Scentre Management Ltd v Franchise Fusion Trading Pty Ltd
[2019] WADC 123
•23 AUGUST 2019
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: SCENTRE MANAGEMENT LTD -v- FRANCHISE FUSION TRADING PTY LTD [2019] WADC 123
CORAM: REGISTRAR KINGSLEY
HEARD: 5 JULY 2019
DELIVERED : 23 AUGUST 2019
FILE NO/S: CIV 208 of 2019
BETWEEN: SCENTRE MANAGEMENT LIMITED
First Plaintiff
RE1 LIMITED
Second Plaintiff
RECO WHITFORDS PTY LIMITED
Third Plaintiff
AND
FRANCHISE FUSION TRADING PTY LTD
First Defendant
TROY ERNEST PICKARD
Second Defendant
Catchwords:
Practice - Application for summary judgment - No new principles
Legislation:
Nil
Result:
Application allowed
Representation:
Counsel:
| First Plaintiff | : | Mr C M Slater |
| Second Plaintiff | : | Mr C M Slater |
| Third Plaintiff | : | Mr C M Slater |
| First Defendant | : | No appearance |
| Second Defendant | : | In person |
Solicitors:
| First Plaintiff | : | Watts Legal Consultants |
| Second Plaintiff | : | Watts Legal Consultants |
| Third Plaintiff | : | Watts Legal Consultants |
| First Defendant | : | Not applicable |
| Second Defendant | : | Not applicable |
Case(s) referred to in decision(s):
ACCC v CG Berbatis Holdings Pty Ltd (2000) FCA 1376
REGISTRAR KINGSLEY:
By a writ dated 18 January 2019 endorsed with a statement of claim the plaintiffs claim monies owing under a lease agreement between the plaintiffs and the first defendant, the second defendant indemnifying the payments by the first defendant.
By a chamber summons dated 11 April 2019 the plaintiffs brought an application for summary judgment against the defendants. The application is supported by the affidavit of Maeve Foley sworn 11 April 2019.
Ms Foley in her affidavit, together with the supporting documentation annexed to the affidavit, makes out the prima facie right of the plaintiffs to have judgment entered. The annexed documentary evidence shows that the plaintiffs and the first and second defendants executed a lease in or about 8 August 2017. At the same time the plaintiffs and the first and second defendants entered into a fitout deed, and the monies payable by the plaintiffs to the first defendant under the fitout deed were paid.
Ms Foley deposes that in September 2018, on behalf of the plaintiffs, she wrote to the first defendant to demand payment of unpaid rent and other charges payable under the lease together with interest. A demand was made on the second defendant in October 2018.
The lease between the plaintiffs and the first defendant was terminated in September 2018 and no monies had been paid by the first defendant or the second defendant to the plaintiffs.
The plaintiffs claim a total of $702,290.80 which includes ongoing rental from 1 May 2019 to the expiry of the lease on 30 April 2022. Plaintiffs' counsel submitted the tenancy has now been relet and therefore the application for summary judgment should proceed with a subsequent hearing on the issue of damages payable if the application is successful.
The first defendant is a company and is currently unrepresented. The second defendant, the first defendant's sole director, was given leave to advocate for the first defendant.
In an affidavit sworn 20 May 2019 Troy Ernest Pickard (Pickard) opposed the plaintiffs' application. Pickard deposes that the previous tenant was a franchisee of the first defendant. It was the franchisees' intention to refurbish the store and enter into a new lease. However the franchisee at the last minute declined to continue and Pickard deposes that the tenancy 'was reluctantly filled by the Bucking Bull WA Master franchisee, Franchise Fusion Pty Ltd'.
Pickard in his affidavit, which is lacking in detail, appears to put forward six issues:
1.Misleading and deceptive conduct.
2.Concerns about the upgrade to the food court.
3.The plaintiffs gave no information on the impact of development.
4.There was no sustainability assessment.
5.The defendants' suffered a special disability by executing a lease agreement with an unsustainable rent level.
