Odour Elimination Services Pty Ltd v Duxberry Nominees Pty Ltd - [2006] WADC 12

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: ODOUR ELIMINATION SERVICES PTY LTD & ANOR -v- DUXBERRY NOMINEES PTY LTD & ORS [2006] WADC 12

CORAM: COMMISSIONER ARCHER

HEARD: 18-22 APRIL, 27 APRIL, 3 AUGUST & 6 SEPTEMBER 2005

DELIVERED : 10 FEBRUARY 2006

FILE NO/S: CIV 2350 of 2002
Consolidated with CIV 2430 of 2004

BETWEEN: ODOUR ELIMINATION SERVICES PTY LTD
First Plaintiff
PETER LUCAS
Second Plaintiff
AND
DUXBERRY NOMINEES PTY LTD
First Defendant
PETER RITCHIE
Second Defendant
WILLIAM GRAY RITCHIE
Third Defendant

Catchwords:

Restraint of trade clause - Implied terms - False and misleading conduct - Unconscionable conduct - Assignment of lease - Inquiry as to damages

Legislation:

Fair Trading Act 1987

Property Law Act 1969
Supreme Court Act 1935

Trade Practices Act 1974

Result:

In the plaintiffs' claims against the first and second defendants, judgment for the first and second defendants
In the first defendant's counterclaim against the second plaintiff, or alternatively the first plaintiff, judgment for the first defendant against the second plaintiff

Representation:

Counsel:

First Plaintiff                :     Mr T Galic
Second Plaintiff            :     Mr T Galic
First Defendant             :     Mr S R Sirett
Second Defendant         :     Mr S R Sirett
Third Defendant           :     Mr S R Sirett

Solicitors:

First Plaintiff                :     Galic & Co
Second Plaintiff            :     Galic & Co
First Defendant             :     Gibson Tovey & Associates
Second Defendant         :     Gibson Tovey & Associates
Third Defendant           :     Gibson Tovey & Associates

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

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1972‑1973) 133 CLR 288
Bevanere Pty Ltd v Lubidineuse and Ors (1985) 7 FCR 325
Brightman v Lamson Paragon Ltd (1914) 18 CLR 331
Castlemaine Tooheys Ltd and Anor v Carlton & United Breweries Ltd and Anor (1987) 10 NSWLR 468
Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Cream v Bushcolt Pty Ltd (2004) ATPR 42-004
Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd (1986) 1 Qd R 406
Fuller's Theatres & Vaudeville Company Limited v Rofe [1923] AC 435
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Hankinson v Brookview Holdings Pty Ltd [2004] WASCA 279
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216
Hungier v Grace & Anor (1972) 127 CLR 210
Keighley, Maxsted & Co v Durant [1901] AC 240
Lindner v Murdock's Garage (1950) 83 CLR 628
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd (1999) 21 WAR 350
Rentokil Pty Ltd v Lee (1995) 66 SASR 301
Trego & Smith v Hunt [1896] AC 7
Waltons Stores (Interstate) Ltd v Maher (1987) 164 CLR 387

Case(s) also cited:

Brendon Pty Ltd v Russell (1994) 11 WAR 280
Bromley Park Garden Estates Ltd v Moss [1982] 2 All ER 890
Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Goldstein v Sanders [1915] 1 Ch 549
Haberecht v Chapman [1992] NSW ConvR 55,639
Holloway v Witham (1990) 21 NSWLR 70
McKenzie v McAllum [1956] ALR 576
Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd [1894] AC 535
Peters (WA) Ltd v Petersville Ltd & Anor (2001) 205 CLR 126
Pioneer Concrete Services Ltd v Galli [1985] VR 675
Sanders v Snell (1998) 196 CLR 329
Sanrod Pty Ltd v Dainford Ltd (1984) 54 ALR 179
Stenhouse Australia Ltd v Phillips [1974] AC 391
Stern v McArthur (1988) 165 CLR 489
Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514
Yorke v Ross Lucas Pty Ltd (1982) 45 ALR 299

COMMISSIONER ARCHER:

Background

The first defendant owned a car wrecking, car sales and mechanical repairs business known as "Port Kennedy Autos & Auto Wreckers" ("the business"). The business was operated out of the first defendant's premises at Unit 1, 9 Paxton Way, Port Kennedy ("the premises").
The second and third defendants were directors of the first defendant. The second defendant, Peter Ritchie, handled the day to day operations of the business, and was the mechanic. His father, the third defendant, did the administration.
The first defendant entered into a contract to sell the business ("the purchase agreement") and an agreement to lease the premises ("the lease agreement"). The purchase agreement contained a clause headed "Restriction on Vendor's Competition" which said: "(a) Restraint Area: A radius of 20 kilometres, (b) Restraint Period: 2 years" ("the trade covenant").
While there was initially some confusion, it was ultimately accepted by all parties that the General Conditions for the Sale of Business ("the General Conditions") applied to the purchase agreement.
Clause 15.1 of the General Conditions relevantly states that the:
"... vendor must not, and must procure that each of its associated persons does not, during the Restraint Period in the Restraint Area;
(a)promote, participate in, operate or engage in (whether on its own account or in partnership or by joint-venture); or
(b)be concerned or interested in (directly or indirectly, or through any interposed body corporate, trust, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant or in any other capacity);
a Restrained Business."
Clause 1.1 of the General Conditions defines a Restrained Business to be a business or operation similar to, or otherwise competitive with, the Business.

The claims

This case involves two actions which were consolidated. In the first proceedings, the plaintiffs' claimed that the first and second defendants breached the trade covenant in the purchase agreement and/or an implied covenant, and engaged in misleading and deceptive conduct. In addition to claiming damages, the plaintiffs also claimed that it was unconscionable conduct by the defendants to issue a default notice for unpaid rent for the premises. They denied they were indebted to the defendants at all, and denied the defendants were entitled to possession of the premises. The first defendant counterclaimed for unpaid lease payments.
In the second proceedings, which were consolidated with the first, the plaintiffs claimed that the first defendant unreasonably refused to consent to an assignment of its lease and that the third defendant intentionally and unlawfully caused the cancellation of the plaintiffs' telephone listing for the business. At the conclusion of the trial, counsel for the plaintiffs withdrew that last claim and accordingly it was dismissed.

The critical issues

While this case gave rise to numerous issues, the critical ones are as follows:

The identity of the purchaser

(1)Who was the purchaser of the business?

Breach of trade covenant

(2)Did the actions of Peter Ritchie after the sale of the business breach the trade covenant?
(3)If so, was the trade covenant void?
(4)If so, was there an implied term of contract that prohibited Mr Ritchie from engaging in conduct falling short of solicitation?

Trade practices claim

(5)Was the trade covenant a representation with respect to a future matter?
(6)If so, did the first defendant have reasonable grounds for making that representation?

Consent to assignment claim

(7)Was there a request for an assignment of the lease?
(8)If so, was consent to that request withheld?
(9)If so, was that consent withheld unreasonably?

Credibility of Peter Lucas

The plaintiffs' claims rely heavily on the evidence of Peter Lucas. As I do not accept his evidence, it is convenient to explain why at the outset.
When giving evidence, Peter Lucas said that a few years after purchasing the business, he tried to sell it. He said he entered into an agreement to sell the business to a Mr Dowling. Settlement was to occur on 1 February 2004 for a gross purchase price of $35,000, none of which was apportioned to goodwill. There was a condition that the lease that Mr Lucas had with Duxberry Nominees be assigned to Mr Dowling.
Mr Lucas said he telephoned William Ritchie to seek an assignment of the lease. He said:
"Mr Ritchie told me that they wouldn't assign the lease – it would be illegal to assign the lease, and he basically told me that I would have to withdraw – in writing, withdraw my lease and set up a new lease with Mr Dowling, so I'd have to cancel one to start another one."
Mr Lucas said he did not have a problem with that and sent William Ritchie a letter in those terms.
Under cross-examination, Mr Lucas denied that he had asked William Ritchie to give Mr Dowling a new lease. He insisted that he had first asked for an assignment of the lease. He also insisted that his first conversation with Mr Ritchie was prior to 10 February 2004. Mr Lucas was shown a diary that he allegedly kept. For the date 21 January 2004, he had written a note "Phoned Bill Ritchie, asked for an assignment of lease. Bill said no need to make new lease by law." In cross‑examination, it was pointed out to him that that entry was in black pen while the other entries were in blue. It was also suggested that the entry was neater than the others. Looking at the entry for that date, it is clear that the record of the phone conversation is neater than the other entries.
Mr Lucas agreed that he had not taken issue with a letter he received from William Ritchie which referred to a telephone conversation on 10 February and to Mr Lucas having indicated a wish to give up his lease.
Mr Lucas was also shown an affidavit that he had sworn and a letter written by his solicitors to the defendants' solicitors in which the subject of the lease was canvassed. In neither document was there any reference to an alleged refusal to assign the lease. Mr Lucas attempted to explain that by saying that he "never had any trouble with the lease" because the lease was between Mr Dowling and Mr Ritchie. He said he did not get involved in it at all. He said he could not remember whether he had mentioned to his solicitor that he had asked for an assignment but it had been refused. Under re‑examination, Mr Lucas described himself as semi-literate.
The defendants called John Gregory, a document examiner. His expertise was conceded by counsel for the plaintiffs. Mr Gregory examined the diary of Mr Lucas in an effort to see whether any of the entries that referred to the issues in this case had been written after entries in respect of subsequent dates. Mr Gregory found that the entry made on the 21 April page had been made after an entry on the 28 April page. He said that there was insufficient evidence in respect of the other entries to form a conclusion one way or the other.
This evidence is of significant weight in assessing Mr Lucas' credibility. There was no innocent explanation as to why the entry on 21 April was made after the entry on 28 April, as it was denied. I am satisfied that it was an attempt by him to give a false impression that the diary entry had been made on the date against which it was entered. Not only does that cause me to doubt whether the other entries were made on the dates upon which they were said to have been made, it also gives rise to a concern as to Mr Lucas' credibility. Taking into account some of the other aspects of Mr Lucas' evidence to which reference will be made, and all of the evidence in this case, I find I am unable to accept Mr Lucas' evidence.

