Salta Properties Pty Ltd - v - Finsbury Printing Pty Ltd
[2015] VCC 757
•10 June 2015
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised |
Case No. CI-14-03131
| SALTA PROPERTIES (PORT MELBOURNE) PTY LTD (ACN 082 021 083) | Plaintiff |
| v | |
| FINSBURY PRINTING AUSTRALIA PTY LTD (ACN 099 835 739) (& ORS ACCORDING TO THE ATTACHED SCHEDULE) | Defendants |
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| JUDGE: | HER HONOUR JUDGE KENNEDY | |
| WHERE HELD: | Melbourne | |
| DATE OF HEARING: | 11, 12, 13, 14 and 18 May 2015 | |
| DATE OF JUDGMENT: | 10 June 2015 | |
| CASE MAY BE CITED AS: | Salta Properties Pty Ltd – v – Finsbury Printing Pty Ltd | |
| MEDIUM NEUTRAL CITATION: | [2015] VCC 757 | |
REASONS FOR JUDGMENT
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Catchwords: CONTRACT – lease with first defendant –breach of lease – quantum of loss- whether the first or second defendants also liable for loss by reason of engaging in misleading or deceptive conduct under section 18 of Schedule 2 of the Australian Consumer Law– whether the third defendant also liable as a person involved in any contravention –– whether interference with contractual relations by second defendant
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Moore | Logie-Smith Lanyon |
| For the Defendants | Mr J. Nixon | Piper Alderman |
HER HONOUR:
1 On about 9 December 2011, Salta Properties (Port Melbourne) Pty Ltd (“Salta”) and Finsbury Printing Australia Pty Ltd (“Finsbury Printing”) entered a 7 year lease in respect of a commercial property at 46 Wirraway Drive Port Melbourne which lease was subsequently repudiated when Finsbury Printing vacated the premises.[1]
[1] This was admitted in the Defence to Further Amended Statement of Claim, paragraph 20(a).
2 Salta claims outstanding losses of $544,310.56 for the breach of the lease by Finsbury Printing.
3 Salta further seeks damages against Finsbury Printing, and/or the second defendant, Finsbury Green Pty Ltd (“Finsbury Green”) in relation to misleading and deceptive conduct in respect of an alleged representation that Finsbury Printing would occupy the premises and conduct a printing business from the premises. Salta seeks damages against the third defendant director, Mr Orel, for accessorial liability as a person “involved in” the contravention.
4 Salta also seeks damages against Finsbury Printing for making representations to similar effect by its execution of the lease.
5 Finally, Salta seeks damages against Finsbury Green for allegedly interfering with contractual relations between Salta and Finsbury Printing.
6 An earlier claim to the effect that Finsbury Printing entered the lease as agent for Finsbury Green as an undisclosed principal was abandoned.
7 Finsbury Printing accepts that it owes damages for breach of contract in the amount of $260,985.20 but otherwise disputes the quantum sought.
8 The defendants further deny that any claim is sustained for misleading and deceptive conduct. In particular, they deny that any representation was made as alleged and further deny that any loss was suffered at all.
9 Finsbury Green also denies the claim based on interference with contractual relations.
10 The issues in the case are therefore:
a. The quantum to be fixed for the breach of the 2011 lease by the first defendant (pleaded at paragraphs 7 to 13 of the further amended statement of claim);
b. Whether the first and/or second defendants have engaged in misleading and deceptive conduct (pleaded at paragraphs 14 to 26 of the further amended statement of claim);
c. Whether the first defendant has engaged in misleading and deceptive conduct by executing the lease (pleaded at paragraphs 28A to 28F of the further amended statement of claim); and
d. Whether any accessorial claim is sustained against Mr Peter Orel for being allegedly involved in the contraventions by the first and/or second defendants (pleaded at paragraphs 27 and 28 of the further amended statement of claim);
e. Whether Finsbury Green has interfered with contractual relations (pleaded at paragraphs 29 to 34).
Background
Parties
11 There are some 100-150 companies in the Salta group, each owning different assets. The market value of the Salta group was given as some $500 million by Mr Tarascio, managing director of the plaintiff.
12 Mr Peter Orel, director of both defendant companies, gave evidence that the “Finsbury” printing business was commenced in 1973 by his father and his father’s business partner.
13 The second defendant, Finsbury Green, was previously known as Finsbury Print Pty Ltd (prior to 28 June 2007) and Finsbury Press Pty Ltd (prior to 9 March 2000) and operated the South Australian business until 2009. It thereafter operated the national Business including in Melbourne.
14 As is apparent from an ASIC business name search, Finsbury Green also owned the business name “Finsbury Green Printing”[2] between October 2002 and December 2011. It also has significant assets in the order of $10 million or so.
[2] Exhibit 3.
15 The first defendant lessee, Finsbury Printing, was incorporated in March 2002. One of the purposes for the incorporation was to enter into an asset sale agreement, (described below) wherein it acquired the book debts of an unrelated company, AC Tod Printing Pty Ltd. It never operated the printing business and was otherwise effectively a shelf company with no assets.
16 AC Todd Print Pty Ltd (now known as Gnezdo Jajce Pty Ltd from 24 February 2012) operated the Melbourne Finsbury printing business until 2009. AC Todd Print Pty Ltd changed its name to Finsbury Print Melbourne Pty Ltd on 15 May 2002.
Original Lease with Finsbury Printing
17 Salta purchased the property at Wirraway Drive in about 1995 and then built a purpose-built factory for the company called AC Tod Printing Pty Ltd which conducted a printing business (but was unrelated to Mr Orel’s group).
18 By lease dated 30 January 2002 AC Tod Printing Pty Ltd entered into a lease with Salta for a 10 year term.[3]
[3] Exhibit 1.
19 However, it appeared that AC Tod Printing Pty Ltd was experiencing financial difficulties such that it sold its assets and went into administration.
20 By agreement dated 13 March 2002 Finsbury Administration Service Pty Ltd (a trustee Finsbury company) and other Finsbury entities entered into an agreement to purchase the various business assets of AC Tod Printing Pty Ltd.[4] Included within the sale were book debts which were assigned to Finsbury Printing.
[4] Exhibit 14
21 Following the execution of the asset sale agreement, Finsbury Printing Australia Pty Ltd then entered into a lease agreement with Salta commencing on 13 March 2002.[5] The term was for 9 years, 8 months and 18 days, which was the balance of the term of the lease to AC Tod Printing Pty Ltd. There was also an option to renew which needed to be exercised by the end of May 2011.
[5] Exhibit 2.
22 The evidence of Mr Orel was that because they had purchased a business in financial trouble they wanted to protect their South Australian assets and that was why Finsbury Printing Australia was the entity that entered the lease.
23 However, a bankers guarantee was also given by Finsbury Print Pty Ltd (ie Finsbury Green Pty Ltd) dated 5 June 2002.[6]
[6] Exhibit 18.
24 There was no documentary evidence that Salta conducted any company search or business name search prior to entry into this lease (or the later 2011 lease).
25 Mr Sam Tarascio, managing director of Salta, and the person responsible for signing leases, gave evidence that the “normal procedure” prior to entry into a lease was for Salta to do a Google search and to meet the people involved by looking at their premises. He was not “directly involved” in the negotiation of the 2002 lease but believed a similar search would have been conducted. Under cross examination he also said that part of the process included conducting company searches but not business name searches.
26 However, he could not say whether Salta went to Adelaide to look at the Finsbury business nor could he say “specifically” what searches were actually conducted. The searches generally included Google but only “to the extent Google was available back then.”
Payment of rent/other conduct during 2002 lease
27 The rent was paid by Finsbury Print Melbourne Pty Ltd up until June 2009 by cheque and thereafter by Finsbury Green (by electronic funds transfer) up until the signing of the 2011 lease.[7]
[7] Exhibit 19.
28 Mr Tarascio accepted that Finsbury Printing was a good tenant and always paid rent on time.
29 As indicated already the group altered in June 2009 such that Finsbury Green operated the Australian business generally including in Melbourne.
30 The evidence of Mr Orel was that, in preparation for this alteration, a “rebranding” occurred in 2007. Thus a photograph[8] shows a large sign with the words “Finsbury Green” on it in big letters outside the premises which Mr Orel said was erected after they had rebranded to Finsbury Green in 2007. This was substantiated by an invoice dated 29 June 2007 from “Option[a]” to Finsbury Green in relation to “Alterations to signage”[9] which Mr Orel said was delivered in respect of those alterations.
