Pavich, B. & M.P. v Bobra Nominees Pty Ltd

[1988] FCA 425

C A T C H W O R D S

Trade Practices Act 1974 5.52, s.82

Smolono ov v O'Brien (1982) 44 ALR 347

d H e m p s t o n Holdings Pty Ltd (1986) 6 5 ALR 302

Mudglnberrl Statlon Pty Ltd v AMIEU [l9861 ATPR 40-708

Brown v Jam	(1-35	ALR 79
m i s t e r Figg	entrepoint Freeholds Pty Ltd (1981)	36
ALR 23

Yorke v Treasureway Stores Pty Ltd [l9821 ATPR 40-313

Gates v The City Mutual Life Assurance Society Limited (1986) 160

Ex-€ [l9301 AC 28

(Ironmongers) Ltd 119691 2 QB 158

Steamship Company Llmlted v Minister of War

Trans ort [l9421 AC 69

d r a l i a Pty Lt; v International Computers (Australla Pty BRANKO PAVICH and MAXINE PHYLIS PAVICH V BOBRA NOMINEES PTY LTD No. WAG 91 of 1986	-	Ltd (1987) 75	ALR 271
FRENCH J.
PERTH

4 AUGUST 1988
IN THE FEDERAL COURT	)
OF AUSTRALIA	1
WESTERN AUSTRALIA	)
DISTRICT REGISTRY	1
GENERAL DIVISION	) No. WAG 91 of 1986
B E T W E E N :	BRANKO PAVICH and MAXINE PHYLIS PAVICH

Applicants

and

BOBRA NOMINEES PTY LTD

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:	FRENCH J.
DATE OF ORDER:	4 August 1988
WHERE MADE:	PERTH
THE COURT ORDERS THAT:

1.	There will be judgment for the applicants jointly	and
severally in the sum of $12,585.
2.	There will be judgment for	the first-named applicant in
the sum of $11,825.

3.         There will be judgment for the second-named applicant in

the sum of $5,633.

4.         There will be liberty to any party to apply withln seven (7) days on the question of the right of the applicants to be heard in relation to interest and the arithmetical correctness of the calculatlons of the amounts of damages set out in the judgment.

5. The offer to lease agreement dated 7 march 1984 is

varied so as to terminate on and from 5 July 1985.

6.          The respondent is to pay the applicants' costs of the application.

Note: Settlement and entry of orders 1s dealt with in

Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT	1
OF AUSTRALIA	1
WESTERN AUSTRALIA	1
DISTRICT REGISTRY	1
GENERAL DIVISION	1 No. WAG 91 of 1986

B E T W E E N :  BRANKO PAVICH and MAXINE PHYLIS

PAVI CH

Applicants

and

BOBRA NOMINEES PTY LTD

Respondent

CORAM:	FRENCH J .
-	4 August 1988

REASONS FOR JUDGMENT

Introduction

The Bri-Max Coffee Lounge and Take-Away commenced

trading upon the opening of the new Beechboro Plaza	Shopping
Centre on 4 April 1984. It closed down when its	proprietors,
Branko and Maxine Pavich, walked out early in July	1985, after 15
months of loss making operation.	They say that by reason of their
involvement in the business they suffered	losses altogether

amounting to about $48,000. For this they blame Mr Paul Letari, the listing agent for the shopping centre owner, Bobra Nominees Pty Ltd, saying that he misled them as to the existence and extent

of restrictions on competition between the shops. His conduct,

they say, can be sheeted home to the owner as conduct that was

mlsleading OK deceptive in trade or commerce in contravention of

s.52 of the Trade Practices Act and they claim damages under s.82

of the Act arising out of that contravention.

In the alternative, they allege fraudulent and/or

negligent mis-statement on the part of Letari attributable to Bobra Nominees and claim damages at common law. They also seek declaratory relief in relation to a lease agreement.

Factual Background

In March 1984, Branko Pavich was working as a sandblaster for Gardner Bros. and Perrott (WA) Pty Ltd, and his wife, Naxine, worked part-time for the Lighthouse Chemist Pharmacy in Hamilton Hill. Earlier that year they had decided to go into business together for themselves. They settled on the idea of a coffee lounge. In February and March 1984 advertisements appeared

in the West Australian Newspaper which attracted their interest.

The advertisements were in the following terms:-

"COFFEE LOUNGE AND BUTCHER, DRAPERY, HEALTH FOODS,

REAL ESTATE FLORIST

2 Shops left in the new Beechboro Plaza. Opening soon,
suitable for dentist, doctors surgery, Chinese restaurant, pizza bar, or non-conflicting trade. For further enquiries phone Paul Letari.