The identity of the purchaser

The plaintiffs submit that the first plaintiff was the purchaser. The defendants submit the second plaintiff was.
The second plaintiff is the sole director and sole shareholder of the first plaintiff. The second plaintiff gave evidence that he intended to purchase the business on behalf of the first plaintiff ("the plaintiff company").
The third defendant, William Ritchie, said that he thought the first defendant was entering into an agreement with the second plaintiff, Peter Lucas, trading as Odour Elimination Services. However, he also said, "In actual fact I didn't really distinguish between Mr Lucas buying the business under that trade or the fact that it was with a company."
The purchase agreement recorded the purchaser as "Peter Lucas of Odour Elimination Services". The second plaintiff signed his name next to the phrase "Signed by the purchaser".
The lease agreement was entered into by Duxberry Nominees Pty Ltd and "Peter Lucas trading as Odour Elimination Services".
Odour Elimination Services is not and has never been a registered business name.
To purchase the business, Mr Lucas and his wife personally took out a loan in their names ("the purchase loan").
The plaintiffs submitted that three documents demonstrated that the first plaintiff was the principal ("the extrinsic documents").
The first of these documents was a "Statement of Change in Certain Particulars" form ("the form"). The form was completed the day after the sale of the business for lodgment at the Business Names branch of the Ministry of Fair Trading. That form stated that the business was now being carried on by Odour Eliminations Service Pty Ltd, and stated an Australian business number. There was no explanation as to why the Australian company number was not stated.
The second document relied upon was titled "To Whom It May Concern" ("the GST letter"). It was common ground that the GST letter was prepared for GST purposes. It indicates the purchaser was Odour Elimination Services Pty Ltd. The content of that document suggests it was prepared prior to the sale of the business. However, while giving evidence, William Ritchie said that the GST letter was signed late in 2000, two or three months after the agreement to sell was signed. William Ritchie said that he wrote in "Odour Elimination Services Pty Ltd" because Mr Lucas had told him that was the name under which he was trading. He said Mr Lucas told him that a couple of months after the purchase agreement.
Mr Lucas was unable to say when the GST letter was signed. He agreed it was possible it had been signed sometime after the purchase and lease agreements.
I accept William Ritchie's evidence as to when the GST letter was signed.
The third document was a letter dated 19 October 2004, sent by the solicitors for the defendants. It was a notice of re‑entry addressed to Odour Elimination Services Pty Ltd and to Peter Lucas. However, a document prepared in 2004 may simply have reflected the situation at that time. By then, it was apparent that the plaintiffs were asserting that Odour Elimination Services Pty Ltd had been involved in the purchase. The notice of re‑entry may have been addressed to include the plaintiff company simply to be cautious and avoid technical defences. However, no evidence was led to explain why the notice was addressed in that way.
The plaintiffs also rely on the fact that the first defendant has counterclaimed against the first plaintiff in the alternative.
The purchase agreement states that Peter Lucas was the purchaser, not his company. I do not accept that the extrinsic documents or the pleadings alter that fact. There is no ambiguity in the description of the purchaser in the purchase agreement. While there is no business called "Odour Elimination Services", the addition of the reference to that name does not detract from the clear description of the purchaser as Peter Lucas.
In Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd (1999) 21 WAR 350, Malcolm CJ, with whom Ipp and Wallwork JJ agreed, said at [49]–[50]:
"… The general rule as stated in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347 per Mason J is that parol evidence of what the parties did or how they may have themselves interpreted or applied the contract is inadmissible:
'to subtract from, add to, vary or contradict the language of a written instrument.'
See also Maynard v Goode (1926) 37 CLR 529 at 538 per Isaacs J; Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 392 per Lord Fraser; and L Schuler AG v Wickman Machine Tools Sales Ltd [1974] AC 235. In the latter case at 261 Lord Wilberforce said that evidence of the subsequent actions or statements of the parties was inadmissible, unless it evidenced a new agreement on the basis of an estoppel: James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583. Lord Wilberforce recognised that there were exceptions, such as to explain technical expressions, identify the subject matter of the agreement or resolve a latent ambiguity, but went on to say at 261:
'But ambiguity in this context is not to be equated with difficulty of construction, even difficulty to a point where judicial opinion as to meaning has differed. This is, I venture to think, elementary law.' "
I find that Peter Lucas personally was the purchaser.
The plaintiffs submitted in the alternative that the first plaintiff ratified the second plaintiff's purchase of the business and entry into the lease agreement. However, "it is essential to constitute an agency by ratification that the agent in doing the act to be ratified shall not be acting for himself but should intend to bind a principal actually named or ascertainable." Keighley, Maxsted & Co v Durant [1901] AC 240.
I do not accept Peter Lucas' evidence that, at the time of entering into the purchase agreement, he intended to bind the plaintiff company. Accordingly, no issue of ratification can arise.

The evidence

Before addressing the other critical issues, it is convenient to set out the evidence.
Mr Lucas was the first witness to give evidence. He said that, after the business changed hands, Peter Ritchie continued to work there until 24 November 2000. Mr Lucas was asked why Mr Ritchie had left at that time. He said, "We had a mutual agreement that he'd leave. Basically I wasn't happy with him though." Mr Lucas went on to explain that Mr Ritchie had "basically lied" to him by asking if he could leave a friend's car on the premises to do some work on it. Mr Lucas said he was later told that the car was stolen. Mr Lucas said he told Mr Ritchie to immediately get the car off the premises, which Mr Ritchie did. He claimed that Mr Ritchie then sold the car to a wreckers using the name of the business. Subsequently, the Motor Vehicle Dealers' Squad attended the premises and questioned Mr Lucas about that car. Mr Lucas claimed to have been very unhappy about that because he could have lost his dealer's licence over it. (Although it seems he did not actually have a dealer's licence at that time.) He said that was why he asked Mr Ritchie to stop working at the business.
Mr Lucas said he employed a full-time mechanic, Mr Ray Perry. He said Mr Perry had commenced working for him on 1 December 2000 as a contractor at $600 a week. He said he had paid Peter Ritchie the same amount, but as an employee.
Mr Lucas said he began to suspect Peter Ritchie was contravening the trade covenant when he received a message that had been left by Mr Ritchie. Peter Ritchie had left a message asking Mr Lucas to take some parts home and that he would collect them from Mr Lucas at a later time. Mr Lucas wrote Mr Ritchie a letter reminding him of the trade covenant. The letter suggested that Peter Ritchie's request for the supply of parts implied that Mr Ritchie was working from his home. The letter concluded that, if that was correct, it would be in breach of the agreement. (Mr Ritchie's home is approximately eight kilometres from the business premises.)
Oddly, the letter referred to a 10 kilometre radius. Mr Lucas was unable to explain why.
After Mr Lucas sent that letter, Peter Ritchie phoned Mr Lucas and asked him what his problem was in supplying parts. Mr Lucas told Mr Ritchie that it was in breach of the trade covenant. Peter Ritchie then asked Mr Lucas to meet him. Mr Lucas said that, during that meeting, Peter Ritchie said he was on the dole and needed to do a couple of jobs a week from home in order to survive. In Peter Ritchie's evidence, he denied making that remark. The evidence showed that Peter Ritchie was never on the dole.

