Profilio v Coogee Bay Village Pty Ltd

[2009] NSWADT 211

Set aside by Appeal:

CITATION:	Profilio v Coogee Bay Village Pty Ltd [2009] NSWADT 211
DIVISION:	Retail Leases Division
PARTIES:	APPLICANTS Joe Profilio Rozi Sajko RESPONDENT Coogee Bay Village Pty Ltd
FILE NUMBER:	085127
HEARING DATES:	15, 16, 17 and 22 June 2009; 16 and 28 July 2009
SUBMISSIONS CLOSED:	28 July 2009
DATE OF DECISION:	10 August 2009
BEFORE:	Chesterman M - Deputy President; Ward R - Non-Judicial Member
CATCHWORDS:	Retail lease – ‘exclusivity clause’ – interpretation of contractual terms – pre-lease misrepresentation – unconscionable conduct – misleading or deceptive conduct – section 11, Retail Leases Act 1994
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 Golden Harvest (Aust) P/L v Paing P/L [2004] NSWCA 85 Prasad v Fairfield City Council [2001] NSWADT 28
REPRESENTATION:	APPLICANTS H Stitt, barrister (15, 16, 17 and 22 June 2009) J Profilio, agent (16 and 28 July 2009) RESPONDENT T Rogers, barrister
ORDERS:	1. The Tribunal declares as follows:-(a) that the Respondent, through granting or having granted to Backpacker World Travel Pty Ltd a lease of premises at 194 Coogee Bay Road, Coogee, on terms that permitted the lessee to use these premises for the provision of internet and email services, was in breach of an obligation under its current lease of premises at 192 Coogee Bay Road, Coogee to the Applicants, such obligation being to ensure that the Applicants had exclusive use of these premises as an internet café; and (b) that the Respondent is liable to compensate the Applicants for the economic harm resulting from this breach 2 (a) Any application for costs of the proceedings so far must be filed and served, with supporting submissions, within 28 days of the date of this decision. The submissions must put forward grounds for making such an order before the proceedings have come to an end.(b) The opposing party must file and serve submissions in reply within a further 28 days. (c) Unless reasons are advanced for a hearing to be conducted, this matter of costs will be resolved ‘on the papers’, pursuant to s 76 of the Administrative Decisions Tribunal Act 1997 3. The matter is set down for further directions at 10.30 a.m. on 13 August 2009.

REASONS FOR DECISION

Introduction

1 This decision is concerned with the question whether a lessor company that had granted to lessees an exclusive right to use the leased premises for the purposes of an ‘internet café’ should be held liable in damages to the lessees by virtue of the fact that the lessee of adjacent premises, carrying on business as a travel agent, granted internet access to customers pursuant to a clause in a lease granted by the same lessor.

2 The Tribunal directed that the question of liability should be argued and determined first. The issue of remedies was left for a later hearing, if this proved necessary. As events turned out, the hearing on liability occupied six days.

3 The Applicants, Mr Joe Profilio and Ms Rozi Sajko, occupy premises under a lease from the Respondent, Coogee Bay Village Pty Ltd (‘CBV’). Since the premises form part of a retail shopping centre owned by CBV, the lease is governed by the Retail Leases Act 2004 (‘the RL Act’).

4 One of the grounds on which the Applicants claim damages is that CBV engaged in unconscionable conduct. Accordingly, the Tribunal has been constituted in these proceedings in accordance with clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It has been constituted by a Deputy President who is a member of the Retail Leases Division, assisted by an appropriately qualified member (Non Judicial Member Harrison), acting in an advisory capacity only. Because no second advisory member was available to assist at the hearing, the Tribunal has proceeded with only one such member. At the commencement of the hearing, it drew the parties’ attention to the fact that it was authorised to do so by sub-paragraph (4)(a) of clause 4 of Schedule 2, Part 3B.

5 During the first four days of the hearing, Mr Stitt of counsel appeared for the Applicants. Thereafter, Mr Profilio, the First Applicant, represented himself and acted as agent for Ms Sajko, the Second Applicant. The Respondent has been represented throughout by Mr Rogers of counsel.

6 Although this case is primarily concerned with leases granted by CBV in 2004, the evidence put before the Tribunal related also to a number of earlier transactions. This evidence will now be outlined.

The 1996 and 2001 Leases and associated transactions

7 In 1996, the Applicants purchased a video store business operating at 192 Coogee Bay Road, Coogee (hereafter ‘Shop 192’) and 194 Coogee Bay Road, Coogee (‘Shop 194’) under a lease from the then owner, Randwick City Council (‘the Council’). These two shops were held under strata title, forming part of Strata Plan 22899. They formed part of a shopping centre known as Coogee Bay Shopping Centre.

8 At the time of the purchase, the Applicants obtained a new lease (‘the 1996 Lease’) from the Council. This lease, which was registered, ran from 8 March 1996 to 28 February 2001 and contained a five-year option to renew at current market rent. The permitted use stipulated in clause 6.1 was ‘video hiring outlet and retail shop’. The 1996 Lease also contained a provision prohibiting any subletting of all or any part of the premises without the consent of the lessor.

9 During 1999, the Applicants replaced their business in Shop 192 with a business providing internet services to members of the public on a commercial basis. They obtained approval for this change from the strata corporation in a letter dated 27 April 1999. After obtaining the consent of the Council in its capacity as owner, they also filed with the Council a notice of intention under the Randwick Local Environment Plan 1998 of their intention to change the use of the shop. Their business at Shop 192, which continues in operation, is called ‘The Chat Site’.

10 On 16 July 2000, the Applicants purported to grant a sublease of Shop 194 (‘the Sublease’) to Dial A Coach Group Pty Ltd (‘DAC’). This followed an approach made by a director of DAC, Mr Graham Freeman, to Mr Profilio. The Sublease ran from 21 August 2000 to 28 February 2001 and contained a five-year option to renew. Clause 6.1 defined the permitted use, ‘subject to the Head Lessor’s consent and that of the local Council’, as a travel agency.

11 Clause 6.4 of the Sublease stated that the sublessee ‘shall not provide Inter-net access to the public from the demised premises’.

12 A copy of the Sublease annexed to Mr Profilio’s affidavit was signed by Mr Freeman on behalf of DAC, but bore no date of execution, no signature by the Applicants and no evidence of having been stamped or registered.

13 Mr Profilio stated in his affidavit that he obtained the Council’s consent both to the change of use of Shop 194 and to the Sublease. Annexed to his affidavit were copies of (a) a letter dated 1 March 2000 from him to the Council, notifying it that the Applicants were ‘interested in’ subleasing Shop 194 and requesting a reply and (b) a letter of reply from an officer of the Council, dated 27 March 2000. This letter included the following paragraph:-

Council has no objection, in principle, to the subletting of the premises provided that any sub-lessee meets the usual tenancy criteria and provided that the terms of any sublease, including rental, remain in accordance with the head lease.

14 Mr Profilio maintained in cross-examination that consent was also given orally by another Council officer, Mr Peter Dwyer. His affidavit did not, however, mention any conversations with Mr Dwyer. In cross-examination, he conceded that he did not send a copy of the Sublease to the Council. Mr Dwyer was not called as a witness in these proceedings and no material from the Council’s file relating to these matters was tendered.

15 During August 2000, DAC commenced operation as a travel agency in Shop 194. It did not make computers available or provide internet facilities to members of the public.

16 On 8 September 2000, Mr Profilio wrote to the Council indicating that the Applicants wished to exercise the option to renew the 1996 Lease. In a letter dated 4 October 2000 and signed by Mr Dwyer, the Council stated that its solicitors had been instructed ‘to prepare the necessary documents’.

17 On 3 November 2000, however, the Council agreed to sell eight shops within Coogee Bay Village Shopping Centre to CBV. Included in the sale were Shops 192 and 194. Settlement of this sale did not occur until 17 September 2001, but during the settlement period CBV made contact with the tenants of these shops with a view to offering new leases to them.

18 Between January and September 2001, there were disputes between CBV and the Applicants as to what the rent for Shops 192 and 194 should be following renewal of the 1996 Lease and as to whether the Applicants were entitled to use two rooms within the building for storage space. On 26 April 2001, an independent valuer determined the current market rent for the two shops.

19 Mr Tom Dover, one of the directors of CBV, took responsibility for renegotiating with the existing tenants. He was the only person within the staff of CBV to be called as a witness in these proceedings. In cross-examination, he gave a series of answers to the effect that to a significant degree – indeed as much as 40% – his affidavit had been prepared by a fellow-director, Mr Peter Alexandrou. In re-examination, he said that he meant only that he had received substantial assistance from Mr Alexandrou in the collection and organisation of the documentary material on which his affidavit was based.

20 In June 2001, Mr Dover visited Shop 194 and realised that a business unrelated to that of The Chat Site was being conducted there.

21 During July 2001, Mr Dover told Mr Freeman in a telephone conversation that CBV ‘had a problem with’ DAC’s tenancy because the Sublease was not registered and the Applicants were refusing to pay the rent due under the 1996 Lease, as renewed. Mr Freeman replied that having regard to these circumstances DAC wished to take a lease of Shop 194 directly from CBV.

22 In the same or a different conversation, in or about July 2001, Mr Freeman told Mr Dover that the Sublease prevented DAC from providing internet services, but that DAC would like to provide such services to its customers and to the public, because it would be a ‘good marketing hook’. He explained this by saying that it was a useful service to offer to DAC’s travel customers, that travellers often wanted to use the internet and that while they were doing this in DAC’s shop they could see DAC’s travel advertising. Mr Freeman was not called as a witness in these proceedings.

23 At all material times, Ms Kathy Klonis, of Klonis & Co Lawyers, was the solicitor for CBV. In a letter dated 19 September 2001, she advised the Applicants that settlement of the sale from the Council to CBV had taken place two days earlier.