3615555 ah 2917808 ~~~

RATTO PARKER & ASSOC."

Paul Letari was then described as a director of the real estate agents, Ratto Parker & Associates (WA). The business of	that firm was carried on by Realty Consultant Holdlngs Pty Ltd as
trustee for the Ratto Parker Unit Trust. It was at that time the
agent for Bobra Nominees Pty Ltd, the owner of the newly
constructed shopping centre.

MCS Pavich rang the telephone number given in the

-newspaper advertisement and spoke to MS Letari's seczetary who gave her directions to the Centre and suggested that she go and have a look at it and phone back if she were still interested. Mr and Mrs Pavich then visited the Centre, located at the corner of Altone Street and Hull way, Beechboro. It was only recently

completed and at that time comprised some 14 or 15 shops. Of

these, as it turned out, a number had been taken up by prospective tenants for occupancy as a delicatessen, pharmacy, fish shop, hardware store, video store and supermarket respectively. At that time Letari had three shops available for lease and for these he had in mind a coffee lounge, a fruit and vegetable store and possibly a butcher.

Mr and Mrs Pavich made an appointment to see Letari at his office at Victoria parkon OK about 7 warch. Letari showed

them a plan of the shopping centre and the location of shops still

available for leasing. The Pavichs said they were interested In

establishing a coffee lounge which could sell take-away foods and

lunches and were immediately attracted by a shop located at the

entrance to the Centre and visible from its carpark. This, they

were told, had already been let as a delicatessen. Mrs Pavich

said that she asked Letari whether the delicatessen would be

selling lunches and take-away food and he said it would not.	It
would be allowed, however, to sell pies and pastles.	It could

also sell bread and cold meats which people could take away to make up thelr own lunches elsewhere. It would not be permitted to

sell sandwiches and rolls made on the premises.

The centre was said to be an exclusive shopping centre where there was to be no conflicting trade. In answer to questions put to her in cross-examination, Mrs Pavich said that she knew that delicatessens ordinarily sell take-away foods which was why she raised the point with Letari more than once. She said, he answered that there would be no conflicting trade and that the delicatessen would not be selling lunches or take-away foods. In that context it should be noted that she accepted that there were limits to the area of exclusivity defined by their

, ! 4 .

prospective trades. In particular, they would not be able to sell fish and chips in competitlon with the fish shop or fruit against the fruit and vegetable shop. But, said Mrs Pavich, had they not received the assurances they did from Letari she would not have entered upon the business.

Mr Pavich, who had less facility in English expression than his wife, said that he expressed doubts to Letari about the viability of the coffee lounge. Letari, he sald, responded by saying:-

"This is not only coffee lounge. We give you

three-in-one which is coffee lounge, lunch bar and

take-away shop and with that three lines you can operate

and you can survive out there."

He confirmed his wife's evidence about Letari's statement

concerning non-conflicting trade:-

"We ask him how we can survive out there if there is deli

already there because deli will sell lunches, sandwiches and the rest of take-away food, you know. He says to us "no way because this non-conflicting trade and as the shopping centre nobody is no interfere with each

other". "

In cross examination Mr pavich showed some

misunderstanding of the notion of exclusivity suggesting that in
context it was a reference to his and his wife's right to sell any

sort of take-away food they wanted. His understanding of what

Letari had said did not, however, depend on the use of the word

"exclusive". In his terms "all the story was about

non-confllcting trade". When it was put to him that Letari did

not promise that he and his wife would be the only people to sell

sandwiches and rolls in the shopping centre, his reply was

emphatic - "I tell you he did. That is not correct what you

said". Like his wife, he would not have gone into the business

but for Letari's representations.

Letari's evidence of this initial conversation

conflicted with the Pavlchs' account. He told them, he said, that

if they took up a coffee lounge they would have "the rights for

coffee". They would have the exclusive right to serve coffee or

cappuccino, light meals and cakes to customers sitting at tables.

That is to say, they would have the exclusive right to conduct

"normal coffee lounge trade". They could also sell cigarettes and

drinks even though there would be other shops selling these lines. There was, he said, no mention of take-away foods and lunches at the meeting. Nor did he recollect any query as to whether the

delicatessen would be carrying on such a trade. He denied the

suggestion that he reassured them that the delicatessen would not be selling take-away food other than pies, pasties and sausage rolls. There was also, he said, some discussion about financial

assistance from the Pavichs' in-laws. It was his evidence that

.	following the initial meeting, which lasted one and a half hours, they went away and later that night rang back and arranged to come back within the next day or so to execute an offer to lease shop
number 8 . According to Mrs Pavich, however, they made the
decision to take a lease at the initial meeting. Some urgency had

been injected into their deliberations by Letari who told them that there were other applicants and that they would have to make a decision then and there. The list of prospective tenants was to

be put to a committee within the next few days.