Mr Lucas said that, once he suspected Peter Ritchie was working from home, he "used to go past his house during the day and of a night time in different vehicles just to see if I could catch him working from home." Mr Lucas said he did that at least three times a week over a period of at least 12 months. Mr Lucas gave evidence that, one night in February, he saw Peter Ritchie working on a vehicle at his home. He said he recognised the vehicle as being an ex‑customer of the business. Mr Lucas said he had not personally seen Peter Ritchie doing work on vehicles on any other occasion.
Mr Lucas said that he had seen Peter Ritchie on two occasions in 2001 leaving the AutoPro store in Rockingham with parts.
Mr Lucas also said he had twice seen Peter Ritchie dropping cars into the auto electrics business which was directly across the road from the business premises. Again, both times were in 2001.
Mr Lucas said on one occasion a vehicle had been towed to the business. He said that, while it was there, the driver of the vehicle got a phone call from Peter Ritchie in relation to fixing the car.
Mr Lucas hired a private investigator to carry out surveillance work of Mr Ritchie.
On one occasion, Mr Lucas received an invoice from AutoPro Rockingham for the supply of a water pump, which turned out to have been supplied to Peter Ritchie. Later, Mr Lucas obtained 100 invoices from AutoPro for the purposes of these proceedings. He said that there was enough work in those invoices for work on 100 cars. He said the approximate value of the chargeable labour would have been around $20,000.
Mr Lucas arranged for an expert, Mr Styles, to assess the invoices. Mr Styles' report set out the profit Mr Styles thought could have been earned from those parts and the work associated with them. Mr Lucas said if he had had that money in his business, he would have brought more stock into the business and bought more cars to sell.
Under cross‑examination, Mr Lucas admitted that the income said to have been lost in the Styles report had not taken into account the labour costs. He said he had not worked out what those labour costs would have been. Indeed, the plaintiffs did not lead any evidence of this. However, under re‑examination, Mr Lucas said that his mechanic, Mr Perry, was under‑worked. He said that his business could absorb an extra two to four jobs a week. This was confirmed by Mr Perry.
Mr Lucas said he went through the first defendant's cash receipt books for the business. He said he had recognised three names as customers that had stayed customers when he took over the business.
Mr Lucas said that, before he purchased the business, he was told by both Ritchies that a particular customer, Waikiki Water Boring, spent about $3,000 a month with the business. He said he got the impression that they would be continuing to use the business after the change of ownership. Under cross‑examination, Mr Lucas said he had been told the Waikiki Water Boring was worth from $2,000 to $3,000 a month. He agreed that he had given instructions to amend a particular application in court proceedings to allege an amount of "at least $3,000". He also changed his earlier evidence and said only Peter Ritchie had spoken to him about Waikiki Water Boring.
In discussing Peter Lucas' credibility, I referred to his evidence about his attempt to sell the business to Mr Dowling, and his requests to William Ritchie to assign the lease, or grant a new lease. Under cross‑examination, Mr Lucas agreed that he never told William Ritchie that Mr Dowling was not the actual purchaser of the business but rather a family trust was.
Mr Lucas agreed that the letter written by William Ritchie seeking more information before granting a lease to Mr Dowling was a request for the sort of information that he would reasonably need to have. He was asked:
"As far as you could see there was no unreasonable resistance from Duxberry to the concept of a lease. They just wanted certain things sorted out at that time?"
And Mr Lucas answered "Yes".
Ultimately, Mr Dowling and the defendants never entered into a lease. Later, the first defendant sent Mr Lucas a notice of re-entry. Mr Lucas then had to put his stock into scrap bins. He said he could not sell it because he did not have a licence. He off-loaded it to Sims Metals for $2,000. He said that was the same stock for which Mr Dowling had been prepared to pay $35,000. Mr Lucas believed the stock was worth about $60,000.
Counsel for the plaintiffs then tendered various profit and loss statements both before and after the business was sold. Mr Lucas was asked to explain why the income for the 1998/99 financial year from the sale of used cars was $138,000, while Mr Lucas' income for the sale of used cars was only $35,000 for the 2000/01 financial year. Mr Lucas explained that it was because he did not have enough money to have as many cars, nor as many good cars, for sale. He said that initially he had three to six cars in his yard for sale at a time. However, he said he was unable to sustain those levels because of the decline in the figures in the vehicle servicing. He said:
"After about three months of being in the business, the figures in the vehicle servicing started to really drop off. That then put pressure on me financially to be able to keep the doors open, which meant that to pay my wages and things like that, I didn't have the extra cash sitting around to be able to keep putting cars out the front and waiting for someone to buy them."
Mr Lucas accepted that the figures he had been given before purchasing the business showed a small loss of about $3,000 once a notional figure for rent was inserted.
Under cross-examination, Mr Lucas agreed that he did not have much working capital left over after he had borrowed to purchase the business. He also agreed that the introduction of the GST in the middle of 2000 caused a lot of businesses to suffer. He agreed that he thought it did affect his business a little bit.
Mr Lucas also admitted under cross‑examination that when he took over the business he stopped advertising in some of the local advertising journals.
Mr Lucas said he had asked for the restraint area to be 20 kilometres and that Mr Ritchie had not objected to that range. Mr Lucas said he would not have bought the business without a restraint of trade clause.
In his evidence‑in‑chief, Mr Lucas said most of his customers came from the Rockingham/Carnamah area. He said there were three or four other repairers in the Port Kennedy area and about 12 or 14 in the Rockingham area.
Under cross-examination, Mr Lucas agreed he would not have minded if Peter Ritchie was carrying on a business in Mandurah. He agreed it would not have affected his business at all. He said he got a few customers that came from Mandurah but not a lot.
Mr Lucas agreed there were eight motor vehicle servicing businesses in Kwinana and 10 in Mandurah. He agreed there was one used car business in Port Kennedy. He agreed there were four businesses selling parts in the Rockingham area and 13 in Mandurah. He agreed there were two wrecking businesses in the Rockingham area, two in Kwinana and five in Mandurah. He agreed there were a considerably larger number of similar businesses than the numbers he had given in his evidence‑in‑chief.
When asked what geographical radius he felt was necessary to protect his goodwill, Mr Lucas said the Rockingham area.
Significantly, Mr Lucas was asked "Would you agree with me that a 20 kilometre radius was just completely unnecessary to protect your business?" Mr Lucas replied "Yes, I would say it's outside the boundaries."
Mr Lucas agreed that the total amount of rent owing at the date of re‑entry was $49,365.97.
Mr Banyard gave evidence for the plaintiffs. Mr Banyard is a tow truck driver. He said that he towed a vehicle for Peter Ritchie on at least half a dozen occasions. He said it was possible it could have been up to a dozen. He said he had towed most of the cars to Mr Ritchie's home except for one that he had taken to Sound Auto Electrics. Most of them he had not picked up again, except for one that he took to Port Kennedy Wreckers.
Mr Banyard also said he had seen Mr Ritchie getting four tyres fitted to a car.
Mr Banyard's evidence was not seriously challenged, and I accept his evidence.
Mr Woolhead also gave evidence for the plaintiffs. He had witnessed the signatures on the signing of the purchase agreement. He said that when he and Peter Ritchie were leaving after the agreement had been signed, he asked Peter Ritchie what he was intending to do now. He claimed Mr Ritchie said:
"I'll probably do what you do, you know, sort of like at the moment – on the dole and doing a few cashies from home."
In his evidence, Peter Ritchie said he had said "I might just do what you do". He said it was an off‑the‑cuff comment which just meant he might enjoy the good life. He said it was not what he was actually intending to do and in fact he never did go onto the dole. He said he was not sure what he did want to do but he wanted to get out of the automotive industry.
Mr Woolhead also gave evidence of an occasion when Peter Ritchie had telephoned him wanting to know the settings for some cylinder heads. He said this was about three to six months after the purchase agreement had been signed. Peter Ritchie said he needed them to finish rebuilding the motor he was working on. On another occasion, he said Mr Ritchie telephoned him asking for a distributor.
Much later again, he said that Mr Ritchie had come to his home and asked him to initial a change on some documents. He was unable to say what the documents were, but believed they were connected to the sale of the business and the court case. He said he had refused, but had said he would go to court if someone subpoenaed him. He said that Mr Ritchie said he was disappointed in him because he was a good mate.