[8] Exhibit 5.
[9] Exhibit 16.
31 Mr Orel also said that they started using green business cards in the middle of 2007 with the words “Finsbury Green” on them and that they put the former blue cards (with “Finsbury Printing”) in the rubbish bins. However, this matter was disputed.
Discussions re expansion
32 From around 2006-2011 Mr Brett Heath (property development manager at Salta) and Mr Orel discussed the possibility of Salta building a bigger building for him. This included by a development of lots 21 and 22 (owned by Salta); expanding 46 Wirraway Drive; and developing near-by Lorimer Street. However, no agreement was reached on any of these options.
33 In many of the email exchanges Mr Orel signs off with a logo of “Finsbury Green” at the bottom.[10] Additionally, the subject of an email in May 2008 appears to be some plans which contain a logo of “Finsbury Green Printing” on them.[11] Mr Heath accepts that these plans were actually created by Salta, consistent with the fact they have “Salta properties” on them. He believed he gave instructions for their preparation but was unable to say with any precision where the instructions came from.
[10] For example, Exhibit A (tab 25); Exhibit B (tab 30, tab 40, tab 40A).
[11] For example, Exhibit A (tab 25).
34 The evidence of Mr Heath was that he thought Finsbury Green was a trading name of Finsbury Printing but did not apparently give it any further consideration. He did not believe he conducted a business search and did not know if anyone else did. However, he could not recall whether or not he negotiated the 2002 lease and did not negotiate the second lease (beyond some preliminary email exchanges).
Negotiations for new lease 2011
35 By May 2011 the option needed to be exercised.
36 In an email of 17 May, Mr Orel asked Mr Heath to advise what the rental would be on a 1 by 1 by 1 basis. Mr Heath responded (in September) that a 1 by 1 by 1 Lease would not be possible, and that Salta would require a minimum 5 year lease (which would have to be approved by the board). Salta further sought a response as soon as possible as the current tenancy was nearing termination and they needed to be “in a position to market the building” if Mr Orel elected not to pursue a new tenancy period.
37 In the result the option was not exercised by May 2011. According to Mr Orel, the intention of Finsbury Green was to relocate the business and the group did not want to commit to a five year lease.
38 However, by September no new “home” had been found for the business with the result that negotiations ensued.
39 Thus, at some stage during the week before 6 September Mr Kieran Carson and Mr Orel had a discussion. Mr Carson was the senior property and leasing manager for Salta who undertook negotiations in relation to the new lease from about September 2011.
40 The precise ambit of this discussion is in dispute. Mr Orel said he advised Mr Carson that he was looking for a 1 by 1 by 1 lease but was told by Mr Carson that his MD was looking for a minimum of 5 years. This, however, was denied by Mr Carson in cross examination who said he may have suggested that should Mr Orel wish 4 or 5 years he would take it to the board.
41 In any event, after seeking approval (from Mr Lip Phua, then General manager asset management, Mr Heath and Mr Tarascio), Mr Carson subsequently emailed a document entitled “invitation to make an offer to lease” dated 6 September 2011. The document gave the name of the (proposed) Lessee as Finsbury Printing Australia Pty Ltd. It also provided for a term of 10 years with rent of $325,795 for the first year.
42 Mr Carson attached this document as “heads of agreement” to “start the conversation” and said he wanted to “follow up from our discussions last week in regards to Finsbury Greens intentions….”
43 Mr Carson’s oral evidence was that he referred to “Finsbury Green” because it was what he had always referred to them as and that’s what they were called in terms of their trading name. Further that it was “all over their buildings, all over their emails…”. He also said that he referred to Finsbury Printing as the lessee because this was the name on the initial lease and they would have “just followed” with the same name going into the next lease. He conducted no company or business searches because it was not something they did with “sitting tenants.”
44 Mr Orel then responded by way of email on 15 September 2011 to Mr Carson’s “invitation” document. He said:
I am a little confused as when we spoke the other week you indicated that your MD was looking for a 5 year term. This HoA you provided indicated the term as 10 years.
45 Mr Carson then had a meeting with Mr Tarascio and Mr Phua to discuss making an amended offer. He thereafter responded to Mr Orel by email on 19 September 2011 with a second “Invitation to make an offer to lease” attached, reducing the lease term to 7 years stating: “I hope that this revised offer is more to your liking.” The invitation was again premised on the basis that Finsbury Printing was to be the lessee.
46 Mr Carson then left the employ of Salta on about 23 September whereupon Mr Phua took over negotiations for the lease. Mr Phua also accepted that no searches were conducted in relation to the Finsbury entities as it was not usual practice for sitting tenants.
47 Significantly, Mr Phua and Mr Orel then attended a meeting on 4 October which is the subject of some dispute and will be considered further below.
48 The next email is dated 4 October to Mr Phua wherein Mr Orel forwarded Mr Carson’s 19 September email above. Mr Phua writes back thanking him for taking the time to meet up and stating that he would “wait to hear” from him next Thursday.
49 Mr Orel then attended a meeting of the “Finsbury board” on 12 October 2011 to consider the 7 year proposal. Thus, there are minutes of a meeting with the heading “Finsbury Green Pty Ltd” dated 12 October 2011. They contain the statement that the board advised Mr Orel to relay to Salta that the Board is “favourably disposed towards the proposed new lease” subject to approval by lawyers. The evidence of Mr Orel was that, although the minutes were entitled “Finsbury Green Pty Ltd” the group did not hold separate meetings for each company within the group, but rather prepared single “management minutes” for the meetings held every two months about the operation of the members of the group (although external accountants prepared statutory minutes separately).
50 On 12 October 2011 Mr Orel emailed Mr Phua, confirming that the board considered the offer “favourably”, and that they wanted to do a comparison to the existing lease, to ensure that there were no significant changes.
51 By email of 12 October Mr Phua said he would instruct “our solicitors to prepare the draft lease for the 7 year initial term” and “looks forward to a mutually beneficial relationship.”
52 The commercial terms of the arrangement therefore appear to have been settled at this point.
53 On 25 October 2011 Mr Phua emailed Mr Orel a copy of the draft lease prepared by Salta’s solicitors. Consistent with the “invitation” documents, the name of the proposed lessee was Finsbury Printing Australia Pty Ltd.
54 By email of 3 November Mr Phua chased up the draft asking whether Mr Orel or his solicitors had had a chance to review the documents. Mr Orel responded that the documents had been “forwarded” for review the day they were provided.
55 Then, on 8 November 2011, Mr Orel emailed Mr Phua saying that the document had got the “all clear”.
56 Mr Phua responded that he would organise for execution copies to be forwarded back to him.
57 It appears that Mr Orel then executed the document by 1 December 2011.
58 The lease was then executed by Mr Tarascio on behalf of Salta.
59 The Lease commenced on 1 December 2011. It provided for a seven year term with rent at $325,795 per annum plus GST and a bank guarantee of $89,593.62 (equivalent to 3 months rent).
60 Finsbury Printing provided the bank guarantee on 6 December 2011.
Vacation of premises and subsequent re-lease
61 It is not in dispute that the premises were vacated in June 2013[12] and the lease subsequently terminated. (It appears to be also thereby accepted that Finsbury Printing were actually in occupation prior to this time[13]).
[12] Defence to Further Amended Statement of Claim, paragraph 20(a); Further Amended Statement of Claim, paragraphs 9(a) and (c).
[13] Consistent with the information contained in the company search, exhibit 13
62 This followed after a Finsbury entity had purchased new premises by contract dated February 2012.
63 Salta subsequently entered into a lease with Omnigraphics, commencing 1 January 2014 (at $300,000 per annum plus GST for 5 years) although the lease was not in identical terms to the Finsbury Printing lease (e.g. the number of car parks were only 29, not 42).
64 In taking this lease Omnigraphics terminated a lease of premises at Gateway Court Port Melbourne with a related Salta entity, Taras Nominees Pty Ltd. By Deed of Surrender dated 1 November 2013, Omnigraphics agreed to pay the landlord $150,000 as a “surrender fee” upon surrendering this lease.
65 Omnigraphics was initially given a “rent free” period until 1 August in the new lease with Salta. However, by Deed of Variation this was later altered to 1 July 2014. The lease also made provision for Omnigraphics to be paid an “incentive payment” of $150,000.