Whether there was, as the Pavichs say, only one meeting

or as Letari says, two, is not of critical importance for present purposes. What is clear, is that they slgned an offer to lease dated 7 March 1984. They paid a deposit of $800 on the following

day and Letari told them that he would put in a good word for them
to the committee. He gave them a photocopied diagram showing the
layout of the shopping centre and highlighting the shop that they

were interested in.

The offer to lease provided for a term of five years

commencing on the date on which the premises were certified by the

architect as practically complete, which date, according to the

terms of the offer, was anticipated to be 29 March 1984. There

was a right to renew for a period of a further 5 years. The offer

document provided:-

"The premises shall only be used f o r COFFEE LOUNGE
TAKEAWAY LUNCH BAR"

.	According to Letari, the words “COFFEE LOUNGE TAKEAWAY” were in his handwriting but he was unsure about the words “LUNCH BAR“.
A couple of days later he phoned Nrs Pavich to tell her that their offer to lease shop 8 had been accepted. The
acceptance is dated 9 Narch 1984. The opening of the shopping centre was scheduled for 29 March 1984.

The Pavichs had to move quickly and did so to fit out

the shop. As a result of their efforts they were able to commence

trading on the official opening day of the centre. In the

meantime, the proprietor of the delicatessen, Nr Wayne Pickersgill, was preparing his shop located at the entrance to the centre. This included putting up signs, advertising lunches and take-away foods. Mrs Pavich was upset when she saw the signs and telephoned Letari to complain about this threatened trespass on coffee lounge trade.

The Pavichs say they attached great importance to the

non-conflicting trade arrangement in the centre. To NrS Pavich it: meant everything, because they relied upon the prospect of getting trade from workers engaged in building housing on a nearby housing

estate development.

Initially business was very slow but it gradually built

up. The take-away food trade peaked at between 5% and 10% of the

total business. Mr and Mrs Pavich say that they complained repeatedly to Letari about the take-away and lunch trade of the

delicatessen. On one occasion Nr Tilli, one of the directors of

.* i

I . , 8.

Bobra Nominees, came to the centre and told them that he was the owner of the centre and they had nothing to worry about. He would

sort everything out ..

On 8 Apr ,il MC and Mrs Pavich wrote to Tilli in the

following terms:-

"We are still waiting for your letter as promised to us in writing. That we are the only shop in the Centre selling Coffee, lunches and Takeaways. Also we want to have a Chicken Rottisorie, also pizza oven (pizza oven has been approved by Ratto Parker)."

The reply to that letter came more than a month later on

11 May and came in the form of a letter from Ratto parker signed by Letari. Significantly, it did not deny the allegation that the Pavlchs had been promised the exclusive right to trade in lunches and take-aways. What it said in the relevant parts was:-

"In regard to your query, your shop will be the only

Coffee Lounge, Lunch Bar and Take-Away foods. You have plenty of lines of food that you can concentrate on selling. As you probably noticed the Delicatessen has removed its sign from the window with regards to lunches. We will not object to you selling chicken in pieces as part of a take-away.

Also on a temporary basis until Stage 2 will be constructed you can Install a Pizza Oven.

On Stage 2 several other trades will be created

including a Pizza Parlour then you will have the first option to take over that shop if you wlsh, or you will convert your pizza oven for pies and pasties.

Under no circumstances will we create any confllcting trade to you or anyone else in the centre."

The letter concluded with an exhortation to sign a formal lease

agreement which had been prepared by the solicitors for Bobra

i

1 :  . 9.

Nominees.

Mrs Pavich agreed that certain signs had been taken from outside the delicatessen but said that it continued to sell and expand its range of take-away foods to cover such items as hot-dogs, sandwiches, rolls, cakes, pies and pasties.

On 15 May 1984 she wrote to Chalmers ti Irdl, solicitors,

who had prepared the formal lease agreement for Bobra Nominees.

In that letter she reaffirmed that when she and her husband had applied for the shop tenancy, they were promised that they could

operate it as a coffee lounge, selling lunches and take-away

foods, that the shopping centre was restricted, and that there was to be no competition. She complained in her letter that although they were supposed to be able to sell take-away foods, they could not sell whole chickens, fish, seafood or pizza. The latter complaint seems to have sprung from the fact that Letari, as evidenced in his letter of 11 May, was not prepared to allow them to sell pizzas after the establishment of a pizza parlour in the proposed stage 2 of the shopping centre. The upshot of the letter was that Mr and Mrs Pavich would not sign the lease which had been prepared.