Peter Ritchie's version was somewhat different. He said he had received an affidavit of Peter Lucas which contained an allegation that Mr Woolhead had said something. He said he decided to go to see Mr Woolhead to ask him whether or not he did say that because he did not believe it was accurate. Mr Ritchie emphatically denied that he asked Mr Woolhead to initial anything. He said what he asked Mr Woolhead to do was read the document. Mr Woolhead apparently told him that he would not read it, he would seek legal advice, he had been told not to read it, and he did not want to get involved. Mr Ritchie said he asked Mr Woolhead three or four times but he kept refusing. He agreed he had said that he was disappointed in Mr Woolhead because they were friends.
Under cross‑examination, Mr Woolhead admitted that he had done some work for Mr Lucas while he was on the dole and had been paid cash and given lunch. Peter Ritchie gave evidence about a disagreement he had had with Mr Woolhead shortly after Mr Lucas had bought the business, as some explanation as to why Mr Woolhead might have an axe to grind.
In relation to the conversation after the signing of the purchase agreement, I prefer Peter Ritchie's version. It is unlikely Mr Woolhead would have remembered the conversation word for word, and the gist of each version was similar. Nor do I find support for Mr Woolhead's version from the evidence of Mr Lucas, as I do not accept Mr Lucas' evidence.
It is unnecessary to resolve the other conflict in their evidence in relation to the document. Had I been required to do so, however, I would have preferred the evidence of Mr Woolhead. The discrepancy is unlikely to be due to faulty recollections. As noted below, I have some concerns about the credibility of Peter Ritchie. While Mr Woolhead is arguably in the plaintiffs' "camp", and while it seems he received cash payments for work "off the books", I do not have the same level of concerns about his credibility.
Mr Lucas' mechanic, Ray Perry, also gave evidence for the plaintiffs. He said he was paid $600 a week for a 40 hour week. He said that the workload varied and one day he may be busy but that most times it was fairly "cruisy". He said he could easily have fitted in an extra four jobs a week.
He said the work had always fluctuated. However, he said that when he was first there it was busier but then dropped off.
Under cross-examination, the Styles' report was put to Mr Perry. He was asked about invoice 1919, which Mr Styles had assessed as requiring 22.7 hours of work. It was put to Mr Perry that the work could be done in about 9.6 hours. He said he would "have to agree" with that and that Mr Styles' estimate was "fairly heavy".
He was then asked about invoice 3231, which Mr Styles had estimated would require 40 hours of work. Mr Perry said he would agree with an estimate of around nine hours for that work.
He was then asked about invoice 289, which Mr Styles had estimated would require labour of 24 hours. Mr Perry agreed it could be done in about 9.6 hours.
He was then asked about invoices 5195 and 5369, which Mr Styles estimated would require 40 hours of labour. Mr Perry agreed the job could be done in 9.6 hours.
Mr Perry said he thought there were around six repair shops in the Port Kennedy area.
I have no hesitation in finding Mr Perry to be an honest and reliable witness. While he is employed by Mr Lucas, he unhesitatingly agreed with many of the propositions put to him under cross‑examination. No other evidence conflicted with the evidence of Mr Perry, except the opinions of Mr Styles and Mr Lucas as to the number of hours required to do particular jobs. I accept Mr Perry was an honest witness, and a witness well qualified to express the opinions that he did. For reasons which I will set out later, I also accept the accuracy of his opinions.
Mr Dowling also gave evidence for the plaintiffs. He said that he met William Ritchie when William Ritchie attended the premises and found Mr Dowling working there. Mr Dowling explained to Mr Ritchie that he was intending to buy the business and asked him for a lease. Mr Dowling said:
"I don't remember asking him for an assignment of a lease. As far as I was concerned I wanted a lease."
He said he did not talk about having a lease transferred and just said "I need a lease." Later in his evidence, however, Mr Dowling claimed that he had asked for an assignment because the word "assignment" was used in the contract he had with Mr Lucas. He said:
"From day one I've asked for an assignment of the lease because that's what's in my contract. I just repeated what's written in my contract. This is what I asked for."
He later clarified that evidence to suggest that on the first time he spoke to Mr Ritchie he was just asking for a lease but on the second and every subsequent occasion he was asking for an assignment. However, he admitted that at the time he did not know there was a difference between them. Later, Mr Dowling claimed that he did ask William Ritchie to assign the lease on the very first occasion.
In light of the numerous inconsistencies in Mr Dowling's evidence on this issue, and the fact that, at the time, he didn't know the difference between a lease and an assignment of a lease, I do not accept he asked for an assignment of the lease.
Mr Dowling gave evidence that the ads he had arranged to be placed in the telephone directories had been cancelled by William Ritchie. While this was initially the subject of an unlawful interference claim, the claim was later withdrawn. However, Mr Dowling said that the phone calls to the premises dropped off significantly. Accordingly, he said he insisted on being given 12 months free rent before he was willing to enter into a lease with William Ritchie.
Mr Dowling also said that he refused to give William Ritchie all of the information he was asking for because he believed the requests were unreasonable. Mr Dowling admitted that William Ritchie had asked him for financial information on his business, his past and the family trust. He said he believed he did not have to provide that information and felt it was "very invasive". He also said he could not provide details of the trust financials because it was a new trust and didn't have a financial history.
Mr Dowling also refused to pay the $750 to draw up the lease, because he knew that the unit next door had only had to pay half of the cost for their lease, and the lessor paid the other half. Mr Dowling also wanted Mr Ritchie to sort out an issue with the roller door and the oil separator.
The defendants did not challenge Mr Dowling's evidence as to his demands for a rent free period and for those other issues to be sorted out. They did not challenge his evidence as to what he refused to provide. Indeed, much of that evidence emerged under cross‑examination as part of the defendants' case that, if there had been a refusal to assign, it was not unreasonable.
Mr Mills was the owner of Waikiki Water Boring & Reticulation Services. He gave evidence for the plaintiffs.
Mr Mills said he had gone to Kwinana High School with Mr Ritchie and described him as a friend. However, he said he did not socialise with him. Peter Ritchie in his evidence said he had not been to Kwinana High School with Mr Mills, as he attended Rockingham Senior High School. However, he agreed that they had known each other for a very long time. He said he would not say they were friends socially, but did remember bumping into him in a pub on one occasion and having a drink with him for an hour or so. Mr Mills did not recall ever having a drink with Mr Ritchie.
Mr Mills said that he had used Peter Ritchie to service their vehicles. Mr Mills said that the repairs to the Waikiki vehicles cost about $500 to $1,000 per month. After the business changed hands, he continued to use that business but was dissatisfied with the service he was receiving. Mr Mills said his manager was not happy with Mr Lucas because the vehicles were coming back with greasy marks on them and they were not getting value for money. Mr Mills said that, as a result, they took their cars to a different repairer nearby (not Peter Ritchie). Other evidence made it clear that Mr Mills could not have taken his cars to the nearby business he named (as that business wasn't there at the time). However, I am satisfied that Mr Mills was merely mistaken as to that. Further, I am satisfied that Mr Mills did stop using Mr Lucas' business because of perceived poor value. There is no direct evidence that Mr Mills used Peter Ritchie to repair the vehicles after the business changed hands, and I am not satisfied that he did.
Mrs Currie gave evidence for the plaintiffs. Mrs Currie is a part owner of AutoPro. She said that Peter Ritchie was a friend of hers and she had known his family for a long time. She said she knew Mr Lucas through his purchase of Peter Ritchie's business.
She said that occasionally she would drop parts out to Peter Ritchie at his business or his home. When she was asked if parts were dropped off after he had sold the business she said "No, not really then, no." When pressed, she said "Definitely no." Mrs Currie agreed that Peter Ritchie had bought parts from her store after he had sold the business. She said Peter Ritchie had an account, but sometimes bought things over the counter for cash. If it was a cash sale, the receipt would simply show a cash sale.
She said that after Mr Ritchie sold the business, he did not buy a lot of parts, but those that he did buy were mainly on the account. She said that it was fairly rare that he would buy something with cash.
Mr Currie, another owner of the business and husband of Mrs Currie, also gave evidence for the plaintiffs. He said that he was a friend of Peter Ritchie. He said they had delivered parts to Mr Ritchie's home from time to time, but mostly Peter Ritchie would come in and pick them up. Contrary to Mrs Currie's evidence, he agreed he had made such deliveries to Peter Ritchie's home after the business had been sold. He said in the last five years it would probably have been half a dozen times.

