misleading and deceptive conduct in reliance upon which the defendant executed the lease. It alleged it had thereby suffered loss and damage which it sought to set off to extinguish the plaintiff’s claim and by way of counterclaim sought an order under section 87 of the Act that the lease be avoided ab initio. It relied upon section 51A of the Act.
Section 51A if the Act provides:
51A Interpretation
(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.
The defendant gave evidence by its director Mr Ribeiro and called evidence from two witnesses. The two other witnesses were two other lessees who had apparently also abandoned their leases in M1. The evidence of these two witnesses added little; in the case of Mr Johanssen, his parents and his sister were the persons engaged in negotiations prior to entering into a lease and anything he could say about what they told him about negotiations was hearsay and was objected to; the other, Ms Reedman-Hawes, was not present during any occasion when according to Mr Ribeiro, he had had representations made to him by Ms Donnelly and/or another person apparently in the employ of Reed Property Group, Brendan Neil. (There is no reference to Mr Neil in the defence).
In July 2005 Mr Ribeiro on behalf of the defendant attended a presentation on behalf of M1. At that time, construction had not finished. The Reed Group were in the process of marketing the apartments and the ground floor commercial premises. Ms Donnelly was an employee of Savilles, who were the agents engaged to find lessees for the ground floor commercial premises. I find that the presentation focused on what the Reed Group envisaged as an ideal mix of commercial uses, food and dining venues on the creek side and traditional office/retail on the Duporth Avenue side, on a grand opening and a successful vibrant precinct. The presentation vision portrayed a lively successful precinct.
According to Mr Ribeiro he and his wife had a shoe store at Noosa which they had operated for some years. He saw an advertisement for M1 and contacted Ms Donnelly. He was told of a presentation to be held on 15 July 2005. Other interested persons were at the presentation. He was told only one 64m² store was still available on Duporth Avenue. (This is the store he leased). When he enquired how the centre was progressing he was told it was going very well. There were a lot of interested parties. The lessor was looking to acquire tenants for the Cornmeal Creek side. Gloria Jeans and Simply Pies had leased. The lessor was in discussions with a pasta bar for the large corner (Duporth Avenue and Cornmeal Creek) area and various other food providers were interested. He was concerned to ensure the centre was open for trade by the beginning of December so he could capitalise on Christmas trade. He was lead to believe that it would be. There was to be a grand opening. He signed the lease on 24 October 2005 and proceeded to arrange for a shop fitter. Because of the time of year and the short notice he had to pay a premium for a shop fitter. As things eventuated delay by the lessor resulted in handover of the premises for fit out occurring on 21 November 2005 rather than 9 November 2005 when it should have and the store was not able to open until 22 December 2005 rather than 7 December 2005. At time of opening there were only 3 stores (including Contigo) opened on Duporth Avenue and one on Cornmeal Creek from out of a potential fourteen. Contractors were still working on the building. There was no grand opening. (This finally occurred in April 2006). There was not a great deal of customer traffic. There was not the expected heavy Christmas trade. In the middle of January 2006 he and other tenants met with a representative of the lessor. Agreement was reached the lessor would provide a three month rent free period. Trade remained poor. He met again with a representative of the lessor. The lessor was prepared to provide another month rent free. He requested a year which the lessor was not prepared to agree to.
I accept Mr Ribeiro’s evidence that M1 did not perform as he had expected and hoped.
According to Ms Donnelly at the time of the presentation, on the Duporth Avenue side only number 2 (the premises leased by the defendant) and the corner premises had not had a lease instructed for them; no leases had been entered into at that time. On the Cornmeal Creek side, Gloria Jeans and Simply Pies had signed letters of intent to proceed with a lease, and leases had been instructed. Ultimately, Gloria Jeans signed a lease and Simply Pies did not. Regarding the corner lot, there were people interested, but no lease had been instructed. (As I understand it, a lease is “instructed” on a site when there is an offer to lease by a potential lessee and the lessor instructs the lessee is acceptable).
I accept Ms Donnelly’s evidence so far as it goes. I accept Mr Ribeiro’s evidence that he believed based on what Ms Donnelly said that Gloria Jeans and Simply Pies has entered into leases. I find that the distinction between an executed lease and a letter of intent to take a lease and a lease instructed was not the subject of a clear distinction during the presentation and discussion which followed.