66 Salta has subsequently sold the premises at Wirraway Drive by contract dated 23 July 2014 for $12,510,000.
Witnesses
67 Salta called Mr Heath and Mr Carson, as well as Mr Nutbean (an asset manager who gave evidence about the releasing).
68 Mr Heath had little independent memory but presented as a straightforward senior man prepared to make appropriate concessions. Similarly, Mr Carson had some memory issues, but was generally straightforward, as was Mr Nutbean.
69 However, Salta also called Mr Phua and Mr Tarascio.
70 As will be apparent below, Mr Phua ultimately conceded under cross examination that much of his evidence adduced by way of affidavit was incorrect. In the light of his presentation in the witness box and his own concessions, I am unable to be satisfied that his evidence can be generally relied upon.
71 Mr Tarascio presented more confidently. However, as will be seen below, he sought to give evidence under re-examination that I did not find credible.
72 Salta also called an expert, Mr Dickinson, whose evidence will be summarised below. Ms Sally-Ann Cartledge (a Salta accountant) was also called but gave some insignificant evidence as to invoices which was not, in the result, relied upon.
73 The defendants called only Mr Orel. He gave clear, responsive, credible evidence and was an impressive witness.
A. Breach of lease agreement by first defendant
74 The plaintiff alleged that Finsbury Printing breached the lease by leaving the premises unoccupied for more than 14 days, by failing to pay rent and outgoings, and by parting with possession other than in accordance with clause 17.2.[14]
[14] Further Amended Statement of Claim, paragraph 9.
75 The first defendant conceded that as at 30 June 2013 the premises were left vacant such that it repudiated the lease. If further accepted that the repudiation was accepted and the lease thereby terminated.[15]
[15] Defence to Further Amended Statement of Claim, paragraph 20(b).
76 Thus, the only issue for determination was the quantum of the plaintiff’s claim.
77 The quantum of the plaintiff’s claim against Finsbury Printing is itemised in a document entitled Plaintiff’s Amended Further and Better Particulars to Paragraph 12 of the Plaintiff’s Further Amended Statement of Claim (“the Amended Particulars”) at $544,310.56.
78 The defendants’ concessions in respect of this claim are set out attachment “A” to its Outline of Submissions (at $260,985.20).
79 The differences will be resolved bearing in mind that a person who has sustained loss by reason of a breach of contract is to be placed in the same position, so far as possible, as if the contract had been performed.[16]
Rent
[16] Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64.
80 There are three periods of rent claimed as follows:
a. “Arrears” for July to August 2013;
b. Rent for September, October, November and December 2013; and
c. Rent for the 6 month rent free period given to Omnigraphics during January to June 2014.
81 There were only two points of dispute between the parties on the subject of rent. The first was whether GST should be included, and the second was whether management fees should be deducted from the rent.
82 In the result, it was conceded by Salta that if it obtained judgment expressed as damages, no GST was payable on the judgment. It was therefore appropriate to exclude the GST amount (which had not been paid) with the result that the amounts given by the defendants were not challenged.
83 These amounts were constituted by the sum of $56,471.12 (referable to July to August 2013), $112,942.24 (referable to September- December 2013) and for the six months (January- June 2014) agreed at $150,000.
84 This brings the total amount of rent owed to $319,413.36.
85 The defendants then submitted that management fees should be deducted given this amount would effectively have been “taken off” the rent received had the contract been performed.
86 However, I do not accept this submission. As will be seen below, the tenant was to pay all management fees under the Lease as an “Outgoing” in addition to the rental obligation. Accordingly, there was no justification for subtracting the management fee from the recoverable rent.
Management fees
87 There are two periods of management fees claimed:
a. Arrears of management fees ($17,212,72);
b. Management fees 2013 ($5,086.40).
88 The first defendant disputed these management fees. Counsel for the defendants submitted that there was no claim for management fees pleaded. In any case, Salta had failed to establish that it had actually paid the management fees which had been invoiced directly to Finsbury Printing.
89 However, the defendants were first put on notice that the claim for damages included management fees by delivery of the Amended Statement of Claim dated 5 December 2014. This was then more fully particularised during the course of the Trial by the provision of the Amended Particulars by 13 May. Although not completely satisfactory, this is sufficient notice in the absence of any identifiable prejudice.
90 Secondly, although it is true that the evidence did not establish that the fees had yet been paid, it is important to consider the terms of the Lease. Pursuant to clause 6.2(b) of the Lease, the Tenant must “pay, or if paid by the landlord, shall reimburse all “Outgoings” which relate solely to the Premises. “Outgoings” are further defined in clause 1.1 as all amounts paid or payable by the Landlord for an Outgoings year in connection with the Premises including for “management and administration.”
91 The Lease therefore imposes a direct liability on the Tenant to “pay” for Outgoings (which includes management fees) which are broadly defined to include amounts “payable” even if not actually paid. This is made clear by both clause 6.2(b) and the definition of “Outgoings”.
92 It was not disputed that the Management Agreement between Salta Asset Management Pty Ltd (“the Management entity”) and Salta Properties (Port Melbourne) Pty Ltd imposed an obligation on Salta to pay the Management Fees as set out in item 5 of the Schedule (see clause 3). Nor was any other challenge made to the actual quantum of the amounts sought.
93 The amount of the Management Fees should therefore be allowed at $22,299.12.
Outgoings
94 There are two groups of outgoings claimed:
a. Arrears of outgoings ($33,324.84);
b. Outgoings for September - December 2013 ($16,643.37).
95 The first defendant conceded that amounts for these periods are owed to the plaintiff, but submitted that the GST component should be subtracted.
96 However, this submission is rejected. Thus, notwithstanding the fact that the judgment will be for damages, GST should be included, because it was a cost the plaintiff incurred, so that total amount should be recoverable. This can be distinguished from rent, given rent was never actually paid by the first defendant, such that the plaintiff was never liable for GST on those amounts.
97 I am accordingly satisfied that an amount of $49,968.21 should be allowed for outgoings.
Re-lease/Make Good
98 The plaintiff claims $25,226.50 in expenses incurred to “make good” the property for the purpose of re-leasing it.
99 In item 7 of its attachment “A” the defendant accepted the re-listing expenses invoiced by Frank Knight and the locksmith expenses, totalling $2,363.18. Thus the first defendant appeared to accept that some “make good” items conceptually arose from its breach in vacating the premises.
100 The amount conceded by the defendants is exclusive of GST. However, given GST was paid in respect of these amounts, the total for those two expenses should include GST at $2,599.50.
101 This leaves two Alpha cleaning invoices and a plumbing invoice from Robert W Gill & Sons.
102 The first Defendant rejected these claims on two main bases. The first was that Salta did not establish the condition of the property at the commencement of the lease, and so it should not be entitled to recover the amounts claimed for cleaning and plumbing. The second was that the plaintiff’s expenditure was not caused by the breach of the first defendant. It said instead, that the expenditure was incurred pursuant to the agreement with Omnigraphics under which the plaintiff agreed to “make good” the premises before Omnigraphics moved in.
103 Both submissions are rejected.
104 I accept that the idea for a full industrial clean appears to have originated with Salta in the course of negotiating the new lease.[17] However, as explained by Mr Nutbean, the warehouse was “very dirty” due to the printing which had generated a lot of dust and residue that went all around the building into the roof and walls. It was “caked with a printing dust.” He considered that the industrial clean was required in order to relet the property to any tenant.
[17] Exhibit 10.
105 His evidence was also that the plumbing invoices related to broken bits of plumbing equipment that required a plumber to fix, which was related to the printing equipment.
106 Although no direct evidence was called as to the state of the premises prior to 2002, it is reasonable to infer that the printing business conducted on the premises caused dust and dirt and printing-related plumbing issues that necessitated the incurring of the expenses claimed.
107 In such circumstances, I consider the amount claimed may fairly and reasonably be considered as arising in the usual course of things from the breach of contract[18] in vacating the premises such that they needed to be “made good” for re-leasing.
[18] In accordance with the first limb in Hadley v Baxendale (1854) 9 Exch 341.
108 Thus, the total amount of “make good” expenses for re-letting inclusive of GST allowed is $25,226.50.
Incentive Fee
109 Finally, the plaintiff claims a lump-sum leasing incentive payment of $150,000 paid to Omnigraphics under the new lease.
110 The first defendant rejected this claim on the basis that the claim was “contrived” and further on the basis that it was not caused by the breach.
