Luu & Anor v Renevier

[1989] FCA 518

g L.ccL..

JUDGMENT NO. S..! ........

C A T C H W O R D S

TRADE PRACTICES - misleading and deceptive conduct - deed of acknowledgment that no representations or statements made by landlord - whether prospective tenant involved in misleading conduct in executing deed of acknowledgment.

Trade Practices Act 1974 s.52

Waltip Pty Ltd & Anor
v. Capalaba Park Shopping Centre Pty Ltd

Qld G9 of 1987

PINCUS .J.
BRISBANE

31 AUGUST 1989

IN THE FEDERAL COURT OF AUSTRALIA	1
QUEENSLAND DISTRICT REGISTRY	1 QLD G9 of 1987
GENERAL DIVISION	)

BETWEEN: WALTIP PTY LTD

First Applicant

AND: ANTHONY MICHAEL GEANEY

Second Applicant

AND: CAPALABA PARK SHOPPING CENTRE PTY LTD

Respondent

AND: CAPALABA PARK SHOPPING CENTRE PTY LTD

Cross Claimant

AND: WALTIP PTY LTD

First Cross Respondent

AND: ANTHONY MICHAEL GEANEY

Second Cross Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:  PINCUS J .

DATE OF ORDER:	31 AUGUST 1989
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.    the respondent pay to the first applicant, Waltip Pty Ltd, the sum of $93,600;

2.    the respondent pay the applicants' costs of and incidental to the proceedings, to be taxed.

NOTE :  Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QLD G9 of 1987

GENERAL DIVISION 1

BETWEEN: WALTIP PTY LTD

First Applicant

AND: ANTHONY MICHAEL GEANEY

Second Applicant

AND: CAPALABA PARK SHOPPING CENTRE PTY LTD

Respondent

AND: CAPALABA PARK SHOPPING CENTRE PTY LTD

Cross Claimant

AND: WALTIP PTY LTD

First Cross Respondent

AND: ANTHONY MICHAEL GEANEY

Second Cross Respondent

PINCUS J . 31 AUGUST 1989

REASONS FOR JUDGMENT

This is an application for relief under s.52 of the Trade Practices Act 1974 by a tenant which claims that it was induced to take a lease in a shopping centre by misleading conduct on the part of the landlord's agent. The tenant's ambition was to build up a chain of franchised fast food shops selling, among other things, donuts. The first applicant ("Waltip") was introduced to the possibility of taking space in the respondentrs shopping centre at Capalaba, Queensland by Mr M.L.A. Greer, then an employee of Jones Lang Wootton. After some inconsequential discussion concerning the possibility of the applicants taking a different shop, Greer discussed with representatives of Waltip in February 1986 a site close to a New World supermarket in the Capalaba Park Shopping Centre; those representatives were the second applicant Mr Geaney, and one Mahoney. Greer showed Geaney and Maloney a plan purporting to set out the layout proposed in the area. It was to be part of a new construction including an area formerly occupied by a large Norman Ross shop.

It is common ground that at the time Geaney and Maloney were shown the plan, the respondent landlord had decided not to follow the layout shown on the plan, but to alter it in a respect which was plainly significant. This was that at the junction of two malls, where the shop offered to the applicants was to be located, a substantial kiosk was intended to be placed. For some reason which is not explained, Greer was not told that and so did not tell Geaney and naloney. The plan was of importance, as being the source of the applicants1 information as to the layout of the	area of the shopping centre in question. Care should have been	taken to ensure that it was not misleading.
It was suggested by Mr Muir Q.C., who led Mr Tait for the respondent, that the omission was not of any moment. Having had the advantage of an inspection of the site and of seeing the excellent photographs which were tendered, I have come to a firm conclusion that the presence of the particular kiosk makes a

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considerable difference. It is of such size and'so situated that it tends to block off the view of shop 113 (that which was offered to Waltip) quite substantially as one walks along the main mall towards the major shop at its end. Walking in the opposite direction, there is no obstruction to view; but, on the other hand, shop 113 is not so prominent, looked at from that angle. Its real attraction from the point of view of a fast food tenant is its excellent visibility to customers moving towards the Coles New World shop. That advantage is largely nullified by the kiosk.

In addition, as Messrs Lynch and Blow, the respondent's

architects, went to the trouble to suggest in a letter written to the respondent, the space allowed between the kiosk and the front of shop 113 was rather skimpy.

