Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd (No 3)
[2020] ACTSC 53
•10 March 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd (No 3) |
Citation: | [2020] ACTSC 53 |
Hearing Dates: | 16, 17, 18, 19 September, 23, 24, 25, 26 September, 1, 2, 3,4 October, 12, 13, 14 November 2013, 10 June, 14, 15 July 2014 |
DecisionDate: | 10 March 2020 |
Before: | Penfold J |
Decision: | 1. Judgment for the plaintiff in the amount of $20.00 in respect of the defendant’s breach of the cleaning obligation under the Lease. 2. The parties will be heard as to costs. |
Category: | Principal Judgment |
Catchwords: | CONTRACT – Construction and Interpretation of Contracts– Where clause makes no express reference to refurbishment or improved tenancy mix – whether contemporaneous documents admissible in construction – whether extrinsic materials available in construing a Torrens title registered instrument – whether contractual terms are non-legal technical terms – whether expert evidence admissible to construe non-legal technical terms – whether construction accords to business common sense and reflects a common commercial purpose – whether construction produces uncommercial or absurd result CONTRACT – where plaintiff attributed changes in supermarket revenue to defendant’s breach – whether changes constituted losses – whether changes reflected loss of revenue that should have been achieved – where multiple causes identified for changes in revenue – where difficulty in estimating loss from breach – whether defendant liable for all loss if plaintiff shows breach caused some loss – nature of burden on defendant who asserts loss was unrelated to breach ESTOPPEL – deed between two proprietary companies –representatives of first company formed understanding based on actions of representatives of second company about how term of deed to be implemented – representatives of second company participated in implementation by first company in accordance with that understanding – after implementation second company sought further action under term of deed – detriment to first company if second company permitted to enforce term of deed – no challenge to authority of either company’s representatives – whether estoppel required action or understanding by particular senior figure in each company |
Legislation Cited: | Australian Capital Territory (Planning and Land Management) Act 1988 (Cth), s 10(2)(b) Evidence Act 2011 (ACT), s 144 Planning and Development Act 2007 (ACT) |
Cases Cited: | 3143 Victoria Street Doncaster Pty Ltd v Retirement Services Australia Pty Ltd [2010] VSC 317 Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Zhu v Treasurer of the State of New South Wales [2004] HCA 56; 218 CLR 530 |
Texts Cited: | A J Bradbrook, C E Croft and R S Hay, Commercial Tenancy Law (LexisNexis Butterworths, 3rd ed, 2009) H McGregor, McGregor on Damages (Sweet & Maxwell, 16th ed, 1997) Macquarie Dictionary Online (2019) < |
Parties: | Supabarn Supermarkets Pty Ltd (Plaintiff) Cotrell Pty Ltd (Defendant) |
Representation: | Counsel R M Smith SC and D A Hassall (Plaintiff) P Greenwood SC and P Walker SC (Defendant) |
| Solicitors Snedden Hall & Gallop (Plaintiff) Norton Rose Fulbright (Defendant) | |
File Number: | SC 1030 of 2009 |
PRELIMINARY MATTERS
Introduction
The plaintiff, Supabarn Supermarkets Pty Ltd (Supabarn), leased supermarket space, under a lease entered into in 2001 (the Lease), in a shopping centre in the Canberra suburb of Kaleen (known at the time of the trial as Kaleen Plaza). When the Lease was entered into, Supabarn and the shopping centre owner Cotrell Pty Ltd (Cotrell) also entered into a deed (the Supplemental Deed) relating among other things to air conditioning in the shopping centre.
Supabarn took action against Cotrell for breach of contract (relying on the Lease and the Supplemental Deed), and also under s 81 of the Leases (Commercial and Retail) Act 2001 (ACT) (the Leases Act). In summary, Supabarn claimed that Cotrell had breached its obligations under the Lease in two important respects, and under the Lease and the Supplemental Deed in several other less significant respects. Substantial damages were claimed in respect of the two significant breaches of the Lease.
The two significant breaches alleged are breaches of clauses 10.7 and 10.13 of the Lease (the disputed clauses). The dispute about these breaches is fundamentally a dispute about the meaning of the two clauses; if the construction advanced by Supabarn is accepted, there would be no substantial dispute about whether those clauses were breached, although there would remain a dispute about the nature and extent of the breaches and the impact of those breaches in damages.