24 In a letter dated 3 October 2001 and faxed on that day to Mr Profilio, Ms Klonis stated that CBV required that ‘all requests for the new lease and for all other matters’ should be put in writing. She referred to the continuing dispute about rent and stated that if arrears of rent being claimed by CBV were not paid immediately the Applicants would be liable to eviction. She then asked, ‘as per the terms of’ the 1996 Lease, that a copy of the Sublease ‘executed by the then owner Randwick City Council’ should be sent to her ‘immediately’. She further asked that evidence of the Council’s consent to the change of use of Shops 192 and 194, from ‘a video hiring outlet and retail shop’ to an internet café and a travel agency respectively, should also be provided ‘immediately’.

25 In a letter also dated 3 October 2001 and apparently sent in reply to Ms Klonis’s letter, Mr Profilio requested a new five-year lease for the two shops, with an option to renew for five years, at the rent that the valuer had determined. He enclosed copies of the strata corporation’s consent to the change of use of Shop 192, the notice of the Applicants’ intention to change this use that they had lodged with the Council, the Council’s letter of 27 March 2000 giving approval in principle to the subletting of Shop 194 and the front page of the Sublease. He also stated, apparently referring to this Shop, that DAC had ‘submitted the Change of Use and any relevant documents’ to the Council.

26 As mentioned earlier, a copy of the Sublease annexed to Mr Profilio’s affidavit bore no date of execution, no signature by the Applicants and no evidence of having been stamped or registered. A copy annexed to Mr Dover’s affidavit was, however, dated 5 October 2001 and was signed by the Applicants. It showed also that stamp duty was paid on 18 October 2001.

27 Mr Profilio acknowledged in cross-examination that he and Ms Sajko did not in fact sign a copy of the Sublease until 5 October 2001. It was put to him by Mr Rogers, counsel for CPV, that Ms Klonis’s letter of 3 October 2001, suggesting that the Sublease might be invalid for lack of consent by the Council, had caused them to be concerned that DAC might sue them for that reason and had prompted them to try to ‘fix up’ their ‘problem’. Mr Profilio denied this, saying that he merely wanted to ‘formalise’ the situation and that he had asked his then solicitor, Mr Papallo, of N J Papallo & Co, to attend to this.

28 According to Mr Profilio, he had a telephone conversation with Mr Dover during November 2001. Shortly afterwards, he sent to Mr Dover a copy of the Sublease and of the Council’s letter to him dated 27 March 2000. At around the same time, he had a further conversation with Mr Dover in which he agreed to surrender the Sublease on condition that (a) CBV would grant him a lease of Shop 192 only, on the same terms and conditions (except as to rent) as the 1996 Lease and (b) that any lease of Shop 194 to DAC would have the same term preventing it from offering internet services to the public. Mr Profilio testified that Mr Dover agreed to this arrangement, while also stipulating that the lease of Shop 192 would last no longer than the renewed 1996 Lease – that is until the end of February 2006 – and would not contain an option to renew, because CBV ‘had plans for’ this Shop.

29 In his affidavit, Mr Profilio said that these conversations occurred around 15 November 2001. In cross-examination, he initially placed them in July 2001, but on being told what he had said in his affidavit, he said that the later date was correct.

30 According to Mr Dover, Mr Profilio agreed with him in a conversation during July 2001 that the Applicants would take a lease of Shop 192 only and that Mr Profilio was happy for it to terminate at the end of February 2006. But Mr Dover said also that Mr Profilio did not make any request that the permitted use of Shop 194 should be restricted along the lines provided in the Sublease.

31 In a letter to Ms Klonis dated 29 November 2001, Mr Papallo enclosed a lease of Shop 192, executed by the Applicants. He also stated that the 1996 Lease was surrendered ‘on condition that’ CBV executed the lease of Shop 192. The letter included the following paragraph:-

We are informed that your client has made lease arrangements with Dial A Coach Group Pty Limited for shop 194 and the Surrender of Lease is being given on that basis.

32 In cross-examining Mr Profilio, Mr Rogers pointed out that this letter did not mention any restrictions on the use of Shop 194. He maintained that the Applicants did not in fact press for any such restrictions to be imposed, because they were ‘frightened’ that DAC might take proceedings against them on the ground that the Sublease was invalid. Mr Profilio denied this, saying that he had told Mr Papallo about Mr Dover’s agreement to include these restrictions in the lease to DAC and instructed Mr Papallo to insist that they be included. He claimed also that Mr Papallo had ‘reassured’ him that this instruction had been obeyed and had promised to send him a letter confirming this, but had never done so.

33 Mr Pappallo was not called as a witness in these proceedings and his file relating to the surrender of the 1996 Lease and the grant of a new lease of Shop 192 was not subpoenaed.

34 Mr Dover stated in his affidavit that during discussions that led to the leasing of Shop 192 neither Mr Papallo nor Mr Profilio had insisted on restrictions of this nature being included in the lease of Shop 194 to DAC. But in cross-examination he said that he could not remember whether this statement was correct. He also said that at the time of these negotiations he had not read the Sublease. He acknowledged that (a) through his discussions with Mr Freeman he had become aware that the Sublease contained a term prohibiting DAC from offering internet services to the public and (b) he knew that this term was important to Mr Profilio.

35 Annexed to Mr Profilio’s affidavit was a copy of a lease of Shop 192 from CBV to the Applicants, commencing on 1 March 2001 and terminating on 27 February 2006 without any option to renew (‘the 2001 Lease’). It bore no date of execution. In Item 16 of Annexure A, it stated: ‘The Lessee shall not use the Premises other than for the purposes of the provision of internet and email services to members of the public.’

36 Annexed to Mr Dover’s affidavit was a copy of a lease of Shop 194 from CBV to DAC, commencing on 1 February 2002 and terminating on 31 January 2012, with an option to renew for five years (‘the DAC Lease’). Its date of execution was stated to be 19 September 2002, though it would appear to have been executed during the preceding month. In subclauses (A) and (B) of Item 16 of Annexure A, it stated as follows:-

(A) The lessee will not use or permit to be used the demised premises other than for the purposes of the provision of a Travel Agency and associated administration office and the sale of travel goods and associated services and as a retail shop, and use as a Travel Agency shall be exclusive to the Lessee throughout the centre known as “Coogee Bay Village Shopping Centre” as owned by the Lessor.

(B) The Lessor further agrees to allow the Lessee to use the demised Premises for the purposes of the provision of internet and email services, such use to be exclusive to the Lessee throughout the centre known as “Coogee Bay Village Shopping Centre” as owned by the Lessor only upon expiration of the lease granted to Mr Joseph Profilio and Ms Rozi Sajko over shop 192 Coogee Bay Road Coogee, registration number 8215442.

37 Mr Dover testified that although he signed the DAC Lease on CBV’s behalf, he did not pay attention to the specific terms of these subclauses. In this context, as in a number of others, Mr Dover indicated in cross-examination that he left detailed matters relating to leases to be handled by Ms Klonis.

38 Near the end of 2001 or early in 2002, DAC installed about ten computers in Shop 194, which were available for obtaining access to the internet on payment of a fee to a travel consultant. Mr Profilio stated in cross-examination that during this period he observed that the new computers were available for use by members of the public. In cross-examination he initially said that he made this observation at a later date (around May 2002). But he subsequently stated that a date indicated in his affidavit – some time in December 2001 or January 2002 – was correct.

39 Soon after Mr Profilio made this observation, he complained to Mr Dover that this conduct by DAC contravened the restrictions which had existed in the Sublease and which should, according to Mr Profilio, have been included in the DAC Lease. According to Mr Dover, Mr Profilio first complained in this way in January 2002. Mr Dover said further that similar complaints occurred throughout 2002 and 2003 and were frequent, being accompanied on occasions by complaints about inadequate storage space.

40 According to both Mr Dover and Mr Profilio, Mr Dover’s response was that the terms of the lease to DAC permitted it to act in this way. He would appear to have given this response both before and after the execution of the DAC Lease during August 2002.

41 Mr Dover’s testimony during cross-examination regarding his conversations with Mr Profilio included the comment that ‘to a degree’ Mr Profilio was a ‘difficult tenant’, who was ‘constantly ringing’ him. He said also, however, that his relationship with Mr Profilio was ‘average’, since other tenants that he had also posed problems for him.

42 Mr Profilio testified that during 2002 he and Ms Sajko decided that although he considered that he had been ‘tricked’ into surrendering the Sublease they would not instigate legal proceedings against CBV on this account or indeed put their complaint about it in writing. Instead, they decided to look for other premises for their business. A factor that they took into account was that the 2001 Lease would come to an end, without any option to renew, in February 2006.

43 During 2002 and 2003, Mr Profilio made some attempts to find alternative premises, but they were not fruitful.

44 Mr Brett Massingham was employed by DAC as a travel consultant from late 2003 to August 2004. He recalled that an A4 sign in Shop 194 set out the scale of fees charged for use of the internet. He did not remember any advertising for this facility outside the shop. In his affidavit, he described the mode of use of the computers as follows:-

There was no restriction on who could use the internet, but it was intended for use by persons enquiring about or purchasing travel products and it would have been rare for anyone else to do so. It was a very small part of the business.

The 2004 Leases and associated transactions

45 According to Mr Profilio, Mr Dover contacted him early in July 2004 and asked whether he was interested in a further lease of Shop 192 following the expiry of the 2001 Lease. According to Mr Dover, Mr Profilio contacted him and requested a further lease.

46 In a letter dated 19 July 2004 to Mr Profilio, Mr Dover indicated that CBV was willing to offer a further lease of five years, with an option to renew for five years. The letter stated that CBV would require an increase in rent. No mention was made of the permitted use for Shop 192 or of the use to which Shop 194 might be put.

47 During August 2004, the business conducted at Shop 194 by DAC, which had gone into liquidation, was taken over by Base Backpackers Pty Ltd. This company is the sole owner of Backpacker World Travel (‘BWT’). BWT installed new desks and computers and changed the signage into its own name instead of DAC.

