Mooloolaba Slipways Pty Ltd v Cashlaw Pty Ltd

[2011] QSC 236

SUPREME COURT OF QUEENSLAND

CITATION:

Mooloolaba Slipways Pty Ltd & anor v Cashlaw Pty Ltd & ors [2011] QSC 236

PARTIES:

MOOLOOLABA SLIPWAYS PTY LTD AS TRUSTEE FOR THE SLIPWAYS TRUST
ACN 180 975 916
(first plaintiff)
MOOLOOLABA ENGINEERING SERVICES PTY LTD AS TRUSTEE FOR THE ENGINEERING TRUST
ACN 121 643 598
(second plaintiff)
v
CASHLAW PTY LTD
ACN 101 574 008
(first defendant)
LESLIE BROWN
(second defendant)
ANTHONY GUY BROWN
(third defendant)
LESLIE ROY APPS

(first defendant by counterclaim)

FILE NO:

SC No 9311 of 2009

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

12 August 2011

DELIVERED AT:

Brisbane

HEARING DATES:

16 , 17, 18, 19, 20, 23, 24, 25 and 26 May 2011

JUDGE:

Atkinson J

ORDERS:

1.   The orders will be:

a)   The defendants pay the first plaintiff the sum of $704,656 less rent and outgoings owing to the first defendant by the first plaintiff, together with interest at 5 per cent per annum on the net amount of $637,406 less outstanding rent and outgoings.

b)     The defendants pay the second plaintiff the sum of $1,081,264.

2.   I shall hear submissions as to the calculation of the amount to be awarded under paragraph 1 (a) and as to costs.

CATCHWORDS:

TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION  LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION – STATEMENTS AS TO FUTURE MATTERS AND PROMISES – where the first plaintiff entered into a sublease with the first defendant for slipway premises located on the Mooloolah River – where the defendants made representations that they would repair and make various improvements to the slipway premises – where in reliance on those representations the plaintiffs were induced to enter into the lease, occupy the premises and  commence business  – whether the representations were in fact made

TORTS – NEGLIGENCE – ESSENTIALS OF ACTION FOR NEGLIGENCE – WHERE ECONOMIC OR FINANCIAL LOSS – CARELESS ADVICE, STATEMENTS AND NON-DISCLOSURE –  GENERALLY – where, in reliance on the defendants’ misrepresentations, the plaintiffs incurred expenditure in performing capital works to the site and sustained losses in operating the slipway and engineering business – where the defendants alleged the plaintiffs’ loss and damage should be assessed on a much narrower basis – whether the plaintiffs were entitled to damages – on what basis the damages should be calculated

DAMAGES – GENERAL PRINCIPLES – MITIGATION OF DAMAGES – PLAINTIFF’S DUTY TO MITIGATE – where the defendants failed to carry out the works the subject of the representations – where the plaintiffs endeavoured to come to some kind of commercial arrangement – where the plaintiffs sought a developer interested in buying the site – where the plaintiffs proposed the development of a boat stacker on the site – whether the plaintiffs are entitled to recover their losses in pursuing their attempts to mitigate their loss

LANDLORD AND TENANT – LEASES AND TENANCY AGREEMENTS – CONSENT OF THIRD PARTIES – CONSENT OF MINISTER OF CROWN – where the sublease required the Minister’s approval pursuant to the Land Act 1994 (Qld) – where the defendants never obtained the plaintiffs’ consent to any amendments to the sublease – whether the sublease was valid

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – JURISDICTION AND GENERALLY – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – AMENDMENT – where on the morning of the sixth day of the trial the defendants made an application for leave to amend the defence – whether leave should be granted

Civil Liability Act 2003 (Qld), s 30
Evidence Act 1977 (Qld), s 92
Land Act 1994 (Qld), s 332
Property Law Act1974 (Qld), s 129

Trade Practices Act 1974 (Cth), s 51A, s 52, s 75B, s 82, s 87CB

Ace Property Holdings Pty Ltd v Australian Postal Corp [2010] QCA 55, cited

Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424, cited
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, cited

Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, applied
Browne v Dunn (1893) 6 R (HL) 67, cited
Bull v Attorney-General for New South Wales (1913) 17 CLR 370, cited

Chan v Cresdon Pty Ltd (1989) 168 CLR 242, cited

Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32, cited
Donoghue v Stevenson [1932] AC 562, cited
Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450, cited
Fortuna Seafoods Pty Ltd as trustee for The Rowley Family Trust v The Ship “Eternal Wind” [2005] QCA 405, cited
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, cited
ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248, cited
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, cited
Palmdale Insurance Limited v Sprenger [1988] 1 Qd R 414, followed
Perre v Apand (1999) 198 CLR 180, applied
Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322, applied
Sutherland Shire Council v Heyman (1985) 157 CLR 424, cited
Tweed Motors (Qld) Pty Ltd v Moran Motors Pty Ltd, Unreported, Supreme Court of Queensland, Wanstall J, 8 June 1964, cited
Tweed Motors (Qld) Pty Ltd v Moran Motors Pty Ltd (1965) 39 ALJR 279, cited

Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15, cited

COUNSEL:

C C Heyworth-Smith for the plaintiffs and first defendant by counterclaim

R A Perry SC for the defendants

SOLICITORS:

Schultz Toomey O’Brien Lawyers for the plaintiffs and first defendant by counterclaim

Barclay Beirne Lawyers for the defendants

1. Two brothers, Leslie Roy Apps, commonly known as Les Apps, who is also the first defendant by counterclaim, and Barry Apps, became the directors of the plaintiff companies, Mooloolaba Slipways Pty Ltd ACN 180 975 916, which was trustee for the Slipways Trust (“Mooloolaba Slipways”), and Mooloolaba Engineering Services Pty Ltd ACN 121 643 598 as trustee for the Engineering Trust (“Mooloolaba Engineering”).  Both companies carried on business on part of Lot W on SP 143293, County of Canning in the Parish of Mooloolah bearing title reference 40033760 situated at 10 Parkyn Parade, Mooloolaba (“the slipway”) from September 2006 to February 2010.  Mooloolaba Slipways carried on the business of an operator of the slipway and Mooloolaba Engineering carried on the business of an engineering firm at the same premises. 

1. The first defendant, Cashlaw Pty Ltd ACN 101 574 008 (“Cashlaw”), was the lessee of land which included the slipway pursuant to a lease entered into with the Department of Transport.  From 20 May 1985 to 1 April 2002, Ernest Leslie Brown, the second defendant, commonly known as Les Brown, was a director of the first defendant, Cashlaw.  Since 14 April 2009 Les Brown’s son, the third defendant, Anthony Guy Brown, has been the director of the first defendant.  Both Les Brown and his son, Anthony Brown, had control over Cashlaw at all times relevant to this action.

1. Les Apps was an experienced businessman who operated a business as an exporter of spanner crabs.  His business was called Crabpak Australia conducted by the company Crabpak Holdings Pty Ltd (“Crabpak”).  Crabpak operated on the river front near the mouth of the Mooloolah River at Parkyn Parade, Mooloolaba on the Sunshine Coast next door to another business, DeBrett Seafood.  The leaseholder of the land on which DeBrett Seafood is situated is Cashlaw.  The leaseholder of the land on which Crabpak was situated is Tabuka Pty Ltd (“Tabuka”), another company controlled by Les Brown.  The business Crabpak was sold to CEAS Pty Ltd in March 2007.

1. Les Apps gave his evidence candidly.  He sometimes made mistakes as to dates and such like but no more than might be expected by a truthful witness.  Barry Apps is a more practical man less used to expressing his views in sophisticated terms.  As he said, his brother was the academic one and he was more “nuts and bolts”.  He struck me as very honest and a person who preferred to avoid conflict.  His answers in cross-examination were, however, not very useful.  He tended to be agreeable and therefore often agreed to propositions put to him which on further examination it was clear that he did not unequivocally adopt.  As a result I found his answers to non-leading questions more reliable.  Except where indicated I have found the evidence of Les Apps and Barry Apps referred to in these reasons as honestly given and reliable.

1. Les Apps was told about the property into which Crabpak moved by his friend Robert Phillips, a solicitor.  Mr Phillips is a long standing friend of Les Apps of about 35 years and was the best man at his wedding.  Les Apps knew that he acted as a solicitor with the firm Klooger Phillips Lawyers for Mr Brown.  Les Apps moved into the Crabpak premises in about mid 2006.  At that time the slipway had been shut down for about six months.  It had previously been operated by Phillip Ashworth and his father for Les Brown.

1. Les and Barry Apps had been the directors of a company which had run a slipway at Flying Fish Point near Innisfail which was managed by Barry Apps.  Barry Apps was the operations manager for a number of prawn trawlers owned by that company and the slipway.  From 2000 he worked as maintenance manager for 4 Seas Pty Ltd, a company involved in long line fishing for tuna whose premises were near the slipway at Mooloolaba.  He was aware that the slipway had become vacant in early 2006.  It had been closed down due to a serious accident so that workplace health and safety issues could be addressed.  According to Barry Apps, Les Brown often asked Barry Apps if he was interested in taking on the slipway.  Les Brown said that Barry Apps told him on several occasions that “they” were interested in it.

1. Les Apps became aware in the latter part of 2006 that Les Brown had spoken to a number of people about leasing the slipway. One of those was Douglas Cuthbert who, together with his wife, operated a slipway at Toorbul. Another was Michael Rider, managing director of Suncoast Marine Pty Ltd (“Suncoast Marine”). Mr Rider was unavailable to give evidence in person because he was at sea off the coast of Thailand at the time of the trial. His evidence was admitted under s 92 of the Evidence Act 1977 (Qld). Mr Rider advised Les Brown that he was not interested in Mr Brown’s proposal that Mr Rider operate the slipway for Les Brown for a share of the profits, but would rather require a lease of at least five years with an option. Les Brown and Mr Rider discussed the state of the building and Les Brown said that he “would fix the slipway up to comply with Workplace Health and Safety requirements.” Mr Rider’s evidence was that Les Brown indicated that an area in the water near the slipway would be made available to tie up boats. However Les Brown also told Mr Rider that plans had been drawn up for a boat stacker, but he did not know whether that would receive council approval. This was apparently confirmed by Les Brown’s evidence in cross-examination that he had written to Queensland Transport prior to the Apps taking on the lease enquiring about the proposal of redeveloping the area and putting in a boat stacker. Les Brown did not reply to a letter from Suncoast Marine dated 1 July 2006 containing a proposal to lease the slipway at Mooloolaba.

1. Les Brown approached Barry Apps and then later Les Apps.  There were a number of discussions between Les Apps and Les Brown about the slipway.  The occurrence of and the contents of those conversations were contentious.  Evidence was given about them by Les Apps, Barry Apps and Shane Miller for the plaintiffs and Les Brown and Anthony Brown for the defendants.  The plaintiffs’ version was also supported to some extent by the fact that in September – October 2006 the Apps told Steve Maiden, whom they subsequently employed as slipway manager, about the repairs Les Brown had said he would undertake.  Mr Maiden was informed by Barry Apps in late 2006 that the landlord had agreed to fix the wharf and the building and generally bring the slipway site up to a standard suitable to enable government contracts to be secured.

1. It is necessary to make a general observation about Les Brown’s evidence.  He is not a young man but has a very sharp mind.  He was capable of tailoring his evidence to suit his case and clearly did so on a number of occasions.  His reliability was of course thereby undermined.  He also appeared to be a person who was easily angered and expressed his anger forcefully.  His son, Anthony Brown, appeared to be trying to be more candid in his evidence.  Unfortunately his credibility was compromised by a letter to Les Brown from Klooger Phillips dated 24 August 2009 which enclosed a draft letter to the plaintiffs’ solicitors saying:

“Please carefully read each of the items and comments contained in the letter to ensure they are accurate and can be substantiated from your records or recollection of events.  It is essential that Mooloolaba Slipways Pty Ltd is not in a position to prove that the comments are incorrect, as this would indicate that your recollection or records are unreliable in the eyes of the Court.