The claim that the Supplemental Deed has been breached also involves a dispute about the meaning of a clause of that deed, as well as about whether the clause has been breached.
By the Second Amended Statement of Claim, filed shortly before the trial began, Supabarn claimed:
(a)a declaration that the defendant had failed to fulfil its obligations under the Lease and the Supplemental Deed;
(b)damages;
(c)compensation for breach of statutory duty under the Leases Act; and
(d)interest.
The damages claimed by Supabarn represent what it says is lost profit resulting from the breaches of the disputed clauses of the Lease. In short, Supabarn says that if Cotrell had complied with what Supabarn says were its obligations under those clauses, then Supabarn would have made additional net profits of nearly $8 million between 2005 and 2012.
Supabarn’s case has changed over time since it was begun in the Magistrates Court in 2009, and indeed since the hearing started in September 2013. Among other things, a claim for an order for specific performance of provisions of the Lease was abandoned in the Second Amended Statement of Claim.
In closing submissions in 2014, counsel for Supabarn indicated:
(a)that the claim for substantial damages is now confined to the asserted breaches of the disputed clauses;
(b)that if those breaches cannot be established, then Supabarn can also not succeed in its claim under s 81 of the Leases Act;
(c)that even if the breaches of the disputed clauses are established, Supabarn will not do any better under the s 81 claim;
(d)that the s 81 claim is not abandoned, but is recognised as “forensically neutral”; and
(e)that the claims for breaches of other clauses, being:
(i)clauses 10.6 and 10.9 of the Lease; and
(ii)cl 8.1 of the Supplemental Deed;
if established, would not entitle Supabarn to anything other than nominal damages, but still need to be determined.
In summary, Supabarn’s central claim is:
(a)that the disputed clauses in the Lease obliged Cotrell to undertake a substantial refurbishment of Kaleen Plaza and to upgrade its tenancy mix;
(b)that by the end of 2004, Cotrell was in breach of that obligation;
(c)that if such refurbishment had been undertaken, and the tenancy mix had been improved, the Supabarn supermarket would thereafter have been more competitive with the supermarkets in new or improved shopping centres in surrounding areas (including in particular the Jamison shopping centre); and
(d)that the supermarket would accordingly have been significantly more profitable over the following few years than it actually was.
10. I note that, despite some earlier uncertainty about the matter, there is no current claim that cl 10.7 obliged Cotrell to expand Kaleen Plaza.
11. The issues arising in this case can be summarised as follows:
(a)Construction issues: What material is admissible in construing the disputed clauses of the Lease, and what do those clauses, and cl 8.1 of the Supplemental Deed, mean?
(b)Breach issues: Has Cotrell breached any of the obligations set out in those or other relevant clauses of the Lease or the Supplemental Deed as construed?
(c)Damages issues: If so, did any breach of any of those obligations cause loss to Supabarn and if so, what was the amount of the loss, and to what damages is Supabarn entitled?
12. I have concluded, in short:
(a)that the construction of the disputed clauses advanced by Supabarn is not available;
(b)that cl 8.1 of the Supplemental Deed does not have the meaning advanced by either party, but a different meaning again;
(c)that Cotrell has breached one of the clauses of the Lease, in relation to its obligation to provide cleaning services at Kaleen Plaza; and
(d)that Supabarn is entitled to an award of nominal damages in respect of that breach.
13. A more detailed summary of my conclusions is at [1052] below.
Background
Contractual documents
14. The Lease was entered into between Supabarn and Cotrell on 7 September 2001; it was for a term of seven years and two months, being the remainder of the period of 10 years covered by an earlier lease (the original lease, entered into on 1 February 1999) that was replaced by the Lease. The Lease provided for two renewals for 10 years each. In connection with entry into the Lease, the parties entered into the Supplemental Deed, also dated 7 September 2001.