Waltip accepted the landlord's terms, and signed a lease, on 8 April 1986. On 25 Hay 1986, a shop fitter was sent to the site on behalf of Waltip and he reported that the kiosk was erected and operating. That was the first the applicants knew of it. Geaney immediately flew from Rockhampton, where his home is, to Brisbane, to investigate the matter and he complained to Mr

John Mickles, the manager of the Shopping Centre. There was also

discussion with a Mr Poppleston, an employee of the respondent, on
the same subject.

It was submitted on behalf of the respondent that as a result of this discussion, the applicants became content with the situation. I do not believe that to be so. The evidence shows that Geaney and Maloney were still concerned about the effect of

the kiosk. The applicants' case was that having signed a lease of 8 ~ p r i l 1986, Waltip, by its directors, thought it had to proceed, having no choice.

I am satisfied that, while to a degree reassured by

contrary opinions expressed by Mickles and Poppleaton, Waltip's
directors were still rather concerned about the suitability of the
site. I find that their concern was reflected in a decision not
to pursue the project vigorously; the shop was not fitted out
until August. Mickles had to threaten to sue, in order to cause
waltip to fit the shop out.

Waltip had intended to obtain a franchisee for the shop

but was unable to do so. It opened on 15 August 1986 with Waltip

as shopkeeper (a series of managers was engaged) and closed on 31 October 1986, having been very unsuccessful. The respondent accepted a surrender of waltipls lease because another similar tenant was obtained who also was, on the evidence, fairly unsuccessful, although the business was carried on for nearly two years.

I find that Waltip was induced to enter into a lease by the presentation of the incomplete proposal plan (which omitted the kiosk) and that had Waltip known that the placement of a large kiosk, considerably obstructing public view of its shop frontage as well as access to the shop, was proposed, it would have found a tenancy of shop 113 much less attractive. There was opinion evidence in favour of the view that the presence of the kiosk should not have been regarded as detrimental and might even have been a boost. In my view that evidence was false. I would accept that the presence of a kiosk in the middle of a very broad mall might not adversely affect, and might even enhance, the business of nearby traders, but the kiosk here in question was so placed as seriously to cut off the view of and easy access to shop 113.

The remaining issues in the case are in two categories. Firstly, there is the question whether certain special defences are made out and, secondly, the question of the damage caused by the misleading conduct.

Special Defences

Although the lease which was executed is not in evidence, it is common ground that it contained a clause set out in the defence, under which the respondent had the right to erect, remove and re-erect kiosks in common areas. Mr Muir argued that it should have made no difference to Waltip whether the plan showed a kiosk or not, since Waltip should have considered the proposal to take a lease of shop 113 on the basis that a kiosk

might be erected at any time. While the argument has some logical	force, the evidence shows that it is rather theoretical than
practical. Although there have been kiosks in this (quite large) shopping centre for many years, none has ever been moved from one place to another; one has been removed. There is no evidence that any kiosk has ever been placed in a mall other than as part of the original construction of the shops in that area. It is true that the kiosk here in question (Kg) was not in place when the Norman

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Ross shop operated, but that kiosk and shop 113 were part of an entire reconstruction of the area in which they are located.

As a practical matter, Waltip had little or nothing to fear from the clause in the lease with respect to kiosks. Further, it seems to me improbable that had shop 113 been established without any kiosk shielding it from the public gaze and been successful, the respondent would have erected a kiosk in the position of Kg, placing the business of shop 113 in jeopardy.

Looking at the matter more widely, the kiosk clause in the lease cannot be a defence because waltip was in fact induced by the misleading statement constituted by presentation of an incomplete plan. The mere possibility that the respondent might have placed a kiosk in the position complained of at some later time cannot negate the inducement.