You may care to review the contents of the letter with Anthony to ensure that the comments are accurate.

Please advise any amendments required.”

1. Les Brown denied that they colluded in their evidence but agreed that he showed the letter and attached draft letter to his son, Anthony.  Mr Phillips from Klooger Phillips agreed in cross-examination that he asked his client, Les Brown, to get together with Anthony to go over together what their recollections were to make sure they had a consistent story.  That is of course not an acceptable instruction for a solicitor to give and inevitably undermined Anthony Brown’s capacity to independently corroborate evidence given by his father.

Description of the slipway

1. The slipway consists of a large industrial building with two jetties jutting out into the river.  Between the two jetties are rails on the riverbed which extend along the riverbed about six metres further than the jetties and which go up into a dry dock on the slipway where ships can be built and repaired.  The two jetties were about the same length as each other.  The eastern jetty was often referred to as Wharf C and the western jetty as Wharf D.  The area of water between the eastern jetty and the next property to the east was referred to as the “sick bay area” where boats could be moored in order to be repaired whilst still in the water.  Within the slipway building there were a number of areas including an engineering area, fitting room, other work areas and an office.

1. Les Brown gave evidence that Cashlaw commenced operation of the slipway from about 1985 to 1986.  He said that Anthony Brown leased the slipway from 1998 to 2003.  Anthony Brown operated the slipway under the name “Mooloolaba Slipways”.  Peter Ashworth managed the slipway during that time.  Then from 2003 to 2006, Peter Ashworth and his son, Phillip Ashworth, leased the property.  Anthony Brown gave evidence that he managed the slipway for seven years from 1998 to 2005 when his company was fined because of a serious workplace accident.  Les Brown asserted in cross-examination that he had never had any conversations with the Ashworths about doing repairs or improvements to the premises.  That evidence was directly contradicted by evidence contained in an affidavit sworn by Les Brown on 7 May 2008 in an action which Cashlaw took in the District Court against Ashworth Investments (Qld) Pty Ltd, where he deposed that following delivery of a draft lease to Phillip Ashworth in or about February 2004, “further oral correspondence was entered into between [Les Brown] and Phillip Ashworth and Peter Ashworth as regards the terms and conditions of the Lease relating to, in particular, to [sic] the repair of improvements on the land on which the slipway was conducted.”  There can be no doubt that all relevant parties were aware of the state of poor repair of the slipway in 2006.

First Representations

1. On the plaintiffs’ case, representations were made by Les Brown which induced Mooloolaba Slipways to enter into a lease with Cashlaw, occupy the premises and commence business and induced Mooloolaba Engineering to occupy part of the premises and commence business.  Some of those conversations took place in the tank room at Crabpak.  Some of that conversation took place in the presence of Shane Miller, who was the tank room manager at Crabpak. 

1. In one conversation, Les Brown said to Les Apps that he was still trying to get Les Apps and Barry Apps interested in taking on the slipway.  Les Apps said to Les Brown that there was a major problem with the “sick bay area”.  Les Apps also told Les Brown that the wharf adjacent to what should have been the sick bay area was in a poor state of repair and that the area adjacent to Wharf C needed extensive dredging.  Les Brown said he would dredge that with his old excavator called a “gradall”.

1. Les Apps’ memory of what Les Brown said was in language which he found difficult and embarrassing to use in court but was as follows:

“I’ll fucking dredge the silt out of the river using my excavator, and under cover of darkness I will disburse it into the fucking run out tide, so hopefully it flows down the river and ends up against that fucking Tony Pinzone’s wharf.”

1. Shane Miller (who was not employed by Les Apps after he sold Crabpak in 2007) recalled being present for two conversations between Les Brown and Les Apps at the Crabpak premises.  He stepped away when they were having their first conversation and while he overheard parts of it, he did not concern himself with what was being said.  On the second occasion he heard Les Brown say that he would repair what has been referred to in these reasons as Wharf C and dredge out the sick bay at night on the outgoing tide using his old excavator.

1. That conversation was particularly memorable for Les Apps and Shane Miller because of the likely effect on Crabpak if Les Brown did the dredging in that way.   Crabpak had constructed large tanks for the storage of live spanner crabs for export.  Those tanks were supplied with water from the river on the incoming tide.  The concern expressed by Les Apps and Shane Miller was that if Les Brown excavated the sick bay in the way he suggested it might cause sediment to build up underneath the tank room.  Shane Miller thought that Les Brown would do the dredging but not in the way he said he would because it would be “illegal and silly”.

1. Les Brown’s version of the conversations was rather different, although he agreed that he had two conversations with Les Apps at the Crabpak premises.  He said that on the first occasion he said to Les Apps that Barry Apps had told him to see Les Apps about the slipway because Barry Apps was interested in taking it on.  Les Brown said he asked Les Apps if he was interested and he said he had no interest.  Les Brown said a week or ten days later he again went to see Les Apps to see if he was interested and Les Apps again said he was not interested.

1. Les Brown then invited Les Apps to come up and have a look at the slipway before making a final decision.  He denied that there was any conversation about the sick bay or the need for it to be dredged.  He said that the only other person present was some distance away (either six, 10 or 25 metres according to his evidence) and obviously out of earshot.

1. Les Brown vehemently denied saying anything about dredging, although in a long non-responsive answer in cross-examination he revealed that he had previously used his old gradall to scoop out from the riverbed under cover of darkness “because Tony Pinzone is an irate little fellow and he would have went crook about doing it … .”  Both the contents of his answer and the manner in which he gave it suggested the truthfulness of Les Apps’ version of what Les Brown said.

1. Later during cross-examination he denied he said he would use his old excavator to dredge the river because “it only reached about – be lucky to reach down to the water, go in the water above five feet, I’d say, never reach, never reach anywhere near it.”  This was of course inconsistent with the answer referred to in the previous paragraph.

1. I am satisfied on the balance of probabilities that the version given by Les Apps of these two conversations is the more accurate.  Les Brown wanted to have Les Apps and Barry Apps take over the lease of the slipway.  As he himself said, they were already tenants through Crabpak and he knew them.  They were not interested and needed persuasion because of the poor state of the facility.  He told Les Apps that he would repair Wharf C and dredge the sick bay and how he would do it.  That conversation was overheard and remembered by Shane Miller.  Les Brown’s evidence as to the conversations he had with Les Apps at the Crabpak premises was not given truthfully.

Second representations

1. In August 2006 Les Brown arranged a meeting with Barry Apps and Les Apps, for the purpose, to use Les Apps’ words, “to see if they could have one last crack at talking us into taking on the slipway.”  Les Apps said that up until then they had indicated they were not interested.  Those present at the meeting were Les Brown, his son Anthony Brown, Barry Apps and Les Apps.  There are different versions of precisely where the conversation took place and what was said.

1. According to both Les Apps and Barry Apps, the conversation took place while they were standing on Wharf D.  Barry Apps said they gathered there because from there they could see the slipway and the buildings.  From Wharf D they could observe the appearance of Wharf C which had a “wave like appearance”.  That was because some of the posts that held up the structure had sunk and it was in a poor state of repair.  From that position they could also see the sick bay.  Les Apps said there was no water in the sick bay at low tide and “minimal water” at high tide.  He said the building itself was in an overall poor state of repair: there were holes in the roof, the steel structure had rusted and it was in a general state of disrepair.  He said he and his brother had discussions about what needed to be done in order to make a business conducted on the slipway viable.  He thought that Wharf C would have to be repaired, the area adjacent to it would have to dredged out and the building itself “would have to be brought up to an appropriate level of repair” to meet applicable building codes and EPA requirements.  The problems with water and power supply would have to be attended to.

1. Barry Apps said he raised with Les Brown the condition of the building and the overall dilapidation of the wharves and their adjacent mooring.  The wharf beside the sick bay was in an unsafe condition.  He said they told Les Brown that unless those things were looked at and could be addressed the Apps were not interested in taking on the slipway.  Barry Apps said that Les Brown then said without hesitation, “Yes, look, don’t you worry about bloody things like that.”  He told them he would sort it out.  He said he would fix the wharves and dredge the sick bay area so they could moor vessels there.  When Barry Apps spoke to Les Brown about the situation with the wharves and the need for dredging he said “Don’t you bloody – you know – you fellas – don’t you – I’ve got this in control.  I’m – I’m going to do it.  I’ll assist youse.  I’ll do what I can for youse in this area.”

1. Barry Apps said that the building was in a run-down condition: roof structures had rusted away, the main frame holding up the main roof had rusted out, there were holes in the roof, the doors and windows had broken out, the foundation work around the building was badly rusted, the timber work was infested with termites and broken through on the walkways and the workshop areas were “very grubby”.  Les Brown described in graphic detail how he would dredge out the sick bay and Barry Apps said to him the other things that he mentioned would have to be attended to including repairs of the building and the fixing of the power and water problems.  Barry Apps said they needed to be able to complete all types of work related to the marine industry at the slipway including, most importantly, government contractual work particularly defence work for the navy or local government fisheries work. He said that Les Brown and Anthony Brown said there would be no problem attending to those matters.

1. Les Apps told Les Brown and Anthony Brown that they did not have an interest in proceeding.  Les Brown then said, “Well, what would it take to make it work?”  Les Apps said a range of things would need to be done.  He said that they would only be interested if they could get certification to attract government marine type work.  Les Apps explained in his evidence that they would not have taken on the slipway just to work on fishing boats because most fishermen were struggling to pay their bills.  Government work usually meant both better profit margins and security of payment.

1. He went through with the Browns the points that would have to be addressed one by one.  He said that Wharf C would have to be fixed and the area adjacent to it dredged, the water and power issues would have to be fixed, the building would have to be brought up to an appropriate standard and any issues with EPA would have to be addressed.

1. Les Brown then said to Les Apps, “Well, what –what – what fuck – what fuck have I got to – what do you fucking want?  What do you want?”  Les Apps replied, “Those issues would have to be addressed.  We would need a 15 year lease for security.  To get the sort of work that we think would be necessary to make this viable, we’d have to spend a lot of money on equipment, engineering equipment.”  He said there was a general discussion about the terms of the lease and Les Apps said they would need some type of assistance for the first six months and it was agreed that rent would start when the work was completed.  Rent would be graduated so that they would not be paying the full rent of $10,000 per month until after six months.  Barry Apps said that there was a “comedy of errors” as Les Brown and Anthony Brown sought a calculator as they could not work it out on their fingers.

1. Les Apps said that Les Brown said, “Okay.  I’ll fucking do all those things.  What, do you want to take it or not?”  Les Apps then asked his brother Barry if he wanted to take it on and Barry said, “If Les Brown supports us and does all the things we’ve just mentioned, yes.”  Barry Apps said he took Les Brown to be a man of his word “on the basis that he would do those undertakings”.  They shook hands on it and left the premises.  Barry Apps said that it was the representation by Les Brown that the works would be done that led to his agreeing to enter into the premises and the sublease.

1. At that time, some repair works were being done to trusses on the roof by people employed by Les Brown.  While the Apps were moving in to the slipway some of the rusted purlins and supports on the walls were patched by Les Brown’s employees.  Les Brown gave evidence that he had about four employees from his transport division replacing or sandblasting purlins.  Some of those patches which were inserted, however, soon broke away.  Les Brown said he assessed what work had to be undertaken, “Just by eyesight, just by going around and looking at the place… .”  He said that when the repairs were concluded, it was “quite workable”.  He said by way of explanation, “It’s only a slipway … It’s purely a rough workplace and it’s very old.”  He agreed that Wharf C was in “very bad” condition.  He also volunteered that the supports for Wharf D were deteriorating.  The only part of the evidence of Les Apps put to him with which he agreed was that he did say to the Apps something like, “What would it take to get you to take it on?”