The evidence establishes the facts pleaded in paragraphs 22 and 23(a)(vi) of the defence. It established that on the occasion of the presentation all the lots on Duporth Avenue except number 2 and the larger corner lot were the subject of letters of intent to take a lease and leases had been instructed, that the ABC Shop was at the presentation and was interested, that a pasta bar/restaurant was interested in the corner premises, a gelati bar, a Gloria Jeans and a Simply Pies were interested in taking premises on the Cornmeal Creek frontage, the latter two had signed letters of intent to lease and leases had been instructed.
I am not persuaded the matters the matter pleaded in paragraph 23(b)(iv), nor the implied representations pleaded in paragraphs 24 and 26 are proven. No doubt the conclusions pleaded in paragraphs 24(a) and (b) could be drawn, but the application of care and common sense to the content of discussion and the occasion would ordinarily call for the reservation of those sorts of conclusions. I find that Mr Ribeiro was keen to establish a Contigo store in M1. He believed the location would generate significant trade. He believed that the commercial premises fronting Duporth Avenue and those fronting Cornmeal Creek would be leased and his store would be one of many operating premises. No doubt he was influenced by the presentation he had attended. But M1 was a premises still under construction. It had no history of trading as a residential and commercial precinct so that predictions about its future operation were in truth guesswork or a gamble.
Paragraph 25 of the defence alleged a representation to the defendant that the plaintiff would ensure the defendant could be trading at M1 by 7 December 2005. In his evidence, Mr Ribeiro made a similar assertion. Support for this lay in a letter from solicitors for the Reed Property Group to the defendant’s solicitors dated 6 September 2005 regarding the terms of the lease to be entered into in which they wrote “our client is agreeable to ensure that your client begins trading by 7 December 2005. As our client is granting a four weeks’ fit out period our client will endeavour to handover the premises to your client for fit out by no later than 9 November 2005.”
It seems to me that the only statements attributable to Metro which may be regarded as representations with respect to future matters were that:
§ M1 would be a vibrant and successful centre;
§ The defendant could be trading at M1 by 7 December 2005.
Mr Ribeiro was an experienced businessman. He had solicitors acting for him during negotiations for the lease. He executed, as did his solicitor, a legal advice certificate required under section 22D of the Retail Shop Leases Act 1994 indicating that advice had been given to the defendant about the legal meaning and effect of certain rights and obligations applying under the proposed lease including the consequences of the lessee breaching lease conditions and the advisability of obtaining additional professional assistance and advice with respect to but not limited to specified matters one of which was financial advice about the operation of the retail business intended to be carried on. It also made clear the solicitor had not expressed an opinion or provided any advice on the viability of the transaction being undertaken. Additionally, the lease which the plaintiff executed contained a clause (Clause 18.2) by which the defendant acknowledged it had not been induced to enter into the lease by any representation (verbal or otherwise) made by or on behalf of Metro which was not set out in the lease. Moreover by letter of 18 August 2005 the defendant’s solicitors wrote to the solicitors for the Reed Property Group indicating the defendant wished to propose amendments to the agreement for lease and lease. The letter indicated that prior to proposing the amendments, the defendant required a sunset clause in the agreement for lease, namely that the premises be open for trade no later than 7 December 2005 “fit out would have to occur prior to this date. If this date is not achieved our client must have the right to terminate the lease. Should no sunset clause be inserted into the agreement for lease then our client will not be proceeding with this matter any further.” This was followed up with another letter dated 5 September 2005 indicating that unless a response was received in the very near future, the defendant would withdraw. Then by letter of 6 September 2005 solicitors for the Reed Property Group responded agreeing “to ensure that your client begins trading by 7 December 2005. As our client is granting a four week fit out to your client, our client will endeavour to hand over the premises to your client for fit out by no later than 9 November 2005.” It proposed an amendment to the definition of “commencement date” in the agreement for lease to read “commencement date means the expiry of the fit out period provided that if the tenant commences trading from the premises earlier than the expiration of the fit out period then the date of commencement will be the commencement date”, the insertion of a definition of sunset clause “ to mean 9 November 2005” and the insertion of a new clause 8.5
“8.5 Termination
(a) If the practical completion certificate is not issued by the sunset date, then either party may terminate this document by written notice to the other party;
(b) If neither party terminates this document under clause 8.5(a) within 5 business days after the sunset date, then the parties are deemed to have waived any right to terminate this document under clause 8.5(a)”.