The second and more important special defence is based upon a deed of acknowledgment which was executed by the parties and became exhibit 6. It is convenient to summarise the effect of the deed. rather than to set it out at length. Clause 1 provides

relation to a proposed lease, which have induced or influenced the	for the specification of statements, made to the tenant in
tenant to decide to enter into the lease. In the space provided, Waltip caused to be written "No such statements have been taken into account in any manner whatsoever by me". Clause 2 says that, except as set out in clause 1, the tenant represents, warrants and undertakes that no statements have been taken into account by him in deciding to enter into the lease and clause 3 particularises
that further, by listing ten different sorts of $tatements which have not been made. Clause 4 says that if the tenant seeks to contend that it has any rights for relief in respect of any alleged statements, that can have no effect on the tenant's obligations under the lease. Under clause 5, the tenant agrees to
indemnify the respondent against any claim which the tenant might make in respect of any statement or statements as defined in the deed.
The defence seeks to take advantage of the deed in two ways. Firstly, it says that the deed is a pure defence - that
Waltip has waived any relevant right or is estopped. Secondly, the respondent sets up a cross claim, saying that it was induced by the representations in the deed to grant the lease.
It is clear that an ordinary exclusion clause cannot operate as a defence to a s.52 claim. In Clark Equipment Australia Ltd v. Covcot Pty Ltd (1987) 71 A.L.R. 367, in dealing with the effect of an exemption clause in a contract, Sheppard J. said:

'But the remedy conferred by 9.52 of the Trade

Practices Act will not be lost, whatever the parties may provide in their agreement. If a vendor of goods has engaged in misleading or deceptive conduct, the law makes him accountable for loss and damage suffered as a result of his unlawful conduct. That conduct will usually have been committed, as in this case, prior to the signing of any contract. If, as a result of the conduct, a person is induced to enter into a contract and suffers loss, an action to recover it lies. The terms of the contract are irrelevant" (p.371).

Jackson J. agreed with the reasons of Sheppard J. iin the relevant respect (at p.375).

The same question was discussed in Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 A.L.R. 83 at pp.97-99. There Lockhart J., in the Full Court, dealt with the effect of two contractual conditions as answers to a claim based on 6.52 of the Trade Practices Act; the other judges agreed with his reasons on this point. The first, special condition 6, was expressed as an acknowledgment by a purchaser that it accepted the premises in their then condition and had not relied on any representation, and that "the only statements, representations and warranties on behalf of the vendor are such as are expressly set out in this agreement". As to that, Lockhart J. held in effect that it was inapplicable, as a matter of construction. Then special condition 7 purported to exclude promises, representations and the like. That was also held inapplicable, as a matter of construction. However, as to both, Lockhart J. went on to say that it did not matter whether the impugned conduct with which the case was concerned fell within them or not. His Honour remarked

that "exclusion clauses ... cannot operate to defeat claims under	6.52". He said that it "may be" that such clauses are ineffective
because they cannot break the nexus between the conduct in contravention of 6.52 and the making of the agreement in issue. He also pointed out that an exclusion clause could not defeat a claim based on fraudulent conduct and added:

"There are wider objections to allowing effect to such clauses. Otherwise the operation of the Act, a public policy statute, could be ousted by private agreement. . . . i t would be contrary to public

policy for special conditions such as 'those with which this contract was concerned to deny or prohibit a statutory remedy for offending conduct under the Act".

These cases were referred to in the Full Court in Keen Mar Corporation Pty Ltd v. Labrador Park Shopping Centre Pty Ltd, 7 March 1989, noted in (1989) ATPR (Digest) 46-048. he majority said (p.53,146):

"It is not in doubt that an exemption clause in a lease cannot be relied by the lessor in answer to a cause of action based upon s.52 or s.53A of the Trade Practices Act."

The majority took the view, however, that an exemption agreement may be relevant in determining whether the trial judge should believe an applicant who says he is misled. Here, the deed seems to me to give the respondent no assistance on this point. I have, of course, in determining the issue of credit, taken into account my personal impressions of the witnesses, as judges always do.

These authorities plainly enough dispose of the deed, so

far as it is relied on as a defence. But what of the cross claim?

It could happen that a person who wishes to sell property suspects that his agent has misrepresented it in a particular way and inquires of a prospective purchaser on that subject. Suppose that the purchaser deliberately lies and claims that the agent has told him nothing, and the vendor agrees to sell the property on the basis of that assertion. That would give the