1. Later in his evidence, Les Brown talked about the extensive repair works done by him after the Ashworths left.  It was clear, however, that more needed to be done and he promised the Apps that the various repairs necessary would be properly carried out.  However, that did not happen.

1. Apart from the repairs which were to be effected by Cashlaw, the 15 year lease was important to Les Apps because it gave Mooloolaba Slipways security of tenure as well as a valuable asset.

1. Les Brown’s version of the meeting was that they started just outside the slipway office and then walked down to the slipway.  He said the Apps made no effort to inspect anything and they walked back between the two engineers’ shops.  Anthony Brown gave evidence that the discussion took place on the empty slipway.  He said they had earlier walked over to the woodworking section where the lathe would be placed.  Les Brown said that Barry Apps said “all of a sudden”, “You know, we could build our crab boats here” and took off into the engineering shop.  He said that Les Apps asked what concessions he would offer and they discussed reduced rental for six months.  He said that two or three days later, Les Apps told him that would take on the slipway.

1. Les Brown said that there was no discussion about dredging or repairs to Wharf C.  With regard to repairs to the building, he told them that he had not yet finished the repairs to the building but that it would be finished in a week or so or that “we still had at least another week’s work to do.”  He then said, somewhat inconsistently with that evidence, that there was no discussion that day about the state of repair of the slipway building.  He said there was, “No mention of the building whatsoever.”

1. Anthony Brown gave evidence that Barry Apps discussed the safety problems relating to the workplace accident where a man had fallen from scaffolding and the expense involved in erecting scaffolding, netting to deal with overspray, the size of the cradles and his desire to build spanner crab boats.  He said his father said to the Apps, “You better bloody make your mind up because other people are interested.”  His evidence did not support the Apps’ case as to the representations being made, nor did it support Les Brown’s version that the lease would be on an “as-is, where-is” basis.  He was careful to say on at least two occasions in his evidence as to whether or not various representations were made, “Not while I was there.”  However he was present while the representations were made by his father on this occasion and generally affirmed what his father was saying.

1. Les Brown said that there was no agreement on that day but that Les Apps came to see him about two or three days later and said that they would take the lease.  Les Brown said in evidence that he told Les Apps that the rent after the initial six month period would have to be $10,000 a month and, “The conditions then will be, you know, as you’d expect the slipway – as-is, where-is, and this is where you’re going to carry on with this lease if we go ahead with it.”  During cross-examination, he asserted that he “forgot” to say in examination-in-chief that his statement that the lease of the slipway would be on the basis of “as-is, where-is” was made not just when Les Apps came to see him two or three days after the meeting at the slipway between Les and Barry Apps and Les and Anthony Brown, but also during the initial meeting at the slipway between those four when the rental was discussed.  This amendment of his evidence was unconvincing.  Mr Perry SC had given Les Brown every opportunity to give that evidence in examination-in-chief through open and sometimes, leading questions.  It appears that the reason Les Brown “forgot” to give that evidence was because it was not true.

1. For the reasons given, I accept the evidence given by Les Apps and Barry Apps as to the representations made at the slipway and their reliance on them.

Third representations

1. Les Apps then organised a meeting between himself, Les Brown and Steve Davis, who was then the owner of DeBrett Seafoods, at the coffee shop in that area about a week after the meeting on Wharf D.  Les Apps wanted Mr Davis to know precisely what was going on, particularly as Mr Davis had 15 boats in his fleet and therefore was likely to be a client of the slipway.  Les Apps asked Les Brown to repeat in Mr Davis’s presence what he had undertaken to do and he did so.  Les Brown said, “I understand what Les [Apps] is trying to do. We are going to support him.” 

1. Mr Davis was a director of Tasmanian Bluefin Pty Ltd which operated a fishing fleet out of Mooloolaba, from premises close to the slipway at 10 Parkyn Parade, Mooloolaba.  He gave evidence as to the conversation with Les Brown and Les Apps at that meeting.  Mr Davis recalled that Les Brown told Les Apps that he would help him out and would dredge out the side of the slipway (by which he meant the sick bay area) and Les Apps said that if the site were improved he could probably make it pay with navy boats and boats of that kind. Les Brown said he would make the slipway better and deeper and put concrete in the sick bay.  He said he would “fix it all up”.  There were discussions about the power to the site being inadequate and unreliable and Mr Brown said he would fix it.

1. Les Brown denied that this conversation took place.  He said that Mr Davis was one of the people he approached about taking on the slipway but Mr Davis was not interested.  He did concede that he had a conversation over coffee with Les Apps and Mr Davis; he also conceded that the Apps’ taking a lease over the slipway could have been mentioned but he said it was just a social gathering where they were “yakking about other things.”  Interestingly Les Brown did concede, when asked if he said words to the effect that Les and Barry Apps would have his support at the slipway, “That could have been their interpretation.  Any of our clients we support them anywhere we can.”  Otherwise he said the version given by Les Apps and Mr Davis was “lies”, “rubbish” and “a cock and bull story.”

1. A submission was made on behalf of the defendants that I should disregard Mr Davis’s evidence because of his animus against Les Brown.  He appeared to dislike and not to trust Les Brown by the time he gave his evidence.  But his evidence did not appear to be tainted by his opinion of Les Brown which, after I reviewed the evidence, appeared not to be without justification.

1. I conclude that the evidence given by Les Apps and Mr Davis is more likely to be accurate and reliable than that given by Les Brown.

1. Shortly after the Apps moved into the slipway, Les Brown told Mr Davis that he was going to get his old excavator and dredge out the area.  Mr Davis said that from his observations none of the work promised by Les Brown was ever done.  As a result, it was often difficult to get his fishing boats on the slip as they were large vessels which could not go on to the slip unless the tide was right which might take up to a month.  He said this would not have been an issue if the dredging and concreting promised by Les Brown had been done.

The representations alleged were made

1. Accordingly, I am satisfied that the plaintiffs have proved paragraph 7 of the statement of claim as particularised, namely:

“In or about late August 2006, the First Defendant represented to the Plaintiffs that the First Defendant would grant to Mr. Les Apps or one of his companies a long term sublease of the slipway and associated buildings and that if the First Plaintiff entered into such a sub-sublease of the slipway with the First Defendant, the First Defendant would:

(a)repair the wharf at the slipway (now known as ‘Wharf C’) to facilitate the Plaintiff working on boats in the water;

(b)upgrade the water to the slipway such that the slipway would meet fire safety standards;

(c)place the building in a usable state of repair and repair any damaged or run down structures;

(d)        dredge the area adjacent to Wharf C; and

(e)undertake any works required in order to rectify any issues raised by the Environmental Protection Authority.”

1. I am further satisfied that at the time the first defendant made the representations and thereafter it intended through its controlling minds, the second and third defendants, that the plaintiffs should rely on the representations.  At the time the representations were made, the defendants knew that the plaintiffs would rely on them to exercise due care and skill in making the representations; the plaintiffs’ reliance was reasonable in the circumstances; the plaintiffs reasonably expected that due care would be exercised in relation to the making of the representations; the plaintiffs were in a position of vulnerability in relation to a lack of care being exercised by the defendants in that the plaintiffs were not in a position to know the true intentions of the defendants in relation to making of the representations; and each of the defendants could reasonably foresee that failure to exercise due care and skill in making the representations would result in damage to the plaintiffs.

1. Each of the defendants breached their duty of care to the plaintiffs by failing to take reasonable care in the making of the representations, failing to take reasonable care to ensure that Cashlaw was, at the time the representations were made, ready and willing to carry out the works the subject of the representations and failing to inform the plaintiffs that Cashlaw may or may not perform the work the subject of the representations.

1. In reliance on the representations referred to in paragraph 7 of the statement of claim, the plaintiffs moved in to the slipway premises to endeavour to operate a slipway business and engineering business, incurred capital expenditure (and associated borrowing costs) necessary to be able to conduct those businesses and Mooloolaba Slipways entered into a sublease document and exercised the first option contained in that sublease document.

Commencement of the slipway and associated engineering business

1. In August to September 2006, Barry Apps moved into the slipway to clean the place up and prepare it for use.  Barry Apps started getting the haul-out equipment serviceable and cleaned up the rusted cradles and repaired the winching equipment.  He cleaned out the workshop areas which were very grubby,  and they were cleaned, painted and wiring and lighting were installed.  The part of the slipway building in which engineering was to be carried out was prepared for the installation of equipment.

1. Machinery was ordered and some put on-site.  Because Mooloolaba Slipways was a $2 company, Crabpak purchased equipment and borrowed from Westpac Bank for those equipment purchases for and on behalf of Mooloolaba Slipways or Mooloolaba Engineering.  Westpac held chattel mortgages over the equipment.  However, Mooloolaba Slipways and Mooloolaba Engineering were always responsible for and made all payments for this equipment.  The leases and loans were subsequently transferred to Mooloolaba Slipways or Mooloolaba Engineering.  The equipment acquired initially by Crabpak included abrasive blasting equipment from Burwell Technologies Pty Ltd on 13 September 2006 for $78,052.70.  A tax invoice was raised by Crabpak on that date to Mooloolaba Slipways for that equipment.  A welding station was purchased by Crabpak from TradeTools (Qld) Pty Ltd on 26 September 2006 for $29,225 and an invoice raised by Crabpak to Mooloolaba Engineering for that on the same date.

1. Lathes, grinders, a milling machine, bandsaw, cold saw, shaper and drilling machines were purchased from 600 Machine Tools Pty Ltd on 26 September 2006 for $169,574.90 and other machinery from 600 Machine Tools Pty Ltd on 12 December 2006 for $183,704.40.  Tax invoices were raised by Crabpak to Mooloolaba Engineering for $98,833.90 worth of equipment bought on 26 September and for all of the equipment purchased on 12 December 2006. 

1. The balance sheet of the Slipways Trust as at 30 June 2007 shows various liabilities including a loan of $265,781 from ACN 104 535 864, the company name of Crabpak after the business was sold.  There are other loans from companies related to the Apps: $5,692 from the Flaherty’s Trust and $32,786 from Tuffy Pty Ltd.  The balance sheet of the Engineering Trust as at 30 June 2007 shows a loan from the Flaherty’s Trust of $14,173; from the Slipways Trust of $137,690; and from ACN 104 535 864 of $80,380.  The arrangement at that time was that bills would be paid from the account of whichever company had funds at the time and inter-company loans raised.

1. Exhibit 36 is a list of the equipment purchased by Mooloolaba Slipways and Mooloolaba Engineering.  Mooloolaba Slipways purchased $223,873 worth of office equipment and machinery from 26 September 2006 to 14 March 2008.  Mooloolaba Engineering purchased $347,253 worth of machinery and equipment between 26 September 2006 and 12 December 2006 and then between 22 April and 28 November 2008, it purchased $3,965 worth of equipment.  Electrical work costing $4,638 was performed between 12 December 2006 and 31 March 2007.  The total spent by Mooloolaba Engineering on machinery and equipment was $355,856. These items were purchased by way of chattel lease from Westpac.

1. The first boat was put onto the slipway for repair on 1 October 2006.

1. Barry Apps undertook the day to day operational control of the slipway and Les Apps’ role was as a non-operational partner and co-director.  They set up two companies on advice from their accountants: Mooloolaba Slipways, which had been purchased from the Browns, to conduct the slipway business and Mooloolaba Engineering to conduct the engineering business which was to be an integral part of the overall business of the slipway to give effect to the two permitted uses under the leasing arrangements with Cashlaw.  There was no unauthorised sublease to Mooloolaba Engineering as Mooloolaba Slipways remained the tenant of the whole of the premises and did not part with possession of the premises.[1]

   [1]See Ace Property Holdings Pty Ltd v Australian Postal Corp [2010] QCA 55 at [79], [175] – [179].