111 In his report of 27 March Mr Dickinson opines that an analysis of the rent free period together with the cash incentive payment given to Omnigraphics indicated a rental incentive to the Lessee in the order of 20.4% which translated to 13 months rent free.
112 However he was of the opinion that as at late 2013 a “market acceptable lease incentive for the subject premises would have been in the order of 10%-15% and usually taken by way of a rent free position….” (equivalent to 6-9 months rent free).
113 It therefore followed that the lease incentive granted to Omnigraphics “did not represent market conditions as at late 2013”[19] and was “excessive”.[20]
[19] Expert Report of Mr Peter Richard Dickinson of P.R. Dickinson Consulting Pty Ltd dated 27 March 2015, page 15.
[20] Expert Report of Mr Peter Richard Dickinson of P.R. Dickinson Consulting Pty Ltd dated 27 March 2015, page 17.
114 In his oral evidence he confirmed that the $150,000 payment was excessive. The following exchange occurred:
Mr Nixon: In other words those two factors combined, seven months rent free and $150,000 were in excess of what you believed was to be the market at that time, in other words in November 2013?---Yes, that's correct.
115 Mr Nutbean sought to suggest that “the deal” with Omnigraphics would not have gone ahead without the incentive fee (highlighting that it had to pay the surrender fee). However, as accepted by Mr Nutbean, an examination of a set of emails dated 30 September 2013 between Mr Nutbean and Mr Fitt (of Omnigraphics) show that the idea for the lease incentive came from Salta (and had not been sought by Omnigraphics). Although this does not necessarily suggest that the incentive claim was “contrived” (as alleged by the first defendant), I am unable to be satisfied that Omnigraphics would not have entered the lease without it on the basis of these emails. This is particularly so in the absence of any evidence from Mr Fitt.
116 In any event, even if Omnigraphics would not have entered the lease the evidence of Mr Dickinson was that the incentive was above market conditions. In such circumstances I am not satisfied that it arose according to the usual course of things from the breach of the lease.
117 Accordingly the claim for the $150,000 incentive fee is disallowed.
Leasing agent expenses
118 Salta had also initially claimed $46,200.00 in expenses payable to Knight Frank for leasing.
119 However, this claim was abandoned in closing with the result that it is not to be allowed.
Deductions
120 Salta accepted that two amounts should be deducted from the total amount of quantum owed. These are a payment of $307.48 for “credits/payments” and $89,893.62 which is the proceeds of the Bank Guarantee.
121 The total amount of deductions off the amount owed by the first defendant is therefore $90,201.10 (including the security deposit).
Interest
122 Salta’s particulars contain reference to interest in an amount of $3,190.13 at item (c). However, no justification was provided for this amount in submissions or otherwise.
123 Nevertheless, as conceded by the first defendant, statutory interest will be payable.
Total
124 Salta is entitled to judgment on the contract claim in the amount of $326,706.09[21] together with statutory interest.
[21] $319,413.36 (for rent owed); plus $22,299.12 (for unpaid management fees); plus $49,968.21 (for unpaid outgoings); plus $25,226.50 (for “make-good” expenses) less $90,201.10 (for deductions including the security deposit) equals $326,706.09.
B. Whether the first or second the defendants have engaged in actionable misleading conduct
125 The claim against Finsbury Green and/or Finsbury Printing in misleading conduct is contained in paragraphs 14-26 of the Further Amended Statement of Claim. In order to assess it, an examination is first necessary of whether the representation alleged therein was made.
Representation
126 By paragraph 21 of its Further Amended Statement of Claim, Salta alleged that the Representation was constituted by:
a. Finsbury Printing and/or Finsbury green making the “Orel Representations”;
b. Finsbury Green giving “the Confirmation”;
c. Finsbury Green accepting the terms of the Draft Lease; and
d. the Silence.
127 The representation was that Finsbury Printing “were to occupy the Premises” and “were to conduct the Business [the printing business] from the Premises.”
128 However, given that it appeared to be accepted that Finsbury Printing did occupy the premises during the course of the lease,[22] the primary focus was on the representation that Finsbury Printing was to conduct the printing business from the premises.
Oral
[22] Further Amended Statement of Claim, paragraphs 9(a) and (c).
129 It was alleged that the Orel Representations were partly oral and partly to be implied.
130 Insofar as they were oral they were said to be constituted by the following which was conveyed by Mr Orel to Mr Phua while touring the premises on 4 October 2011:
c. the business conducted on the Premises was doing well and Finsbury Printing required a further lease of the Premises;
d. Finsbury Printing wanted to lease the Premises for another three years;
e. the business might require the lease area to be extended.[23]
[23] Further Amended Statement of Claim, paragraph 14.
131 A further representation was said to be implied from the conversation and tour of the premises to the effect that “the occupier of the Premises and the person conducting the business from the Premises would be the tenant.”
132 In order to consider whether this representation is sustained it is necessary to consider the evidence of both Mr Phua and Mr Orel.
Evidence of Phua
133 In examination Mr Phua adopted an affidavit dated 19 January 2015.
134 In paragraph 6 of that affidavit he stated that he could recall from having previously inspected the premises that from at least February 2007 the premises was adorned with signage bearing only the mark “Finsbury”.
135 He later details his meeting with Mr Orel at the premises on 4 October 2011 which he claims occurred because Orel phoned him and said:
“Come to the Premises and we can have a chat about the renewal, since the option has expired, and if you want I will show you around the business, we can talk about the expansion of the Premises for the expansion of the printing facilities”
136 He claimed that Mr Orel greeted him and gave him his business card, which he annexed, and took him on a tour. The business card annexed was blue and had the words “Finsbury Printing” on it. He also observed a large quantity of printing equipment and that the premises was adorned with paperwork, posters and signage bearing the mark “Finsbury”.
137 In oral evidence he also claimed that he recalled seeing signage that was “just Finsbury”.
138 The affidavit continues:
“During the Site Meeting on 4 October 2011:
a. Mr Orel:
….
ii. said to me that:
A. the business was doing well and would require a further lease of the Premises;
B. he was extremely unhappy that the Option had lapsed;
C. he wanted to lease the Premises for the business for 3 years only;
D. the business might require the lease area to be extended; and
E. the business would be expanding into a new premises.
b. I explained to Mr Orel that Salta Properties required the new lease to be for 10 years.
c. Mr Orel said he was not going to sign a 10 year lease, and he offered 5 years.
d. I told Mr Orel that I would need to discuss his offer of 5 years with management and that I would get back to him.”
139 The affidavit concludes:
“11. Based on my observations and conversations with Mr Orel at the Site Meeting, I believed that the Tenant, Finsbury Printing was the entity conducting business as the Premises, using the name “Finsbury” and would continue to do so under the new lease.”
Under cross examination
140 It became very clear during the course of the cross examination that much of the contents of the affidavit were wrong.
141 Thus, after being shown the photograph of the outside of the premises (with the Finsbury Green sign), Mr Phua accepted that the signage in October 2011 “could have been Finsbury Green”. He also agreed that it was “possible” he in fact received a green business card with “Finsbury Green” on it.
142 He accepted that what he said in paragraphs 6 and 10(a)(i)B and 11 regarding “Finsbury” could be wrong.
143 It was also pointed out to him that, as at 17 September, Salta’s offer was already down to a seven year term which made it highly unlikely that he would have said Salta required a 10 year lease (as he had stated in paragraph 10(b)).
144 Ultimately, in the light of the surrounding objective evidence, he accepted that the affidavit was not correct at paragraphs 6, 10B, 10(b), 10(c) 10(d) and 11.
145 He also accepted that he had no notes to make reference to in preparing his affidavit which was prepared over 3 years after the meeting and just had the “recollection” in his head.
146 When asked if he accepted that his recollection was not a good one also in relation to paragraph 10(a)(ii) he said based on the trail of emails, “potentially yes.”
Evidence of Orel
147 Mr Orel adopted an affidavit of 11 February.
148 He claimed that the first time he met Mr Phua was on 4 October 2011. He further claimed that Mr Phua phoned him and said he wanted to arrange a meeting to discuss Salta’s offer for a new lease.
149 They introduced themselves and “exchanged business cards”.
150 He recalled looking through the premises and said:
I refer to paragraph 10 of Mr Phua’s affidavit. Whilst walking through the premises we discussed generally how our respective businesses were fairing in the current market. I agree that I said the business was doing well but other than to this extent paragraph 10 of Mr Phua’s affidavit is confused and wrong. (paragraph 10)
151 They further discussed that Mr Heath had been working on a development proposal for a number of years wherein Salta would develop and sell a purpose built facility.