48 According to Mr Profilio, DAC was replaced by BWT in Shop 194 at a distinctly earlier time – that is, towards the end of 2002. In cross-examination, he said that this occurred early in 2004. Neither of these dates appears to be correct, since Mr Massingham testified that the takeover occurred around August 2004.

49 Mr Profilio testified that once BWT had refitted Shop 194 and commenced trading, he observed that it maintained a policy of providing internet and email services to its ‘network’ of travel agency customers only. It did not advertise these services as being generally available. He believed that BWT provided these services as a ‘marketing tool’.

50 In cross-examination, it was put to him that he could not tell ‘just by looking’ whether BWT’s provision of these services was limited in this way. He then claimed that at this time there were no signs indicating that they were available to the public. He added that in reaching these conclusions he had relied on other sources, while acknowledging that he had not referred to these sources in his affidavit.

51 Mr Massingham testified that after working for DAC as a travel consultant until August 2004, he stayed on with BWT in the same capacity until January 2005. It is not clear from his affidavit whether his evidence regarding the mode of use of the computers in Shop 194 (see [44] above) related only to the period when DAC occupied the shop or included also the period when he was employed there by BWT.

52 Mr Brent Moulang was employed by BWT as a network co-ordinator. During a ‘transition period’ from about June 2004 to the beginning of 2005, he visited Shop 194 in connection with the installation of new computers. In his affidavit, he stated:-

Prior to the installations that I was required to make, I observed that the customers that used the internet were paying customers. By that I mean that I observed on a number of occasions that the customer paid for the use of the internet at the desk that DAC had for their travelling arrangements. Customers would be permitted to walk in from the street, purchase time at the service desk and use the computers to access the internet.

In my opinion other than the cosmetic changes that were made to the shop…. the basic business model did not change. In particular, prior to the purchase of the shops by BWT and the outfitting with the new systems, people were permitted to use the internet and were permitted to pay for this at the front desk.

53 After the letter of 19 July 2004 from Mr Dover to Mr Profilio, negotiations took place between the Applicants and CBV regarding the rent to be paid under the proposed new lease of Shop 192. Around the beginning of November 2004, an increased amount was agreed on. As from the beginning of November 2004, the Applicants paid this amount as rent.

54 During a period concluding in early December 2004, CBV negotiated and entered into a lease of Shop 194 to BWT. Relevant aspects of this lease (‘the BWT Lease’) are outlined below.

55 During November and December 2004, CBV also negotiated and entered into a new lease of Shop 192 (‘the 2004 Lease’) to the Applicants. Ms Klonis acted for CBV and Mr Angelo Hatsatouris, of Patrick Hargraves & Co, solicitors, acted for the Applicants. A prominent question in these negotiations, conducted mainly through letters that are described in the ensuing paragraphs, was the scope of the permitted use and of any exclusive use to be granted.

56 The initial draft lease submitted by Ms Klonis to Mr Hatsatouris early in November stated that the premises ‘cannot be used other than for the purposes of an Internet Café’. On 8 November, Mr Hatsatouris sent a copy of this draft to the Applicants. The parties’ solicitors then exchanged letters during November and December 2004, in which the relevant passages for present purposes were as outlined in the next eight paragraphs.

57 On 24 November, Mr Hatsatouris wrote as follows to Ms Klonis:-

We refer to previous correspondence and note that the premises adjacent to our client and within your client’s property is ( sic ) also being used for an internet service.

The use prescribed for the subject Lease is that the premises cannot be used other than for the purpose of an internet café.

Our client has requested that this use be expanded to enable other commercial uses to be applied to the premises which could include use as a sub-agent for a travel agency and other services not normally associated with an internet café.

58 On 26 November, Ms Klonis advised that CBV would not agree to include a travel agency or a pizza shop as a permitted use.

59 On 30 November, Mr Hatsatouris asked whether the permitted use could be extended to include ‘internet café “and other related activity” and stated that the Applicants ‘would also like a provision in the Lease that no other shop in the Centre be granted use as a “Internet Café”’.

60 On 2 December, Mr Hatsatouris confirmed recent telephone advice from Ms Klonis that CBV would agree to add the words ‘and other related services’ to the permitted use. After commenting on other aspects of the current negotiations and observing that another tenant called Dominoes Pizza had recently been granted exclusivity, he suggested the following clause for the lease:-

4.4 The Lessee acknowledges that the use permitted in 4.1 will not permit the sale of pizzas or kebabs or the operations of a licensed travel agent.

4.5 The Lessor warrants and agrees that the Lessee shall be entitled exclusivity ( sic ) within the building in which the demised premises form part for the use of the premises as an internet café.

61 On 2 December, Ms Klonis advised that CBV consented to the Applicants ‘having other related activities’, which she specified in draft provisions contained in her letter. She advised further that exclusivity as an internet café would only be granted ‘relating to that part of the shopping centre shops owned by the Lessor’. She then suggested the following draft provisions in substitution for those proposed by Mr Hatsatouris:-

4.1 The Lessee shall not use the Premises otherwise than for the purposes of an Internet Café and related activities, where related activities, is defined as the sale of snacks, coffee, drinks, confectionery and sandwiches.

4.4 The Lessee acknowledges that he will not use the premises during the term of the Lease and any further term or holding over period for any activity which relates to the use of the Premises as a travel agency, pizza shop, tobacconist, delicatessen or kebab shop.

4.5 The Lessor acknowledges that the Lessee shall have the exclusive use of the Premises as an Internet Café relating only to the land owned by the Lessor and known as Lot 17 in Strata Plan 22899 attached hereto and marked as Annexure B.

4.6 Notwithstanding clause 4.5 the Lessee acknowledges and accepts that the occupier from time to time of the Lessors Land known as Shop 194 Coogee Bay Road Coogee allows access to the internet for the occupiers customers, however, the primary use of the shop is a Travel Agency.

62 On 7 December, Mr Hatsatouris advised that the Applicants were concerned about entering into a ‘restrictive covenant’ and that the suggested draft clauses 4.1 and 4.4 were therefore not acceptable. He made the following points based on instructions that he had received from the Applicants:-

1. A business described as an ‘Internet Café’, being known also in Australia as ‘Cybercafe , Email & Internet Centres and Communication Centres’, provided services that varied from location.

2. Very few of them served food and drinks, and the large majority had ‘computers where customers can email and access the internet and use computer related hardware and software to perform many other functions’.

3. Some had evolved into communications centres for travellers providing useful information and services.

4. The nature of this business was ‘such that it will continue to evolve as new technology is developed’.

63 Mr Hatsatouris then suggested that the phrase ‘related services and activities’ would include the sale and provision of products and services which he described as follows:-

Phone cards, faxing, CD burning, Computer services, online hotel booking, foreign currency exchange, Postage, freight forwording ( sic ), web design, online job search, Photocopying, Printing, Typing Services, online travel booking desk, online games, incoming phone services, Photo Processing, Digital cards, Mail Box rental, Mobil ( sic ) Phone, Scanning, laminating, USB ports, office software, network installation, Internet services provider, Computer training, selling products and services online, and new services and products as computer technology is developed in the future. Snacks, coffee, drinks, confectionery and sandwiches.

64 Mr Hatsatouris then asserted that the ‘restrictive covenant’ that CBV sought to impose was ‘unfair and unreasonable’, particularly since the Applicants had paid the increased rent for the months of November and December 2004. He pointed out that while the services listed by him included online hotel and travel bookings, the Applicants were not seeking to be a licensed travel agent and that ‘similar services appeared to be offered by the travel agency’.

65 Mr Profilio said in cross-examination that he ‘saw’ Mr Hatsatouris’s letter of 24 November 2004, but did not ‘see the letter go out’. He said that he later suggested to Mr Hatsatouris that the precise extent of the internet services that he understood BWT to be supplying should be drawn to CBV’s attention. He added that he believed that one of Mr Hatsatouris’s later letters did do this, but did not identify the letter in question.

66 Mr Profilio said in his affidavit that on 25 November 2004 he rang Mr Dover and asked whether the Applicants could have a travel desk and provide other products and services. Mr Dover replied that CBV would prefer their business to be an internet café while Shop 194 would be a travel agency. Mr Profilio replied that in that event the Applicants would like exclusivity as an internet café, while Shop 194 could provide internet and email access ‘as they were doing now’. On being asked by Mr Dover what this was, he said that Shop 194 did not provide such access to the general public, but only to customers who purchased travel products. He said also that they ‘did not provide any other services’. Mr Dover then told him to put his request in writing, which he said he would do through his solicitor.

67 Mr Profilio said also that at the time when Mr Hatsatouris’s letter of 7 December 2004 was sent he knew and approved of the contents of the list of ‘related services and activities’. He also knew that negotiations were currently in train for the grant of the BWT Lease, but he did not inquire, or ask Mr Hatsatouris to inquire, as to the terms of the use that this lease would permit for Shop 194.

68 Mr Dover did not refer in his testimony to the alleged conversation on 25 November 2004. He said in his affidavit that he remembered ‘considerable discussions’ between himself, Ms Klonis and Mr Hatsatouris about the range of exclusive uses that should be granted to the Applicants. He added that he was concerned about the activities of other shops in the centre, citing as an example the fact that BWT, Woolworths and a tobacconist sold telephone cards.

69 Mr Dover also said in his affidavit that late in November 2004 he instructed Ms Klonis to accede to Mr Profilio’s request for exclusivity as an internet café and permission to conduct related activities, adding ‘anything to keep him quiet’.