The sublease document

1. Les Apps, on behalf of Mooloolaba Slipways, and Nancy Brown, on behalf of Cashlaw, executed a document entitled “Instrument of Lease” for a sublease of the slipway on 15 November 2006 (“the sublease document”).  The permitted uses were “Engineering and Slipway”.  There was never any misconception that the premises would not be used for both engineering and a slipway.  The name of corporate entities controlled by the Apps to carry out each business was not, as Les Brown conceded in his evidence, of any interest to him or to Cashlaw.  The term set out in the sublease document was 1 September 2006 to 28 February 2007.  There were three options to renew, each of five years.

1. The description of the premises being subleased was “Part of Lot W on SP 164167 as shown on the attached Plan.”  The attached plan showed a cross-hatched area which was said to be the subleased area which included most of the building and the dry part of the slipway, but not the rails in the riverbed between and extending beyond Wharf C and Wharf D which led up to and into the slipway.  In addition the sublessee was granted non-exclusive use of the east side of Wharf D and exclusive use of Wharf C.  Also attached to the sublease document was a plan of Lots W and X in Lot 1 on SP 143293.  It is tolerably clear that the slipway building could not be used to slip and repair boats unless use was made of the slipway rails in Lot X and that use of Wharf D and Wharf C served no utility unless it was to access boats moored to them from the waters in Lot X.

1. Les Brown volunteered whilst under cross-examination that he told Les Apps that the reason Wharf C and Wharf D were not put in the lease was because of their condition.  He said that if they had been in good condition they would have been put in the lease.  That matter was not put to Les Apps in spite of my observation that Mr Perry SC was being careful to comply with the rule in Browne v Dunn.[2]  I conclude that detail was added by Les Brown in an attempt to bolster his case rather than because it was true.

   [2](1893) 6 R (HL) 67.

1. The following rental arrangements applied:

·    rent for the first month (September 2006) was waived;

·    rent for the second month (October 2006) was $3,500 inclusive of outgoings plus GST;

·    rent for November 2006 to February 2007 was $7,000 per calendar month inclusive of outgoings plus GST; and

·    rent for the first year of the first option period was $10,000 plus GST per month payable on the first day of each month.

1. Rent was subject to review in accordance with the sublease document.  Outgoings were only payable by Mooloolaba Slipways after the first six months and the percentage was four-sixteenths of the amount of the outgoings.

1. Mr Perry SC for the defendants asked Les Apps whether he was aware that $10,000 per month was “essentially the equivalent to the amount of rent that the lessor had to pay to the government”.  Les Apps said he was not aware of that.  A positive assertion was made on behalf of the defendants that the rental paid by Cashlaw to Queensland Transport for the area subleased to the first plaintiff was equivalent to the rent charged by Cashlaw to the first plaintiff.  During the trial of this matter, by dent of careful cross-examination by Ms Heyworth-Smith, that assertion was shown to be quite untrue.

1. The evidence showed that Cashlaw was paying $200,000 per annum rental for the whole of Lot W and that the hatched area was about one-quarter of Lot W for which Cashlaw paid to Queensland Transport $50,000 per annum.  Cashlaw charged Mooloolaba Slipways $120,000 per annum so it could not be said, as Les Brown had asserted, that the rent payable by Mooloolaba Slipways to Cashlaw was equivalent to the rent payable by Cashlaw to Queensland Transport.  Les Brown endeavoured to justify his position by saying that it was expected that the Apps would use areas outside of area demised to them, for example, for car parking.  It may well have acted as a justification in Les Brown’s mind for the rent charged that he knew that the plaintiffs would be using land and water outside the part of Lot W in the sublease document.

1. Les Apps asked Les Brown’s solicitor, Mr Phillips, who was also a friend of Les Apps, whether there were any “nasties” in it.  He said that there were not and that it was a normal, straightforward lease.  Mr Phillips, who made no notes of any of the conversations he had with Les Apps about this matter, could not remember having this conversation.  I accept that the conversation was as Les Apps related.  Les Apps signed it without insisting on any changes because he “trusted Les Brown at that stage to be a man of his word” and he trusted Mr Phillips.  He had done the same in the past when Mr Phillips had drawn up the subleases from Les Brown’s companies for Crabpak and Flaherty’s, a chandlery business, also on the banks of the Mooloolaba River near its mouth.  He conceded that had he been dealing with a solicitor he did not know, he probably would have sought legal advice, but did not because he trusted both Les Brown and Mr Phillips.  This does not change the fact that he relied on the representations made by Les Brown in deciding both to enter into the premises and undertake the business of Mooloolaba Engineering and Mooloolaba Slipways there and to enter in the sublease document and its attached guarantee and indemnity.

1. The defendants’ case was that the conversations between Les Apps and Mr Phillips had not taken place.  This was rather unconvincingly put to Les Apps in cross-examination and denied.  In re-examination, Les Apps’ telephone records were produced which convincingly corroborated Les Apps’ evidence that he had conversations with Mr Phillips prior to and subsequent to signing the sublease document.

1. The sublease document did not contain the promises that were the subject of the representations.  Les Apps raised the fact that they were not incorporated into the written sublease document with Mr Phillips shortly afterwards, probably a day or two after he signed it.  Mr Phillips told him those were his instructions.

1. In addition to the sublease document Les Apps signed a deed of guarantee and indemnity on 15 November 2006.  Again in doing so he relied on the representations made by Les Brown.  In it he guaranteed payments to be made under the “lease”.

1. The land the subject of the sublease document was part of the land held by Cashlaw as sublessee from Queensland Transport (“the lease”) and held by Queensland Transport on Perpetual Lease 217700 from the Department of Natural Resources and Water (“the perpetual lease”).  The area leased by Cashlaw was Lots W and X on SP 164167.  The lease was from 1 January 2003 until 30 June 2033.  The rent payable was governed by a formula set out in the lease including a different rate for Lot W, the land above the high-water mark (AHWM), and for Lot X, the land below the high-water mark (BHWM).  The rent for the land AHWM from 1 July 2006 to 30 June 2009 was nine per cent of the unimproved value; and for the land BHWM, the rent payable depended on whether it was used for mooring, pontoons, jetties, slipways, ramps or lift out facilities.  Lot W covered the area AHWM which covered the slipway buildings and adjoined Parkyn Parade to the north, the high-water bank of the Mooloolah River to the south, and the edges of the slipway building on the eastern and western boundaries.  Lot X covered an L-shaped area BHWM from the high-water bank of the Mooloolah River to the north, an area of river to the west of Wharf D as its western boundary, a line parallel to the end of Wharf D and Wharf C as part of its southern boundary and the length of the long concrete jetty to the east of the slipway facility as its long eastern boundary.

1. Within Lot X were Wharf C and Wharf D, the water between them, which contained the rails for the slipway, the water to the west of Wharf D and the water to the east of Wharf C (known as the sick bay), and the water to the south of the sick bay from the end of Wharf C and adjacent to the long concrete jetty to the east.  Les Brown conceded in evidence that although the water to the east of Wharf C was not part of the leased area, he would have had no objection to its being used by Mooloolaba Slipways.  The same must be true for the water between Wharf C and Wharf D since the slipway could not otherwise be used.  Les Brown’s instructions to his solicitor recorded by Mr Phillips in handwriting show that he instructed that non-exclusive use was to be granted to Wharf D and that the subtenant would not therefore be able to moor boats on the west side.  Implicit in that in the circumstances of this case is his understanding that boats could be moored elsewhere, for example, on the east side of Wharf D and on either side of Wharf C.

1. The sublease document was governed by the provisions of s 332 of the Land Act 1994 (Qld) (“Land Act”) which provides:

“332     Subleases require Minister’s approval

(1)A lease issued under this Act may be subleased only –

(a)if the Minister has given written approval to the sublease or the lessee holds a general authority to sublease; and

(b)to a person who is eligible to hold the sublease under this Act.

(2)A copy of the proposed sublease must accompany the application seeking the Minister’s approval.

(3)The Minister may –

(a)refuse to approve a sublease; or

(b)       approve the sublease on the conditions the    Minister considers appropriate, including, for      example, that a stated mandatory standard            terms document form part of the sublease; or

(c)approve the sublease unconditionally.

(4)The Minister’s approval lapses unless the sublease is lodged in the land registry within 6 months after the Minister’s approval.

(5)The Minister may extend the time mentioned in subsection (4).

(6)If the Minister decides not to approve a sublease, the sublessor must be given written notice of the decision and the reasons for the decision.

(7)The sublessor may appeal against the Minister’s decision.

(8)Without limiting subsection (3)(a), the Minister may refuse to approve a sublease of a lease if the Minister is satisfied that the subleasing would be inappropriate, having regard to the purpose and conditions of the lease.”

1. In order for Cashlaw to further sublease the land, approval of Queensland Transport was also required pursuant to clause 34.1.2 of Cashlaw’s lease from Queensland Transport.  Cashlaw was obliged within a reasonable time of the execution of the sublease document to seek the relevant Minister’s approval.  Mr Phillips wrote to Queensland Transport seeking its approval on 7 December 2006 with copies to Les Brown and Les Apps.

1. On 1 January 2007, Barry Apps, on behalf of Mooloolaba Slipways, exercised the option to extend the sublease for five years from 1 March 2007.

1. It was a requirement of any consent that could have been given by either the Minister, or the Minister’s delegate, and Queensland Transport, that a sublease not contain any options to renew the sublease which were not subject to Ministerial consent.  That requirement was identified in a letter from Queensland Transport to the solicitors for Cashlaw on 9 March 2007.  Even if such a requirement could not be imposed, Cashlaw could not allow an option to be exercised which was not subject to Ministerial consent.  Further, Queensland Transport noted that there was no survey plan of the area proposed to be subleased attached to the sublease document.

1. Mr Phillips replied to Queensland Transport on 2 July 2007 saying that he was awaiting a copy of the lease plan before resubmitting the amended document to Queensland Transport.  Mr Phillips conceded in evidence that before any amendments could be made they would have to be agreed to by Mooloolaba Slipways.  On the same day, Mr Phillips wrote to Les Brown alerting him to the areas in which the sublease document required amendment and asking Les Brown to arrange for his surveyor to prepare a formal lease plan to be annexed to the sublease document so that it could be registered.  Mooloolaba Slipways were never alerted to any problems with or delays in obtaining the relevant approvals.

1. On 4 September 2007 and, after not receiving any reply, again on 8 November 2007, Queensland Transport wrote to Mr Phillips saying that they had not yet received the plan which they had sought in March 2007.  On 19 December 2007, Mr Phillips replied to Queensland Transport saying that he had again contacted his client about the preparation of a lease plan and expected it to be delivered to him within a week or two.  Mr Phillips said he understood that the surveyor had taken longer than expected to prepare the plan.  It does not appear, however, that any surveyor had been retained by then to prepare any such plan.

1. On 10 July 2008, Mr Phillips wrote to Queensland Transport enclosing an amended sublease document and saying that he had only just received the amended lease plans from Cashlaw’s surveyor. 

1. The consent of Mooloolaba Slipways to any amendments to the sublease was never sought.  Les Brown said that notwithstanding that he always believed that the sublease document was enforceable.  What Mr Phillips did was simply to make handwritten amendments to the sublease document without seeking the agreement of the signatories or showing the survey plan to Les Apps.  However it was not until 1 March 2010, well after this litigation had commenced, that Mr Phillips finally sent Queensland Transport the sublease document purportedly amended in accordance with Queensland Transport’s letter of 9 March 2007.  He did so on Les Brown’s instructions and to protect Cashlaw’s interests, even though the other signatory to the sublease document had not seen and did not know of the amendments made to it and, as Mr Phillips conceded, would not at that stage have agreed to it.