15. Reference is also made in this matter to an earlier deed (the Development Deed), entered into on 10 February 1999, which refers to an earlier Letter of Intent setting out “the procedure for the ultimate acquisition” by Supabarn of the supermarket in Cotrell’s building (then operated as a Jewel supermarket), and the details of the lease to be granted to Supabarn by Cotrell. This deed recited that the “Developer” (a company with links to Supabarn, or possibly an earlier incarnation of Supabarn) had negotiated to acquire the supermarket from the previous tenant, and intended to carry out at its own expense certain works in the shopping centre on behalf of Cotrell, such “investment” to be recovered by the Developer within 10 years after completion of the works, under the terms of a varied lease.
16. Although the Development Deed was executed nine days after the original lease, the terms of the lease variation seem to have been incorporated in the original lease before it was signed. I accept that the Development Deed was “contemporaneous” with the original lease; it is not clear that it was contemporaneous with the Lease, which was signed more than two years later, but this may not matter if its real significance is only to explain uncontroversial aspects of the original lease which may be available in construing the Lease.
The disputed clauses
17. As mentioned, the case largely turns on the meaning of the disputed clauses of the Lease, which are as follows:
Management of Centre
10.7 The Landlord must conduct, manage and operate the Centre as a high quality retail shopping centre and in an efficient manner at all times.
Landlord’s obligations
10.13 The Landlord acknowledges that when anything is required to be done in relation to the Centre or the Premises for the essential operation of a retail shopping centre which is not expressly or by necessary implication the responsibility of the Tenant under this Lease but is the responsibility of the Landlord, then such thing must be done by and at the cost of the Landlord.
18. As well, Supabarn asserted breaches of several other clauses of the Lease, and of a clause of the Supplemental Deed, as follows:
(a)From the Lease:
Services
10.5 The Landlord must keep all services in the Centre operating during the Centre Trading Hours breakdowns or unavoidable delays excepted.
Maintenance of Common Areas
10.6 The Landlord must keep the Common Areas in good repair, clean and adequately lit.
Structural Works
10.9
(a) The Landlord must at its own cost keep the Centre in a sound structural condition.
(b) Without limiting paragraph (a) the Landlord must:
(i) carry out any structural repairs, alterations or improvements to the Premises or the Common Areas as required:
(A) to maintain and keep the Premises and the Centre in good and substantial repair, working order and condition; or
(B) by any Authority;
(ii) maintain and keep the roof and exterior walls of the Premises and all gutters and downpipes in a good state of repair and condition.
(c) The Landlord must carry out any work required pursuant to this clause promptly and in a proper and workmanlike manner.
(d) The provisions of this clause are subject to the provisions of clauses 6.2, 7.1 and 7.3.
(b)From the Supplemental Deed:
Common Area Air Conditioning and Air Lock
8.1 The Owner covenants and agrees with the Tenant to install an air conditioning system in the common area of the Centre. Such system shall be installed in accordance with the recommendations and specifications of a Consultant engaged by the Owner. If the Owner and the Tenant engage separate Consultants in respect of their respective air conditioning installations then both parties shall take such reasonable steps to ensure, via their respective Consultant’s [sic], that both air conditioning systems to be installed shall be compatible. The Owner in addition covenants and agrees with the Tenant to provide and install an air lock to the main entry.
(Emphasis in original.)
Other relevant provisions
19. Other provisions of the Lease are said to be significant in construing the various clauses. Relevant definitions from the Lease include the following:
Centre means:
(a) the Land and any other land which the Landlord uses with the Land for a shopping centre and a carparking area or other undertakings relating to a shopping centre;
(b) all improvements on the Land and the other land; and
(c) all plant, equipment, fittings, fixtures, furniture and furnishings of the Landlord for use in the Centre.
Common Areas means those parts of the Centre intended by the Landlord for common use. They include parking areas, driveways, walkways, docks, stairs, escalators, lifts and toilets.
Land means the land described on the cover sheet on which the Premises are situated.
20. The cover sheet referred to in the definition of “Land” specifies the land as block 10 of section 88 in the district or division of Kaleen, identified in Vol 1541, Folio 75.
21. Other relevant provisions of the Lease include the following:
1.3 Headings are for convenience only and do not affect interpretation.
Conduct of business
6.5 The Tenant must operate the Tenant’s business in the Premises in good faith and in a reputable manner and in keeping with the operation of the Centre as a high quality retail shopping centre and will not commit or suffer or knowingly permit any illegal or unlawful act to be committed or performed or done on the Premises.