152 They further discussed the heads of agreement Mr Carson had sent a few weeks earlier as follows:
Mr Phua and I discussed Salta’s offer and had a conversation the substance of which was as follows. I said, I do not understand why the heads of agreement is for 7 years when I wanted a one by one by one year lease. Mr Phua said, that is the best we will do. I said that is worse than our option of five years in our last lease. Mr Phua said that is what the owners want and it is the best that they will do. I said, we will need to put this to the board for consideration. (paragraph 13)
153 In oral evidence he confirmed that it was Mr Phua who had telephoned him to introduce himself as Mr Carson had left and he wanted to discuss the heads of agreement with him.
154 He said there was a tour (first) and then a discussion and he said he was not happy with the seven year term which was worse than the existing lease with the 5 year option.
155 In relation to Mr Phua’s affidavit at 10(a)(ii):
· He conceded that he said the business was doing well;
· He denied saying he required a further lease;
· He denied saying he was extremely unhappy that the option had lapsed- he did say the option was better at five years than the proposed 7 year term;
· He denied saying he wanted to lease for 3 years; he was looking for a one by one by one lease because they wanted to purchase their own property;
· He denied saying the business might require the lease area to be extended;
· He denied saying that the business would be expanding into new premises
156 Under cross examination he maintained that Mr Phua telephoned him. He denied giving Mr Phua the (blue) business card annexed to his affidavit although he accepted that he did not say this in his affidavit. He confirmed that he would not have given him that card because they had Finsbury Green business cards after 2007 and they destroyed the blue cards referring to Finsbury Printing. He denied that this was a recent invention.
157 He accepted that he told Mr Phua the business was doing well and was positive about the business. Further, that he was showing Mr Phua new machinery. He also accepted that he told Phua he was going to go to the Board.
Evidence of Tarascio
158 Mr Tarascio also gave some evidence of what Mr Phua told him after the meeting. Thus he said the premises was generally kept in good repair, and the tenant had purchased new equipment. The business conducted was robust and busy, and Mr Orel indicated that there were significant government contracts. He says that he and Mr Phua formed the view that the tenant was continuing to be of good quality.
Finding re meeting
159 It is quite possible that Mr Phua held the view he alleges to have held (in paragraph 11 of his affidavit), particularly given his discussion with Mr Tarascio.
160 This however is completely irrelevant to what was actually said at the meeting by Mr Orel.
161 I accept that Mr Orel told Mr Phua “the business” was doing well and was “positive” about the business. Further, that he showed him new machinery.
162 However, I do not accept Mr Phua’s evidence that Mr Orel gave him his “Finsbury Printing” (blue) business card. Notwithstanding that Mr Orel’s affidavit did not contain reference to it, I prefer his evidence on this matter and accept that he gave him a “Finsbury Green” business card. This is consistent with the general 2007 “rebranding” (corroborated by the invoice of Option[a] of June 2007, described earlier). Mr Orel’s evidence was also generally more cohesive and reliable.
163 I also generally prefer his other evidence over that of Mr Phua. In particular I accept that “Finsbury Green” indicia was outside the building, consistent with Mr Carson’s evidence.
164 Thus, although Mr Orel might have been said to have had his “Finsbury Printing director’s hat on” (as he in fact conceded), he also ostensibly had his “Finsbury Green director’s hat on” given the surrounding circumstances including the fact that he handed Mr Phua a Finsbury Green business card.
165 However, there was nothing said at the meeting as to which entity was to occupy the Premises and conduct the business. Instead, any belief that Finsbury Printing was to conduct the business appears to have been based on a presumption of Mr Phua and Mr Tarascio. Thus, in the words of Mr Tarascio, we “assumed” Finsbury Printing was carrying on a printing business and that Finsbury Green was “possibly a trading name.”
Confirmation
166 The next component of the alleged representation was that by email of 12 October Orel confirmed to Phua that “our board… have considered [the offer of a lease to Finsbury Printing] favourably”.[24]
[24] Further Amended Statement of Claim, paragraph 15.
167 In fact the actual email states that: “I can now confirm that I have met with our board today and they have considered the offer favourably.” It then requests a copy of the lease to compare with the existing lease.
168 Although it is signed off by Peter Orel with a “Finsbury Green” logo at the bottom in large print I am unable to be satisfied that this constitutes a communication from Finsbury Green (as alleged in paragraph 21(b)). Given the substance of the email contained an approval of the offer which was made to Finsbury Printing this is not substantiated.
169 In any event, there is nothing in this email to substantiate the alleged representations to the effect that Finsbury Printing were to occupy the premises and conduct the business.
Acceptance of draft lease
170 It is true that Mr Orel forwarded an email to Mr Phua of 8 November saying the document [the draft lease] has “got the all clear.” It is signed by him as a CEO.
171 It was said by the plaintiff that no other conclusion “can reasonably be drawn” other than he was signing on behalf of Finsbury Green given the only company he was the CEO of at the time was Finsbury green.[25]
[25] Outline of the Plaintiff’s Submissions dated 17 May 2015, paragraph 20.
172 However, there was no evidence that this was known to Salta. Rather, the natural representation being made was that Mr Orel had the all clear from the Finsbury Printing board given it was the proposed party to the lease.
173 Again, it also did not advance the making of the alleged representation to the effect that Finsbury Printing were to occupy the premises and conduct the business.
The Silence
174 It was next alleged that at no relevant time prior to the execution of the 2011 Lease did the defendants inform Salta that Finsbury Green was to occupy and conduct the business from the premises.[26]
[26] Further Amended Statement of Claim, paragraph 20.
175 Mr Orel accepted that he never had a discussion with anyone from Salta about what Finsbury Printing Australia did or what Finsbury Green did. Nor did he ever discuss which entity ran the business from the premises. He said if he had been asked which entity ran the business he would have said Finsbury Green from mid 2009.
176 However, full disclosure in all commercial negotiations is not necessary to avoid a breach of the section.[27] Rather, silence is to be assessed as a circumstance like any other;[28] the question being whether, having regard to all the relevant circumstances, constituted by acts, omissions, statements or silence, there has been conduct that is misleading or deceptive.[29]
[27] Russell V Miller, Miller’s Australian Competition and Consumer Law Annotated 36th ed, Thomson Reuters 2014, page 1478.
[28] Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608.
[29] Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 at page 618.
177 For reasons expressed below, I am unable to be satisfied that the alleged representations were made when all the surrounding circumstances are taken into account.
178 However, it was alleged by Salta that Finsbury Green “must have known that Salta was labouring under a misapprehension that Finsbury Printing were conducting the Business by reason of the discussions at the 4 October meeting and the terms of the draft lease [including by reason of clause 11(b) of the lease].”
179 It thereby followed that an obligation arose to inform Salta that Finsbury Printing would not occupy the premises.[30]
[30] Outline of the Plaintiff’s Submissions dated 17 May 2015, paragraphs 22 – 23.
180 Even if Mr Orel knew or suspected that Salta was labouring under some delusion, however, this does not of itself impose any obligation of full disclosure. Both parties were commercial entities of considerable net worth represented by lawyers on both sides. Thus, as Gleeson CJ said in Lam v Ausintel Investments Aust Pty Ltd[31]:
Where parties are dealing at arm’s length in a commercial situation in which they have conflicting interests it will often be the case that one party will beware of information which, if known to the other, would or might cause the other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice.
[31] (1989) 97 FLR 458 at 475.
181 In any event, there was no evidence that Mr Orel “knew” Salta was labouring under any such misapprehension; nor was any such suggestion made to him.
182 There was nothing said at the meeting of 4 October even on Mr Phua’s own version. Rather, as observed already, his conclusion at paragraph 11 of his affidavit appears to have been based on his own presumptions.
183 It is true that the draft lease contained a clause to the effect that the tenant would be in default if, without the Landlord’s written consent, it “discontinues its business on the Premises” or “leaves the Premises unoccupied for more than 14 days” (clause 11(b)).
184 However, clause 11.1(b) appears to generally focus on protecting the landlord from changes or alterations in the state of the Tenant or the premises rather than stating something as to Finsbury Printing’s future intentions. More particularly, the clause says nothing about what the tenant’s “business” actually is, or will be, given the concept of the “business” is not even a defined term.