Both Mr and Mrs Currie gave evidence about a receipt in the name of Phil's Engineering. That receipt is discussed later. For now, it is sufficient to note that that receipt raised some concerns about the evidence of Mr and Mrs Currie.
The plaintiffs called Mr Needs. Mr Needs carried out surveillance of Peter Ritchie at the request of Mr Lucas. Mr Needs did a spot check at 4 pm on Thursday 7 June 2001. He noted that two vehicles were present, but saw nothing of significance.
The next day, surveillance was conducted between 9.05 am and 5.34 pm. Mr Needs saw Peter Ritchie driving a grey Camry and later saw the Camry on a hoist in the rear garage. Mr Needs saw Peter Ritchie appear to repair the wiper blades on the Camry and test drive it. Mr Needs said he later saw Peter Ritchie briefly squat at the driver's side of a utility and said he appeared to be working on the dashboard area. In his evidence, Peter Ritchie said that the grey Camry was the second job he did for Phil Edwards, whose evidence is discussed below. In relation to the utility, he said it was only one and a half years old and he would not have been working on the dashboard. He said it was possible he was looking for a wallet or something like that. On viewing the surveillance video of that event, it is impossible to determine what Peter Ritchie was doing. Even if he was working on the utility, that would add little to the evidence, in light of his admission that he worked on 35 cars or more.
The plaintiffs called Phil Edwards, who had twice contacted Mr Ritchie to get his cars serviced. The first occasion was in April 2001 and the second in June 2001. He said one vehicle was a blue Camry and the other was a white Pulsar sedan. He said on each occasion it cost him $80 for both parts and labour.
Mr Edwards said he had asked Peter Ritchie for a receipt on the first occasion in the name of his business, Phil's Engineering. Peter Ritchie gave him a receipt. Mr Edwards said he did not take much notice of it at the time, but it was in fact a tax invoice made out from AutoPro. Mr Edwards did not have an account with AutoPro, nor had he ever attended the AutoPro store. On the second occasion, Mr Edwards said that Peter Ritchie was a bit reluctant to give him a receipt so "I didn't sort of hassle him too much." Later, Mr Edwards said that he had asked again for the receipt and then rang up the next day to "hassle him about it". He said Peter Ritchie said he would bring the receipt around but it did not happen.
Under cross‑examination, Mr Edwards denied that he had told Peter Ritchie he had been referred to him by AutoPro. He admitted he was a friend of Peter Lucas. He said he had suggested to Peter Lucas that he could find out if Peter Ritchie was running the business from home by contacting Peter Ritchie himself and asking if he could service his car. Accordingly, that is why he did.
The plaintiffs called Mr Styles, "an automotive engineering consultant". Mr Styles analysed the AutoPro invoices to determine what the labour charge would have been. He said that Mr Lucas had given him his views of the appropriate labour charges but that he had told Mr Lucas:
"I would be a bit more conservative and I produced my figure and his was slightly higher but, as I said, I remained conservative on this because I was advised that it was probably going to go to court so I didn't wish to be too hard on the prices."
Mr Styles added the cost of the parts listed on the various invoices, and reached a total of $7,574.49. He said those parts would have involved labour worth $17,110 (at $50 per hour). He said he would expect a profit of 28 per cent on parts (equating to $2,120) and 33 per cent on labour ($5,720). Accordingly, he said the minimum total profit arising from those parts would have been $7,840.
Mr Styles was taken to the first invoice, 1919, and asked to explain what was involved in doing that particular job. Mr Styles gave a very lengthy explanation, saying that all of those tasks would need to be done, "if you are going to do it to the Australian National Competency Standard." He was taken to a number of other invoices and gave similar answers. He was asked what he would say to the suggestion that a particular job would take considerably less time than he had estimated. He repeatedly said, "Then the task wouldn't have been done to the Australian National Competency Standards."
However, Mr Styles also said that he was pricing the jobs on the basis of the market rate. In respect of invoice 5195, for example, he had put a figure of $1,895. He said, "That's how much labour I would have been able to charge out if I did the job." When it was put to him that it approximated to about 37 hours of labour he said, "The person may not have spent that amount of labour on it but they certainly would have charged that amount."
Under cross‑examination, Mr Styles denied that his evaluations were based on an ideal world. However, he did agree that not everybody performed to the Australian National Competency Standards ("the standards"). He said the standards came into effect and "have been gradually recognised." He said he did not know how many workshops charged according to the standards.
Mr Styles was also asked about various manuals that set out flat rates for particular jobs. He agreed that some businesses would quote using those flat rates and hope to be able to do the job in less time in order to make a profit.
In light of all of the evidence, and particularly the evidence of Ray Perry, the evidence of Mr Styles is not helpful. Several examples were put to Mr Perry, who readily conceded that he could have done the work in much less time than that assessed by Mr Styles. Further, Mr Styles conceded he was basing his assessments on the standards. There was no evidence as to how widely those standards were employed throughout the industry and no evidence that they were used by Mr Lucas in his business. On the contrary, Mr Lucas' own mechanic did not seem to aspire to such standards. Further, there was no evidence that Mr Lucas charged more for labour than the hours that were actually worked.
As is discussed later, Peter Ritchie also went through the invoices and made his own estimates. Mr Perry agreed with those estimates of Peter Ritchie that were put to him. Accordingly, I am more inclined to rely on the assessments made by Peter Ritchie. While there were some question marks over his credibility, I am satisfied that his evidence in this regard should be accepted. He had obviously analysed the invoices thoroughly and had painstakingly calculated how long each task would take. The confirmation by Ray Perry, Mr Lucas' own mechanic, provided sufficient independent corroboration to overcome any concerns one might have about Peter Ritchie's credibility generally. Peter Ritchie also produced some invoices in respect of jobs done before the business had been sold that showed significantly less labour was charged for particular jobs than the value of the labour estimated by Mr Styles.
Accordingly, I find that the assessments of time made by Mr Styles do not provide a useful indicator of the amount of labour for which charges would actually have been made in respect of the parts purchased by Peter Ritchie.
William Ritchie was the first witness to give evidence on behalf of the defendants. He explained that his role in the business was administration and doing the accounts, while his son, Peter Ritchie, ran the business. He said the primary income producing section was the sale of used cars. He said Peter Ritchie would buy unserviceable used cars, bring them up to serviceable state and then sell them. He said they financed the purchase of those cars from normal cash flow or through an overdraft. He said he thought the overdraft was about $10,000 or more.
William Ritchie, who has a certificate of accountancy from TAFE, explained what he found when he compared the business accounts before and after the sale. In broad terms, it appeared that Peter Lucas had made more of a profit from vehicle servicing than Peter Ritchie had. Conversely, Peter Lucas had made significantly less profit from the sale of used cars.
The various accounts were tendered in evidence, and William Ritchie's evidence as to their contents was self‑evidently accurate.
In relation to the assignment of the lease issue, William Ritchie said Mr Dowling had never asked for the assignment of a lease. That denial was vigorously challenged in cross‑examination.
It is unnecessary to analyse William Ritchie's evidence on this point for two reasons. Firstly, it is for the plaintiffs to prove that they requested an assignment of the lease. Secondly, the plaintiffs rely on the evidence of Mr Lucas for an assignment. (I have already noted that I do not accept that Mr Dowling asked for an assignment.) The attack on William Ritchie was made simply to rebut William Ritchie's evidence that Mr Lucas did not ask for an assignment. However, as I have earlier indicated, I do not accept Mr Lucas' evidence.
The next witness for the defendants was Peter Ritchie. He said that he had initially agreed to work for Mr Lucas for about a month. However, there were delays with Mr Lucas getting the various licences that he required and so he stayed on for longer.
Peter Ritchie also gave evidence about the alleged stolen vehicle that he had taken to Mr Lucas' premises. Mr Ritchie said he initially did not know the vehicle was stolen, but later began to have suspicions. He claimed that he was assured that it was not stolen. He sold it to a wreckers. When he was asked about the vehicle by the Motor Vehicle Dealers Licensing Squad, he did not tell them who he had bought the car from. He said he told them he did not know where the vehicle came from. In other words, he lied to them. While Peter Ritchie candidly admitted his deceit, and while there are many reasons why people lie (including to protect a friend), this evidence does give rise to concerns about Peter Ritchie's credibility.
Peter Ritchie said that that the incident with the alleged stolen vehicle caused a strain in his relationship with Mr Lucas. A week or so later, Peter Ritchie decided he should leave. On top of the strained relationship, he said he had only ever intended to stay there for about a month. In addition, the mother of his children was having some difficulties and wanted him to take care of the children full time. As it happened, he did not end up doing that as the woman no longer needed him to. However, he said he did look after the children more often than previously.
Peter Ritchie gave evidence of the occasion that he contacted Mr Lucas to seek some parts. He said it was the day after he had finished working for Mr Lucas. Mr Ritchie explained that he had bumped into an old girlfriend whose car had broken down, and he wanted to give her a hand. Mr Ritchie described the conversation he subsequently had with Mr Lucas in which Mr Lucas raised the trade covenant. Mr Ritchie said he had told Mr Lucas that he was trying to promote Mr Lucas' business because that was also in his (Peter Ritchie's) interests, as his company leased the premises to Mr Lucas. Mr Ritchie said that he was not paid in cash for the work he did on that woman's car but said she re‑covered a seat on one of his children's bikes.
I accept counsel for the defendants' submission that "one could hardly imagine a less surreptitious attempt to breach a restrictive trade covenant than someone ringing up and asking for a part to fix a broken down vehicle."
Peter Ritchie gave evidence of the various jobs (out of the car repair industry) he had had since ceasing work for Mr Lucas. He did a few casual jobs until June of 2001, and since that time has been almost entirely in full‑time employment, albeit with several different employers.
Peter Ritchie said that he received income from his housemates, and was also drawing money from director's loans that he had with the company. Mr Ritchie owned his own house outright and did not have any car repayments to make.
Peter Ritchie agreed that he had done some mechanical repair work at his home between February 2001 and August 2002. He said he did not advertise any of that work. He said people just came to see him and asked him for help. In addition, he was also repairing his own cars.
Mr Ritchie estimated that he had worked on somewhere between 30 and 40 cars, not including his own. Of those, about 15 had been previous customers. He said virtually all of them were friends to some degree.
Under cross‑examination, Peter Ritchie said he was 99 per cent certain it was no more than 35 or 40 cars. He accepted the possibility it might have been more, but denied it could have been 100.
It was put to Peter Ritchie that there were some 98 invoices over a six month period. Peter Ritchie pointed out that many of those invoices could relate to one car. However, he conceded that there would have been occasions where he might have done four or five cars in a week. However, he pointed out that he may not have been paid for all of those jobs. He accepted that he was averaging two or three cars a week during that six months.
Peter Ritchie purported to explain why he had given Phil Edwards a receipt from AutoPro made out to Phil's Engineering. He said that he had purchased around $50 worth of parts for the job for Phil Edwards. He said because he knew that he would probably be charging him $80, he bought some other items for himself to make it up to the value of $80. He then asked Mr Currie to write the receipt out to Phil's Engineering because that was the name Mr Edwards had given him. That explanation was less than convincing. However, in my view, it is of little moment. That is because it is for the plaintiffs to prove that Peter Ritchie was engaged in work in breach of the trade covenant. Any doubts I may have as to Peter Ritchie's credibility may disincline me to accept his evidence that he only worked on 35 cars. However, it does not assist the plaintiffs to prove, on its own, that the number of cars upon which he worked was significantly more.
Peter Ritchie gave evidence that he received between $1,500 and $2,000 in payments for the labour he performed on repairs from his home. It was obvious that he had not declared that income in his tax returns.
Peter Ritchie conceded that Mr Banyard had towed numerous vehicles on his behalf. He explained the circumstances of five tows that he could recall. One tow was simply a tow of a vehicle to a potential purchaser. Another tow was for a friend's car in respect of which Mr Ritchie did not receive any payment. On another occasion, he arranged a tow for a friend's car, but did not do any work on that car. On the last occasion, it was for the stepmother of one of his housemates. Again, Mr Ritchie said he had not done any work on that car.
Under cross‑examination, Mr Ritchie admitted that a Mr Wright was a very good friend of his. He agreed that he had spoken to Mr Wright a couple of weeks earlier and had also spoken to him two nights before he gave his evidence. He said he knew that Mr Lucas was contemplating issuing a subpoena on Mr Wright's wife. He agreed he thought Mr Banyard's name had come up in the course of that conversation, but denied knowing that Mr Wright had or was intending to ring Mr Banyard about him giving evidence.
Mr Ritchie explained that he only agreed to do work for Phil Edwards because Phil Edwards kept on pushing and pushing. He said that AutoPro had referred people to him on a couple of occasions. He agreed they were people he did not know.
Mr Ritchie was asked about Mr Lucas' evidence that, on his review of the records, he could only recognise three customers as having stayed with the business after it changed hands. Mr Ritchie explained that quite often he did not write the person's name down or would write "cash sale" or just the person's first name. He also named several other people that he knew who had gone back to the business after it had changed hands.
Peter Ritchie gave evidence about the Styles' report. He said that he had used on his own vehicles about $800 to $900 worth of the parts Mr Styles had included in his report.
Peter Ritchie also said that he had obtained approximately $500 worth of parts from sources other than AutoPro and the Capricorn Society – and those parts would not have been contained in the Styles' report.
Peter Ritchie said that once or twice he had bought parts from AutoPro with cash rather than on his account. He said that probably more than 90 or 95 per cent of parts that he bought from AutoPro he bought on account.
Mr Ritchie went through a detailed analysis of the Styles' report. Mr Styles made an arithmetic error of $590 when adding up the cost of parts in relation to Invoice 1919. In addition, he incorrectly included credited parts in the amount of $527.89. The total profit on mark‑up of parts from AutoPro sources was $1,526.98, not $2,120. The total of additional parts from Capricorn was $970. Prior to the mark‑up, the total value of all parts used by the second defendant was $6,423.52, not $7,574.49.
Peter Ritchie also identified which of the invoices related to work he had done on his own car. He also identified those invoices that related to personal repairs of family members' cars that were done free of labour charge, and only the costs of parts was recovered. He also identified those jobs that had been done in exchange for payment in kind.
Most significant, however, was Mr Ritchie's evidence of his assessment of the amount of labour that would have been required to perform each of the relevant tasks. His assessments were significantly lower than those of Mr Styles. For the reasons I have already expressed, I accept Peter Ritchie's evidence in this regard.
Even if one does not accept Peter Ritchie's evidence as to the extent to which the parts were not accompanied by labour costs, and even assuming all of those people would have chosen Mr Lucas' business, the total maximum loss to Mr Lucas was quite modest. Further, it is clear that whatever caused Mr Lucas to suffer financial difficulties had little to do with the repair side of the business. As noted, Mr Lucas made more of a profit from the repair side of the business than had been made prior to the changeover. It was not suggested on behalf of the plaintiffs that less profit was earned than the accounts revealed, such as may occur if cash payments are made for labour and are not entered into the books. Accordingly, I must assess the position on the basis of their own accounts. Those accounts show no loss whatsoever in the profitability of the repair section. Further, it is apparent that Mr Lucas made far less money from the car‑sales side of the business than had been made by the defendants.
It is true that the gross income from vehicle services was some $35,000 less after the business changed hands. However, there are a number of possible reasons why that might have occurred, other than a breach of the trade covenant. Mr Lucas conceded that the introduction of GST had had some impact. Further, it is likely that some customers at least had used the business by reason of Peter Ritchie's personal qualities and skills and had gone to other local repairers after he left. There was also the evidence of Mr Mills that he had taken his business elsewhere as he was dissatisfied with Mr Lucas' service.
The plaintiffs have failed to prove that the reduction in gross income was attributable to the work Mr Ritchie was doing. And, in any event, there was no reduction in net income from the repair side of the business.