Tenant amenities
10.14 The Landlord must not do anything which would in any manner interfere with the normal conduct of the Tenant’s business in and from the Premises. In particular, the Landlord must not make any change, alteration or addition to the Centre which would:
(a) reduce the visibility of the shop front of the Premises or the Tenant’s external signage to potential customers inside and outside the Centre, the Landlord acknowledging that maximum visibility in this regard is beneficial to the Tenant in the conduct of its business; or
(b) reduce the means of access to or from the Centre’s carparks or the Premises except to undertake maintenance or repair (after providing prior reasonable written notice to the Tenant); or
(c) interfere with the efficient operation of any parcel pick-up facilities from time to time serving the Premises.
(d) reduce the accessibility of the Premises to customers and potential customers within the Common Areas adjacent to the Premises including without limitation by locating lifts, escalators, malls and pedestrian walkways and the location of kiosks and specialty shops in the vicinity of the premises except to undertake maintenance or repair (after providing prior reasonable written notice to the Tenant); or
(e) reduce vehicular access to the Centre or to the carparking areas from the roadways adjacent to the Centre except to undertake maintenance or repair (after providing prior reasonable written notice to the Tenant); or
(f) alter the size or location of any pylons or signs carrying the name or logo of the Tenant.
If the Landlord breaches its obligations under this clause, then, in addition to any remedy which the Tenant may have in law or in equity, the Landlord must pay reasonable compensation to the tenant for (but not limited to) loss of profits which are proven to be caused by the Landlords’ [sic] actions. The amount of compensation will be assessed by an auditor appointed at the request of either party by the President of the Australian Institute of Chartered Accountants (or his nominee) who in making the assessment will act as an expert and not an arbitrator. The certificate of the auditor as to the amount of the loss of profits will be binding on the parties.
Landlord’s works
10.15 Before carrying out any works in the Centre the Landlord must:
(a) provide the Tenant with plans and specifications of the proposed works including a construction programme and staging plans;
(b) consult with the Tenant as to the time at which the works are to be carried out so as to minimise (so far as is reasonably possible) disruption to the Tenant’s business;
(c) ensure that proper and adequate access is available for the public to and from the Centre via the entrances from the carparks and to and from the Premises from the carparks;
(d) ensure that the method of carrying out the works keeps noise, vibration and the intrusion of dust and dirt into the Centre and the Premises to a minimum;
(e) take appropriate steps to ensure that persons engaged in the works do not use the carparks in the vicinity of the Premises;
(f) at its cost carry out all work lawfully required by a Government Authority to be carried out on the Premises as a consequence of the works carried out by the Landlord and any consequential alterations to or making good of the Premises or any property of the Landlord or the Tenant.
22. Part 18 of the Lease provided for a total term of up to 27 years, extendable after the first 7 years for two further 10-year terms, all at the option of Supabarn. The Landlord had no capacity to extend the term of the Lease at its own option.
23. However, if the Landlord wished to sell the Centre, Pt 19 of the Lease gave Supabarn a “right of first refusal”, under which the Landlord was obliged to give Supabarn notice of the wish to sell, accompanied by a contract for sale that was irrevocable for 21 days after receipt by Supabarn.
24. Part 8 of the Lease permitted Supabarn to assign the Lease, with the Landlord’s consent, which could only be refused if Supabarn had committed a substantial breach of the Lease or, in general terms, if the proposed assignee was not a suitable person to take on the Lease.
25. The Lease was renewed under Pt 18 in 2009. Cotrell pointed out that the pleadings related only to a breach of the Lease that expired in 2009. Given the conclusions I have reached, the significance of this fact did not need to be considered.
Written submissions
26. There were six sets of written submissions and related documents before me. Supabarn provided five of them, totalling nearly 270 pages:
(a)Amended Final Submissions, dated 16 June 2014;
(b)Amended Plaintiff’s Submissions in Reply, undated but filed on 2 July 2014 and responding to the Defendant’s Outline of Closing Submissions;
(c)Plaintiff’s Supplementary Submissions: Management Reports – Evidence as to High Quality Tenants, dated 2 July 2014;
(d)Mr Leyshon (“PL”) – Critical Evidence, printed on 13 July 2014 and provided in court on 14 July 2014; and
(e)Amended Plaintiff’s Submissions in Reply to the Defendant’s Oral Submissions pursuant to Leave granted on 15 July 2014, undated but filed on 1 August 2014.