At the time that the letter was written business had

picked up a little in relation to the lunch trade, but was still not running at a profit. The pavichs put signs up outside the shopping centre, but observed that the bulk of the lunch trade continued to go to the delicatessen. They installed a pizza bar in June 1984. They also had video games in the shop to try to attract custom. The full range of take-away and lunch foods they offered was wider than that of the delicatessen and included sandwiches, rolls, hamburgers, chips (in buckets), sausages, hot-dogs, spaghetti, cakes, drinks, hot chocolate, tea and coffee.

Mr and Mrs Pavich, who have a child, then aged 3 years,

both worked in the business on the basis that one would be at home looking after the child while the other was working. There was some conflict in their evidence about the number of days per week

and hours per day that they worked, but not a great deal turns on that. Initially, according to Mrs Pavich, they were open 5 days a week from 8.30 am until 6 pm. However a couple of months after commencing they began trading 7 days a week and maintalned that until they left the business. They also extended their hours of operation to run from 8.30 am until 9.30 pm. The late closing time meant that whichever of them was in the shop at that time would be there until about 11 pm cleaning up. Whoever was openlng up the following day would have to arrive early to prepare for the days trading.

They saw their bank manager in about June or July 1984

and were told that they would need to take about $2,500 per week

in the business to break even. They were at the time taking

somewhere in the vicnity of $500 to $600 per week. It was put to

Mrs Pavich in cross examination that even if they had taken all

the delicatessen lunch trade, they would not have earned more than an extra $200 per day, that is $1,400 per week which would still leave them below the suggested break even point. On this question, Mrs Pavich simply said "I disagree there. I feel we could have managed somehow" and further "well we probably would have lost but it certainly would have helped us".

The position was that at no time did the Pavichs make

enough money to cover their overheads. They had to borrow from Mrs Pavich's father and a few friends in Order to keep going. Their situation became worse in summer. With the delicatessen continuing to sell sandwiches, rolls and other take-away food, they had what Mrs Pavich described as virtually "zero trade". They repeatedly complained to Letari and Tilli but nothing was ever done.

Eventually in March or April 1985, they consulted a solicitor. On 4 April he wrote to Letari on their behalf

repeating the allegation that Letari had represented to them that nobody else in the centre would be able to sell take-away foods,

lunches or sandwiches. The letter concluded:-

"The purpose of this letter is to inform you that since my clients obtained legal advice, they have become aware of their right to rescind the Lease and seek damages for the loss they have sustained as a result of the misrepresentation. They are prepared to forego exercising this right provided that the representation is made good by the lessors taking action to ensure that

centre for the remainder of the term of my clients'	there is no further "conflicting trade" operating in the
Lease, and provided that they put forward a satisfactory offer to compensate my clients."

In the meantime Ratto Parker & Co. were replaced as

agents by Mair & Co. who wrote to the Pavichs' then solicitor on 29 May declining to admit any llability but advising that every assistance would be given to find a suitable replacement tenant to

take over from Mr and Mrs Pavich. On 28 June 1985, the Pavichs'

solicitor wrote to Mair & Co. informing them that his clients were rescinding the Agreement for Lease and reserving their right to claim damages. He expected that they would vacate the premises on 5 July 1985. The Pavichs had not paid rent for some 6 or 7 months prior to vacating the premises and the amount of rent and variable outgoings and other charges said to be outstanding at that time as evidenced by a tenant's statement from Mair & Co. came to

$7,509.85. All equipment that they had installed in the shop was removed. The floorcovering and the partitioned brickwall which had been erected were left in place. They held the equipment in storage for some time and eventually disposed of it save for an air-conditioner and a cutting machine.

M K Pickersgill, the proprietor of the delicatessen, gave evidence for the Pavichs. He had moved into his premises in February 1984. In his initial negotiations he told Letari that he was intending to carry on business as a super-deli. There was in that context no discussion of take-away foods. From the outset the delicatessen was selling pies, pasties and sausage rolls. This was later expanded to cover hot chicken rolls, hot-dogs, sandwiches and rolls. For the first six months of operation the

The quantity of this aspect of the take-away trade does not appear	sandwiches and rolls were made on request but not pre-prepared.
to have been very large. Plckersgill said of it "there would always be the odd ones each day - requests". The range of
take-away foods gradually built up on customer request. The
delicatessen's customers for these items mostly comprised tradesmen building new homes in the vicinity of the shopping

,. I	,
L	13.