Trade covenant claim

The plaintiffs allege that the trade covenant was breached. The plaintiffs submitted that damages:
"are principally sought as against the first defendant in relation to the breach of trade covenant, although the second defendant, as a director of the first defendant, is liable under s 75B of the Trade Practices Act 1974 for any misleading and deceptive conduct engaged in by the first defendant in relation to the claims made in paragraphs 13A and 13B of the Statement of Claim. Section 9 of the Fair Trading Act is also pleaded against the second defendant."

What this submission appeared to concede was that, while both the first and second defendant were alleged to have breached the trade covenant, in actual fact, the claim against the second defendant was limited to the Trade Practices Act 1974 ("the Trade Practices Act") and Fair Trading Act 1987 claims.
It is clear that a breach of the trade covenant of itself could not give rise to a cause of action against the second defendant. It was common ground that the second defendant was not a party to the purchase agreement. Further, the only way that the conduct of the second defendant could give rise to a breach by the vendor would be if the conduct of the second defendant could be said to have breached cl 15.1 of the General Conditions.
As noted above, cl 15.1 of the General Conditions relevantly states that the:
"... vendor must not, and must procure that each of its associated persons does not, during the Restraint Period in the Restraint Area;
(a)promote, participate in, operate or engage in (whether on its own account or in partnership or by joint-venture); or
(b)be concerned or interested in (directly or indirectly, or through any interposed body corporate, trust, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant or in any other capacity);
a Restrained Business."
Clause 1.1 of the General Conditions defines a Restrained Business to be a business or operation similar to, or otherwise competitive with, the Business.
It was common ground that the second defendant was an "associated person" of the first defendant.
Business is defined in cl 1 of the purchase agreement to include "automotive wrecking/car sales/mechanical repairs". It was submitted on behalf of the defendants that it should be concluded that, unless a business involved all of those three activities, it would not fall within the terms of cl 1.1. That submission was only faintly pressed, and I do not accept it. Such an interpretation would be contrary to the natural meaning of the clause and the purpose of trade covenant clauses.
It was then submitted on behalf of the defendants that the amount of work conducted by Peter Ritchie was insufficient to fall within cl 1.1.
The purpose of cl 15.1 is clearly to capture those businesses that, in all the circumstances, do impact upon the business sought to be protected. It would defy logic and common sense if Peter Ritchie could be said to have breached that clause if he had repaired his own car. Similarly, it would be an affront to common sense if he were to said to have breached that clause if he repaired the car of a friend for no fee. Obviously, at some point, the line must be drawn. However, it may not always be easy to decide on which side of the line a particular level of activity falls.
In Hungier v Grace & Anor (1972) 127 CLR 210 the High Court was dealing with the issue of whether the appellant was carrying on the business of money lending. Barwick CJ said at 217:
"Whilst no doubt system and regularity are involved in the carrying on of a business, it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. One may systematically make regular deposits to a bank account but not be carrying on a business of doing so. In other words, system and regularity of making transactions are not in themselves definitive in this field. Their absence may well deny that a business is being carried on but their presence does not necessarily establish that it is."
Barwick CJ noted at 218 that all of the events were of the respondent's initiation and, "strangely enough for one said to be in the business of money-lending, none of the appellant's seeking." His Honour also said on the same page: "It is said that the transactions were systematic and regular. But there was no system on the part of the appellant except to respond to the respondent's requests. There was no regularity but of the respondent's contriving."
Menzies J said at 222:
" 'Business' is, of course, a word of great flexibility, but, in the relevant definition of 'money lender', it ought not, I think, to be extended further than to cover what I would describe as the carrying on of a course of money lending in an organized way with some continuity and generality. It is true that, in lending money as he did, Hungier was acting as a businessman not a philanthropist, but the fact that he got a good return on the money which he lent ‑ albeit without security ‑ does not, of itself, give his lending the character of the carrying on of a business. … True it is, that Hungier was financing Grace's business transactions, but was it his business to do so, or was it rather no more than a convenient way of his investing surplus funds derived from his business, which both helped his friend, and yielded him a higher return than he could have obtained by depositing surplus moneys with some borrowing institution?"
In this case, the evidence goes no further than establishing that Peter Ritchie worked on 35 to 40 cars (excluding his own) over an 18 month period. While one might have a suspicion that there could have been more, the evidence does not establish it. I also accept that Peter Ritchie did not always charge for his labour. Further, there was no evidence Peter Ritchie actively sought any vehicle repair work. Had there been such evidence, that would have been a significant factor in assessing on which side of the line the conduct falls. On the evidence in this case, however, I am not satisfied that Peter Ritchie was carrying on a business. Accordingly, I find that the trade covenant was not breached.

Validity of trade covenant

In case I am wrong about that, it is necessary to consider whether the trade covenant was unreasonable as to area, scope and duration such as to render it void and unenforceable.
The law in this area is well settled and there is no dispute between the parties as to the appropriate principles. Many of those principles were usefully summarised by his Honour Malcolm CJ in Cream v Bushcolt Pty Ltd(2004) ATPR 42‑004. Those principles include:
1.Restraints of trade will be held void unless they can be justified as reasonable (par 18).
2.The party who seeks to enforce a restraint of trade clause in a contract carries the burden of proving that the restraint is reasonable as between the parties (par 20).
3.In order to be reasonable, it must afford no more than adequate protection for the party in whose favour it is imposed (par 23).
4.The amount of the purchase price paid and particularly the amount paid for goodwill is relevant to the question of reasonableness, but not decisive. The question in each case is whether the covenant goes no further than is necessary to afford the covenantee adequate protection (par 23).
5.The question whether a particular provision operates unreasonably in restraint of trade is to be determined not by the form in which the relevant provision is framed, but by its effect and operation in practice (par 26).
6.A restraint may be imposed more readily and more widely upon the vendor of a business in the interests of the purchaser than upon a former employee in the interests of the employee (par 24).
From other often‑cited cases come the following well established principles:
1.An admission by a covenantee that a lesser area would have provided sufficient protection tends to prove that the covenant encompassed an area that was wider than was reasonably necessary for the covenantee's protection: Lindner v Murdock's Garage (1950) 83 CLR 628, per McTiernan J at 647.
2.The fact that the parties have bargained from a position of equality is one of the circumstances to be considered in determining whether the covenants were reasonable, but it does not save from invalidity a covenant found to be unreasonable or contrary to the public interest: Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1972‑1973) 133 CLR 288, per Gibbs J at 317.
3.A covenant will be unreasonable if the area covered exceeds that fairly covered by the business of the covenantee at the date of the agreement or which at that date can reasonably be expected to be covered by such business on the expiration of the agreement: Brightman v Lamson Paragon Ltd (1914) 18 CLR 331, per Rich J at 335, endorsed by Isaacs J at 337.
4.A covenant cannot be saved by carving, out of the area to which the parties agreed the restraint should apply, a smaller area within which it would be reasonable for the plaintiff to be protected: Lindner (supra) per McTiernan J at 647.
5.When determining whether the area or duration of the restraint is reasonable, as a general rule, there is no real scope for either reading down or severing the relevant clause. Either the area of the restraint is reasonable or it is not. Either the duration of the restraint is reasonable or it is not: Rentokil Pty Ltd v Lee (1995) 66 SASR 301, per Debelle J at 337.
It was common ground that the trade covenant in the purchase agreement was a restraint of trade covenant.
The plaintiffs submitted that it was significant that the amount paid for the goodwill of the business in this case ($21,700) comprised more than 25 per cent of the total purchase price ($80,000). Counsel for the plaintiffs drew the court's attention to the decision in Hankinson v Brookview Holdings Pty Ltd [2004] WASCA 279. In that case, Wheeler J, with whom E M Heenan and Simmons JJ agreed, said at [20] that goodwill representing a little over one fifth of the total purchase price was a significant amount. I accept that the amount paid for goodwill in this case was significant. However, it is obviously not determinative. Further, I also accept the submission made by counsel for the defendants that the goodwill must be taken to be allocated to all of the business, not just the repairs, particularly as the repairs side of the business was not its most profitable side.
In this case, the trade covenant stipulated a 20 kilometre radius. Evidence was led to demonstrate that, even within a 10 kilometre radius of the business, there were approximately 60 car repair businesses (not even including car wrecking and car sales businesses). In Port Kennedy alone, there were about another 10 car repair businesses.
It is also significant that Peter Lucas conceded that the area covered by the restraint clause was more than was necessary to protect his business. Indeed, counsel for the plaintiffs conceded in his closing submissions "rightly or wrongly he gave that evidence; whether he understood it or not is another matter, but I guess the long and short of it really is does that concession under cross‑examination do away with the enforceability of a restraint covenant when you have a litigant conceding that it was in excess of what he really wanted."
In all the circumstances, the plaintiffs have not satisfied me that the area covered by the trade covenant goes no further than is necessary to provide adequate protection to the plaintiffs. Accordingly, I find the trade covenant to be void and unenforceable.
I should also note that counsel for the defendants submitted the trade covenant was also void as the two year time period was an unreasonable period of time, particularly as the business had only operated since 1998. While it is unnecessary to decide this point, in my view, the two year time period is not unreasonable.