185 I am also unable to find that a generalised approval (through lawyers) as to this clause (considered in the context of a 40 page document) establishes that Mr Orel knew that Salta believed that Finsbury Printing was conducting the printing business at the premises.
186 I am therefore not satisfied that Mr Orel “must have known” that Salta was labouring under a misapprehension that Finsbury Printing were conducting the Business by reason of the discussions at the 4 October meeting and/or the terms of the draft lease [including by reason of clause 11(b) of the lease]” or otherwise.
Overall findings re representation
187 Before considering the overall finding, the defendants made a “threshold submission” that the representation claim was not made out because Salta actually knew that Finsbury Green was conducting the business. This was said to flow from the following matters:
· That the evidence of Mr Tarascio was to the effect that relevant company and Google searches would have been conducted;
· The Bank guarantee given in 2002 was given by Finsbury Green;
· That various plans forwarded by Mr Heath – and prepared by Salta – identified the client as “Finsbury Green Printing” not “Finsbury Printing”;
· That there were a large number of emails from Mr Orel which included reference to a “Finsbury Green” name and logo;
· That Finsbury Green paid the rent during 2009-2011;
· The signage from 2007 was in the name of “Finsbury Green”;
· That Mr Phua was given a business card with “Finsbury Green” on it;
· The absence of discovery (until late in the trial) of notes of the weekly leasing meetings conducted by Salta.
188 However, although Mr Tarascio suggested that searches would have been conducted he was ultimately unable to say what searches were actually conducted. Further, the absence of the notes of the weekly meetings does not positively establish knowledge.
189 In relation to the other matters, although I accept that they should have put Salta on notice of the existence of the “Finsbury Green” entities (the business name and company) I am unable to be satisfied that Salta actually knew that Finsbury Green was conducting the business.
190 The above surrounding circumstances are however relevant to consider when determining what meaning was objectively conveyed by Mr Orel in context.[32] Thus, whether particular conduct is misleading or deceptive is to be determined in the context of the evidence as to the alleged conduct and to the relevant surrounding facts and circumstances.[33]
[32] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Perpetual Trustee Co Ltd v Ishak [2012] NSWSC 697; Cunningham v Westpac Banking Corp Ltd [2012] FCA 1088.
[33] Russell V Miller, Miller’s Australian Competition and Consumer Law Annotated 36th ed, Thomson Reuters 2014, page 1452.
191 As indicated already, the high point of the representation case was that Mr Orel was “positive” about “the business” when showing Mr Phua some machinery at the premises in October. Mr Orel also generally approved Salta’s draft lease which provided for a default if Finsbury Printing “discontinued” a business.
192 However, I do not consider that this evidence establishes the representation alleged. These findings do not establish any representation to the effect that Finsbury Printing was the entity which would be occupying the premises and running the printing business.
193 I am also fortified in so finding given the matters cited above.
194 Thus the existence of the Finsbury Green company was obvious given the payment of the rent and bank guarantee.
195 As accepted by Mr Carson the “Finsbury Green” name was also “all over their buildings, all over their emails” and was actually denoted on the business card handed to Mr Phua on 4 October.
196 I accept that the fact that a person could have discovered the misrepresentation had he or she made proper inquiries does not absolve the maker of the representation from liability.[34] However, the copious reference to “Finsbury Green” in this case weighs against the actual making of any representation that Finsbury Printing was the entity which would be conducting the printing business.
[34] Russell V Miller, Miller’s Australian Competition and Consumer Law Annotated 36th ed, Thomson Reuters 2014, page 1453.
197 In particular, I am unable to be satisfied that the vague discussions about the “business doing well” on 4 October amount to any representation that a particular entity was to occupy the premises and conduct the business.
198 As is evident from the oral evidence of Mr Tarascio and paragraph 11 of Mr Phua’s affidavit, Salta appears to have presumed that Finsbury Printing was the entity carrying on the printing business. It was also Salta who chose the contracting entity (as Finsbury Printing) when it typed up the initial “invitation” document. However, people who are misled only by their own misconceptions will not have been misled by the relevant conduct.[35] Rather, any error must result from the “conduct” of the person and not from other circumstances for which the person is not responsible.[36]
[35] Russell V Miller, Miller’s Australian Competition and Consumer Law Annotated 36th ed, Thomson Reuters 2014, page 1463.
[36] Russell V Miller, Miller’s Australian Competition and Consumer Law Annotated 36th ed, Thomson Reuters 2014, page 1446.
199 Overall, I am unable to be satisfied, in context, that any conduct engaged in by Mr Orel conveyed a meaning that Finsbury Printing would be the entity which would be running the printing business and occupying the premises.
200 It is unnecessary to go further. However, even if some representation was made it has certainly not been shown that it was made by Finsbury Green itself. Thus, if the alleged representation was found to be made it could only be because (contrary to my finding above), Mr Orel was found to be holding out some meaning on behalf of Finsbury Printing only at the October meeting. Negotiations (including the approval of the draft lease) were also conducted on behalf of Finsbury Printing given it was to be the party to the lease.
201 Thus, even if I was wrong as to the making of the alleged representation, I would be unable to be satisfied that Finsbury Green made any representation in its own right at all.
202 Given, however, that the alleged representation is not established, Salta has not sustained its claim based on misleading and deceptive conduct (at paragraphs 14-26).
203 It is therefore unnecessary in such circumstances to consider other elements of such a claim. However, for sake of completeness I will briefly record my views in relation to the issues of reliance and loss (which were also challenged by the defendants).
Reliance
204 Although the representation alleged is of a kind likely to provide an inducement, any inference of inducement is no more than an inference which may be rebutted by the actual facts of the case.[37]
[37] Lord Buddha Pty Ltd v Harpur [2013] VSCA 101 at [159]
205 The evidence of Mr Tarascio was that the decision to enter the lease was made after Mr Phua undertook his inspection and after the negotiations had concluded and they had arrived at an “acceptable lease term and security arrangements.” Further that his recollection of the meetings was that they could have only agreed to the draft lease “once the commercial terms had been clearly identified and agreed on.”
206 He ultimately gave two reasons why Salta was prepared to enter the lease. Firstly, a “key aspect” was Mr Phua’s inspection. Secondly, that the tenant had a good trading history.
207 Under cross examination he accepted that he made the decision after his discussion with Mr Phua. Further, that it was “probable” that the decision was made within a week or two of 4 October if the terms were agreed.
208 The essence of this evidence was therefore that the decision was made by around 18 October at the latest after the commercial elements of the deal had been finalised (which appears to be by 12 October when Mr Orel communicates general acceptance of the commercial terms from his Board and Mr Phua sends the matter to the lawyers to prepare a draft lease).
209 Insofar as any representation was made at the meeting and prior to 18 October I therefore accept that it induced entry into the lease.
210 However, insofar as it was constituted by conduct post 18 October (including approval of the draft lease in November) I am unable to be satisfied that it played any part in inducing entry into the lease. I am fortified in this view by the failure to produce the weekly meetings notes which I am able to infer would not have assisted Salta.[38]
Causation and Loss
[38] Jones v Dunkel (1959) 101 CLR 298.
211 In closing submissions Salta sought damages on the same basis and in the same amount as its contractual claim (citing Marks v GIO Australia Holdings Ltd[39] and Henville v Walker[40]).[41]
[39] (1998) 196 CLR 494.
[40] (2001) 206 CLR 459.
[41] Outline of the Plaintiff’s Submissions dated 17 May 2015, paragraph 31; Further Amended Statement of Claim, paragraph 26.
212 In the alternative it sought damages on the basis of 3 alternative scenarios if the court considered that the measure of damages was a tort measure.[42]
[42] Outline of the Plaintiff’s Submissions dated 17 May 2015, paragraph 32.
213 There are several relevant principles governing the issues of causation and loss under the Australian Consumer Law in this case which have been recently summarised by the Court of Appeal in the decision of BHP v Steuler[43] as follows:
[43] [2014] VSCA 338 at paragraph [540].