27. Supabarn’s submissions were repetitive and occasionally misleading and, while apparently carefully structured, were “organised” in ways that tended to obscure rather than to illuminate the issues and the arguments.[1]
28. Cotrell provided the Defendant’s Outline of Closing Submissions (90 pages), filed on 17 June 2014.
The ACT planning hierarchy
29. Kaleen Plaza was located in the Kaleen group centre. The ACT planning hierarchy, and the place of group centres in that hierarchy, are important parts of the background to Supabarn’s claims.
The National Capital Plan
30. Under s 10(2)(b) of the Australian Capital Territory (Planning and Land Management) Act 1988 (Cth), the National Capital Plan is, among other things, to “set out the general policies to be implemented throughout the Territory” in relation to land use and the planning of road systems.
31. The National Capital Plan broadly defines land use for Canberra and the Territory, and adopts seven major categories for land use. Since 1990 and until 2014, Chapter 4 (dealing with urban areas) relevantly provided, under the heading “Centres”:
One of the key principles of Canberra’s urban structure has been that a hierarchy of centres has been developed, with each town having a centre acting as a focal point for higher order retail functions, commercial services, office and community facilities.
This hierarchical principle, at the metropolitan level, means that:
Ÿ Canberra Central continues to be the main location of metropolitan employment
Ÿ Civic has been encouraged to develop as the most specialised retail, commercial, cultural, entertainment and tourist centre
Ÿ town centres provide retail, commercial, cultural, entertainment and other facilities to meet community needs, and serve also as locations for office-based employment.
Centres at each level in the hierarchy form the focus of a range of retail, commercial and community facilities and services, in which specialisation increases at successively higher levels.
The integrity of the hierarchy of centres has broadly been maintained with the levels of [sic] fulfilling distinct but complementary functions.
The Territory Plan
32. The requirement to prepare a Territory Plan was set out in the Interim Planning Act 1990 (ACT) and continued by the Land (Planning and Environment) Act 1991 (ACT). The Plan seems to have been first consolidated in 2008 after the commencement of the Planning and Development Act 2007 (ACT).
33. In 1998, Part A2 of the Territory Plan dealing with “Principles and Policies” explained the role of group centres as follows:
2.4 Group Centres will continue to provide the opportunity for major weekly shopping and other retail and personal services primarily to serve the needs of their respective catchments. They will generally be smaller than the nearby town centre and larger than local centres.
34. Several expert witnesses referred to the planning assumption or expectation that people would do their “weekly shop” or “major shop” at a group centre, but it is not clear that this expectation continued throughout the period to which Supabarn’s case relates. Part 4.4 of the consolidated Territory Plan as in force between 2008 and 2012, entitled “Group Centres Precinct Code”, set out the following overview of group centres in the planning context:
Group centres are larger shopping centres throughout Canberra that serve groups of nearby suburbs. They incorporate a wide range of shopping, community, recreation and business facilities. As well as providing for major food retailing, they also offer opportunities for speciality shops, non-retail commercial uses such as banks, and residential development. Planning policies for group centres seek to retain relatively relaxed, low-key character with mainly low-rise development, promote competition and investment, and support improved facilities for the community.
35. In March 2008 there were 17 group centres designated in the Group Centres Precinct Code, being Calwell, Charnwood, Chisholm, Conder, Curtin, Dickson, Erindale, Hawker, Jamison, Kaleen, Kambah, Kingston, Kippax, Manuka, Mawson, Wanniassa and Weston. Land within a designated group centre fell into one of three commercial zones, CZ1 (Core Zone), CZ2 (Business Zone) and CZ3 (Services Zone). Not all group centres contained land in each zone. The Kaleen Group Centre contained only a CZ1 zone.
36. Nevertheless, Supabarn’s arguments relied heavily on the planning expectation that people will do their “weekly shop” at a group centre, and also on the further assumption (apparently based on the theory of “retail gravitation”, at [840] below) that, all things being equal, it will be their nearest group centre.