vendor a cause of action in deceit and would, uider the general law, presumably prevent the purchaser from undoing the transaction on the basis of misrepresentation by the agent. Of course, a deliberate lie on such a point would be improbable. Where the prospective tenant is a company acting in the course of its business, in an appropriate case the landlord may possibly have a cause of action under 6.52 of the Trade Practices Act, on the basis of the tenant's non-fraudulent but misleading conduct, consisting in statements as to what was relied on by the tenant in agreeing to take a lease. The question would be whether such a suit was contrary to public policy: cf. Johnson v. Moreton (1980) A.C. 37 at 58 to 62, 6 8 . But the respondent, in order to succeed in its cross-claim, must show that it was truly and not merely theoretically misled. Here the evidence was that the agent was supplied with an incomplete plan of what was proposed; the respondent did not trouble to tell the agent of its intention to build a kiosk. The respondent could not have thought that its misleading plan had been corrected by any statement made by the agent, since the agent was not possessed of any information whatever about the kiosk. There is nothing to suggest that the respondent believed that the agent had failed to use the	misleading plan provided by it and intended for use. In short,	despite the general negation (by clause 2 of the deed) of any
inducement, I cannot find that the respondent was led to believe that the misleading plan remained unused. Further, the respondent must have assumed the plan would induce the applicants, in the sense that the applicants would proceed on the basis that the plan represented the layout of the area in question.
It does not appear to me that a deed 'of this sort is likely to be of any practical use to a respondent in a case like the present, when it must be obvious to the respondent that a misleading document provided by it has been used in negotiation.
A second answer made by Nr Dutney, for the applicants, to the cross claim based on the deed is to point out that both the deed and the lease were executed by the respondent long after the dispute about the kiosk had arisen. On the evidence, including the correspondence, it is clear that Waltip complained in May 1986 of having been misled with respect to the kiosk. It is true that after making its complaint concerning the kiosk, Waltip decided to proceed with the venture (believing itself bound to do so by its execution of the lease agreement) but that could not have made the respondent think that Waltip had not been misled by the plan. I could not find that the respondent was induced to execute the lease by the content of clause 2 of the deed. It executed the deed in full knowledge of Waltip's complaint of having been misled.
I should add that it was not contended at the trial, nor pleaded, that the lease became effective at any time prior to
execution by the respondent - for example by estoppel.
Damages
Waltip carried on business in the shop from 15 August to 31 October 1986. The lease was later surrendered and a new tenant

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found. As I have mentioned, Waltip's claim does not include any sum said to represent the difference between the value of the lease and the price paid; the claim is purely for "consequential loss".

Waltip's case is that it intended to install a franchisee in the shop, but was unable to do so because of the presence of the kiosk. It claims profit it would have allegedly made if everything had gone according to plan, as well as other losses.

There are two possible ways of assessing damages for

misleading conduct. The more orthodox is to compare Waltip's
financial position with that which it would have enjoyed had it
not been misled; ordinarily, one assumes that if Waltip had not
been misled it would not have entered into the transaction at all.
The less orthodox method is to endeavour to place Waltip in the
financial position it would have enjoyed if the statements made
had been true.

An illustration of the difference between the results of the two methods is as follows. A business is sold and	representations are made as to its characteristics, which turn out
to be false; assume that, as can easily occur in practice, the business was, although misrepresented, still worth every cent paid for it. Then, prima facie, the applicant receives no damages, but if the second method of assessement just referred to is used, the applicant may be given damages based on the difference between the profit which has been derived from the business and that which would have been derived if representations had been true.
In some instances it is necessary to depart from the more orthodox method of assessment, to avoid giving damages quite out of proportion to the injury which has been done; an example appears to be the Henjo case, referred to above. aut it can never
be right to give an applicant the benefit, as to different aspects of his claim, of both methods of assessment. Here, if Waltip had never been induced by misleading conduct to enter into the transaction in question, it would not have made any profit out of it. The case is not one in which there is any necessity to use the less orthodox method of assessment and the claim for the profits which supposedly would have been made if the plan complained of had been correct must fail.
A second claim which must be rejected is for loss of reputation. The basis of this claim as presented was shadowy, but it is enough to say that there is nothing which gives it any rational support.
The third category of claim is simply the financial outlay made by Waltip and direct financial loss to it. The sums involved are conveniently to be found in exhibit 12, a letter from Nr B. Sully dated 22 February 1989. The letter includes a component of $30,700, principally made up of trading losses said to total $17,883. The figure comes from a trading account which is in evidence, and the other items, although not admitted, were not seriously challenged. The last and most difficult element in

Waltipls claim for damages is a sum of $67,585 claimed to be due in respect of leasing charges.