Implied term of contract

In the alternative to the trade covenant, the plaintiffs claim that there was an implied term of the purchase agreement that the first and second defendants' conduct for the duration of the restraint period would not derogate from the goodwill of the business.
This aspect of the plaintiffs' claim was not covered in their written submissions. In oral submissions, counsel for the plaintiffs suggested that the implied term was relied upon in case the trade covenant was found to be void.
Terms may be implied in a contract by law or when necessary to give business efficacy to the contract: Castlemaine Tooheys Ltd and Anor v Carlton & United Breweries Ltd and Anor (1987) 10 NSWLR 468, per Hope JA at 486. The plaintiffs submitted that the term they sought to imply fell into the latter category (par 11A of the statement of claim).
In my view, the term sought to be implied by the plaintiffs is not necessary to give business efficacy to the contract in light of the express trade covenant.
Further, counsel for the plaintiffs disavowed any suggestion of solicitation of former customers by the second defendant. Accordingly, the implied term was said to prohibit the defendants from engaging in conduct falling short of solicitation (unlike the implied term in Trego & Smith v Hunt [1896] AC 7). Such an implied term would go well beyond what was reasonably necessary to protect the plaintiffs and, for that reason alone, it could not be implied.
If I am wrong, it is necessary to note that the claim for breach of the implied term does not lie against the second defendant as he is not a party to the contract.

Trade practices claim based on restrictive trade covenants

The plaintiffs' claim under this heading is based on the characterisation of the trade covenant as a representation as to a future matter on the part of the vendor and one of its directors, the first and second defendants.
Engaging in conduct for the purposes of s 52(1) of the Trade Practices Act may include making a contract (s 4B(2) TPA). If a statement in a provision of the contract is false, that may constitute engaging in misleading or deceptive conduct: Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470, per Lockhart and Gummow JJ at 505. Conduct will be misleading or deceptive if it leads, or is likely to lead, into error: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, per Gibbs CJ at 198. The defendant need not have an intention to mislead: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd(1978) 140 CLR 216 per Steven J, with whom Jacobs J agreed, at 228 and Murphy J at 234.
Entering into a contract for the sale of a business can constitute engaging in conduct in trade or commerce: Bevanere Pty Ltd v Lubidineuse and Ors(1985) 7 FCR 325.
In Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217, Ormiston J said at 238:
"It is wrong to view every contractual obligation as an unqualified promise to perform the stipulated act. … If the promise induced the other party to enter into the agreement, as one can readily accept it would, then it is that promise and the circumstances then surrounding it which must be examined. The promise can only be said to be misleading or deceptive if it was in some way inaccurate; otherwise every unfulfilled mutual contractual promise will constitute misleading or deceptive conduct, a consequence which I cannot believe those who drafted the Act intended. If intention be relevant, the promise may be misleading if the promisor had no intention to fulfil it at the time it was made and accepted. If intention be irrelevant, then the promise may be misleading if the promisor had no ability to perform it at that time."
At 239, Ormiston J said:
"It would seem on the authorities that, at the least, a contractual promise would amount to an implied representation that the promisor then had an intention to carry out that promise. If it can be shown that he had no such intention, he would be guilty of misleading or deceptive conduct."
At 241, Ormiston J said:
"However, I am persuaded that if there be an unconditional promise which forms part of the contractual obligations, then it is proper to treat the giving of that promise, at least in the ordinary case, as the making of a representation as to a future matter, being either the doing of an act or the 'refusing' (sic) to do an act, being in each case the subject of the promise."
I respectfully accept the principles stated by his Honour. In my view, the trade covenant was a representation with respect to a future matter, namely, that the corporation would not engage in conduct which would breach that clause.
Accordingly, the onus is on the first defendant to prove it had reasonable grounds for making that representation. As was said by Ormiston J in Futuretronics at 240, "He may achieve this, in part, by showing that he had a genuine intention to perform his promise and that he had the ability at the time to perform it, but in the end he must show objectively that he had reasonable grounds for making the representation."
The plaintiffs rely on the evidence of Mr Woolhead that Peter Ritchie said he was going to work from home and do the odd "cashy". However, I accept Peter Ritchie's evidence that any remark he made would have been flippant. The plaintiffs also rely on Mr Lucas' evidence that Peter Ritchie said that he needed to do one to two jobs a week from home to survive financially. I do not accept Peter Ritchie said that. Further, they rely on the fact that Mr Ritchie did do some work from home, which is common ground.
The first defendant has satisfied me it did have reasonable grounds for making that representation. On all of the evidence, I am satisfied that, at the time the purchase agreement was entered into, Peter Ritchie intended to quit the industry. He may have contemplated doing the occasional repair job on his own vehicle, the vehicles of friends or, occasionally, of acquaintances, and may have contemplated sometimes being paid for those repairs. However, as I have found, that level of activity, without evidence of solicitation, would not constitute a breach of the clause. Accordingly, the fact that he may have intended to engage in that conduct would not mean that the first defendant did not have reasonable grounds for making the representation. In other words, if that was in his mind, I would still find that the first defendant had reasonable grounds for making the representation.

Damages

If I am wrong, it is necessary to assess to what damages the plaintiffs would be entitled, if any.
In assessing damages for breach of contract, the basic principle is that the injured party is to be placed in the situation which would have resulted from the proper performance of the contract: Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64.
In the statement of claim, the plaintiffs' claim damages for breach of contract claims damages for the damage or destruction of the goodwill of the business, the inability to develop its own goodwill, and the loss of the market value of the work performed by Peter Ritchie.
While the written submissions state that the plaintiffs' "evidence" is that it received nothing for the goodwill, there is no evidence of that. No evidence was led as to the value of the business received. In his opening address, counsel for the plaintiffs made it clear that the plaintiffs did not allege that the purchase price was too high. Further, I do not accept that the goodwill was attributable only to the repair side of the business.
In addition, I am not satisfied that the goodwill of the business has been damaged or destroyed by the actions of Peter Ritchie. There is no evidence of solicitation on his part. It is impossible to know how much, if any, of the work done by Peter Ritchie during this time would have gone to the plaintiffs had Mr Ritchie not done the work. It is, of course, significant that there are a number of other vehicle repairers in the vicinity.
Counsel for the defendants also pointed out that the plaintiffs did not lead any evidence to show what they had earned in the first six months of taking over the business compared to what they had earned in the six months following the alleged competition by Peter Ritchie.
Peter Lucas gave evidence of the number of the customers he had who had been customers of the business before he purchased it. However, that evidence was far from persuasive. No independent analysis of the books and accounts of the business was conducted in order to determine the extent of the repeat business. Further, Peter Ritchie in his evidence was able to identify additional clients that had not been counted by Peter Lucas. In addition, clients who paid in cash would not have had their names recorded in a way that would have allowed them to be detected by a review of the records.

I am also not satisfied that the plaintiffs were unable to develop their own goodwill. Even if that was so, I am not satisfied that that inability was due to the actions of Peter Ritchie. It seems that Mr Mills at least took his business elsewhere due to a perception that the plaintiffs provided inadequate service. In addition, there was evidence that Mr Lucas had advertised less than the defendants had.
In relation to the loss of the market value of the work performed by Peter Ritchie, that loss is dependent upon me being satisfied that the work would have been done by the plaintiffs had Peter Ritchie not done it.
I accept that, if I am satisfied that some damage occurred, I must "do the best that I can" to assess that damage. I am satisfied, on the balance of probabilities, that some of those people would have taken their cars to Mr Lucas had Peter Ritchie not performed the work. It is impossible to calculate how many would have done so, the value of that work and any flow on impact on goodwill. Accordingly, I am left to "do the best that I can". The assessment should be modest in view of the large number of other repairers in the area and the likelihood that many of those people would have taken their vehicles to the other businesses. Accordingly, I would provisionally award damages in the amount of $2,000.
In assessing damages for misleading or deceptive conduct, it:
"should not be assumed that the loss or damage which a person suffers as a result of a contravention of Pt V is necessarily singular. Nor should it be assumed that loss or damage is incurred either as a loss on capital account, or as a loss on revenue account which, if to be compensated by an award of damages, must be translated into a single capital sum." (Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at [49]).
In this context, the plaintiffs' entitlement to damages would be an amount representing the "prejudice or disadvantage as a result of altering … [its or his] position under the inducement of the misleading conduct": Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, per McHugh, Hayne and Callinan JJ at [46]. It is necessary, therefore, to consider what the plaintiffs would have done differently had they not been misled.
The plaintiffs submit:
"The measure of damages would be the difference between the price paid for the business ($80,000) and the value of the business received. The plaintiffs' evidence is that it received nothing for the goodwill which it paid good consideration for. The price paid for the goodwill ($22,000) is a loss which flows as a direct consequence of the misleading and deceptive conduct. As for the remainder of the items purchased, these were later sold for just $2,000."
In its statement of claim, the claim is particularised:
"The plaintiffs would not have committed borrowed funds totalling $80,000 to the purchase of the business were it not for the defendants' misleading and deceptive conduct. The plaintiffs no longer have a business and have incurred and continue to incur interest on the said funds borrowed."
The claim was later amended to add that the plaintiffs would not have entered into the lease agreement.
The inadequacy of the evidence in respect of the goodwill has already been addressed.
In relation to the sale of the stock for $2,000, I accept that Mr Lucas was required to sell his remaining stock in a fire sale because he no longer had a licence to operate from the premises. Evidence was led that that stock was the stock for which Mr Dowling was prepared to pay $35,000. Peter Lucas estimated its value at approximately $60,000. It was implicitly accepted by counsel for the plaintiffs that the loss caused by the need to sell the stock in the fire sale was about $33,000. However, the plaintiffs have not proved that loss was attributable to the conduct of the defendants. Most significantly, the plaintiffs have not satisfied me that the failure of its business (if indeed the business did fail) was due to the conduct of the defendants. There was significant evidence that suggested the plaintiffs were not carrying on the business efficiently. In particular, I refer to the evidence in relation to the advertising of the business and the failure to maintain significant numbers of used cars for sale.
In relation to the borrowed funds, a bundle of bank statements and other materials were tendered. Counsel for the plaintiffs indicated he would subsequently make use of those documents, including in the form of a schedule, but that never occurred.
Under cross-examination, Mr Lucas explained that his company already had a business loan, and that was extended when this business was purchased. He said that was why the loan documents referred to an amount of approximately $139,000. No attempt was made by the plaintiffs to identify what amount of the interest was attributable to the purchase of the business.
I accept that Mr Lucas would not have purchased the business nor entered into the lease agreement if there had not been a trade covenant. I accept that, if I am satisfied that some damage occurred, I must "do the best that I can" to assess that damage even in the absence of any evidence.
However, I am not satisfied that the value of the business received was less than the purchase price. Accordingly, I cannot be satisfied that any damage occurred.