70 In cross-examination, Mr Dover said variously, until reminded of the passage just mentioned in his affidavit, that he did not agree to the exclusivity clause and that he did not remember agreeing to it. He said also that he was not involved in the detailed exercise of formulating the provisions regarding permitted use and exclusivity in the new lease to the Applicants, nor indeed in the equivalent operation relating to the BWT Lease. He added that he considered these matters to be appropriate for Ms Klonis to undertake on behalf of CBV and that he did not remember whether the negotiations for the two leases occurred at about the same time.

71 An undated Lessor’s Disclosure Statement, referable to the 2004 Lease and signed by the Applicants, was annexed to Mr Profilio’s affidavit. Under the heading ‘Details as to Agreements or Representations’, the following sentence appears in handwriting: ‘Lessor has agreed to provide exclusivity of use as internet café as defined in lease for Lot 17 SP 22899 subject to right of travel agent to permit internet use to its customers.’ Lot 17 in Strata Plan 22899 comprises the land within Coogee Bay Shopping Centre that CBV owns.

72 On a date or dates earlier than 15 December 2004 (the date of stamping), the Applicants executed the 2004 Lease and Mr Dover executed it on behalf of CBV. No date of execution is shown on the Lease.

73 The 2004 Lease commenced on 1 November 2004 and terminates on 31 October 2009. It contains an option to renew for five years. The amount of rent stipulated is the amount that was agreed during the negotiations mentioned above.

74 On the issues of permitted use and exclusivity, the 2004 Lease provides as follows:-

4.1 The Lessee shall not use the Premises otherwise than for the purposes of an Internet Café and related services and activities to the Lessees customers including but not limited to providing all computer services via the internet including online booking services for hotel and travel, online games, online job search general computer services, Internet services provider and the sale of phone cards, faxing services, postage web design, photocopying, printing, typing services, incoming phone services, photo processing, digital cards, mailbox rental, mobile phones, scanning, laminating, USB ports, office software, network installations, computer training, selling products and services online, and new services and products as computer as computer ( sic ) technology is developed, snacks, coffee, drinks, confectionery and sandwiches.

4.2 The lessee acknowledges that he will not use the premises during the term of the Lease and any further term or holding over period for any activity as a Licensed Travel Agency, Pizza or Kebab Shop, Tobacconist or Delicatessen without the prior written consent of the Lessor.

4.3 The Lessor acknowledges that the Lessee shall have exclusive use of the Premises as an Internet Café relating only to the land owned by the Lessor and known as Lot 17 in Strata Plan 22899 attached hereto and marked as Annexure B.

4.4 Notwithstanding clause 4.3 the Lessee acknowledges and accepts that the Lessee and or its heirs, successors or assigns of the Lessors Land known as Shop 194 Coogee Bay Road, Coogee allows access to the Internet for the Lessees customers, however, the primary use of the land is a Licensed Travel agent.

75 On a date in December 2004, which appears from the document to be 5 December but might be 3 December, a director of BWT executed the BWT Lease on BWT’s behalf and Mr Dover executed it on behalf of CBV.

76 The BWT Lease commenced on 1 October 2004 and terminates on 30 September 2012. It contains an option to renew for five years.

77 On the issue of permitted use, the BWT Lease provides as follows:-

4.1 The Lessee shall not use the Premises otherwise than for the purposes of a Travel Agency and associated administration office and the sale of travel goods and associated services and as a use of a retail shop and for the provision of internet and email services.

78 Clause 25 of the BWT Lease provides that part of Shop 194 may be sublet by CBV for the purpose of installing an ATM and that the net rental received from the sublessee should be shared equally between CBV and BWT.

79 Mr Dover provided in his affidavit the following explanation of his and his fellow-directors’ reasons for agreeing to the 2004 Lease:-

… we believed this would ensure that each tenant would continue to provide essentially the same products as they were doing at the time of signing. The Travel Agency would continue to provide travel services as a primary use and internet access as a secondary use, and the Chat Site would continue to operate as an internet café.

80 In cross-examination, Mr Dover said that when signing the 2004 Lease and the BWT Lease he did not read the provisions in these leases dealing with permitted use and exclusivity and he did not realise that clause 4.1 of the BWT Lease might be in conflict with clause 4.3 of the 2004 Lease. He also did not remember whether there were any disclosure statements relating to the BWT Lease, or whether he was involved with the decision to include clause 25 in this lease. He said that he was aware that an ATM had been installed in Shop 194.

The internet facilities provided by BWT from 2005 onwards

81 At a time which he described as ‘early 2005’, Mr Profilio observed that BWT had erected signs both outside and inside Shop 194 advertising internet access and had posted an ‘Internet Price List’ on the front door. In addition, he saw that a price list of products and services was posted above every computer, advertising fast internet connections at low cost, CD burning, word processing, facilities for the installation of USBs and PDAs, iPods and printing facilities.

82 Photographs of the signage and of the ‘Internet Price List’, taken by Mr Profilio on or about 21 June 2005, were annexed to his affidavit.

83 On or about 10 May 2005, Mr Profilio rang Mr Dover and complained about the installation of this signage outside and inside Shop 194. According to Mr Profilio, he reminded Mr Dover of the exclusivity clause in the 2004 Lease and said that BWT were ‘only allowed to provide internet and email service to their customers’. Mr Dover’s version included claims that (a) Mr Profilio also mentioned photocopying by BWT and (b) Mr Dover himself said that BWT were permitted to provide internet and email access under their lease and that ‘these issues were supposed to be resolved’ when the two leases were signed.

84 On or about the same day, Mr Profilio sent a handwritten fax to Mr Dover showing in brief notes and rough diagrams the content of the signage and price lists that he had seen outside and inside Shop 194.

85 In a letter dated 11 May 2005 to Ms Klonis, Mr Hatsatouris described the signs advertising internet access erected outside Shop 194, alleged that the current occupiers of this Shop were ‘in addition promoting their internet services and computer services which are the same as the Chat Site, namely work (sic) processing, printing, photocopying, USB facility’ and claimed that CVB had ‘an obligation to exercise his authority under the Lease to restrict the travel agent next door from promoting the services which fall within the definition as agreed in clause 4.1’.

86 Mr Dover testified that after his conversation with Mr Profilio he relayed Mr Profilio’s complaints about the advertising to the Facilities Manager for BWT. The Facilities Manager said that BWT had ‘always provided the internet from this store, but that ‘as a favour’ to CBV they would see if they could help them out.

87 On 25 May 2005, Mr Hatsatouris wrote to Ms Klonis pointing out that she had not replied to his previous letter.

88 In a letter dated 14 June 2005 to Mr Hatsatouris, Ms Klonis advised that BWT had agreed to discontinue offering photocopying services and CD reading and burning, and to adjust their advertising to reflect these changes.

89 In letters to Ms Klonis dated 23 June and 11 July 2005, Mr Hatsatouris indicated that these measures were insufficient to resolve the issue.

90 Mr Profilio testified that in a telephone call on or about 25 June 2005 he repeated his complaint about BWT’s activities to Mr Dover. Mr Dover replied: ‘As far as I’m concerned, they are a travel agent and you are an internet café, and that’s it!’

91 In a letter to Ms Klonis dated 2 August 2005, Mr Hernan A Gonzalez, solicitor, claimed on behalf of BWT that his client was ‘not prohibited by the Lease from announcing its internet and e-mail services and displaying signs promoting’ these services. Mr Gonzalez also claimed that since the Applicants had entered into their lease on the understanding that BWT would be providing such services, they were not entitled to complain about BWT making its clients aware of them.

92 In a letter to Mr Hatsatouris dated 11 August 2005 and enclosing a copy of this letter from Mr Gonzalez, Ms Klonis stated that CBV would ‘adhere to the terms of the respective leases’. She added (a) that the Applicants always knew that BWT would ‘probably continue to have internet on their premises’, (b) that ‘the primary use of the premises is a Travel Agent as per the terms of their Lease’ and (c) that CBV had ‘not at any time granted as per the terms of your clients lease a lease for an internet café to any other tenant in the centre’.

93 In further letters to Ms Klonis dated 16 and 29 August 2005, Mr Hatsatouris repeated the Applicant’s claims that according to the 2004 Lease BWT was not to be permitted to advertise and provide internet services for the general public. He also claimed that BWT were targeting the Applicants’ customers, and he conveyed specific objections by them to the provision of the following services by BWT:-

Windows player to view pictures from digital cameras

USB ports digital, digital card reading to burn CDs

Adobe PDF file reader

PDAs and iPod, MP3, player programmes

Microsoft Office – Word, Excel for word processing, Power Point

Facsimile, printing and photocopying.

94 According to the evidence of Mr Dennis Timmins, who commenced employment with Base Backpackers Pty Ltd as a Facilities Manager in October 2005, the practice then adopted by BWT was to require that any visitors to any of its agencies, including Shop 194, who wished to buy time on the internet should first obtain a BWT card. They might have done so at another BWT location, or might be given one, with a small amount of ‘free time’, while waiting for a travel consultant to attend to them, or might be given one with ‘free time’ in conjunction with a purchase of travel products or services. Any internet time not used in the shop where a card was obtained could be used in any other BWT shop in Australia. The travel consultants employed by BWT were encouraged to watch how customers were using the internet – looking over their shoulders if necessary – and to try to make a sale to any customer who appeared to be using it for travel purposes. For these reasons, the availability of internet access was viewed as a ‘hook’ for BWT, as for other travel agencies, to ‘get backpackers through the door to purchase travel products’.

95 It was put to Mr Timmins in cross-examination that consultants who looked over the shoulders of BWT customers to see how they were using the internet would be breaching their privacy. He replied that BWT did not ‘offer privacy’, as their shops were ‘public spaces’.

The involvement of Global Gossip

96 On or about 5 July 2007, Mr Profilio observed that BWT had changed their computers in Shop 194 and had attached webcams and headsets to the new computers. About two weeks later, he observed that the signs outside the shop advertised ‘Global Gossip’ and that the new computers all displayed ‘Global Gossip’ as their login page. He stated that this association with Global Gossip at Shop 194 was still continuing.