It is common ground that Waltip leased equipment to be used in the shop and that, when it decided that the shop could not be made profitable, it removed the equipment and sold it. The total amount of its liability under the lease was $88,587.16, of which it paid $5,161.33; the latter sum, however, is one of the items in the expenditure of $30,700 referred to above.

Waltiprs case was that it sold some of the items to the franchisee of a store at Coffs Harbour, New South Wales; credit is given for their price.

The first point to consider is the general recoverability of the sum in question. Mr Muir submitted, for the respondent, that the business was not given a chance but was simply let go. The argument gains some force from the fact mentioned above, that another tenant was found who was willing to take the shop over despite the presence of the kiosk. But the respondent's difficulty is that, as I have found, Waltip was in

judgment was that the best thing to do was to put an end to its

fact misled, in a way which was important to it; its commercial

trading losses by surrendering the lease, thereby saddling itself with a substantial loss on the equipment which had been installed. I have, in the end, been unable to resist the conclusion that the respondent must accept responsibility for the losses in respect of the equipment. It does not appear to me possible to say that Waltipfs decision to give the shop up was unreasonable, and I think it is sufficiently traceable to the wrongful act I have found to have occurred. I must confess to some feeling of unease at the result, but it appears to me to follow from the findings I have made. The price the respondent has to pay for its misleading conduct seems a heavy one. That is because that conduct, in the unfortunate circumstances of the case, happened to bring in its train a heavy loss.

I have therefore concluded that, as a general

proposition, Waltip is entitled to be compensated for the losses
it sustained in respect of the leased equipment.

Mr Tait, for the respondent, raised three points about

the claim just discussed.

1. Coffs Harbour

Waltip's case was that it was obliged to give a credit of $15,840 in respect of some of the leased equipment, which was sold to its franchisee at Coffs Harbour, New South Wales. Mr Tait, for the respondent, said the figure should be $18,687.

The $15,840 was a calculated figure, being the difference between $23,000 worth of plant and equipment sold and the alleged value of equipment which did not come from Capalaba. The alternative propounded by Mr Tait is based on a valuation and Mr Dutney submitted that I should prefer the "actual sale price" to the valuation.

In my opinion, Mr Tait's contention is to be preferred. The figure of $15,840 is not, in reality, "an actual sale price", but is derived from a valuation.

2.  Proportion of finance charges representing Coffs Harbour

transfer

The argument M Tait advanced under this heading was that, since Waltip had reduced its loss on lease equipment by selling some to Coffs Harbour, there should be a proportionate reduction in the amount of lease commitment claimed.

The complication surrounding this argument is that the Coffs Harbour purchaser did not in fact pay the sum in question. Security was taken and eventually waltip finished up in legal proceedings relating to the matter.

That particular loss, on one view of the matter, should not be laid at the door of the respondent, because it was not its fault that the money was not paid by the franchisee at Coffs Harbour. However, looking at the issue more broadly, I can see no

notionally received; in fact, it continued to be responsible for	justification for crediting Waltip with any sum beyond the price
and to pay the sums due under the leaqe.
3. General reduction
The third point Mr Tait took was simply that the equipment lease should have been paid out, putting an end to the
financiervs charges. The argument gains some s)trength from the fact that the interest component of those charges seems to be rather high, but I do not think this is sufficient reason to reduce Waltip's claim. As Mr Dutney pointed out, if Waltip had paid the equipment lease out, it would have had instead an interest claim in this Court.
In the result then, the sum of $67,585.83 claimed under this heading suffers a reduction of $2,847, bringing the claim to $64,738.83. Adding that figure to the sum of $30,700 mentioned above, the damages become $95,438.83.
That must be further reduced on account of the small counter-claim which was proved, in the sum of $1,876.40, the net
damages being $93,562.43; 1 will round them up to $93,600.
Having considered the question of interest, I do not propose to allow any.
In the result, there will be judgment for the first applicant, Waltip Pty Ltd. against the respondent in the sum of $93,600 with costs. I cmrtify that this and the mixtman preceding pages

mr. a true copy of the reasons for judgment herain

of Him Honour Hr. Justic. Pinsum.

Assoelate

bated 31 f MV

Counsel for the applicants:	Hr P.R. Dutney
Solicitors for the applicants:	Rogers Matheson h Clark
Counsel for the respondent:	Hr J.D.H. Muir Q.C. and Mr D.H. Tait
Solicitors for the respondent8	Flower and Hart