“(1) A plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage it has suffered in consequence of its altering its position under the inducement of the misrepresentations made by the defendant;
(2) Under s 82(1) of the TPA, as under the common law, a plaintiff can only recover compensation for actual loss or damage incurred, as distinct from potential or likely damage;
(3) In determining whether a plaintiff has suffered loss or damage under s 82(1), it is usually necessary to compare the position that the plaintiff is in having been misled, with the position it would have been in but for the misrepresentation; by undertaking this comparison a court can determine whether the plaintiff is worse off as a result of relying upon the misrepresentation made by a defendant;
(4) Section 82 requires identification of a causal link between loss or damage and conduct done in contravention of the Act; the question of causation is relative to the purpose of s 82, applied to the circumstances of a particular case;
(5) Determining the question of causation will often involve considering how much worse off the plaintiff is as a result of entering into the transaction which the representation inducted it to enter than it would have been had the transaction not taken place. This entitles the plaintiff to all the consequential loss directly flowing from its reliance on the representation, at least if the loss is foreseeable;
(6) Analysing the question of causation only by reference to what is, in essence, a ‘but for’ test has been found wanting in other contexts and it should not be treated as an exclusive test of causation under s 82 of the TPA either; especially where there is more than one cause of the loss;
(7) It is relevant to ask what the plaintiff would have done had it not relied on the representation;
…
(9) A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted;
(10) A court should not engage in speculation about multiple possibilities of past hypotheticals to which no specific evidence was directed;
(11) Once the causal connection is established, there is nothing in s 82 of the TPA which suggests that the amount that may be recovered under that section should be limited by drawing some analogy with the law of contract, tort or equitable remedies;
(12) If the defendant’s breach has ‘materially contributed’ to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage.”
214 As indicated above, the plaintiff is entitled to recover as damages a sum representing the prejudice it has suffered in consequence of altering its position under the inducement of the misrepresentations.
215 However, the key complaint of Salta in this case was that the making of the alleged representation caused it to enter a contract it did not want to enter, namely to enter the contract with the non-trading entity, Finsbury Printing. Thus at paragraph 25(a) of the Amended Statement of Claim Salta claims that “but for” the contravention it would not have entered into the 2011 lease with Finsbury Printing at all. It thereafter proposes a number of alternative transactions it would have entered instead.
216 There can therefore be no basis for suggesting that the loss suffered by the making of any representation would be measured by the full value of the contractual bargain with Finsbury Printing.
217 Rather, in such circumstances, the “remedial purpose of the statute”[44] is addressed by the award of a measure of damages best measured by a comparison between the positions in which Salta is in, with the position it would have been in if there had been no contravention as enunciated in principle 3 above. This necessitates an examination of what Salta would have done, given it would not have entered into the contract with Finsbury Printing.
[44] Henville v Walker (2001) 206 CLR 459 at paragraph [18].
218 Salta however next attempted to seek damages on the basis of three alternative scenarios which were said to be based on a tort measure. The first was premised on the basis that Finsbury Green would have become a tenant; secondly on the basis that a stranger would become a tenant; and finally on the basis that Omnigraphics would become a tenant in December 2011.
219 However, as highlighted in principle 10 above, a court should not engage in speculation about hypotheticals to which no specific evidence was directed. There was simply no evidence put before the court that Omnigraphics would have become a tenant in December 2011.
220 The evidence also did not establish that Finsbury Green would have become a tenant.
221 The evidence of Mr Tarascio under examination was that if he had been told Finsbury Printing was not operating the business he would only have entered the lease with appropriate guarantees from the directors of the business or from the trading entity. They would have requested a lease with Finsbury Green or would have insisted on Finsbury Green effectively “standing behind” the tenant.
222 The evidence of Mr Orel was that he would not have signed the lease if Finsbury Green was the prospective tenant, if personal director’s guarantees were required, or if Finsbury Green was required to give a guarantee. Rather he would have vacated on 1 December.
223 In closing submissions, Salta sought to challenge this evidence. In particular, it was suggested that Mr Orel had not explained what he would have done with his 55 employees, nor with his machinery.
224 However, none of these matters were put to Mr Orel. He also gave credible evidence that if they had to vacate on 1 December they would have diverted some of the work to their Adelaide plant and would have outsourced the balance in Victoria. “Outsourcing” would have meant subcontracting that work to other printers. In fact more than half of their work had been outsourced in the middle of 2011. It was not difficult to outsource.
225 I accept this evidence. I therefore accept that, but for the making of any alleged representation, Salta would have been left without a member of the Finsbury group as a tenant and would have effectively had to go to “market” to find another tenant.
226 Accordingly, the second scenario appears, prima facie, applicable.
227 Salta provided little explanation about this scenario however, which was only provided in closing. Doing the best the court can, it appears to follow the following steps.
228 First a comparison is made between the hypothetical position and the actual position for the period December 2011 (when a tenant needed to be found) to June 2014 (after which Omnigraphics commenced payment), a thirty-one month period. The hypothetical scenario (revised in handwriting) presumes there would be 6 months taken to find a tenant (taken from September 2011) and also that a 6 months rent free period would be offered. This gives a figure of some $555,000.00 for hypothetical rent (presuming a monthly rent of some $26,666.67). It is compared with the rent actually received of $515,842.08.
229 Second it is presumed that the hypothetical tenant would be a “good tenant” such that it would pay management fees ($25,600) and would mean that the landlord would not be liable for the make good expenses ($25,226.50) and outgoings ($33,324.84) it was in fact liable for in the present case. The actual position is therefore worsened by an amount of $84,151.34.
230 Next, the lump sum incentive of $150,000 also worsens the actual position given this was actually paid. It is presumed that no such incentive would be payable in the case of the hypothetical tenant.
231 The comparison is therefore a net position of $281,690.74[45] for the actual versus $555,000.00 for the hypothetical, a difference of $273,309.26 which the plaintiff says is its loss.
[45] $515,842.08 (rent received), less $84,151.34 (make good, unpaid outgoings and unpaid management fees), less $150,000.00 (lump sum incentive payment).
232 There are however a number of difficulties with this speculative approach.
233 First, the calculations completely fail to take into account the fact that Salta received $89,893.62 proceeds of the bank guarantee in the actual position.
234 Second, as I have already found, the incentive fee is not justifiable and was excessive if added to the rent free period.
235 Third, although the evidence of Mr Dickinson was that it would have taken Salta between 6 and 12 months to secure a tenant[46] the 6 month figure was at the bottom of the range. In oral evidence he also stated that it was not unreasonable for this court to allow 9 months for Salta to find a tenant.
[46] Expert Report of Mr Peter Richard Dickinson of P.R. Dickinson Consulting Pty Ltd dated 27 March 2015, page 10.
236 He also said that the market at the time was to offer an incentive of between 10 and 15 per cent (which equated to 6-9 months).
237 Overall Mr Dickinson accepted that if Salta had marketed the premises in late 2011, Salta would not have received rent for a term of between 15 months (9 months to get a tenant and 6 months incentive) and 18 months (9 months to get a tenant and 9 months incentive).
238 However, the plaintiff’s figures only apparently allow for 12 months.
239 Fourth, the plaintiff’s figures also presume that the Landlord would have “started marketing in September” if not for the representation. In closing submissions this was said to be on the basis of an (unidentified) email from Mr Heath. However, although Mr Heath appears to refer to a desire to “market the building” in September (after the option had well and truly expired),[47] there was no evidence that Salta sought to market the building at all, notwithstanding that Salta did not obtain a signed lease (from its sitting tenant) until December. I am unable to be satisfied on the evidence that it “would have started marketing in September.”
[47] Exhibit B (original document).
240 Finally, there was also no evidence to support the likelihood that the tenant would have been a “good tenant” paying all outgoings and management fees, such that no make good would be required.
241 I am therefore unable to be satisfied that the plaintiff’s approach is sound.
242 At the very least, there can be no basis for the inclusion of the incentive fee and the exclusion of the bank guarantee in assessing the actual scenario. However, when these two matters are taken into account, the actual figure becomes $521,584.36[48] as compared to the hypothetical figure of $480,000.00 (counting from December).[49] There is accordingly no loss[50] even accepting the plaintiff’s other assumptions including that only 12 months should be allowed to find a tenant and provide an incentive.
[48] $515,842.08 (rent received), less $84,151.34 (make good, unpaid outgoings and unpaid management fees), plus $89,893.62 (proceeds of the bank guarantee).
[49] In such a situation, the new tenant would commence paying rent in January 2013. Rent would be received for the eighteen months between January 2013 and June 2014 (inclusive). Eighteen months at (the plaintiff’s figure of) $26,666.67 per month equals $480,000.00.
[50] The plaintiff is better off in the actual position by the amount of $41,584.36.