97 Mr Profilio testified (a) that to his knowledge the company known as Global Gossip is a very large operator and owner of internet cafes, (b) that it sells access cards for internet use at any location where it provides services (including Shop 194 and the other agencies maintained by BWT), (c) that these cards can be used at any Global Gossip location and (d) that users of Global Gossip’s services can earn and redeem ‘Gossip Points’ at any of its locations.

98 According to Mr Profilio’s evidence, the services provided at Shop 194 by BWT, in conjunction with Global Gossip, amount to ‘90% of the same services that the Chat Site provides’. The only services not available at Shop 194 are photocopying, scanning and laminating.

99 Following a number of complaints about Global Gossip’s involvement made by Mr Profilio to Mr Dover during July and August 2007, Ms Klonis wrote on 23 August 2007 to BWT. Her letter included the following passage:-

We are instructed that our client has received notification that you may have breached your lease as follows:

1. Subleased your premises to Global Gossip

2. Providing Internet services to the general public.

We note your use of the premises is for a Travel Agency and associated administration office and the sale of travel goods and associated services and as a use of a retail shop and for the provision of Internet and email services to your customers only.

Could you kindly provide response to our correspondence within 7 days.

If you fail to remedy the breach and or not reply our client will pursue any damages they suffer from any breach of the lease.

100 In a reply to Ms Klonis dated 30 August 2007, Mr Timmins wrote that BWT had not entered into a sublease with Global Gossip and that Global Gossip was an internet service provider to BWT. He added that BWT ‘provide internet and email services as a marketing tool to encourage customers into our travel shops and to service the needs of our customers already travelling within our travel network’.

101 Ms Klonis sent a copy of this letter to Mr Profilio. In a reply to her dated 3 September 2007, he maintained that BWT were in breach of their lease in providing internet services both to the general public and to Global Gossip customers. He pointed out (a) that Global Gossip had 114 locations in Australia, New Zealand, Vanuatu and Fiji; (b) that one of these locations, shown on its website, was identified as BWT’s travel agency at Shop 194; and (c) that BWT had 33 locations in Australia and New Zealand. He claimed that BWT’s breaches of their lease were diverting his customers to Shop 194, with the result that both the takings and the value of his business were reduced.

102 Mr Dover said in cross-examination that he did not know what sort of enterprise Global Gossip was, because he had no relevant technical expertise. He said also that he had not seen the correspondence between Ms Klonis, Mr Profilio and Mr Timmins during July, August and September 2007 because Ms Klonis, being CBV’s solicitor, was ‘supposed to handle’ such matters.

103 Mr Timmins testified that BWT had decided to outsource their internet services because maintenance of these services by their own staff was unsatisfactory. BWT had engaged Global Gossip to act as its internet service provider. Allowing Global Gossip’s internet access cards, as well as BWT cards, to be used in BWT premises meant that BWT could ‘attract more backpacker/adventure tour persons into the premises’, with a view to selling travel services or products to them. BWT did not earn any revenue directly from the use of Global Gossip cards in BWT’s shops because the cards were purchased from Global Gossip.

104 Mr Timmins estimated that the revenue obtained from providing internet access represents only 4% of the turnover of Shop 194. He did not produce any financial documents to support this estimate. During cross-examination, he indicated that the turnover to which he referred comprised the gross amounts received from customers. It included, for example, the total airfare paid by a customer even though most of this fare would be paid to the airline concerned. Mr Timmins was not able to say how the profitability of BWT’s internet services compared with that of its travel services and products.

105 Four other witnesses corroborated from their own experience Mr Timmins’ evidence that a person visiting Shop 194 could purchase internet access on the shop’s computers without having first purchased a travel service or product. These were Ms Lorant Corba, a former employee of the Applicants, and three witnesses, identified below, who were engaged by the parties to give evidence regarding the meaning of the phrase ‘internet café’. Ms Corba visited Shop 194 on 14 July 2008.

106 Photographs of the exterior of Shop 194, taken by Mr Profilio on 12 June 2009 and annexed to a supplementary affidavit sworn by him, show prominent signs advertising internet services at ‘low cost’ and with ‘fast connection’, and indicating that these services are ‘powered by Global Gossip’.

Evidence regarding the meaning of ‘internet café’

107 As just mentioned, three further witnesses prepared reports and gave oral testimony relating in different ways to the meaning of the term ‘internet café’ and their views as to whether the business conducted at Shop 194 answered this description. Their reports dealt with other matters, but were admitted into evidence only in so far as they were relevant to the issue of liability.

108 In ruling on objections raised by opposing counsel to the qualifications of these witnesses, to their reports as a whole and to passages in their reports, the Tribunal stated and applied three principles, as follows. First, the Tribunal, being not bound in these proceedings by the rules of evidence (see ADT Act, section 73(2)), could admit the testimony of persons put forward as experts even though their qualifications or the manner in which their evidence was presented might not meet the criteria prescribed by those rules. Secondly, a witness who had academic qualifications, specialist knowledge acquired through research and/or practical experience relating to the development of publicly available internet services within Australia generally and/or in locations, such as Coogee, which a significant number of tourists regularly visited, could potentially furnish factual or opinion evidence of relevance to the questions to be determined by the Tribunal. Thirdly, the evidence furnished by such witnesses, while in no way determinative of the interpretation to be given to the phrase ‘internet café’ in clause 4 of the 2004 Lease, was capable of providing assistance in determining this question through illustrating the range of meanings attributed to this phrase at the time when this Lease was executed.

109 The Tribunal ruled that, subject to certain excisions, the reports of these witnesses should be accepted into evidence. Each of the witnesses was cross-examined.

110 The sole witness called by the Applicants to give evidence about the meaning of the phrase ‘internet café’ was Mr Bruce Arnold. He is employed by the University of Canberra as a law teacher. He described himself as being also a telecommunications and internet analyst. He said that over a period of about 10 years he had provided consultancy services on matters of internet and telecommunications business and regulation through a company founded by him. He had provided these services both to government agencies and to the private sector. In addition, he had given many presentations and published a number of monographs and articles relating to these matters.

111 So far as relevant, his testimony related principally to the meaning of the phrase ‘internet café’, specifically as used in Australia in and around the year 2004. He pointed out that there was no official definition of this phrase for the purposes of an industry agreement, industry association, regulatory agency or standard industry classification such as is used by the Australian Bureau of Statistics. In popular usage, the terms ‘cybercafe’ and ‘LAN café’ were treated, he said, as alternative labels.

112 Mr Arnold expressed the opinion that the essential attributes of an internet cafe were as follows: (1) access to the internet (or, as he termed it, ‘connectivity’) was provided; (2) it was provided within premises run as a commercial concern; (3) it was made available to members of the public; and (4) it was paid for. The presence of these features, he said, was both sufficient and necessary to constitute an internet café.

113 He maintained that computers giving internet access in a public library would not constitute an internet café because the commercial element would not be present. The same would apply, he said, to computers provided on a non-profit basis by a charitable foundation.

114 Mr Arnold sought to distinguish isolated computers providing internet access, such as are found in airports, by describing them as internet ‘kiosks’. He agreed, however, that this distinction might not be clear-cut.

115 He suggested also that an internet café and a quite different and possibly larger commercial enterprise, such as a service station or a supermarket, could operate within the same premises, which would then be the venue for two quite separate enterprises. He added that one might find an internet café inside a hotel, so long as it was available for public use, not merely for use by hotel guests. When asked, by way of example, how he would characterise a group of computers providing internet access inside a rural service station, his reply was that, even if the number of computers was very small, it could still be an internet café. He suggested that such an enterprise would be viewed by some people as a service station, by others (particularly if they did not have a driving licence) as an internet café and indeed by others as the local newsagent or food supplier.

116 In this and other contexts, Mr Arnold placed some emphasis on the proposition that in ascertaining the meaning of ‘internet café’ it was important to take into account the relevant ‘demographic’. It followed, he said, that evidence of how this phrase was interpreted overseas would be unreliable when determining how it should be interpreted in Australia and that its meaning might indeed vary within Australia.

117 Mr Arnold expressed the opinion that the provision of coffee or other refreshments was not an essential feature of an internet café, nor was the provision of ‘related services’ (for example, network installation, phone cards, faxing and web design) such as were listed in clause 4.1 of the 2004 Lease. He said that such services were, however, commonly found in internet cafes. He also said that signage advertising the venue as an internet café was not a prerequisite.

118 Mr Arnold visited Shop 194 on 25 November 2008. He observed the advertising of internet services as depicted in the photographs taken by Mr Profilio on 21 June 2005. He also observed that there was no ‘physical segregation’ or ‘segregation in terms of service’ between BWT’s travel services and its provision of internet services. Without purchasing travel services or products, he was able to buy time online and use that time to perform such operations as checking email, looking for employment or indeed booking a hotel room. He saw other customers engaging in ‘what you might expect of activity in an internet café: for example surfing the web for news, sending email, updating their Facebook profiles, copying images’. He found the software to be such as would be ‘expected in an internet café’ and that the hardware included web cams and USB capability. He noticed that no coffee or other form of refreshment was available.

119 On the same day, Mr Arnold visited Shop 192. He came to the conclusion that ‘in terms of an internet café (connectivity and computer access) there is little for either a Coogee resident or a visitor to Coogee to differentiate’ the two enterprises.

120 The first of two witnesses called by CBV to give evidence about the meaning of the phrase ‘internet café’ was Mr John Corrigan. His qualifications did not show him to be an expert on matters relating to the internet. He did however have experience in market research.