. cent re.	Pickersgill estimated that although the lunch and take-away trade was not a major component of his business, it probably amounted to $150 a day after he had been going for about
6 months when his range of foods was increased. Sandwiches and
rolls accounted for $50 to $75 a day.
Before vacating the premises the Pavichs did attempt to sell the business. On 23 January 1985 they signed an authority to
s e l l in favour of Carter Giorgi, a firm of real estate agents.
They specified a selling price at $23,000 comprising $19,000 for plant and $4,000 for goodwill. Mr Sigfried Hoffler, a licensed real estate salesman employed by that firm, attempted to sell the business without spending money on advertising, that is by referral of persons who showed interest in acquiring advertised businesses of a similar kind. He had only five enquiries, none of which led to an offer being made. Given the record of the business to that point it is difficult to see what attraction it
would have had to a prospective purchaser.

The damages claimed on the amended statement of claim

comprise losses incurred in connection with the establishment of

the business, the sale of plant and equipment and the loss of

earnings during the period of the tenancy, namely 1 April 1984	to
30 June 1985.	The latter sum relates to the loss of wages that
could have been earned had	the Pavichs remained in their

respective previous employments. The establishment and plant

losses are claimed at $16,538.00.	The loss of earnings is said in
the pleadings to amount to $33,000.	As to the first component,

the particulars set out the following elements:-

"Installation of coffee machine	$45.00
Bricks, transport of bricks and

construction of brick partitioning	$425.00
Plastering	$260.00
Cost of paint	$80.00
Cost of double bowl sink	$115.00
Plumbing expenses	$785.00
Lighting and wiring	$700.00
Sign writing	$220.00
Installation of exhaust fan	$131.00
Extension of brick wall to ceiling	$150.00
Electricity connection fee paid to SEC	$200.00
Loss on sale of plant	$7,525.00

Loss of value of air-conditloning unit $2,260.00

Loss of value of cutting machine $688.00

Replacement of roof sheets upon removal

of alr-conditioning unit and exhaust fan $140.00

Replacement of ceiling panels	$120.00
General removal costs	$100.00
Floor covering	$1,297.00

It was conceded that the figure of $220 for the sign was also included in the item "Loss on sale of plant" and therefore counted twice in the particulars. The amount of $785 for plumbing expenses was also included in the calculation of loss on sale of plant under the item "Sink and plumbing" for which $762 was calculated as the loss after sale of the sink for $40 against what was said to be its written down tax value at $802. On that basis the claim for plumblng expenses at $785 is counted twice and

should be excluded from the partlculars.	The air-conditioner and
cutter for which the applicants clalmed loss of value at $2,260

and $688 respectively were not in fact sold and it was conceded by

Mrs pavich and her counsel that no claim could properly be made

for those items. On this basls the claim apart from loss of earnings reduces to $12,585.00 and that loss was established by the evidence.

I 15.

In connection with the loss of earnings claimed, evidence was given by Ves Van Zyl, the Personnel Training and

Safety Manager of the Gardner Perrott Group, that Mr Pavich had

been employed as a blaster/spraypainter in the financial year

ended 30 June 1983 and in the following financial year until March

1984. For the period 27 August 1982 to 30 June 1983 he earned

$15,907.71 gross of which $3,314.41 was deducted for tax. For the

period 1 July 1983 until 14 March 1984 he earned $12,627.52 of

which $2,457.16 was deducted. Although it appears that Pavich was

off work for some time and on workers' compensation, Mr Van Zyl's

evidence was that he was working during the period from 1 July

1983 to 14 March 1984. In relation to MKS Pavich, MT Brangan, a

pharmacist employed by Lighthouse Chemists, gave evidence that she

had been employed at the Hamilton Hill pharmacy in 1983/84. A

record of tlme worked and payments received by her from 2 2 July

1983 until 10 march 1984 showed that she earned $4,195.62 net of

tax which was $728.35. In regard to loss of earnings counsel for

the Pavichs submitted that the evidence showed Mr Pavich's net

income before he went into the coffee lounge business was $275 per

week. His loss was therefore calculated on the basis of the 67

weeks for whlch the business was operated, yielding a figure of

income foregone of $18,425. A similar calculation for MKS Pavich

led to a calculated loss of $8,777, on the basis of $131 net

weekly income.

BY an amendment at the commencement of the hearing,

counsel for the applicants also sought to claim by way of damages
the sum of $7,509.85 being the unpaid rent said by Mair & Co. to
be due to Bobra Nominees after the Pavichs vacated the coffee

. . . ,

i 16.

. lounge. There had been at the time of trial no recovery action in relation to that rent, but counsel for the respondent indicated that it was to be claimed. Before turning to my findings in the matter it is necessary to return to the pleadings.