1. On 8 and 9 April 2010, Queensland Transport informed Mr Phillips of further amendments Crown Law had suggested to the sublease document. He was asked to provide a copy of the signed lease, so that a “form 18 consent form” could be completed. He did so knowing that the amendments had not been agreed to by Mooloolaba Slipways. Mr Phillips then received the relevant government approvals. The approvals gained were not valid because, they were, unbeknownst to the Minister and Queensland Transport, based on an amended sublease document which had not been agreed by the parties to it. There was therefore no effective consent to the sublease document given by the Minister pursuant to s 332 of the Land Act or Queensland Transport pursuant to clause 34.1.2 of Cashlaw’s lease.

1. Cashlaw did not advise Mooloolaba Slipways or any of the plaintiffs that unconditional approval to the sublease had not been granted.  Les Apps believed that Mooloolaba Slipways had a valid lease and continued in that belief until he found out in the course of this litigation that approval had not been given.  He thought that there were no problems gaining the appropriate consents.  Barry Apps was concerned about the delay in the return of a “stamped” lease but was never advised that there was any problem and assumed that it would come through in due course.

1. During the plaintiff’s occupation of the slipway, all parties operated on the basis that the sublease document and the option apparently exercised under it were valid and that rental accrued pursuant to it.  In these circumstances it would appear that, without the relevant approvals, the sublease document could not act as a demise but rather was a concluded bargain defeasible on refusal of those consents or, I interpolate, upon the obtaining of consents on a basis which rendered those consents invalid.  Entry into possession and payment of the rent created a tenancy upon the terms of the sublease document in all respects save for the duration of the term as it became determinable on one month’s notice.

1. This conclusion follows upon the terms of the Land Act and s 129 of the Property Law Act1974 (Qld) as explained by Connolly J, with whom de Jersey J (as his Honour then was) agreed, in Palmdale Insurance Limited v Sprenger.[3] His Honour referred to the decision of Wanstall J in Tweed Motors (Qld) Pty Ltd v Moran Motors Pty Ltd[4]and equivalent provisions of the Land Act 1910 (Qld):

   [3][1988] 1 Qd R 414 at 417-419.

   [4]Unreported, Supreme Court of Queensland, Wanstall J, 8 June 1964.  The decision of Wanstall J was reversed on appeal by the High Court in Tweed Motors (Qld) Pty Ltd v Moran Motors Pty Ltd (1965) 39 ALJR 279. However, while Kitto and Windeyer JJ made obiter comments expressing doubt as to whether an instrument of sublease was ineffectual as a demise until the Minister gave approval, their Honours considered it unnecessary to come to a final conclusion on that point and the appeal was allowed on other grounds.

“Nothing in the Land Act 1910-1959 made an agreement for sublease unlawful until the Minister’s consent had been obtained so as to invalidate it: Norton v Angus (1926) 38 C.L.R. 523, 532, 536 and 540; Robertson v Admans (1922) 31 C.L.R. 250. It is a concluded bargain defeasible on refusal of consent: Rawson v Hobbs (1961) 107 C.L.R. 466, 491. His Honour examined the decision in Butts v O’Dwyer and pointed out that the legislation there under consideration in terms forbade and invalidated a transfer without consent.  His Honour pointed out however, that the majority of the High Court at 279-80 regarded a transfer executed in anticipation of consent as valid and as effective to pass the estate once the consent was obtained.  At 280, their Honours say:

‘If the Minister’s consent is obtained a transfer will become capable of valid operation and the plaintiff will be in a position to register the memorandum of lease under the Real Property Act.’ (emphasis supplied.)

Section 166 of the Land Act 1910-1959 provided, amongst other things, that leases might be transferred with the permission of the Minister; and that any transfer or agreement to transfer a lease, not produced for the consideration of the Minister within three months from the date of the execution thereof, should be a breach of condition on which the lease was held and the lease should be liable to be forfeited accordingly.  In Norton v Angus Isaacs J at 532 said:

‘Sec. 166 was relied on in argument as an obstacle to the validity of the agreement.  But that section does not invalidate this contract to transfer, even though there was no prior permission, and even though the intended transferee was not yet a qualified person.  The contract did not contain an agreement to transfer without the previous permission of the Minister.  But sec. 166 creates a condition precedent to a valid and effective transfer, namely, previous permission, the penalty for which is liability to forfeiture.  The fact that the forfeiture may be waived does not detract from the statutory requirement in the first place of prior permission.  The section is directed to the holder, because the ‘breach of condition’ is his breach, and the lease or licence which may be forfeited is his.’ (emphasis supplied.) Cf. Higgins J at 539.

Wanstall J in the Tweed Motors case expressed his view of the effect of the provisions of the 1910 Act in the following language:

‘These provisions, in my view, prevent the grant of a sublease by the plaintiff, giving the defendant an estate in the land, without the Minister’s approval, but permit the making of a concluded agreement to sublease operative between them and binding on them, as an agreement, pending Ministerial approval and defeasible upon refusal of approval.  I reach this conclusion by way of construction of the terms of s. 121 in the context of the whole Act and, in particular, the context supplied by ss 94, 130 and 166.’

As provisions to the same effect as all of the relevant provisions of the Act of 1910 are to be found in the current legislation, I am of the respectful opinion that this is a correct statement of the law and that it continues to be applicable.

However, entry into possession and payment of rent will create a tenancy upon the terms of the void lease in all respects save for the duration of the term: Woodfall, Landlord and Tenant (28^th ed.) para. 1-0651. At common law a tenancy from year to year would have been implied but s. 129 of the Property Law Act 1974-1986 has abolished tenancies from year to year implied by payment of rent. Section 129(1) goes on to provide that if there is a tenancy, and no agreement as to its duration, then such tenancy shall be deemed to be a tenancy determinable at the will of either of the parties by one month’s notice in writing expiring at any time. The reference to there being no agreement as to the duration of the tenancy postulates there being no agreement between the parties ‘operative at common law to incorporate as part of it a provision that it was to continue for a term of years or to be at will or for a periodic tenancy:’. Dockrill v Cavanagh (1944) 45 S.R. (N.S.W.) 78, 83 per Jordan CJ. In the absence of the Minister’s approval there was, in my opinion, no operative agreement for a term in this case.

It follows in my opinion that s. 129(1) applied. It was thus open to the appellants to have determined the tenancy at any time by one month’s notice in writing expiring at any time.”

Amendment of the defence refused

1. On the morning of the sixth day of the trial counsel for the defendants sought to further amend the defence.  The amendment was refused with reasons to be delivered with this judgment.  Reasons were not delivered at the time as it would have delayed the trial beyond the time allocated for it in the civil list. 

1. The application was said to arise out of the evidence given in-chief and cross-examination by Les Apps and to a lesser extent, Barry Apps. The defendants sought to amend the defence to include an allegation that  Les Apps relied upon his relationship and conversations with the solicitor, Mr Phillips, when determining whether or not to execute the lease document. The amendment pleaded that the plaintiffs’ claims against the defendants were proceedings to which the proportionate liability provisions of Part VIA of the Trade Practices Act 1974 (Cth) (“TPA”) and Chapter 2 Part 2 of the Civil Liability Act 2003 (Qld) (“CLA”) applied and that Mr Phillips was a concurrent wrongdoer within the meaning of those Acts.

1. Mr Perry SC for the defendants submitted that any determination of the plaintiffs’ claim necessarily involved findings of fact with respect to those conversations between Les Apps and Mr Phillips which should be determined as part of the trial, notwithstanding the consequence that the trial might not be able to continue.

1. The plaintiffs submitted the amendments should not be permitted because, inter alia, the application was brought late in the trial, the amendments were so tenuous they ought not be entertained, the defendants would not suffer any prejudice if the amendments were not allowed because they could seek contribution in separate proceedings against Mr Phillips and the plaintiffs would suffer prejudice if they were allowed because they had not had access to Mr Phillips’s entire file and there would be additional costs of delays and further court time. Ms Heyworth-Smith also submitted that the proposed amendments did not plead a sustainable defence of proportionate liability and further, were internally inconsistent.

1. Section 87CB(3) of the TPA defines a ‘concurrent wrongdoer’ as a “person who is one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.” Similarly, s 30 of the CLA provides “a person who is 1 of 2 or more persons whose acts or omissions caused, independently of each other, the loss or damage that is the subject of the claim” is a concurrent wrongdoer.

1. In oral submissions, Mr Perry SC argued that the plaintiffs’ case revolved around the execution of the sublease document and that Mr Phillips was a concurrent wrongdoer within the meaning of those provisions because the representations that Les Apps alleged he made, if established, provided an alternative basis of reliance for the decision to enter into the sublease document.  In response, Ms Heyworth-Smith submitted that for the proposed amendments to succeed on this basis it would have to be pleaded, and was not, that Mr Phillips was somehow liable separately for the loss and damage suffered by the plaintiffs because of the representations said to have been made by him.

1. In Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175, the High Court considered the relevant principles for an application for leave to amend a pleading at an advanced stage in the litigation and said at [111] – [113]:

“An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court’s earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.

A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.

In the past it has been left largely to the parties to prepare for trial and to seek the court’s assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.” [footnotes omitted]

1. The application for leave to further amend the defence was first raised on the sixth day of the trial. Given the advanced stage in the proceedings, further delay and wasted costs were important considerations.

1. I was referred by Ms Heyworth-Smith to two affidavits of Les Apps filed earlier in the proceedings which referred to the friendship between Mr Phillips and Les Apps and the trust Les Apps placed in Mr Phillips. I am not therefore convinced that such an application could not have been made earlier, or indeed, before the request for trial date was filed when there would have been no requirement for leave of the court to amend the pleading. 

1. Further, I was not convinced that the proposed amendment in the form it was handed to me pleaded all the facts necessary to properly give rise to the operation of the relevant provisions on proportionate liability.

1. Ultimately, to allow the defendants’ proposed amendments would have been to cause undue prejudice to the plaintiffs given the late stage the application was made in the trial and, as was implicit in submissions by the defendants, the trial would not have been able to proceed to its conclusion in the sittings which it had been allocated for some time.  For these reasons, I refused to grant leave to further amend the defence.

Problems with the slipway

1. Evidence as to the state of the slipway was given by a number of witnesses who were familiar with it at the time of the Apps’ entry into it, by those who undertook inspections later and by way of photographs and a DVD recording taken on 28 February 2010, the day that the plaintiffs vacated the premises. The inspections will be referred to later in these reasons.  The photographs, taken while the plaintiffs occupied the slipway premises, graphically demonstrated the dilapidated state of the slipway: with broken and ill-fitting windows and doors incapable of being shut completely or of keeping rain out; rusting reinforcing and deep cracks and crumbling in the concrete; rusted wall panelling and supports and purlins; roof gutters rusting or rusted away completely leading to rain water coming in to the premises; and very low water pressure from the fire hose.  Wharf C was extremely dilapidated with deep cracks in the concrete apron to the wharf, rotting posts above and underneath the wharf and the reinforcing in the concrete was exposed and rusting.  All of these impressions were confirmed by the DVD evidence.

1. Phillip Ashworth said that the slipway building was in poor condition when he took over management from his father in 2003.  The roof was severely rusted and there was rust throughout the building including in the reinforcing in the concrete.  Some of the concrete had “busted away”.  There were many water leaks.  Power supply to the building was poor.  The building deteriorated further until he vacated it in April 2006.  His evidence was that the jetty on the eastern side, Wharf C, was sinking into the river and drooping and the sick bay “silted up”, although during the period 2003 to 2006, “at some stages, there were boats, vessels in the sick bay.”  Boats would be moored on the eastern side of three pilings which were further out into the river than Wharf C.

1. Darren Prentice was a fitter who had worked at the slipway with Ashworth Marine Engineering (“Ashworth”) as leading hand or foreman.  There were about a dozen staff working with Ashworth repairing fishing vessels.  Mr Prentice worked there for five years until 2003 when he left and started his own business, Mooloolaba Marine Maintenance, repairing vessels wherever they were moored.