121 The bulk of the admitted sections of Mr Corrigan’s report comprised the findings of a survey that he had conducted on the operations of ten businesses (including Shop 192) that described themselves as internet cafes and a further eight businesses (including Shop 194) that described themselves as adventure travel agencies but also offered internet access. He surveyed a further eighteen businesses that provided internet access but did not depict themselves as an internet café or an adventure travel agency. All of the 36 businesses surveyed were located in Coogee, Bondi Beach or the Central Business District of Sydney. The reason for choosing these locations was, he said, that they had the common feature of being visited by a significant number of what he called ‘budget/backpacker travellers’. Mr Corrigan visited a number of relevant venues, including Shops 192 and 194, within the period from 17 to 20 February 2009.

122 Relevant sections of Mr Corrigan’s report were admitted, not as expert evidence in the traditional sense, but as a summary of factual data that he had compiled and analysed. The Tribunal considered that this summary might prove useful to it in determining how the phrase ‘internet café’ should be interpreted within the particular context of the 2004 Lease.

123 In his report, Mr Corrigan identified the ‘key characteristics’ of internet cafes as (a) the provision of a computer with internet access; (b) the provision of internet access using a laptop not provided by the business; (c) the use of core software programs; and (d) payment by users on a time basis. He stated also that all internet cafes offered some or all of a range of ‘primarily business related services’. His list of these services corresponded quite closely with the list of ‘related services and activities’ in clause 4.1 of the 2004 Lease. He also said that internet cafes tended to be open for 12 – 18 hours per day, ‘to cater for the transient nature’ of their core clientele.

124 Mr Corrigan found that the ten self-styled internet cafes which he surveyed had all or virtually of these characteristics. In addition, they derived most of their revenue from the provision of internet access. The eight adventure travel agencies that he surveyed all promoted the sale of internet access in their external signage, but did they not display their prices externally, they kept their internet screens separate from their travel desks and screens and some of their internet services were provided ‘free’ to travel customers.

125 Mr Corrigan observed that, in contrast to Shop 192 and indeed a travel agency owned and run by BWT at Bondi Beach, Shop 194 had a relatively small number of internet screens (ten, as compared with 28 at the Bondi Beach agency), it did not have dedicated internet staff, it did not display its internet charges prominently, it did not sell drinks and its hours of operation were relatively short (9.30 a.m. to 7 p.m., as compared with 9 a.m. to 9 p.m. at Shop 192 and 6 a.m. to midnight at the Bondi Beach Agency). In further contrasting Shop 194 with Shop 192, Mr Corrigan observed that Shop 194 did not provide internet connections for laptops and related services such as printing and photocopying.

126 He also observed that the ‘core revenue’ of Shop 192, but not of Shop 194, was derived from the provision of internet access based on time used. In cross-examination, however, he appeared to concede that when two distinct business streams (the examples given were the sale of internet access and the sale of comic books) were in operation at a single venue, it could be said that two separate businesses were being conducted there, not merely the business that generated the most revenue.

127 The second of CBV’s witnesses to give evidence on these matters was Mr Peter Hind. In his curriculum vitae, he said that ‘through’ his IT consulting company he was ‘an independent analyst, researcher and commentator on the IT industry around the Asia Pacific’. His experience included running management forums for IT executives, co-authoring a book called ‘The IT Managers Survival Guide’ and conducting research into various IT-related topics, including the adoption of information technology in Australian and New Zealand organisations.

128 On the basis of this experience and of Mr Hind’s stated familiarity with some academic literature relating to internet cafes and information technology generally, relevant sections of Mr Hind’s report were admitted.

129 Mr Hind’s report and his testimony in cross-examination showed that he agreed, generally speaking, with Mr Arnold’s identification of four key attributes (see [112] above) as necessary ingredients of an ‘internet café’. But he differed from Mr Arnold in expressing the opinion that a further attribute – namely a sociable atmosphere or ambience – was also necessary. While he considered that the provision of coffee or other refreshments could contribute to the necessary ‘ambience’, he did not think that this was essential. He supported this opinion that there must be a suitable ‘ambience’ by explicit reliance on the following sources: (a) three articles, based in part on empirical research, published within the period from 1999 to 2003 by various academic scholars working in Scotland and Norway; (b) his own experience of internet cafes in the Gulf States; and (c) a presentation by the President of an Internet Cafe Association in the Philippines. In cross-examination, he acknowledged however that ‘in terms of social development and how people live and work’ the Philippines differs materially from Australia and that the two countries might therefore have different views on what constituted an internet cafe.

130 Mr Hind visited both Shop 192 and Shop 194 in March 2009 and again in May 2009. He observed that though the computers and the accompanying facilities in Shop 192 appeared to be less modern and less efficient than were to be found in Shop 194, there were on both occasions more customers in Shop 192. He attributed this ‘paradoxical’ discovery to the fact that Shop 192 had a ‘lively ambience’, whereas Shop 194 ‘was not a place where someone using the Internet could holler and let off steam’. He also noted that in Shop 192, but not in Shop 194, customers could use a computer without paying in advance for time online.

131 On the basis of this material, Mr Hind concluded that the Chat Site at Shop 192 was an internet café whereas BWT’s business at Shop 194 was ‘a backpacker travel agency which provides Internet kiosk facilities’.

Assessment of the witnesses

132 The credibility and reliability of the two key witnesses, Mr Profilio and Mr Dover, were the subject of attack during closing submissions. The Tribunal’s view of the evidence given by each of them is as follows.

133 As Mr Rogers pointed out, Mr Profilio made a number of factual assertions for which one would have expected to find, but did not find, support within the documentary evidence. Most of the assertions in question were to the effect that particular undertakings were given to him on CBV’s behalf during conversations with Mr Dover. But they included his assertion (see [32] above) that during the negotiations for the 2001 Lease Mr Papallo had ‘reassured’ him that an instruction by him to insist that restrictions on the use of Shop 194 should be inserted in the DAC lease had been obeyed and had promised to send him a letter confirming this, but had never done so. In addition, Mr Profilio’s recollection of the dates of important events was frequently faulty and on one matter on which Mr Rogers placed considerable emphasis during submissions – namely, whether in the latter part of 2004 BWT provided internet access in Shop 194 to people who were not its travel customers – his evidence was unconvincing. Finally, there were a few allegations – for example, that Mr Dwyer gave consent orally on the Council’s behalf to the granting of the Sublease – that Mr Profilio made in cross-examination without having done so in his affidavit evidence.

134 For these reasons, the Tribunal is inclined to treat with caution those aspects of Mr Profilio’s testimony which were or might be favourable to the Applicant’s case where no corroboration for them is to be found elsewhere in the evidence.

135 In his written submissions on behalf of himself and Ms Sajko, Mr Profilio maintained that Mr Dover ‘was prepared during cross examination to hide behind the catchcry “I don’t remember” or “I don’t recall”’. In the Tribunal’s opinion, the frequency with which Mr Dover claimed not to remember relevant events was indeed noteworthy, given that he was the employee of CBV charged with managing its leasing business. In forming this view, the Tribunal has allowed for the fact that most of these events occurred more than five years ago.

136 As Mr Profilio argued, the reliability of Mr Dover’s evidence was also undermined by his statements during cross-examination regarding the contribution made by Mr Alexandrou to the preparation of his affidavit (see [19] above). Although Mr Dover’s explanation of these statements in re-examination allayed the Tribunal’s concerns on this matter to some extent, it did not entirely dispel them.

137 Mr Dover’s failures of recollection weakened what might be called CBV’s ‘version’ of significant aspects of its dealings with the Applicants. Whether these failures were genuine or, as Mr Profilio argued, were put forward in order to avoid giving evidence adverse to CBV’s interests, the result is the same. Some important aspects of CBV’s behaviour remain unexplained.

138 With regard to the evidence of the parties’ three expert witnesses (loosely speaking) regarding the meaning of the phrase ‘internet café’, the Tribunal has no hesitation in concluding that the evidence given by Mr Arnold is to be preferred. He offered a coherent and convincing account, based on substantial academic expertise and practical experience, of the key features of an internet cafe and the broad parameters of this concept, within the demographic and temporal contexts of relevance to this case. The fact that his approach to defining the concept had some uncertainties and internal inconsistencies (notably when he was pressed to say whether a venue with only one computer could be an internet café) does not seriously detract from the value of huis evidence. This is because, as he was careful to point out, the terminology in this field is far from settled and is subject to reasonably rapid change as technology develops.

139 By contrast, Mr Corrigan’s report went little further than to demonstrate that, within the range of businesses within greater Sydney that he surveyed, the businesses which depicted themselves as internet cafes possessed to a greater degree the attributes associated with internet cafes than did the businesses which depicted themselves as adventure travel agencies offering internet access. To a significant extent, his conclusions appeared to be determined in advance by the methodology that he employed.

140 Mr Hind’s report suffered from the significant defects that the range of academic and other sources on which he principally relied were distinctly narrow and were almost entirely concerned with the meaning of the phrase ‘internet café’ in overseas contexts. The Tribunal does not agree with his proposition that a sociable atmosphere or ambience is an essential ingredient of the concept ‘internet café’ within the contexts of relevance to these proceedings.

The grounds of the Applicants’ claim

141 The legal grounds on which the Applicants based their claim against CBV for damages or other appropriate relief were partly set out in the Further Amended Application and in Mr Stitt’s opening address. When making closing submissions on behalf of the Applicants, Mr Profilio agreed with a suggestion by the Tribunal that there were six such grounds, as follows: (1) breach by CBV of the exclusivity clause (Clause 4.3) in the 2004 Lease; (2) conduct derogating from the grant made to the Applicants in this Lease; (3) pre-lease misrepresentations falling within section 10 of the RL Act; (4) unconscionable conduct under section 62B; (5) misleading or deceptive conduct under section 62D; and (6) failure to comply with the requirements of section 11 relating to the contents of lessors’ disclosure statements.

142 It is convenient to discuss each of these grounds separately.

Breach of the exclusivity clause

143 Appropriately, the arguments relating to this ground, particularly those advanced by Mr Rogers, focussed significantly on the wording of clause 4 of the 2004 Lease. This clause is reproduced above at [74].