The Pleadings

It is common ground on the pleadings that Bobra Nominees

owned and operated the Beechboro Plaza Shopping Centre and in its operation of the centre was engaged in trade and commerce. It is also admitted that it employed Ratto Parker & Associates as its agents. The Pavichs allege that the 3 newspaper advertisements of 2 7 and 2 8 February and 1 March 1 9 8 4 amounted to representations on behalf of and therefore by Bobra Nominees that 2 shops were available in the centre for use as a coffee lounge or any other non-conflicting trade. This was denied in the defence, as was the plea that the reference to non-conflicting trade meant that the shops would be available for the operation of any kind of business

not already conducted or planned for the centre. It is further

alleged that at their meeting with him on 7 March 1 9 8 4 , the Pavichs advised Letari that they were interested in operating one of the available shops as a coffee lounge and take-away lunch bar

and asked him whether any other shop was or would be permitted to

sell take-away foods including lunches and sandwiches. That

allegation is denied, as is the central plea that Letari

represented to the Pavichs on that occasion that no other

proprietor in the shopping centre was or would be able to sell
take-away foods including lunches and sandwiches. It is said that
as a result of the representation pleaded the Pavichs agreed to

, , ,

B 17.

lease shop 8 and that pursuant to that agreement they commenced carrying on business in that shop under the name "Bri-Max Coffee Lounge and Take-Away'' . Denying the representations, Bobra Nominees denies in the alternative any reliance upon them and

further, in effect, denies that the Pavichs carried on their business pursuant to the agreement. The representations are said to have constituted misleading or deceptive conduct by Bobra Nominees in contravention of s.52 of the Trade Practices Act. This is particularised by the assertion that the respondent or its

servants or agents advised the applicants that they would have the exclusive right to sell take-away foods, including lunches and sandwiches in the shopplng centre when they knew that the

delicatessen was or would be permltted to sell such lines. There
is also a plea of a contravention of s.53(a) of the Act, but given
the overlap with s.52, this was not pursued. The representations
attributed to Bobra Nominees are also alleged to have amounted to

fraud and negligent mis-statement.

As a result of these matters, it is said that the

Pavichs rescinded the agreement to lease by thelr solicitors'

letter of 28 June 1985. In addition to the damages claimed which have already been outlined, they seek a declaration that the

agreement was validly rescinded and interest on such damages as are awarded.

Findings of Fact

It is clear that Ratto Parker & Associates were at all

material times acting through Mr Letarl as the duly authorised
agent of Bobra Nominees in connection with the letting of shops at

the Beechboro Plaza Shopping Centre. The text the of

advertisements which were placed in the West Australian newspaper in February and March 1984 represent, as pleaded, that 2 shops were available for use, inter alia, as a coffee lounge or for some other non-conflicting trade. The term "non-conflicting trade" read in context imports the statement that the available shops could be used for the operation of a business of a kind not

already conducted or planned for the c ntre. The t rm

must, no doubt, be read in a commercially realistic sense

recognising that there may be some overlap between different

activities in the one centre. The sale of chips in a fish and

chip shop might be seen as overlapping with the sale of chips from the coffee lounge in small cardboard buckets or cups. Such overlaps would not falsify the represented stricture against non-conflicting trade. The question whether or not two businesses are "conflicting" in the relevant sense will be a question of fact havlng regard to the commercial realities of a small centre rather than nice semantlc distinctions or sophisticated competition tests.

The representation said to emerge from the newspaper advertisement is not critical to the resolution of the case except

in an evldentiary sense to which I shall refer later. What is important is the question whether the oral statements attributed to Letari by the pavichs were made by him. I am satisfied that they were. I accept the evidence of MC and Mrs pavich that upon their enquiring whether the delicatessen would be selling lunches and take-away foods he answered that with the exception of pies

.'

and pasties, it would not. That view is strengthened by the

reference to non-conflicting trades in the newspaper advertisements. In context, a business described in the relevant agreement as "coffee lounge take-away lunch bar" could reasonably

be expected to be the only business engaging in the activities there described. This is reinforced by the provision in the agreement that "the premises shall only be used for coffee lounge take-away lunch bar", the trade description having been inserted in Letari's own hand. Also his failure to unequivocally deny the allegation in the letter of 11 April 1984 when he replied on behalf of Tilli in his letter of 11 May, tends to strengthen that inference.

The representations were made at a time when Mr Wayne

Pickersgill had been accepted as the tenant for the delicatessen slte and had paid his first rental instalment. His evidence, which is not in dispute on this point, is that there was no discusslon about take-away foods and lunches when he negotiated with Letari. And it is evident that there was nothing in his agreement with Bobra Nominees that restricted him from engaging in that trade. Furthermore it is not in dispute that the take-away

and lunch service is, as Pickersgill said, part of the standard

range of services offered by a "super-deli" of the kind that he

was running in the Beechboro Plaza. His experience in the field

of food retailing extended over 10 years during which he had

operated 2 supermarkets and another super-deli prior to moving

into the Beechboro Plaza.