Inquiry as to damages

The plaintiffs sought an inquiry as to damages for breach of the trade covenant or the implied term. When pressed, counsel for the plaintiffs submitted that such an inquiry was necessary to assess "the full extent of the plaintiffs' damages". Counsel submitted that the full picture of where the previous customers had gone was not before the court. An inquiry as to damages would reveal that true picture by forcing the defendants to produce all relevant documents.
In his closing submissions, counsel for the plaintiffs said: "What I'm suggesting is that what would occur for practical purposes would be for the other side to be simply ordered to reveal the full extent of mechanical repair work done using parts purchased from all sources." Later, he said:
"So I'm the first to concede that it's a tall order but nonetheless it's a head of relief that's available to the court in a proper case. It all rests upon the assertion we say that the defence has not made full disclosure. If your Honour is left with that impression, then we would encourage you to then order an inquiry and then we'd take it from there. But there'd be a compulsion order made on the other side to reveal what we say perhaps wasn't revealed in the course of the proceedings."
This is not an appropriate case for an inquiry. There was nothing to prevent the plaintiffs from producing all relevant evidence as to the extent of their damage. Discovery was provided by the defendants and no application for further and better discovery was made. It is simply not appropriate to seek an inquiry as to damages on the basis that the discovery of the defendants is said to have been incomplete. That conclusion is fortified by the actual evidence in this case, in particular the surveillance evidence of Mr Lucas himself. It is clear that the amount of work conducted by Mr Ritchie was not of a significant level.

Unconscionable conduct claim

The plaintiffs' claim in this regard is based on the equitable principle that prevents a party from exercising a legal right in a way that involves unconscionable departure from a representation relied upon by another to his or her detriment: Waltons Stores (Interstate) Ltd v Maher (1987) 164 CLR 387 and Commonwealth of Australia v Verwayen (1990) 170 CLR 394. In the statement of claim, the unconscionable conduct was said to arise from the second defendant's breach of the trade covenant and/or implied term which:
(1)adversely affected the success and/or financial viability of the plaintiffs' business; and
(2)caused or alternatively contributed to the plaintiffs' vulnerable position (par 16 of the statement of claim).
It is apparent, therefore, that the plaintiffs' claim must fail if the trade covenant was not breached. In other words, even if the trade covenant was not void, or even if there was an implied term to a similar effect, there could be no entitlement to damages if the defendants did not breach the trade covenant.
Similarly, the plaintiffs' claim will fail if they do not establish that they suffered a loss as a result of any such breach.
For the reasons set out above, I am not satisfied that the defendants breached the trade covenant. Further, even if I am wrong about that, I am not satisfied that the plaintiffs suffered any loss. Accordingly, no issue of unconscionability can arise and I dismiss this claim.

Counterclaim

The defendants' counterclaim for the unpaid rent and charges ("the lease payments") in the amount of $50,465.97 plus interest on the outstanding lease payments from the dates of each of the demands pleaded until judgment or payment, whichever is the earlier, at the rate specified from time to time pursuant to s 32 of the Supreme Court Act 1932.
A bundle of invoices for those lease payments was tendered in evidence. Those invoices ranged in dates from 1 September 2000 to 1 September 2004, and totalled $49,365.97. Mr Lucas admitted receiving those invoices. Mr Lucas also admitted that the total amount of lease payments owing was $49,365.97 as at the date of re‑entry, 19 October 2004. The last invoice covered the period to 31 August 2004. The rental component of each lease payment was $1,000 plus GST per month. It was common ground that no lease payments had been made for years. Accordingly, I accept that an additional $1,100 was owing for the month of September 2004, bringing the total due to the amount claimed in the defence.

Consent to assignment claim

It was common ground that the lease in this case did not exclude the operation of s 80(1) of the Property Law Act 1969.
Accordingly, it is necessary to determine whether:
(1)there was a request for assignment,
(2)if so, whether consent to that request was withheld,
(3)if so, whether the consent was withheld unreasonably.
The law in this area is well settled. The following principles emerge from the authorities:
1.The lessee bears the onus of establishing that the refusal was capricious or arbitrary: Secured Income Real Estate (Australia) Limited v St Martins Investments Proprietary Limited (1979) 144 CLR 596, per Mason J at 609.
2.If the evidence establishes that the lessor entertained doubts, reasonably based, that the proposed assignee would pay the rent promptly and without difficulty, it is reasonable to refuse to grant the lease on that ground: ibid at 610.
3."... in the ordinary case where a landlord withholds his consent because insufficient details are available upon which to make a reasonable decision, he does not withhold his consent unreasonably ...": Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd (1986) 1 Qd R 406, per Thomas J at 412. See also Fuller's Theatres & Vaudeville Company Limited v Rofe [1923] AC 435 at 442.
4.If the refusal is designed to achieve a collateral purpose or benefit wholly unconnected with the terms of the lease and the bargain made between the lessor and the lessee, it will be unreasonable: Bromley Park Garden Estates Ltd v Moss [1982] 2 All ER 890.
This claim turns very much upon the evidence led at the trial.
For the reasons I have expressed, I do not accept Mr Dowling asked for an assignment. Nor would I accept that Mr Lucas did, without some other evidence to support his version of events.
Counsel for the plaintiffs submitted that it is inconceivable that the second plaintiff and third defendant did not have a conversation about the assignment of the lease, because the assignment of the lease was an express condition of the agreement for the sale of the business. However, having observed Mr Lucas giving evidence, and his own admission that he considers himself to be semi‑literate, I do not accept that it is inconceivable. It is clear Mr Lucas was seeking a lease for Mr Dowling. The precise nature of how that would be achieved was, in my view, not something Mr Lucas was clear about nor cared about.
Counsel for the defendants also pointed out that it is unrealistic to suggest that Peter Lucas would accept William Ritchie's statement that an assignment could not be given as a matter of law, without seeking legal advice. I accept that was unrealistic in light of the fact that Mr Lucas had instructed a lawyer to prepare the sale of business agreement and was dealing with a solicitor in relation to a rental dispute. Further, there was no allegation of a refusal to consent to an assignment even up to the swearing of an affidavit on 9 September 2004.
Accordingly, the plaintiffs have failed to prove an assignment was asked for. Further, even on the plaintiffs' version there was never a request for an assignment of the lease to the actual proposed lessees. William Ritchie was never asked to assign the lease to the Dowling Family Trust. It is also clear that Mr Dowling wanted terms inconsistent with the existing lease. In particular, there were issues in respect of the roller door and an oil separator, the length of time for the lease, and also a rent free period.
Alternatively, the defendants submitted that, even if William Ritchie said that the granting of an assignment was unlawful, that would have been merely a statement of belief as to the law, not a refusal to assign. I accept that submission.
The defendants further submitted that even if there was a refusal to assign, that would have been reasonable given the substantial default of the lessee, and referred to in Goldstein v Sanders [1915] 1 Ch 549. I accept that in some circumstances substantial default on the part of the lessee may make it reasonable for the lessor to refuse to assign, but it will always depend on the circumstances of the case.
Counsel for the plaintiffs submitted that much of the information sought by William Ritchie was unreasonable. Counsel suggested that his motive for insisting on a new lease rather than granting an assignment was that he wanted to obtain a lease for a longer period of time than remained on the original lease, and at increased rental. In addition, counsel for the plaintiffs pointed out that William Ritchie was apparently prepared to give Mr Dowling a new lease even though he did not ever get the information he claimed to need.
The defendants submitted that at no time did the lessee or purported assignee provide sufficient information to the first defendant to consider such a request.
In my view, it was reasonable for William Ritchie to demand financial information from Mr Dowling. That evidence was not supplied. The fact that Mr Ritchie eventually did grant a lease to Mr Dowling, without having got that information, does not mean it was not reasonable for him to have required it. Rather, it was obviously a result of his increasing desperation to receive some rent.
In light of my findings, it is unnecessary to consider the question of damages. However, I note that the plaintiffs submitted that they had hoped to sell the business to Mr Dowling for $35,300 (and see par 23 of the statement of claim). However, there was other evidence that Mr Lucas was carrying on a similar business at different premises, using the Port Kennedy business telephone number. In these circumstances, it would be very difficult, if not impossible, to determine what loss, if any, the plaintiffs would have suffered if there was an unreasonable refusal.

Result

There are certainly a number of unusual features about the evidence in this case. I have concerns about the credibility of witnesses on both sides. However, ultimately, it is for the plaintiffs to prove their case. In my view, they have failed to do so.
The plaintiffs' claim against the third defendant has already been dismissed.
I would dismiss the plaintiffs' claims against the first and second defendants. In the first defendant's counterclaim against the second plaintiff, or alternatively the first plaintiff, I find for the first defendant against the second plaintiff in the amount claimed plus interest, as claimed.