243 Another simpler way of considering loss, as the defendants submitted, would also be to compare the length of time Salta was “rent free” in the actual versus hypothetical positions. The actual position was that Salta was out of rent for 12 months (being for the six months in July - December 2013 and the six months rent free in 2014). From this however should be subtracted the security deposit of 3 months which gives a net position of 9 months.
244 As indicated above, the hypothetical position, consistent with the evidence of Mr Dickinson, however would be that Salta would be out of rent for 15 - 18 months.
245 The result would again be that no loss is established even if account is taken of the other expenses.
Summary
246 Salta has failed to make out the representation alleged against Finsbury Printing or Finsbury Green.
247 Even if the representation was made, no loss is established.
248 Reliance would also be only established in a qualified way although it is unnecessary to consider this further given the other findings.
C. Accessorial liability of Mr Orel
249 Given I have found no contravention Salta cannot establish that Mr Orel was a person “involved in” a contravention, for the purposes of obtaining damages under s 236.[51]
[51] As alleged in the Further Amended Statement of Claim, paragraphs 27 – 28.
D. Whether a term of the lease agreement was misleading or deceptive
250 Salta alternatively relied on the execution of the lease as constituting a claim in its own right. Thus it was alleged that, by executing the lease, Finsbury Printing represented that it “could and would” occupy the premises; and conduct the business from the premises.[52]
[52] Further Amended Statement of Claim, paragraph 28A(a) and (b).
251 Secondly, that it “could and would” perform all its obligations under the lease including the payment of all future rent and outgoings for the term of the 2011 Lease.[53]
Representation re conduct/occupation of business
[53] Further Amended Statement of Claim, paragraph 28A(c).
252 Dealing with the first representation(s), Salta alleged they were implied by reason of clauses 13.3, 11.1(b), and 17.1.
253 However, the courts have been cautious in implying representations from contractual promises, particularly representations as to capacity.[54] As Allsop J stated in McGrath[55]:
“…it is appropriate to say that the divining of representations from the making of contractual promises and the entry into contracts is a task to be approached with caution and with an eye to all the facts and not by reference to implying representations mechanistically from equivalent promises….”
[54] Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670 at paragraph [173].
[55] McGrath; in the matter of Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2 at paragraph [138].
254 Bearing this in mind, it is clear that clause 13.3 imposes an obligation to insure and does not establish the representation.
255 Clause 17.1 contains a template type clause which prohibits transfer or “otherwise part[ing] with possession” other than in accordance with clause 17.2. There is nothing therein from which to imply a representation that Finsbury Printing could and would conduct the business from the premises. Nor does the clause give rise to a representation that Finsbury Printing “could and would occupy the Premises.” To the contrary, clause 17.2 makes detailed provision for the circumstances in which the tenant might actually part with possession subject to the Landlord’s consent (which cannot be unreasonably withheld).
256 For reasons given already, clause 11(b) also does not substantiate the making of the alleged representation.
257 In any event, clause 19.6(b) means the allegation cannot succeed. It provides:
“The Landlord and the Tenant agree that nothing will be implied by this Lease or will arise between the Landlord and the Tenant, whether by other agreement or because of any promise, representation, warranty or undertaking given by or for the Landlord or the Tenant.”
258 The lease therefore provides that further representations cannot be implied as the plaintiff seeks to claim.
259 Even if the lease constituted the representation the evidence also did not establish that Salta actually entered the lease in reliance on these clauses.
260 For reasons given already, I am satisfied that Salta made the decision to enter the lease well prior to executing it by about mid-October once the commercial terms were agreed to.
261 There was, however, some further evidence of Mr Tarascio in relation to the actual execution of the lease.
262 Thus under cross examination he said that he leafed through the document and did a “cursory check” of Schedule 1 to ensure it was according to his understanding of the agreement. He “predominantly” would have looked at the term, rent, security and the review mechanism. He admitted that he could not recall if he read all the terms.
263 Under re-examination however he agreed that he did not read leases every time he signed them because they operated off standard templates. Instead he “will generally be alerted to any key changes and I will read those key changes.” His evidence continued:
Mr Moore: Are there any particular terms in the lease that you're aware of and consider?
Mr Tarascio: As in this transaction?
Mr Moore: M'mm?
Mr Tarascio: Yes, the tenant was to be the operator of the business at the premises.
264 However, no particular clause was identified.
265 I did not find this evidence credible. In particular, if this had really been a focus on signing it would be expected that Mr Tarascio would have given evidence about it under examination. It was also inconsistent with the substance of his evidence under cross examination that his focus was the term, rent, security and rent mechanism.
266 Accordingly, even if a representation was made in the lease to the effect that Finsbury Printing could and would occupy the premises and conduct the business, I am not satisfied that it was actually relied upon.
267 Finally, even if the lease constituted the representation which was relied upon, there would remain the question of loss.
268 Given, if there was a misrepresentation, it was made by reason of the contractual warranty it may be appropriate for the measure of damages to equate to the contractual measure.[56] However, if this is the case, the claim adds nothing to the relief already awarded above.
[56] Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at page 506.
269 If, on the other hand the tortious basis is appropriate, no loss is made out for reasons already given.
270 Either way, no further remedy is appropriate.
Representation re performance of obligations
271 In relation to the other representation relied upon to the effect that the Lessee could and would “perform its obligations” under the lease, the plaintiff relied on “Schedule 1 of the Lease and the Lease generally.”
272 It is true that clause 5.1 provides that the Tenant must punctually pay the Rent (although this was not referred to by any witness nor in submissions).
273 However, for similar reasons as indicated above, I am unable to be satisfied that an implied representation can be spelt out to the effect that Finsbury Printing “could and would” perform its obligations including the payment of rent. In particular, the presence of clause 19.6(b) suggests no such representation should be implied.
274 In any event, even if the alleged representation is sustained, there is no reliance for reasons given already, given the decision had already been made to enter the lease prior to execution by Mr Orel. I also do not consider that the decision to enter the lease was in any way induced by any representation contained in the clauses of the lease.
275 Finally, if the measure of damages would be that available at common law for breach of the contract,[57] the claim sounds in no consequences given Finsbury Printing has already been found to have liability for this above.
[57] Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at page 506.
276 No loss has been established if the measure is tortious.
277 It should further be noted that no accessorial liability was pleaded in relation to this claim.
E. Interference with Contractual Relations
278 In paragraph 33 of its Further Amended Statement of Claim, Salta claims that Finsbury Green procured Finsbury Printing to breach the terms of the 2011 Lease. Its particulars of this allegation (which amounted to material facts) were as follows:
In or about June 2013 Finsbury Green starved Finsbury Printing of funds thereby preventing Finsbury Printing from paying the Plaintiff rent under the 2011 lease. In a conversation between Daniel Nutbean of the Plaintiff and Peter Orel of Finsbury Green, in or about July 2013, Orel told Nutbean that Finsbury Printing holds no money and the rent and management fees owing would not be paid.
279 However, in closing submissions Salta abandoned any reliance on this “starvation” claim.
280 Instead, it sought to allege for the first time (solely by way of submission) that the lease was interfered with by Finsbury Green “in relocating the Finsbury Green business operated out of the premises in May 2013, which procured Finsbury Printing to break its lease with Salta.”[58]
[58] Outline of the Plaintiff’s Submissions dated 17 May 2015, paragraph 39(b).
281 It was difficult to see how this submission could be sustained. The interference relied upon appeared to be indirect (ie amounting to a prevention of performance) such that it could only be relied on if it was an unlawful act[59] (which it was not).
[59] Thomson and Co Ltd v Deakin [1952] 1 Ch 646, 694; Woolley v Dunford (1972) 3 SASR 243 at page 264.
282 In any event, the submissions cannot be entertained in circumstances where it was totally outside the ambit of the pleaded case.
283 In circumstances where Salta has abandoned its pleaded claim on interference with contractual relations its claim must accordingly fail.
Conclusion
284 There is judgment for Salta against Finsbury Printing in the amount of $326,706.09.
285 The claim against the second and third defendants should be dismissed.
286 I will hear from the parties on the question of costs.
SCHEDULE OF PARTIES:
| SALTA PROPERTIES (PORT MELBOURNE) PTY LTD (ACN 082 021 083) | Plaintiff |
| v | |
| FINSBURY PRINTING AUSTRALIA PTY LTD (ACN 099 835 739) | First Defendant |
| FINSBURY GREEN PTY LTD (ACN 007 743 151) | Second Defendant |
| PETER ROBERT OREL | Third Defendant |
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