Letari told the Pavichs that the delicatessen would not
'sell take-away foods or lunches with the exception of pies,
pasties and sausage rolls. In the context of the discussion about
non-conflicting trade, this went beyond a mere promise, to the
assertion, implicit if not express, that the delicatessen could
not trespass on that field of activity. The fact was that no such
restriction existed. On this basis the representation was false.
In the context of s . 5 2 it matters not whether it be characterised

as a statement of fact or law or mixed fact and law. It was

incorrect and it misled the Pavichs as to thelr entitlement to trade in take-away foods and lunches free of effective competition.

I am satisfied also on the balance of probabllities that it was a factor which induced them to enter into the written agreement with Bobra Nominees. This appears from thelr direct testimony that they would not have entered the business but for Letari's assurances. It is rather reinforced by the evldence of their dismay and concern when they found that the delicatessen was in fact operating in a field which they obviously regarded as an important element of their trade.

Letari was, at the relevant time, acting at least within his ostensible authority. His conduct whether by virtue of that

fact or by force of the provisions of s.84 of the Trade Practlces Act, - was attributable to Bobra Nominees which is thus taken to have engaged in conduct in trade or commerce which was mlsleading

OK deceptive.

I am not satisfied on the evidence that the conduct was shown to have been fraudulent. To support such a	finding I would
have to be satisfied that Letari either knew that	the delicatessen

was under no restriction in operating in the area to be covered by the coffee lounge, take-away and lunch trade or recklessly did not care whether that was so . That would require a clear view as to the obligation of the delicatessen operator and the nature of the business encompassed by the description "coffee lounge take-away lunch bar". While I am prepared to find that, viewed objectively, his conduct was misleading, I am not satisfied that the evidence discloses enough about his state of mind to support a finding of fraud. As to the claim of negligent mis-statement, counsel for the Pavichs indicated in hls closing address that that was not pursued.

The Measure of Damages

Section 82 of the Trade Practices Act gives rise to the
surviving cause of action in this case providing as it does that:-

"82(1) A person who suffers loss or damage by conduct of another person that was done in contraventlon of a provlsion of Part IV or V may recover the amount of the loss or damage by action against that other person or agalnst any person Involved in the contravention."

The measure of damages hangs on the word "by" which has ben interpreted to mean "by reason of" or "as a result of" - Smolonogov v O'Brien (1982) 4 4 ALR 347, 362; Neilson v Hempston Holdings Pty Ltd (1986) 65 ALR 302, 308; Mudginberrl Station Pty - Ltd V AMIEU -[l9861 ATPR 40-708, 47,717. NO express limit on recoverability is imposed by the section where a causal connection

1 ' . ! 22.

between contravention and loss can be demonstrated. Generally speaking, however, the measure of damages applicable to deceit has been regarded as appropriate - Brown v Jam Factory Pty Ltd (1981) 35 ALR 79, 88; Mister Figgins Pty Ltd v Centrepoint Freeholds Pty

- Ltd (1981) 36 ALR 23, 59; Hubbards Pty Ltd v Simpson Ltd [l9821

ATPR 40-295, 43,675 and in the Full Court, 119821 ATPR 40-319 at

43,925; Yorke v Treasureway Stores Pty Ltd [l9821 ATPR 40-313,

43,862 - 43,863; Gates v The City Mutual Life Assurance Society

Limited (1986) 160 CLR 1.

The measure of damages in deceit requires that the loss

flow "directly" from the fraudulent inducement. This requirement

which can be traced back to Lord Atkin's judgment in - Clark v Urquhart 119301 AC 28, may be followed through the judgment of the

Court of Appeal in Doyle v Olby (Ironmongers)	Ltd (1969) 2 QB 158
to Gates v The City Mutual Life Assurance Society	Limited (supra).

The term may do little more than to emphasise the need for a clear

causal connection between conduct and claimed loss and if taken in

that sense is not inconsistent with the words of s.82. For

reliance upon a "direct" causal connection is consistent with	the
view that in the law "Causation is	to be understood as the man in

the street, and not as either the scientist or metaphysician,

would understand it" - Yorkshire Dale Steamship Company	Limited v
Minister of War Transport 119421 AC 691, 706 (Lord Wright).	It is

also consistent with the views expressed by Gummow J. in Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd

(1987) 75 ALR 271 at 279, where his Honour observed that the end

condition described in s.82 or posited by the rules governing tort liability may have many causes but the selection of those sufficient to establish that connection which gives rise to liability is influenced by policy and not merely logic. The primacy of the causation principle in s . 8 2 would seem to exclude reliance upon such concepts as mitigation or contributory

negligence, unless it can be shown that the applicant's own

carelessness or disregard for his or her interest is the cause of all or some part of the claimed loss. It may still be in such a case that the misleading or deceptive conduct complained of may be identified as a sine qua non of the loss claimed. There may come a point however where the applicant's own conduct is so domlnant in the causal chain as to constitute a novus actus interveniens. It is perhaps simply putting it another way to say that in such a case a selection principle of the kind adverted to by Gummow J. comes into operation to exclude liability. The criteria for such selection may import concepts analogous to remoteness, mitigation

or contributory negligence. It is not necessary however to

explore its full ramifications here.