Pickard deposes that the second defendant had no practical alternative other than to enter the lease as the Bucking Bull brand had invested capital and generated goodwill. The second defendant did not see any real alternative but to agree to the plaintiffs' request for 'an unsustainable high rent as the price for lease execution'.
0n 31 May 2019 the paucity of detail in Pickard's first affidavit were highlight by plaintiffs' counsel. Mr Pickard stated that he was advised by a registrar that his affidavit in opposition could be in general terms and need not go into specifics.
Mr Pickard appears in person. The well-established principles are that litigants in person should be afforded some latitude. The court must be careful to ensure that any case being put forward by the litigant is not denied because of a poorly expressed document for submission.
Bearing those principles in mind I granted leave to Mr Pickard to swear a further affidavit going into more detail. That was done by Mr Pickard in an affidavit sworn 18 June 2019 (Pickard's second affidavit).
Misleading and deceptive conduct
Pickard deposes that prior to the execution of the lease the plaintiffs' leasing executive informed 'the defendant' that the average rent in the food court was $120,000 per annum. Pickard deposes that using a standard industry formula of rent as a percentage of sales of 16%, the defendant calculated an average revenue of $750,000 per annum.
The defendants were in the unique position in that the first defendant being the master franchisee had command of the financial information by each of its franchisees. This is supported by the statements made by Pickard in pars 12 and 13 of his second affidavit. Pickard refers to the use of historical market share data collected by the Bucking Bull Master Franchisee (par 12) and that after the execution of the lease 'Bucking Bull was trading above the average within the Whitford City shopping centre food court'.
Whilst Pickard deposes at par 11 of his second affidavit that he used a standard industry formula of rent there is no basis in fact for there being a standard industry formula. In the course of oral submissions Pickard stated that the rental payable by the first defendant was $117,500 and that Pickard's own system of financial management was used to determine whether the tenancy was viable.
For a defence of misleading and deceptive conduct to be arguable the defendants must show that not only was the representation false, but the defendants were induced to act in reliance upon the representation. It is the case that if a material representation (and in my opinion a statement that the average rent was $120,000 per annum would be material) is made which is calculated to induce the representee to enter into a contract, and the contract is in fact entered into, there is a fair inference that the representee was induced to do so by the material representation. However, where the representee is possessed of actual knowledge of the true facts then it cannot be said the representee has been induced.
In this case the defendants were in the unique position of having substantial financial records to inform himself.
Further there is no evidence that the first defendant traded at a loss. Pickard in his second affidavit deposes that whilst the anticipated annual revenue was in the excess of $750,000 the Bucking Bull Whitford City store only achieved $488,736.01 in revenue. The estimate of annual revenue in excess of $750,000 comes from the application of the defendants' financial formula and not to any representation made by a representative of the plaintiffs.
In my opinion the defendants have not shown to have raised an arguable issue on this matter.
Concerns about the upgrade
Pickard deposes that he was misled by being advised the plaintiffs would be investing considerable monies in upgrading the food court. Pickard deposes that prior to the execution of the lease the plaintiffs' leasing executive informed 'the defendant' that Westfield Whitford City would budget $1 million in the 2018/2019 financial year to upgrade and enhance the food court precinct. Pickard deposes that the expenditure of these funds did not eventuate. Pickard deposes that it was the knowledge that the expenditure of such significant funds was an indication that Westfield Shopping Centre was committed to the ongoing operation and success of the food court despite the new casual dining precinct that motivated the first defendant to execute the lease.
Where there has been material misrepresentation then this must lead to loss and damage suffered by the representees. There is no fact deposed to by Pickard in his first or second affidavits that identifies any damage that is linked to the food court precinct. There is no evidence to support the statement that the expenditure did not eventuate. This contention lacks sufficient particulars to warrant there is an arguable defence.