1. Mr Prentice started working for Barry Apps at Mooloolaba Slipways in October 2006 and worked there until 28 February 2010.  He said it was dirty and run down when they first moved into it.  He said the structure itself was “fairly stable” but the area from the workshop out onto the slipway itself, the crib area and the shipwright area were rusted and run down.  When it rained the rain water ran down through the beams and from the slipway through the brick work and across the floors.  The pipe underneath the sump drain underneath the driveway had collapsed so that all the water would come down the driveway and through the front doors of the building.  Water would be about an inch deep across about a third of the floor affecting their capacity to do any work.

1. Mr Prentice described the problems the employees experienced with electricity.  They found that if they switched lights on, bulbs would sometimes explode.  The circuit board was covered with silicon to try to stop the water from running inside of it.  Water ran down in the boilermaker section into the power points.  As soon as it rained they would have to turn the power points off and stop any electrical work.  He said that the main power board looked “pretty dodgy”.  By that he meant that there was a lot of raw silicon sitting on top of it to try and stop the water going down through it and the door to the power board did not close properly.

1. Mr Prentice said that Wharf C on the eastern side was in a very poor state of repair.  The structure was buckled and appeared as if it was about to fall in.  The sick bay was too shallow to put boats into it so they could only work on boats at the end of Wharf C, which interfered somewhat with the operation of the slipway.

1. When Shane Miller, the tank room manager at Crabpak, was shown the slipway by Les Apps when the Apps first took over the slipway he noticed that the wharf area was “just about falling down” and the sick bay area was very shallow.

1. Wharf C was used purely as an access to get to the boats moored near the end of it for them to be repaired.  Mr Prentice said the slipway was fairly busy for the first six to 12 months because the slipway had been closed down so there was a build up of work.

1. Kerry Hill was employed at Mooloolaba Slipways for about three months in 2007 working as production supervisor.  He said they tried to diversify to get outside work because the marine side of it was “a bit quiet”.  He said it was a tough environment in which to obtain outside work because the premises were old and it was not a good look for new customers.  He said they were in a run-down state and “a bit of an eyesore”.  During wet weather they had a major problem with water inundation into the rear workshop which was the fabrication shop and entailed a lot of welding and electrical work.  As soon as the rain water came in on the floor they had to lift all of the electrical equipment up off the floor and get all the leads out because it was a safety hazard so work had to come to a halt.  The inundation was run off from the car park and blocked up drains.  So far as electrical work was concerned they had a lot of trouble with electrical surging and burnt out a couple of new welding machines as a result.  The water pressure on the site was poor which would have been a problem had there been a fire.  He could not recall any work being done on the site by the landlord during the period when he was employed.

1. Alan Trickey was a customer of the slipway.  He is a company director and one of his major business interests is in the fishing industry.  His company, Dagenhaven Pty Ltd, owned a number of fishing trawlers at Mooloolaba at the relevant time.  He recalled that there was a problem with there not being an area to work on a boat out of the slipway in the water.  The area that should have been available was not up to the standard expected of a facility of that type: the wharf appeared to have deteriorated to a point where it was unsafe.

1. Mr Trickey’s company owned a vessel called the “Miss Melissa”.  It could not be berthed in the sick bay because at low tide it would sit on the bottom and list on one side and therefore had to be moored further out into the river, although he was unable to give precise evidence as to where it was.

1. Barry Apps said that the slipway was busy when they first took it over as there was a backlog of fishing vessels waiting to be slipped. It tapered out by March to April 2007 when they worked on vessels moored elsewhere.  The sick bay was still unable to be used so they used the slipway side of Wharf C to a limited extent.  However access along that wharf was dangerous because of the condition it was in, so work was severely restricted by the condition of the wharf and the lack of dredging of the sick bay and the fact that working on vessels on the slipway side of the wharf restricted access to the slipway.  Had the sick bay been dredged, it would have been able to take two reasonably sized vessels without restricting use of the slipway at all.

1. Les Apps said that his company improved the slipway premises.  They enclosed the engineering section and put in roller doors and put structures on the western side of the building to comply with EPA requirements. 

1. The Apps employed Steve Maiden as manager of the slipway in January 2007.  He remained with the slipway until June 2007 when he resigned.  When he commenced work he observed that the slipway needed repairs and modifications.  He was particularly concerned about the slipway winch because it was unguarded and therefore represented the greatest risk of injury.  It was immediately replaced.  His other concerns related to the leaking roof and the need for dredging to allow vessels to use the sick bay and keep the slipway open.  He was also concerned about the wiring and rainwater running over the electrical connections and inundating the floor of the building, in particular the engineering fabrication workshop.  He referred to Wharf C being in such a poor state of repair that access could only be sought from it to vessels “precariously”.  To his knowledge only two vessels were accessed from Wharf C during his time at the slipway, a small river cruiser and a small fishing vessel.  Repairs were not carried out from the wharf because of its dangerous state but rather from the vessels themselves.

1. In order to make the slipway financially viable, he worked towards having the facility certified for quality assurance and workplace health and safety to enable them to tender for larger government contracts.  However the specific problems referred to earlier together with the general poor state of repair of the building did not enable that to happen.  By the time he left in June 2007 the lack of slippings being booked in meant that the business was being supported by its engineering work.

1. Mr Maiden is an experienced slipway manager who has obtained quality assurance certification for other slipways.  Using that experience and his personal knowledge of the operations of Mooloolaba Slipways he prepared a report which was tendered as Exhibit 35.  His report refers to certification to certain standards which, while not necessary to obtain private sector work, is almost always necessary to obtain government work.  At the time of his employment with Mooloolaba Slipways they were:

·     AS/NZS ISO 9001:2000 – Quality Management Systems;

·     AS/NZS 4801:2001 – Occupational Health and Safety Management Systems; and

·     AS/NZS ISO 14001:1996 – Environmental Management Systems.

1. He attached to his report the Commonwealth Procurement Guidelines, the Royal Australian Navy’s Slipping and Docking Requirements and extracts from a Department of Defence Tender document and Australian Institute of Marine Science Tender document, which demonstrate the necessity to comply with some or all of those standards.  He also gave examples of Federal government agencies that might invite tenders for works on slipways.

1. Mr Woffinden’s report of 20 May 2010 was done following the carrying out of repairs as set out in a report by Barry Cromar, a senior structural engineer from Cardno, dated 2 March 2010.  Those repairs were carried out in about March 2010 under Cardno’s supervision.  It appears that many of the repairs that were required to be done were being or had been undertaken before the facility was inspected by Mr Woffinden.  The wall which had been secured by chain and rope, for example, had been repaired prior to its being inspected by Mr Woffinden.  Broken beams had been replaced.

1. On 8 April 2010 Mr Woffinden had written to Les Brown saying:

“Further to our report dated 2/3/2010 we have inspected the remedial works undertaken on our site direction and confirm as follows:

Item 1: Primary Structural Elements – Columns and Rafters

Corroded base plates cleaned and treated with zinc primer.

Item 2: Secondary Structural Elements – Purlins and Girts

Severely corroded elements replaced.
Surface rusted elements cleaned and primed.

Item 3: Roof and Wall Sheeting

Fixings cleaned and treated where necessary.

We also noted some skylights in the roof sheeting are leaking stormwater and should be repaired, however this is not a structural defect.

It is our opinion that the building has not been structurally compromised by these repairs and the structural integrity has not been significantly reduced from its original ‘as built’ condition.  We would expect no significant change to the present structural condition over the next 2 years.”

1. Mr Woffinden’s report of 20 May 2010 therefore dealt with the condition of the slipway and its buildings after repairs had been carried out by the defendants after the plaintiffs had quit the premises.

1. Tom Lacina, from Gregory’s Fire Services, gave evidence in a report dated 12 November 2009 that seven fire extinguishes which he inspected at Mr Brown’s premises had not been regularly maintained.  As there was no admissible evidence that those fire extinguishes were at Mooloolaba Slipways during the time the plaintiffs were in occupation or as to what other fire extinguishes were at the premises, that report had no evidentiary value.

1. A desktop audit of the premises was undertaken by NCS International to provide an opinion on whether or not the slipway premises was certifiable to ISO 14001, ISO 9001 and AS/NZS 4801 standards.  The audit was undertaken on 8 and 9 July 2010 and was based on documentation provided to NCS International and photographs and video footage of the slipway facility.  The members of NCS International who carried out the work were Ratna Pullela who is the team leader (environment and quality auditor) and Noel Gurney who is the lead auditor (quality and safety auditor).  A report from NCS International dated 12 July 2010 reviewed the documentation against requirements of the ISO standards and reviewed the video footage and photographic evidence.  Based on those findings the auditors expressed their opinion as follows:

“Organisations preparedness:
It appears that the organisation (Mooloolaba Slipways Pty Ltd) has the ability and capacity to develop a system for certification.  The organisation’s ability to identify appropriate quality, safety and environmental risks is demonstrated by the commentary provided with the Video footage and the procedures developed as part of management system.  The organisations understanding of legal and other requirements for quality, safety and environment were demonstrated by the manner in which the photos were presented and supportive documents provided with affidavits.  The legal requirements were well identified under OHS legislation and regulation.  The organisation has demonstrated their understanding of emergency preparedness and its legal implications through the photographic evidence, video footage and appropriate procedures.  Whilst the organisation has demonstrated their understanding of systems requirements, the management system documentation is primarily focused towards Quality and Safety system certification.  Environmental management system documentation requirements were not addressed in the management system documentation.  The organisation has not developed any environmental system documentation required for certification like environmental policy and risk assessment procedures, emergency preparedness procedures, etc specifically addressing ISO 14001 requirements.  Nonetheless with the help of a, management systems professional, the organisation can easily fill this gap in documentation to comply with the ISO 14001 requirements.  Already provided documentation for quality and safety management systems demonstrate, the organisation’s understanding and ability to develop appropriate procedures to comply with relevant ISO management system standards.

It appears that the organisation (Mooloolaba Slipways Pty Ltd) has the ability and capacity to develop management system procedures for certification to AS 4801 – Safety, ISO 9001 – Quality and ISO 14001 – Environmental standards.”

1. The report also deals with the condition of the site which appears to have been the reason that notwithstanding the capacity of Mooloolaba Slipways to develop management system procedures, certification would still not be gained.  The report says with regard to the condition of the site:

“Based on the evidence through video footage and photographic evidence, the site appears to be requiring considerable upgrading to bring it to an acceptable working condition to conduct operations in safe and environmentally compliant manner.  The building inspection report from Focus demonstrates that the Wharf and building requires considerable repairs before it can be made fit for intended purposes. 

Due the followings reasons, the auditors consider that the slipway site is not fit for certification to nominated AS 4801 – Safety, ISO 9001 – Quality and ISO 14001 – Environmental standards.  Although there are numerous other factors which could effect the certification of the site, this list concentrates on some of the critical issues which could influence certification decision. 

·     The uneven and undulating surface of the Wharf makes it unsafe for using as a work platform for vessels.

·     The uneven subsidence of the supporting piers for Wharf jetties and highly degraded/deteriorated concrete for piers make the Wharf jetties structurally unsafe.

·     Exposed electrical leads and potential rain water intrusion into switch board could potentially cause a fire or safety hazard to the site.

·     Rain water intrusion into workshop making it an unsafe work area for (electrical) machines and potential water contamination due to oil spills.

·     Sheet metal partition wall restrained with chains and ropes to a stair case is structurally unsafe and could cause major accident.

·     Integrity of emergency preparedness infrastructure like fire fighting equipment was compromised and was tapped to provide water supply to various other parts of the building.  Tapping of fire fighting water is not legally compliant and unsecured water meters are not a standard plumbing practice.”