In the circumstances of this case, it is reasonably open to conclude that the Pavichs' business would have failed even if the delicatessen had not entered upon the take-away food and lunch

trade. But the fact is established, that were It not for the

conduct complained of they would not have taken up the occupancy

of shop 8 and would not have sustained the loss they did. In the relevant sense therefore, the Pavichs have suffered loss by reason of the conduct of Bobra Nominees. I am satlsfied that so much of that loss as relates to the fitting and installation of plant in the premises flows directly from the conduct and is recoverable in these proceedings. In my view however, the claim for loss of

; ' .	.
A	24.

earnings for the full period of 15 months that they occupied the premises is a claim for recovery of loss, some part of which was brought about by the applicants' fallure to act in their own interests and vacate the premises at an earlier date when it was clear that they were in a chronic loss making situation. Drawing the line in such a case is necessarily a somewhat arbitrary

exercise. However doing the best I can, it seems to me that the

relevant causal connection no longer operated after the first 9 months in the business; That is to say, I am not prepared to allow recovery of loss of earnlngs beyond the time, roughly speaking, at which the Pavichs ceased to pay rent. On this basis and applying the approach to calculation adopted by counsel for the applicants, I would deduct from the period of 67 weeks used by him a total of 2 4 weeks, leaving loss of earnings to be calculated over 4 3 weeks. On this basis the loss of earnings recoverable by

Plr and Mrs Pavich are $11,825 and $5,633 respectively.

The question that then arises is what, if anything, is to be done in respect of the unpaid rent claimed by the

respondents. The applicants seek a declaration that the written agreement was effectively rescinded by the notice from their

solicitors sent on 28 June 1985.	In my opinion the proposition
that the lease was rescinded by that notice is at best a dubious	one. At whatever time the Pavichs chose to leave the premises
however there should be no continuing liability under the written agreement which came into existence as a result of the
representations made by Letari. I am prepared therefore, in the
exercise of the powers conferred on the Court by s.87 of the - Trade
Practices Act, to vary the agreement so that it is taken to have

I

: b .

25.

.

. terminated from the date that the premises were vacated, namely 5 July 1985. As to the Pavichs' claim for damages in relation to the unpaid rental which may be the subject of separate action by Bobra Nominees, that, consistently with the view I have already taken, is not a loss which would be recoverable as one sustained by reasons of the respondent's contravention of s.52. In the circumstances, it will be left to Bobra Nominees to pursue its claim for outstanding rent in relatlon to the last six months of occupancy.

This is not a case in which any claim has been made for the operating loss of the business. The applicants have preferred to formulate their claimed loss in terms of the establishment costs and income foregone and no real issue was taken on the applicability of these items as a basis for calculation. On the question of interest I had no submissions as to the appropriate rate or the date from which it should be paid. It was however claimed in the relief, and I will give to the parties liberty to be heard in that regard. I will also allow liberty to apply on the question of the correctness of the arithmetical calculations upon which the judgment is based. In the circumstances therefore, I propose to make the following orders:-

1.   There will be judgment for the applicants jointly and severally In the sum of $12,585.

2.    There will be judgment for the first-named applicant in the sum of $11,825.

3.    There will be judgment for the second-named applicant in the sum of $5,633.

4 .	There will be liberty to any party to apply within seven ( 7 ) days on the question of the right of the applicants to be heard in relation to interest and the arithmetical correctness of the calculations of the amounts of
damages set out in the judgment.

5. The offer to lease agreement dated 7 March 1984 is

varied so as to terminate on and from 5 July 1985.

6.    The respondent is to pay the applicants' costs of the application.

I certify that this and the preceding

twenty five (25) pages are a true copy
of the Reasons for Judgement of his

Honour Justice French.

Associate:  < kq-

Counsel for the Applicant: MC M. O'Sullivan

Solicitors for the Applicant: Durack & Zilko

Counsel for the Respondent: MC B. Luscombe

Solicitors for the Respondent: Robinson Cox

Date of Judgment:  4 August 1988