The Kaleen Group Centre
37. A plan of the Kaleen Group Centre is at Appendix A: Kaleen Group Centre – Core Zone (CZ1).
38. The building owned by Cotrell that is the subject of this dispute was built in 1988. It is the building in the middle of the designated area that, on the plan, contains the letters CZ1 and the number 88 (Kaleen Plaza). Cotrell’s building does not include:
(a)the roughly rectangular building at the south-west end of Kaleen Plaza, beside which the word “Georgina” identifies the adjoining street, and which has no internal access to Kaleen Plaza; or
(b)the two smaller buildings at the north-east end of Kaleen Plaza, between which runs a strip providing access from Georgina Crescent into the Plaza.
39. Those three buildings house other businesses and, at least in the case of the two smaller buildings, would appear to the casual observer to be part of Kaleen Plaza.
40. The areas to the north-west and the south-east of Kaleen Plaza, which were at the relevant times car parks, have direct access to the Plaza from doors roughly in the middle of each long wall.
41. Thus, Kaleen Plaza is the largest building in the area designated as the Kaleen Group Centre, but it is not the only building, and it is not the only building housing retail businesses. Nor does it include Georgina Crescent itself, or the car parks, albeit that some of the external areas are included in the Lease’s definition of “Centre” (at [19] above).
Other preliminary matters
Supabarn and the Koundouris Group
42. Supabarn is associated with, or perhaps owned by, the Koundouris Group. Various members of the Koundouris family, and possibly other entities under the Koundouris Group umbrella, have from time to time acted on behalf of Supabarn. However, there has been no explicit suggestion that anything in this case turns on the nature or scope of relationships or authority within the Koundouris Group or the Koundouris family; no information about such matters was in evidence, although the evidence did suggest that Erik Koundouris had a senior position within the family and the Koundouris Group.
Cotrell and Dr Solomon
43. Cotrell was owned by a Dr Solomon, who took a close interest in the operations of the company from his base overseas. Kaleen Plaza was managed on his behalf by Jones Lang Lasalle (JLL), and it seems that, for any matters that could not be handled by JLL staff within their authority, those staff dealt directly with Dr Solomon himself.
SupaExpress
44. Late in the period for which Supabarn claims substantial damages, the owners of a small supermarket in the Kaleen local centre (at the other end of the suburb from Kaleen Plaza) made an agreement with Supabarn as a result of which the small supermarket was, in mid- 2012, rebranded as a SupaExpress, with a Supabarn logo and with the staff wearing Supabarn-branded uniforms. Points on a Supabarn loyalty card could be earned through spending at the SupaExpress, but could only be redeemed at the Supabarn supermarket.
Terminology: Kaleen Plaza, Kaleen shopping centre, Kaleen Group Centre, and “the Centre”
45. The name “Kaleen Plaza” refers to the building owned by Cotrell, and does not include the shops to the south-west and north-east of Cotrell’s building (at [38] above)]. Cotrell’s building was “re-branded” as Kaleen Plaza at some point after the building was acquired by Cotrell; James Koundouris gave evidence that this was effected by the building managers, JLL, and that the change involved “signage above the doors with a logo which says ‘Kaleen Plaza’”.
46. In this matter, there are various points at which it may be significant to distinguish between:
(a)the middle building (Kaleen Plaza), which was owned by Cotrell and in which the Supabarn supermarket was located;
(b)the larger complex, sometimes referred to as the shopping centre, that included some or all of the buildings adjoining each end of Kaleen Plaza as well as Kaleen Plaza itself;
(c)the “Centre”, as defined in the Lease (at [19] above);
(d)the Kaleen group centre, which included, as well as the shopping centre, at least Georgina Crescent, the car parks around the shopping centre, and several other businesses.
47. Some of the evidence given and indeed some of the material in submissions has not been rigorous in observing those distinctions. In particular, evidence and submissions often refer to the “Centre”, sometimes referring to the shopping centre operating in the Kaleen group centre and sometimes referring, quite deliberately, only to the Centre as defined in the Lease (being the building and some of the surrounding land, as well as some improvements and other physical items used in Kaleen Plaza). On the other hand, the expression “shopping centre” is sometimes used to refer only to those parts of the complex located in Cotrell’s building. At other points, “shopping centre” and “group centre” seem to be used interchangeably, although in some important respects they are not interchangeable. Mostly this has not caused any particular confusion, but on occasions evidence or submissions have been ambiguous and have required interpretation (and see [50] and [51] below).