Misleading conduct by failing to inform
Mr Pickard submits that the plaintiffs engaged in misleading and deceptive conduct by failing to disclose information in relation to the impact of the redevelopment of Westfield Whitford City and the plaintiffs' intentions in relation to the diminished size and subsequent attraction of the food court.
Pickard deposes at (par 20 of his second affidavit) that prior to 2017 and prior to the execution of the lease the plaintiffs' closed approximately five tenancies in the food court effectively reducing the number of food operators by one third. Pickard deposes that this significantly reduced the food offering within the food court and its attractiveness as a destination for consumers. Pickard goes on to depose (par 22 second affidavit) that the opening of the new casual dining precinct, the relocation of the cinema entrance from the food court and the removal of car parking bays in close proximity to the food court also impacted adversely the viability of the food court.
Pickard deposes that by failing to disclose the adverse impact of their decision the plaintiff has engaged in misleading conduct.
An actionable representation is a statement made, in this case by the plaintiffs, to the defendant about some existing state of affairs, or to some past event, which is one of the factors that induce the defendant to enter the contract. Pickard in his affidavit has not provided evidence of any representations made by the plaintiffs in relation to the alternations to the food court nor the closure of tenancies. In fact Pickard was aware there was likely to be an impact the construction of a new casual dining precinct as the plaintiff had closed approximately five tenancies prior to the first defendant entering the lease (par 14 first affidavit and par 20 second affidavit).
There is no evidence that the plaintiffs made any representations as to viability. In my opinion the defendants were aware of the risks in relation to the redevelopment of the food court and the opening of a new casual dining area, and having considered those risks entered into the contract. In my opinion there has been no misleading or deceptive conduct on the part of the plaintiff.
No sustainability assessment
Pickard in his second affidavit (par 25) contends that the plaintiffs engaged in misleading conduct in that the plaintiffs failed to present any sustainability studies to the defendant highlighting the impact a reduction in the number of food outlets in the food court would have on the viability of the food court and its tenancies.
A review of the lease does not disclose any contractual obligation to provide a sustainability assessment to the defendants. There is no evidence from the defendants that there is any legal obligation to present a sustainability study to the defendant. Nor is there any evidence that the plaintiffs made any representation based on a sustainability study to the defendant, which representation misled the defendant. In my opinion there is no evidence of any actionable representation made to the defendant in relation to the sustainability studies.
Special disability
Pickard in his first affidavit (par 17) contends the plaintiff engaged in unconscionable and misleading conduct resulting in the second defendant suffering a special disability by executing a lease agreement with an unsustainable rental level. Pickard deposes that the plaintiffs took unfair advantage of its superior position.
The special disability which Pickard refers to is, in reality, the situational disadvantage arising from the intersection of the legal and commercial circumstances in which tenants in a shopping mall may find themselves; ACCC v CG Berbatis Holdings Pty Ltd (2000) FCA 1376 (Berbatis). However the mere inequality of bargaining power is not sufficient to amount to a special disadvantage (Berbatis). The High Court in Berbatis noted that the special disadvantage must be such that a person cannot make a judgment about their own best interests.
In this case the defendant had the financial knowledge and made their own decisions in relation to the viability of the tenancy at the rental offered by the plaintiffs. In my opinion the defendants were under no special disadvantage.
For these reasons I am of the opinion that the defendants have not raised any arguable defence and there will be judgment for the plaintiffs for damages to be assessed.
On 31 May 2019 the costs of the adjournment were reserved. Pickard, at the first substantive hearing submitted that the registrar, at the first return, had stated his affidavit could be in general terms.
I have reviewed the transcript of the first return and no statement of that nature was made by the registrar. However, the registrar did refer to written submissions, and did say to Pickard that the submissions did not need to be fully written out.
As Pickard is self-represented I am prepared to accept he may have been confused as to the level of detail required in the affidavit in opposition. For that reason the costs of 29 March 2019 will be costs in the cause.
I will hear counsel on the issue of damages, and on costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
TS
Court Officer21 AUGUST 2019
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