144 The Applicants’ case on the exclusivity clause. In essence, the components of the Applicants’ claim that their exclusivity entitlement has been infringed is as follows:-

(a) By authorising BWT, in clause 4.1 of the BWT Lease, to use Shop 194 ‘for the provision of internet and email services’ (in addition to using it as a travel agency and for other stated purposes), CBV was in breach of a contractual obligation, imposed on it by clause 4.3 of the 2004 Lease, to ensure that the Applicants had ‘exclusive use’ of Shop 192 ‘as an Internet Café’ so far as the land owned by CBV in the shopping centre was concerned. If, as appears most likely from the evidence, the 2004 Lease was the first of these two leases to be executed, the breach occurred at the time of execution of the BWT Lease. If on the other hand the BWT Lease was the first to be executed, the breach must be taken to have occurred at the time of execution of the 2004 Lease, on the ground that CBV undertook this obligation at a time when they were not in a position to comply with it.

(b) At any time when BWT both advertised internet facilities with some degree of prominence and permitted a significant number of persons who had not become its ‘customers’ through purchasing travel products or services to obtain access to the internet on its computers subject to payment of a fee, it was using the premises as an ‘internet café’, within the meaning of this phrase in clause 4 of the 2004 Lease.

(c) This use of Shop 194, commencing at the latest in early 2005, inflicted economic harm on the Applicants through depriving them of potential customers.

(d) This use of Shop 194 by BWT did not fall within the exception created in clause 4.4 of the 2004 Lease to the promise of exclusivity in clause 4.3, because in clause 4.4 the Applicants merely acknowledged and accepted that BWT was permitted to grant access to the internet to its ‘customers’, meaning thereby persons who had become customers of its ‘primary’ business as a licensed travel agent by purchasing travel products and/or services.

(e) It follows that BWT is liable to the Applicants for all economic harm sustained in this way after the commencement of the 2004 Lease.

145 If the Tribunal is to accept this line of reasoning, one of the matters of which it must be satisfied is that at some point of time BWT’s granting of access to the internet in Shop 194 to members of the public, pursuant to clause 4.1 of the BWT Lease, had the consequence that the business operations that it conducted there included the business of an ‘internet café’, according to the meaning to be attributed to this phrase in clause 4 of the 2004 Lease.

146 The four principal arguments supporting this line of reasoning appear to the Tribunal to be as follows.

147 First, BWT’s internet business possessed all four of the attributes that Mr Arnold identified as both necessary and sufficient to constitute an internet café (see [112] above). BWT granted (1) access to the internet (2) within premises run as a commercial concern, (3) making such access available to members of the public (4) on the basis that it was paid for. Furthermore, Mr Timmins’ statement that Shop 194, along with other shops run by BWT, did not ‘offer privacy’, but were ‘public spaces’ (see [95] above), suggests that the computers in the Shop should not be viewed merely as a row of ‘internet kiosks’. BWT’s business of providing internet access accordingly fell within the range of meanings that could reasonably be attributed to the phrase ‘internet café’ at the time when the 2004 Lease was executed.

148 Secondly, this approach to defining ‘internet café’ is entirely consistent with the meaning envisaged in clause 4.1 of the 2004 Lease. A significant number of facilities that, as Mr Arnold and indeed Mr Corrigan pointed out, are commonly made available in businesses known as internet cafes are listed in this clause. But according to the natural interpretation of this clause, they are listed there as ‘related services and activities’. Nothing in the clause suggests that they are to be conceived collectively or individually as essential elements of an internet café.

149 Thirdly, the fact that BWT’s ‘primary’ business – whether assessed by reference to revenue received, prominence in advertising or any other measure – was that of a travel agency did not mean that in the same premises it was not also carrying on the business of an internet café. In this connection, Mr Arnold’s observations regarding multiple businesses within the same premises and indeed a concession made by Mr Corrigan on this matter provide important support.

150 Fourthly, events occurring both before and after the grant of the 2004 Lease showed that this interpretation conformed with the parties’ understanding of what was being agreed by them. The following are the most important instances:-

1. Over a significant period before the grant of the Lease, Mr Profilio frequently made it clear to Mr Dover that he was opposed to DAC or BWT being free to provide internet access to any member of the public.

2. Mr Hatsatouris adopted a similar stance when negotiating with Ms Klonis regarding the terms of the 2004 Lease.

3. The Lessor’s Disclosure Statement for this Lease contained the following sentence under the heading ‘Details as to Agreements or Representations’: ‘Lessor has agreed to provide exclusivity of use as internet café as defined in lease for Lot 17 SP 22899 subject to right of travel agent to permit internet use to its customers.’

4. Ms Klonis, in her letter to BWT dated 23 August 2007 (see [99] above) included a claim that CBV had been notified that BWT ‘may have breached’ its Lease by ‘providing Internet services to the general public’.

151 CBV’s case on the exclusivity clause. The arguments in response put on CBV’s behalf can be summarised as follows:-

(a) It was important, following well-established rules of contractual interpretation, to construe Clause 4 of the 2004 Lease as a whole.

(b) Clause 4.3 granted exclusivity to the Applicants only with regard to a certain category of business enterprise or ‘establishment’ – namely, an ‘internet café’ – not with regard to any defined activity or group of activities. It required that CBV should not permit any other of its lessees within Coogee Bay Shopping Centre to maintain an enterprise that answered the description ‘internet café’. It did not prohibit CBV from permitting a lessee such as BWT to operate a travel agency – which is a quite different category of enterprise – in which one of the activities taking place was the grant of internet access, on a paid basis, to members of the public.

(c) The first part of clause 4.4 (from its commencement to the words ‘the Lessees customers’) constituted an ‘acknowledgment’ and an ‘acceptance’ by the Applicants of a state of affairs that existed at the time when the Lease was granted. This was that BWT was permitting members of the public, who had not purchased travel products or services, to obtain access to the internet on its computers on payment of a fee. The term ‘customers’ accordingly meant any person who purchased anything from BWT at Shop 194. It included all those who purchased internet services, irrespective of whether they also purchased travel products or services.

(d) The second part of clause 4.4 (from the words ‘however the permitted primary use’ to the end) expressly identified the category of enterprise maintained by BWT at Shop 194 as a ‘licensed travel agent’. In so doing, it lent support to the proposition that the phrase ‘internet café’ in clause 4.3 referred to a category of business enterprise, not to a business activity or group of activities.

152 The submissions advanced by Mr Rogers in support of this line of argument may be summarised as follows.

153 First, because the Tribunal was obliged to interpret the phrase ‘internet café’ with particular regard to its mode of use within clause 4 of the 2004 Lease, it should not adopt the more general definition offered by Mr Arnold, or indeed any definition offered by Mr Corrigan or Mr Hind. It should instead pay particular attention to the situation obtaining in Shop 194 at the time when this Lease was being negotiated.

154 Secondly, it was apparent from the evidence that at that time – and indeed ever since the surrender of the Sublease late in 2001 and the grant of the DAC Lease early in 2002 – the occupant of Shop 194 had, to Mr Profilio’s knowledge, provided internet services on a commercial basis to members of the public. Mr Profilio’s allegation that he had sought, in conversations with Mr Dover and through his then solicitor Mr Papallo, to have prohibitions on this mode of use of Shop 194 inserted into the DAC Lease should not be believed. In fact, Mr Profilio’s chief concern at this time was to avoid being sued by DAC on the ground that the Sublease was invalid for lack of consent by the Council in its capacity as lessor.

155 Thirdly, Mr Hatsatouris’s letter of 24 November 2004 to Ms Klonis was of particular significance in this context because of its explicit recognition that at that time BWT was using Shop 194 ‘for an internet service’. He meant thereby that internet access was being offered to the public, along the lines described by Mr Massingham and Mr Moulang. Mr Profilio’s statements to the contrary should not be believed.

156 Fourthly, since this was the state of affairs in Shop 194, to the knowledge of both parties, it gave important guidance as to the content of what the Applicant lessees ‘acknowledged’ and ‘accepted’ in clause 4.4 of the 2004 Lease. It showed clearly that the phrase ‘Lessees customers’ in the first part of the clause included any persons who purchased internet services, irrespective of whether they also purchased travel products or services.

157 Fifthly, the statement in the second part of clause 4.4 that the ‘permitted primary business’ of BWT in Shop 194 was that of a licensed travel agent operated, at most, as a warranty given by CBV to the Applicants. It did not require that CBV should insert a term to this effect in the BWT Lease. Because BWT’s primary business was and remained a travel agency, any such warranty had not been broken.

158 The Tribunal’s conclusions. In the Tribunal’s opinion, this question of interpretation of clause 4 of the 2004 Lease should be resolved in favour of the Applicants. It agrees, generally speaking, with the arguments set out above at [xxx]. It would add only the following observations.

159 The Tribunal accepts the proposition, implicitly underlying the arguments on both sides, that because the meanings of the key phrases ‘internet café’ (in clauses 4.1 and 4.3) and ‘Lessees customers’ (in clause 4.4) are uncertain, it is appropriate to take into account relevant conduct of the parties and their agents, both before and after the execution of the Lease. Authority for this proposition may be found in Carter and Harland, Contract Law in Australia (4th edition, 2002) at [716], [718]. At the same time, account should be taken of the opinions of Mr Arnold – whose testimony was, for reasons already stated, distinctly more useful than that of Mr Corrigan or Mr Hind – regarding the range of meanings that could reasonably be attributed to the phrase ‘internet café’ in the relevant circumstances.

160 A significant aspect of the qualification, contained in clause 4.4, to the entitlement to exclusive use conferred by clause 4.3, is that in describing what the Lessees of Shop 194 did in relation to access to the internet it did not employ a phrase, similar to that used in the DAC Lease, such as ‘provides internet and email services’. It stated instead that the Lessee ‘allows’ access to the Internet for its ‘customers’. Similar phraseology was used in the relevant clause of the Disclosure Statement (‘subject to the right of travel agent to permit internet use to its customers’). Words such as ‘allow’ and ‘permit’ do not clearly imply that the relevant facility is intended to be available to the public at large.