Terminology: group centres, shopping centres and supermarkets
48. Although Kaleen Plaza and most of the other shopping centres and supermarkets mentioned in this matter are located in group centres in the ACT, the significant issues arise in relation to the shopping centres in those group centres and the supermarkets located within those shopping centres.
49. To the extent that other aspects of a group centre are mentioned in connection with the quality or attractiveness of a shopping centre, one must keep in mind that such aspects are not within the control of a shopping centre owner, and would not generally be relevant in assessing the obligations of the owner or the entitlements of a tenant operating a supermarket within the shopping centre.
50. For this reason, and also because of the lack of consistency in terminology mentioned above, some references in evidence to locations identified by the name of the group centre have had to be treated as references to the shopping centre concerned, and some general references to group centres have also had to be treated as references to the shopping centres in the group centres concerned. Some references to the shopping centre at the Kaleen group centre must be treated as references to Kaleen Plaza rather than the shopping centre as a whole.
51. Much of Supabarn’s argument about the meaning of the disputed provisions of the Lease relied on the use, in the Lease, of the expression “Centre” (at [19] above) to describe not only Cotrell’s land, all improvements on the land, and all Cotrell’s plant, equipment, fittings, fixtures, furniture and furnishings used in the Centre, but also other land (some not covered by the Crown lease) that is used by Cotrell, including the car parks on either side of the building. Some references in evidence and submissions to “the Centre” were clearly, or possibly, intended to invoke the Lease definition, while others were not.
52. The evidence before me included references to the floor areas of several of the shopping centres and supermarkets mentioned. Different descriptions were used for what was being measured, including “gross floor area” (GFA), “gross lettable area” (GLA), and “retail floor space”. No technical explanation of the various terms was given. It is likely that the terms have slightly different meanings, but I am satisfied that for present purposes they can be accepted as roughly equivalent, such that the following figures extracted from the evidence may not be exactly comparable but are adequate to give an idea of the relative scale of the various premises described:
Shopping centre
Size (square metres)
Supermarket
Size (square metres)
Westfield Belconnen
74,000
Jamison shopping centre
9,557
Coles
Aldi
4,148
1,400
Erindale shopping centre
Erindale (retail space outside shopping centre)
5,000
2,800
Woolworths
2,930
Civic
Supabarn
3,700
Wanniassa shopping centre
5,100
Supabarn
1,550
Kaleen Plaza
3,280
Jewell
Supabarn
1,700
2,244
Terminology: other group centre shopping centres
53. Most of the other group centre shopping centres referred to in this judgment also have particular names. For instance, the Jamison shopping centre was known as the Jamison Centre (but might have acquired a new title since its 2007 upgrade), the Kippax shopping centre was known as Kippax Fair, and the Chisholm shopping centre was known as Chisholm Village. The names are not necessarily used consistently throughout the evidence and the submissions. However, there is only one “shopping centre” in each group centre (although there may be other retail space in the group centre, for instance in Erindale), so any use of a group centre name in reference to a shopping centre can be assumed to refer to the only “shopping centre” in that group centre.
Terminology: retail shopping centres
54. Although both of the disputed clauses refer to a “retail shopping centre”, most of the references in evidence and submissions have been to a shopping centre or shopping centres without mention of “retail”, while a few references have been to a retail centre without mention of “shopping”. I cannot see that in the current context the inclusion or omission of “retail” has any significance; certainly there was no issue arising from any comparison between “retail” shopping centres and any other kinds of shopping centres, whatever they might be. Nor was any reference to “retail centre” confusing in the current context.
Terminology: refurbishments, upgrades and expansions
55. It was clear from the evidence that although refurbishments and expansions commonly took place together, they were distinct activities, in that a refurbishment involved changes to the existing physical qualities of the shopping centre while an expansion of a shopping centre enabled either or both of an increase in the size of some tenancies (often the supermarket anchor tenant) and an increase in the total number and therefore variety of tenants.