1. With regard to environmental compliance the auditors reported:

“Whilst the photos and video footage provides an in-appropriate work environment and house keeping for the slipway site, the auditors could not come to a conclusion about the environmental compliance of the site for certification as the following evidence was not available for review during this assessment:

·Report on EPA’s requirements for the site to be environmentally compliant.

·A report from a qualified professional on the dredging requirements for mooring bigger vessels near Wharf Jetties and its environment implication.

·Report on local council environmental requirements.”

1. On 5 May 2010 Professional Valuation & Auction Services (“PVAS”) prepared a valuation of the assets of Mooloolaba Slipways on a market value in continued use or forced liquidation value.  The inspection of the premises was carried out 4 May 2010.  The report was written by Mark Griffiths who is a certified practising valuer.  The valuation was of the equipment that was not sold before, at or after the auction that was carried out of the assets of the business.  He certified the market value of the assets in continued use at $23,970 and their forced liquidation value as $13,290.

Termination

1. On 28 January 2010, Mooloolaba Slipways served a notice terminating the sublease document.  The plaintiffs carried out an auction of the capital assets that were at the slipway on 18 February 2010.  They reduced the quantum of their claims by the amount received as a result of that auction.

1. On 28 February 2010, Mooloolaba Slipways ceased to occupy the premises which included the engineering shop.  An auction was carried out and whatever could be sold was sold.  Those items sold and those not sold, together with the prices achieved at or after the auction, are set out in Exhibit 40.  The sale of equipment raised $154,552.73.

1. As has already been discussed, the approval of Queensland Transport and the relevant Minister to the sublease document was subsequently wrongfully obtained by Cashlaw on 8 November 2010.

1. Since May 2010, the slipway has been operated by Mr and Mrs Cuthbert who operate it for Cashlaw.  Mr Cuthbert gave evidence that there is no “legal arrangement” between Cashlaw and the Cuthberts.  He was able to describe the terms of an oral agreement between Cashlaw and Doug Cuthbert Pty Ltd.  There is no written agreement between them.  Mr Cuthbert’s occupation of the premises appears to operate without his having any legal protection.

Counterclaim

1. The defendants alleged in their counterclaim that Mooloolaba Slipways failed to remove certain of its fixtures, fittings and chattels or did so in a way that caused damage to the premises.  The defendants alleged that the first plaintiff removed a switchboard and other plant and equipment and that wiring and electrical cables were cut off, disconnected or left hanging loose.  Barry Apps denied that that occurred.  He said that the plaintiffs removed wiring from the switchboard to their equipment but that no cables or wires were left hanging loose or cut.  The cables and wires depicted in the photographs shown to Barry Apps were in the same condition they were in when they entered the premises.  Les Brown said he took the photographs but was unable to say whether the conditions depicted were any different from what they were when the Apps moved in to the premises.  This allegation does not sound in damages.

1. The defendants alleged that the first plaintiff failed to remove a disabled motor vessel stored in the premises and that Cashlaw incurred an expense in removing that vessel and disposing of it.  Barry Apps conceded that a prawn trawler was left behind called the “Rexandra”.  It came to the slipway after it had been involved in a collision at sea.  The plaintiff in fact took the vessel from the insurance company on an “as is where is” basis.  Exhibit 41 is a tax invoice from Mooloolaba Slipways to Sunderland Marine Mutual Insurance Co Limited.  The tax invoice showed that the “Rexandra” had been at the slipway since 1 December 2007.  The charges that had been incurred until 3 January 2008 were $32,665.60.  There was commercial value in using various parts from the vessel.  When they left the premises the main keel section and parts of the hull remained.  A marine company had expressed an interest in buying the keel for $30,000.  Les Brown agreed that he had taken no steps to ascertain its value.  No evidence was given as to the cost of removing it.  I am not satisfied that any loss was caused to the defendants.

1. It was also claimed by the defendants that the first plaintiff moored the motor vessel the “Dallis” on guide posts adjacent to Wharf C for the period from 1 October 2008 to 31 March 2009 for which it charged a third party the sum of $10,010 for mooring.  It was alleged that this was in breach of the terms of the sublease document and the headlease as Mooloolaba Slipways purported to let, hire, occupy or otherwise used an area forming part of the demised premises in respect of which the first defendant Cashlaw had an exclusive right of possession pursuant to the head lease and which did not form part of the demised premises pursuant to the sublease document.  Barry Apps said that the “Dallis” was a luxury motor vessel that was at the slipway for substantial repairs.  They worked on it while it was on the slipway and when it was afloat in the water between Wharf C and Wharf D on the eastern side of Wharf D towards Wharf C.  A final invoice was sent to the owner of that vessel on 27 March 2009 for $19,342.79 including a mooring fee.  The mooring fee was not in fact paid.  It was put into the invoice to encourage the owner to take the vessel.  When it came time for him to pay the invoice they did not require him to pay the mooring fee.  The defendants’ allegation in the counterclaim for $10,010 for monies had and received by the first plaintiff for mooring fees for the “Dallis” must fail.

1. It was also alleged that Mooloolaba Slipways moored the motor vessel the “Miss Melissa” on guideposts adjacent to Wharf C for the period from 26 October 2007 to 1 March 2010 for which it charged a third party the sum of $28,700.  Barry Apps said that vessel had been grounded and was under an insurance claim. At first it was moored as far into the sick bay as they could get it.  They inspected it and put it back in the water as far as they could without the wharf and the sick bay being available.  They had to moor it further out in the water stream from the slipway until there was a clearance from the Department of Transport to allow the vessel to be moved.  It was not the responsibility of Mooloolaba Slipways to move the vessel but it could not be moved from that point until it was cleared.  Barry Apps thought they charged about $20,000 for the mooring of the “Miss Melissa.”  Invoices from Mooloolaba Slipways showed that $50 a day mooring fee was charged totalling $25,025 (including GST).  However there was no claim with regard to this in the counterclaim.

1. The counterclaim also made a claim against Les Apps pursuant to the deed of guarantee and indemnity.  Unsurprisingly this was not pressed in argument so I will deal with it briefly for the sake of completeness.  The guarantee and indemnity was entered into in reliance on the same misrepresentations which infected the entry into the sublease document and, because of the failure of Cashlaw to obtain the valid consent of the Minister and Queensland Transport, the sublease document never became a valid lease.  For both reasons, Cashlaw could not rely on the guarantee and indemnity to pursue a claim against Les Apps.[5]

   [5]See Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; Chan v Cresdon Pty Ltd (1989) 168 CLR 242.

1. The claim for unpaid rent will be dealt with later in these reasons to reduce the amount of damages awarded to Mooloolaba Slipways in respect of compensation for its loss.

Liability

1. The pleadings support two legal bases for the claims by the plaintiffs against the defendants: damages for negligence and damages for misleading and deceptive conduct pursuant to s 82 of the TPA.

Negligence

1. The negligence claimed in this case is negligent misrepresentation causing economic loss.  As the law of negligence initially developed from Donoghue v Stevenson,[6] tortuous liability was restricted to those cases where the loss suffered included damage to person or property rather than pure economic loss.  However the law developed “incrementally”, to quote Brennan J’s justifiably cautious nostrum in Sutherland Shire Council v Heyman,[7] so that now there are criteria for the imposition of liability on a tortfeasor for pure economic loss caused to another. 

   [6][1932] AC 562.

   [7](1985) 157 CLR 424 at 481.

1. In Perre v Apand,[8] McHugh J posed the questions which were relevant to that case which must be answered in each case where the loss suffered is pure economic loss:

   [8](1999) 198 CLR 180 at [133].

1.          Was the loss suffered by the plaintiffs reasonably foreseeable?

2.          If yes to question 1, would the imposition of a duty of care impose indeterminate liability on the defendants?

3.          If no to question 2, would the imposition of a duty of care impose an unreasonable burden on the autonomy of the defendants?

4.          If no to question 3, were the plaintiffs vulnerable to loss from the conduct of the defendants?

5.          Did the defendants know that their conduct could cause harm to individuals such as the plaintiffs?

1. Each of those questions should be answered favourably to the plaintiffs in this case.  For the reasons set out herein, the loss suffered was reasonably foreseeable, there is no indeterminate liability upon the defendants[9] and the imposition of a duty of care upon them does not cause an unreasonable burden on their autonomy.  The plaintiffs were particularly vulnerable to loss from the conduct of the defendants and the defendants must have known that their conduct could cause harm to a person in the position of the plaintiffs.

   [9]Cf Fortuna Seafoods Pty Ltd as trustee for The Rowley Family Trust v The Ship “Eternal Wind” [2005] QCA 405 at [17].

1. The liability to the plaintiffs is independent of and additional to any liability which arises under the TPA.

Misleading and deceptive representations under the TPA[10]

[10]The Trade Practices Act1974 (Cth) has now been replaced by the Competition and Consumer Act2010 (Cth) which came into effect on 1 January 2011.

1. Section 52 of the TPA provides a comprehensive statement prohibiting misleading or deceptive conduct. Section 52(1) provides:

“A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

1. Section 51A was introduced in 1986 to facilitate proof in misrepresentation cases involving representations as to future matters. It provides:

“(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.”

1. In this case the major conflict was as to whether or not the representations were made.  There was little contest, nor could there be, that if the representations were made, as I have found they were, they were misleading and deceptive and, so far as they concerned future matters, Cashlaw did not have reasonable grounds for making the representations.  There is no doubt that the plaintiffs relied on the misleading representations that were made to them and thereby suffered loss and damage.  The first plaintiff would never have entered into the sublease document, occupied the premises and commenced business and the second plaintiff would not have entered into the premises and commenced business had they not relied on the false and misleading representations made by the defendants.

1. Enforcement and remedies are set out in Part VI of the TPA. Section 82(1) provides that:

“a person who suffers loss or damage by conduct of another person that was done in contravention of Part … V … may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”

1. As Gummow J held in Marks v GIO Australia Holdings Ltd,[11] s 82 has at least five discrete elements:

   [11](1998) 196 CLR 494 at [95].

(1)         it identifies the legal norms for contravention of which the action under the section is given;

(2)         it identifies those against whom the action lies;

(3)         it specifies the injury for which the action lies as the suffering of loss or damage;

(4)         it stipulates a causal requirement that the plaintiff’s injury must be sustained by the contravention; and

(5)        it provides the measure of compensation is the amount of the loss or damage sustained.

1. His Honour referred at [99] to the TPA’s being a “fundamental piece of remedial and protective legislation” which gives effect to what Lockhart J in ICI Australia Operations Pty Limited v Trade Practices Commission[12] referred to as “matters of high public policy”.  Accordingly, it is to be construed so as “to give the fullest relief which the fair meaning of its language will allow.”[13]

   [12](1992) 38 FCR 248 at [32].

   [13]Bull v Attorney-General for New South Wales (1913) 17 CLR 370 at 384; Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32 at 44; Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 41.

1. In I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, Gaudron, Gummow and Hayne JJ set out at [42] – [46] some basic propositions with regards to the remedies found in Part VI of the TPA:

“42. It is necessary to approach the principal issue in this case with some basic propositions well in mind. First, Pt VI of the Act, and, in particular, ss 82 and 87(1), have operation in many different kinds of case. Section 82 entitles a person who suffers loss or damage by conduct of another that was done in a contravention of any of a very large number of provisions – ranging from contravention of any of the restrictive trade practices provisions of Pt IV to the so-called consumer protection provisions of Pt V – to recover the amount of that loss and damage. Section 82 can, therefore, be engaged in cases in which the contravener’s conduct is intentional or even directed at harming the person who suffers loss and damage. It can be engaged in cases, like the present, in which the contravener can be said to have fallen short of a standard of reasonable care as well as contravene the Act, and in cases in which there was neither want of care nor intention to harm, but still a contravention of the Act.