This was confirmed as acceptable by the defendant’s solicitor by letter dated 8 September 2005.
As to the first of the abovementioned representations with respect to future matters, I do not think that it amounts to conduct that is misleading or deceptive or likely to mislead or deceive in terms of section 52 of the Act. A “presentation” regarding a premises like M1 in the process of construction is hardly likely to describe itself as a boring and unsuccessful centre. In reality, talk about it being vibrant and successful amounts to no more than an expression of the owner’s intention and hopes to be received as such by listeners who will make their own evaluation either with or without expert advice.
As to the second of the representations, in light of the evidence, it is to be taken as misleading. However the defendant had negotiated a term in the agreement for lease and lease enabling withdrawal in the event of delay. I infer that the practical completion certificate did not issue by 9 November 2005. It must have been reasonably apparent when fit out could not commence by 9 November 2005 (the sunset date) that opening on 7 December would not occur. In his evidence, Mr Ribeiro said he became aware that opening would not be possible on 7 December 2005 but because he understood he would be able to open on 15 December 2005, he continued on. He was finally able to open on 22 December 2005. He did not withdraw. He continued, later negotiating rent free periods. A factor influencing his decisions according to Mr Ribeiro was the expense already incurred for shop fit out. No doubt that was a consideration. However the defendant had the option to terminate the agreement for lease which it chose not to exercise in circumstances when it could have done so and if it wished, sought to explore whether it could recover money wasted.
In its defence the defendant pleaded that because of the contravention of section 52 of the Act it had suffered loss and damage. The amount thereof may be recovered by action against the contravener “or against any person involved in the contravention”.[1] Section 75B of the Act enlarges the body of persons who may be regarded as “involved in the contravention” as that term is used in Part VI of the Act.[2] However evidence to show the plaintiff company was a person referred to in section 82 was lacking despite it appearing that both it and Metro were a part of the Reed Property Group. Apart from that there was no detail in the evidence about damage suffered by the defendant. Further and better particulars of loss and damage referred to in the defence were not pursued in the evidence.
[1] Section 82 of the Act.
[2] Containing sections 82 and 87.
The defendant’s counterclaim sought an order under section 87 of the Act that the lease be voided ab initio. Such an order is contemplated by section 87(2)(a) of the Act where loss or damage is suffered or is likely to be suffered by conduct of another in contravention of section 52 of the Act and may be made against “the person who engaged in the conduct or a person who was involved in the contravention”. Once again there was no sufficient evidence to show the plaintiff company was a person referred to in section 87(2)(a) of the Act. However Metro as the original lessor may be so regarded. In that circumstance the whole or a part of the contract or lease may be declared to be void and to be void from the outset “or at all times on or after such date before the date on which the order is made as specified in the order”.
In considering whether any order pursuant to section 87(2)(a) should be made because of what I have found was the misleading conduct of Metro, the defendant’s decision to continue with the lease and later to take advantage of four months rent free trading thereunder are relevant matters. In the final analysis I do not think it has been shown that an order should be made voiding the lease from the outset or at all. Counsel for the plaintiff informed me that damages pursuant to the lease beyond the commencement of rental by the new tenant was not being sought despite that rent to be paid by the new tenant is less than that due under the lease.
A failure on the part of the plaintiff to mitigate the loss consequent upon termination of the lease was pleaded in paragraph 14(b) of the defence. The period of time which elapsed before a new tenant was found was lengthy. One may speculate about the reasons. The only evidence touching the issue came from Ms Donnelly in Exhibit 3. She deposed that despite endeavours to find a tenant by advertising in and around M1 and direct contact with potential tenants, the new tenant with rental to commence on 1 April 2008 was only recently secured.
I give judgment for the plaintiff against the defendant on the defendant’s counterclaim.
I give judgment for the plaintiff against the defendant for $102,663.98 together with interest at 9% on $5854.33 from 10 October 2006 on the plaintiff’s claim against the defendant.
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