161 In the Tribunal’s opinion, Mr Hatsatouris’s letter of 24 November 20004 to Ms Klonis does not have the significance that Mr Rogers attributed to it. It did not state that internet access was being offered to the public in Shop 194. Instead, it said only that the Shop was ‘being used for an internet service’. Its principal aim was to ask that the permitted use for Shop 192 should include purposes additional to an internet café. Even if, as Mr Rogers submitted, it was intended to acknowledge that public access was available and was written with Mr Profilio’s approval, the phrase could have been intended to mean that to the limited extent described by Mr Massingham (see [44] above), BWT’s ‘non-travel customers’ were granted access to the internet. This is broadly compatible with what Mr Profilio claimed to be his understanding of the situation.

162 It may well be that while the number of ‘non-travel customers’ using the internet facilities at Shop 194 remained at the low level indicated by this witness while also the availability of these facilities was not given any prominence in the Shop’s advertising, the Shop was not being used for the purposes of an ‘internet café’. But as from early 2005, advertisements such as appeared in Mr Profilio’s photographs were displayed and (it would seem) significant numbers of ‘non-travel customers’ used the internet facilities.

163 From this point of time onwards, if not earlier, the breach of Clause 4.3 committed by CBV through failing to include a restriction in the BWT Lease presumptively caused economic harm to the Applicants, for which CBV is liable.

164 Finally, the Tribunal observes that it is difficult to understand why what it has held to be a conflict between clause 4.3 of the 2004 Lease (as qualified by clause 4.4) and clause 4.1 of the BWT Lease was permitted to arise. Even if, contrary to its ruling, there was no actual conflict, there was at least the appearance of a conflict, which should have drawn attention to the likelihood that litigation such as these proceedings might ensue. Mr Dover testified that although he took responsibility for the leases granted by CBV and indeed signed both of these Leases, he was not aware of any apparent conflict between them. The matter remains a mystery.

Conduct derogating from the grant made in the 2004 Lease

165 In his written submissions, Mr Profilio contended that CBV, by granting permission in the BWT Lease for Shop 194 to be used for ‘the provision of internet and email services’, had rendered Shop 192 unfit for the purposes set out in the 2004 Lease and had therefore breached its covenant not to derogate from the grant that it had made to the Applicants. He relied on the Tribunal’s decision in Prasad v Fairfield City Council [2001] NSWADT 28.

166 In the Tribunal’s opinion, this is not a case in which the covenant that lessors make, expressly or by implication, not to derogate from the grant that they give to their lessees, has any scope to operate. The reason is that the 2004 Lease itself defined in clauses 4.3 and 4.4 the extent to which CBV granted exclusivity to the Applicants. If the Tribunal had held that CBV’s conduct did not breach these clauses, it could not consistently have held that there was a breach of the covenant not to derogate. Having in fact reached the opposite conclusion, it again sees no role for this covenant to play.

167 The Tribunal accordingly rejects this line of argument.

Pre-lease misrepresentations

168 Mr Profilio argued that pre-lease misrepresentations, falling within section 10 of the RL Act, were contained within (a) Mr Dover’s letter dated 19 July 2004 offering a new lease which would give the Applicants ‘certainty’ for five years (see [46] above) and (b) the correspondence and conversations between CBV’s agents (Mr Dover and Ms Klonis) and the Applicants and their agents during negotiations for the 2004 Lease, notably the letter from Ms Klonis to Mr Hatsatouris dated 2 December 2004. His claim was that it was falsely represented to the Applicants that they would have exclusivity for their business as an internet café in the 2004 Lease, that they relied on this representation in deciding to enter into the Lease and that they had suffered damage because of its falsity.

169 In the Tribunal’s opinion, this argument must be rejected, principally for the following reason. To the extent that a promise or undertaking along these lines may have been conveyed to the Applicants during the negotiations for the 2004 Lease, the evidence falls well short of establishing that the relevant agents knew at the time that CBV had no intention of honouring it. Knowledge of falsity at the time when the alleged misrepresentation was made is an essential ingredient of a claim under section 10: see Golden Harvest (Aust) P/L v Paing P/L [2004] NSWCA 85.

170 The Applicants’ case under this section accordingly fails.

Unconscionable conduct

171 Mr Profilio contended that the conduct of CBV’s agents with regard to both the DAC Lease and the BWT Lease was unconscionable within the meaning of a number of subparagraphs within section 62B(3) of the RL Act. This subsection lists a number of matters that the Tribunal may take into account in determining whether a lessor has engaged in unconscionable conduct within the meaning of section 62B(1).

172 So far as relevant, section 62B(3) states:-

(3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to:…


(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and…

(f) the extent to which the lessor’s conduct towards the lessee was consistent with the lessor’s conduct in similar transactions between the lessor and other like lessees, and…

(i) the extent to which the lessor unreasonably failed to disclose to the lessee:


(i) any intended conduct of the lessor that might affect the interests of the lessee, and

(ii) any risks to the lessee arising from the lessor’s intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and…

(k) the extent to which the lessor and the lessee acted in good faith.

173 Mr Profilio’s argument was that CBV’s conduct from the time when it negotiated the 2001 Lease to the time in 2007 when it failed to put a stop to Global Gossip’s involvement with Shop 194 fell within each of these four subparagraphs. He claimed that through its agents CBV engaged in ‘unfair tactics’, treated the Applicants in a manner that was inconsistent with its treatment of DAC and of BWT, failed to disclose both intended conduct that affected the Applicants’ interests and risks that arose from such conduct, and failed to act in good faith.

174 Mr Rogers argued that the evidence failed to support any such assertions. He maintained also that because the Further Amended Application did not refer to CBV’s conduct in the years before 2004, it was not open to the Applicants to rely on any such alleged conduct in its claim under section 62B.

175 As the Tribunal pointed out during the hearing, a claim of unconscionable conduct under this section will fail unless the conduct proved was ‘highly unethical’ and involved a ‘high level of moral obloquy’: see Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583).

176 In the Tribunal’s opinion, the evidence falls short of establishing this form of culpability. While it is possible that Mr Dover deliberately ‘tricked’ the Appellants (as Mr Profilio put it) into entering into the 2004 Lease, intending all along that BWT should have a lease permitting a competing use of Shop 194, it is also possible that the conflict between this Lease and the BWT Lease occurred because neither Mr Dover nor anyone else involved the preparation of them realised that at least an apparent conflict existed.

177 The Applicant’s unconscionable conduct claim must therefore be dismissed.

Misleading or deceptive conduct

178 As set out in the Further Amended Application, this claim, based on section 62D of the RL Act, more or less replicated the Applicants’ claims under section 10 and section 62B. For broadly similar reasons to those set out above, a claim in these terms is not substantiated by the evidence.

179 As argued by Mr Profilio at the hearing, the claim of misleading or deceptive conduct seemed to be based on an assertion that he had been deceived by the manner in which Ms Klonis dealt with a request by him to receive copies of her correspondence with BWT during August 2007. No evidence to support such a claim was put before the Tribunal.

180 This part of the Applicant’s case accordingly fails.

Breach of requirements applying to lessors’ disclosure statements

181 In his closing submissions, Mr Profilio maintained that a matter set out in the Lessor’s Disclosure Statement for the 2004 Lease caused the Statement to be misleading and materially false, thereby contravening section 11(2) of the RL Act.

182 The Tribunal has found it difficult to ascertain precisely what was being urged in this line of argument, which was not mentioned in the Further Amended Application and was given only limited treatment in the submissions.

183 The Tribunal is satisfied that no argument based on a breach of section 11(2) can avail the Applicants, because the remedy of termination available to a lessee in such a situation must be exercised within six months of the commencement of the lease.

Concluding observations

184 The Applicants are entitled to a declaration to the following effect: (a) that CBV, in granting to BWT a lease of Shop 194 on terms that permitted BWT to use this Shop for the provision of internet and email services, was in breach of its obligation under the 2004 Lease to ensure that the Applicants had exclusive use of Shop 192 as an Internet Café; and (b) that CBV is liable to compensate for the economic harm resulting from this breach.

185 It is worth noting at this point that while compensation in civil litigation normally takes the form of a lump sum award of damages, the Tribunal’s powers under section 72 of the RL Act include making an order that the rent payable under a subsisting lease should be appropriately reduced in the light of a finding against the lessor.

186 The matter is set down for a further directions hearing at 10.30 a.m. on 13 August 2009, at which arrangements for a further hearing on the question of remedies will be addressed.

187 At the commencement of the hearing on liability, the Tribunal granted a short adjournment, in fulfilment of its duty under section 74 of the RL Act, in order that the possibility of settlement of this case could be further explored. Unfortunately, no settlement was reached. The Tribunal now urges that a further attempt be made. The difficulties associated with assessing economic loss in a case like this are well recognised and the prospect of another long and costly hearing is all too evident.

188 In a document filed during the hearing, the Applicants signalled that if successful on liability, they might wish to apply forthwith for an award of costs in relation to the proceedings so far. This is not normally the approach taken by the Tribunal. Good grounds must be shown for the making of any costs order before proceedings have come to an end. But the Applicants are entitled to put forward such grounds if they so wish.

189 The Tribunal accordingly directs as follows:-

(a) Any application for costs of the proceedings so far must be filed and served, with supporting submissions, within 28 days of the date of this decision. The submissions must put forward grounds for making such an order before the proceedings have come to an end.

(b) The opposing party must file and serve submissions in reply within a further 28 days.

(c) Unless reasons are advanced for a hearing to be conducted, this matter of costs will be resolved ‘on the papers’, pursuant to s 76 of the Administrative Decisions Tribunal Act 1997.