43. Secondly, s 82 entitles a person who suffers loss or damage by conduct done in contravention of a relevant provision, to recover not only from the contravener but also from any person involved in the contravention. Persons involved may have acted intentionally or carelessly; they may have acted with or without intention to harm. …

45. Fourthly, s 82 is concerned only with the position of a person who has suffered loss or damage and only that person may rely on the section.” [footnotes omitted]

1. Section 75B of the TPA empowers the court to make an award of damages under s 82 against any person knowingly concerned in the contravention of the Act by the corporation: see Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450. Section 75B(1) provides that a reference in Part VI to a person involved in a contravention of a provision of Part V shall be read as a reference to a person who:

“(a)       has aided, abetted, counselled or procured the contravention;

(b)has induced, whether by threats or promises or otherwise, the contravention;

(c)has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d)        has conspired with others to effect the contravention.”

1. I am satisfied that at the time Les Brown made the representations to the plaintiffs on behalf of Cashlaw with Anthony Brown’s concurrence, neither Les Brown nor Anthony Brown intended to cause Cashlaw to undertake any of the matters referred to in paragraph [7] of the statement of claim. They were directly and knowingly concerned in Cashlaw’s breach of s 52 of the TPA.

Loss and damage

1. Evidence was given on behalf of the plaintiffs of the loss and damage they suffered by Peter Haley, the director of forensic accounting and litigation support at Vincents Chartered Accountants.  Mr Haley is a member of the Institute of Chartered Accountants of Australia and a member of the Financial Services Institute of Australasia.  He is a very experienced forensic accounting expert and gave his evidence fairly without any apparent bias towards the plaintiffs who called him.

1. He assessed the economic loss suffered by the plaintiffs as a result of the alleged conduct of the defendants.  He did not include a calculation for the loss of time claimed in the statement of claim.  He calculated the economic loss suffered by the plaintiffs as a result of entering into the sublease document, undertaking capital works to enable their business operations and operating their slipway and engineering businesses.  He did so on the basis of the allegation in the statement of claim, which I have found to be proved, that had the representations not been made, the plaintiffs would not have entered into the sublease document; incurred expenditure in performing capital works to the site necessary to be able to conduct the operation of a slipway; operated the slipway; incurred expenditure in performing capital works to the site necessary to be able to conduct the business of an engineering firm at the slipway site; and commenced to operate its engineering business.

1. He also took into account the allegation, which I have also found to be proved, that the works the subject of the representations not having been performed, the plaintiffs were unable to obtain relevant accreditations, the effect of which was to render the plaintiffs incapable of tendering for State and Commonwealth government work at the slipway and unable to service larger vessels at the slipway. 

1. From the profit and loss statements and movements in the balance sheet Mr Haley was able to calculate that the capital outlays of the Slipways Trust were $230,576 and the capital outlays of the Engineering Trust were $363,425.  He deducted from this the net capital value of the outlays at the end of the business, being the price received for the assets at auction minus the incidental costs and advertising of the auction, which was $116,250.  He allocated this amount equally between the plaintiffs at $58,125 each.  The total borrowing costs for the Slipways Trust until 28 February 2010, when the business ceased, was $98,733 and for the Engineering Trust to the same date $86,488.  Mr Haley then calculated trading losses: excluding financing charges such as borrowing costs and interest expenses which had already been addressed under the separate head of damage “borrowing costs”; depreciation was excluded so as to not double count the amounts in respect of the loss under capital outlays; non-trading items such as management fee expenses, trust distributions and commissions received were excluded; and an extra two months of trading profits/losses were included in respect of the months January and February 2010, calculated as one-third of the loss suffered in the six months ended 31 December 2009.  The trading losses of the plaintiffs were $366,222 for the Slipways Trust and $419,423 for the Engineering Trust.

1. These trading losses included that amount payable or paid in rent.  It would therefore be double compensation to compensate the first plaintiff for outstanding rent payable and not require the first plaintiff to pay that rent.  The amount of rent outstanding as at 28 February 2010 when occupation of the slipway ceased should be deducted from the loss otherwise awarded to the first plaintiff.  The defendants identified the unpaid rent (and outgoings) in the counterclaim at $318,066, although I have not been able to tell from the evidence provided whether that figure is correct.

1. In Mr Haley’s opinion the economic loss suffered by the plaintiffs in respect of their respective businesses as a result of the conduct of the defendants was as follows:

Heads of Loss	The Slipways Trust (first plaintiff) $	The Engineering Trust (second plaintiff) $
Capital outlays Net current capital value Borrowing costs Trading (profits)/losses Net loss sustained	$230,576 ($58,125) $98,733 $366,222 $637,406	$363,425 ($58,125) $86,488 $419,423 $811,211

1. The total net loss sustained was therefore, in Mr Haley’s opinion, $1,448,617.  These figures are fully supported by his detailed analysis.

1. To answer that analysis and opinion, the defendants called Norbert Calabro from Calabro SV Consulting Pty Ltd.  Like Mr Haley, Mr Calabro is a very experienced forensic accounting expert.  The principal objectives of his report were said to be to make an independent assessment of the report prepared by Mr Haley and to determine the loss, if any, suffered by the plaintiff.

1. Mr Calabro criticised Mr Haley’s approach which was to assess the losses suffered by the plaintiffs as a result of entering into the sublease document, undertaking capital works to enable their business operations and operating the slipway and engineering businesses.  Mr Haley did that, as I have said, on the basis that had the representations not been made, the plaintiffs would not have entered into the sublease document and incurred expenditure in performing capital works on the site necessary to be able to conduct the operation of a slipway and operated the slipway and engineering businesses.  As I have said, I have found those allegations proved and I accept that Mr Haley adopted the correct approach.  The approach adopted by Mr Calabro would only be correct if I had made a finding that the plaintiffs would only have suffered the loss of profit which would have been derived from State and Commonwealth government work had they relied on the representations.  That is not a correct approach because in fact the plaintiffs would not have entered the business at all had the representations not been made.

1. Unfortunately Mr Calabro’s report suffered from its tendency to advocate in favour of the defendants who had retained him rather than being scrupulously objective.  This impression was confirmed by his oral evidence. 

1. His conclusion was that in respect of Mooloolaba Slipways:

“(i)In my opinion [Mooloolaba Slipways] has been insolvent and unable to pay its debts as and when they fell due since 2007;

(ii)The poor operating performance of [Mooloolaba Slipways] does appear to relate to the management and poor funding of the entity; and

(iii)Taking all of this into account and giving also consideration to my comments in paragraph 6(d) it is my view that any losses suffered are the consequence of poor management decisions rather than the failure of the alleged misrepresentation.”

1. In respect of Mooloolaba Engineering, Mr Calabro concluded:

“(i)In my view [Mooloolaba Engineering] has been a border line case from its very beginning.

(ii)The poor operating performance does also appear to be a reflection of management and poor funding of the entity.

(iii)Taking all of this into account and giving also consideration to my comments in 6(d), it is my view that any losses suffered are the consequences of poor management decisions rather than the failure of the alleged misrepresentations.”

1. Paragraph 6(d) is as follows:

“Actions by plaintiffs
The plaintiffs allege that in or about August 2006 Cashlaw and/or its directors made certain representations, yet:

(i)In November 2006 they were prepared to enter into a lease, with no conditions, even though none of the work required by the alleged representations had been carried out.

(ii)Further, in January 2007, the Plaintiffs took up an option to renew the lease for a further five years, even though the lease had no conditions attached to it and no work had been undertaken as, allegedly, required by the alleged representations.

(iii)My instructions are that the Plaintiffs waited until January 2008 and March 2008 to make a request in writing requiring the works to be done.  I understand that the Defendants claim they never received the letters.

(iv)The Plaintiffs spent $252,782 acquiring plant and equipment in September 2006 that is before they signed the lease and at a time when no work had been undertaken.  This expenditure represented 45 % of the total capital expenditure on the project.

(v)The Plaintiffs spent a further $168,104 in December 2006, that is before the plaintiffs exercised the option of 5 years.  Again at that time no work had been undertaken by the Defendants.  This represented a further 30% of the total capital expenditure.”

1. In oral evidence Mr Calabro said that a prudent person would never expend a lot of money based on oral representations which had not had been reduced to writing or had not in fact been carried out.   While that might be a wise attitude, it can not be the case that no business person should be able to rely on the word of another, or that if they do so, that it must be considered imprudent.  The Apps had had previous business dealings with Les Brown, the representations were made repeatedly and in the presence of others and the problems with the site were obvious.  They had no reason to doubt his word.  As Barry Apps also said in his evidence, it was necessary to set up the equipment on site as soon as possible so that it would be ready for work to commence and some of the equipment had a long lead time for delivery so it was necessary to order it as promptly as possible.

1. Apart from reliance on oral representations, other matters which Mr Calabro said showed poor management were the cost of sales and wages left too little excess for other costs for the business to be profitable.  The businesses were highly geared and current liabilities were increasing over current assets.  He formed the view that Mooloolaba Slipways was unable to pay its debts as they fell due from 2007 and therefore was insolvent from the very beginning.  He doubted the reliability of the accounts because of the low and decreasing amount of stock on hand at the end of each succeeding financial year and work in progress was not brought into the accounts which, he said, was “highly unusual” for a business of this type.

1. The businesses had high costs but those overheads were necessary to run the slipway and engineering businesses.  The problem with the income of the business was not caused by poor management but by the defendants’ not carrying out the work the subject of the representations the plaintiffs relied upon in entering into the business which meant that the plaintiff companies were not able to attract the business and derive the income they would otherwise have achieved.  As Mr Haley said in cross-examination, Mr Calabro rather overstated the current liabilities by including the overdraft which, although probably payable on demand, did not in fact have to be repaid immediately.  In any event, Mooloolaba Slipways was not insolvent because it paid its creditors as and when debts fell due.  It had support from its owners and their companies who could inject cash whenever needed so it was not insolvent.  Mr Haley said that it is not at all unusual for a business of this size not to account for work in progress or stock on hand.  Barry Apps’ evidence was that they acquired whatever consumables they needed for each job as it occurred and so their stock on hand was minimal.  When taking an overall financial snapshot of the businesses from commencement to end, stock on hand and work in progress at the end of any particular financial year makes no difference to the overall result.

1. I have accepted the reliability of Mr Haley’s report and nothing in Mr Calabro’s evidence led me to doubt it.

Calculation of the plaintiffs’ loss

1. The net loss sustained by the plaintiffs was $1,448,617, being $637,406 by the first plaintiff and $811,211 for the second plaintiff.  From that should be deducted the correct amount for rent owing by the first plaintiff to the first defendant. The amount of unpaid rent (and outgoings) claimed by the first defendant was $318,066.  I shall hear further submissions as to the correct amount owing for rent and any outgoings accounted for in the balance sheets but still owing. To that should be added the total sum of $134,500 as compensation for the plaintiffs’ attempt to mitigate their loss, attributed equally to each plaintiff.

1. Interest should be added on the conservative basis sought by the plaintiffs of five per cent per annum from 1 September 2006 to 12 August 2011, the date of judgment, a period of approximately five years.  The interest component on the first plaintiff’s loss can not be determined until the amount of rent and outgoings owing, if any, is deducted from the loss of $637,406.

1. The loss suffered by the second plaintiff was $811,211.  The interest which should be added on the same basis is approximately $202,803. 

Conclusion

1. Subject to submissions about the amount owing by Mooloolaba Slipways to Cashlaw in respect of unpaid rent and outgoings and interest owing on the net amount, judgment should be entered in favour of the first plaintiff against the defendants in the sum of $704,656 (being $637,406 + $67,250).  Judgment should be entered in favour of the second plaintiff against the defendants in the sum of $1,081,264 (being $811,211 + $202,803 + $67,250). In the circumstances it is not necessary to make any orders under the counterclaim.

1. I shall hear argument as to costs and the correct calculation of the precise judgment sum to be awarded to the first plaintiff.