56. Some witnesses referred at times to “upgrades”, including some who, by using both “refurbishment” and “upgrade” in the same context, seemed to imply that an upgrade was different from a refurbishment, but no evidence was given indicating that the words “refurbishment” and “upgrade” were technical terms describing different matters.
57. Accordingly, I have used the terms used by the witnesses concerned where relevant. In my own discussion of matters, I have generally used “refurbishment” (the term mainly used in Supabarn’s case) rather than “upgrade”. At some points it has seemed appropriate to use both terms, but I have not treated the evidence as making any distinction between “refurbishment” and “upgrade”, and nor have I intended any distinction in my own use of the terms.
58. In relation to tenancy mix, there are references in evidence and submissions to “upgrading” and “improving”, but no apparent difference in the intended meanings.
Witnesses
59. Supabarn called a number of witnesses, including several witnesses said to be experts in various relevant fields and several members of the Koundouris family (at least one of whom gave evidence as an expert witness).
60. Cotrell called two witnesses to give evidence about the management of Kaleen Plaza, and three others to give evidence as experts.
61. Brief comments can be made at this stage about the witnesses, but their detailed evidence is more usefully considered in the contexts to which it is relevant.
Called by Supabarn
Eric Koundouris
62. Aristidis Eric Koundouris (Eric Koundouris) had sworn two affidavits, dated 20 April 2009 and 6 August 2013, and gave oral evidence on 18 September 2013. Several significant paragraphs of the earlier affidavit were excluded in a preliminary hearing (see Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd (No 1) [2014] ACTSC 11), and other aspects were excluded for other reasons. Eric Koundouris gave brief evidence about breach issues and damages issues.
James Koundouris
63. Dimitrios Aristidis (James) Koundouris (James Koundouris) swore two affidavits, and gave oral evidence on 19 September 2013.
64. James Koundouris had not been involved in negotiations with the defendant about the supermarket lease, but had been involved with the operation of the supermarket from when Supabarn first took it over, initially as the weekend manager.
65. James Koundouris had had some experience overseeing tenancy mix in shopping centres, specifically at the Centrepoint and Homeworld shopping centres in Canberra during the 1990s. He said that he would be undertaking a similar role in relation to the SupaExpress shopping centre at the Crace local centre, which was due to open shortly.
66. James Koundouris’s evidence related to the breach issues and the damages issues.
Theo Koundouris
67. Theodoros Aristidis Koundouris (Theo Koundouris) gave evidence as an expert witness. He was the managing director of the plaintiff, held an accounting qualification, and had previously worked for Price Waterhouse Coopers for four years.[2] Theo Koundouris gave evidence about the damages issues.
Paul Powderly
68. Paul Powderly was a Certified Practising Valuer and a member of the Australian Property Institute. He was authorised under NSW law to practice as a valuer and property consultant, and had more than 10 years of continuous experience in valuing property of the relevant kind. He had prepared three reports.
69. Mr Powderly had inspected Kaleen Plaza in order to report on its condition on several occasions in 2006, 2007 and 2012. He had also spent some time with colleagues who lived in Kaleen, and “frequented it quite regularly and used the centre” for some years before first inspecting the centre in a professional capacity; some of his views reflected his personal observations of the centre over time.
70. Mr Powderly gave evidence relevant to the construction issues and the breach issues.
Jeremy McKinnon
71. Jeremy McKinnon was the National Director of Consultancy at Colliers International; his particular area of expertise was research and analysis specialising in retail economics, demographic modelling, forecasting customer analytics of shopping centres, location analysis and sales forecasting. Mr McKinnon conceded that he was not an expert in the day-to-day management of shopping centres.
72. Mr McKinnon gave evidence relevant to the construction issues, the breach issues, and the damages issues. He had prepared two reports, dated 2 April 2013 and 4 July 2013 (the Supplementary Report), providing an assessment of whether Kaleen Plaza was a “high quality retail shopping centre” and an estimate of loss to Supabarn said to have been caused by Cotrell’s conduct of Kaleen Plaza. The reports involved “benchmarking”, which required Mr McKinnon to identify a group of other shopping centres against which to assess Kaleen Plaza, and a group of other supermarkets in relevant shopping centres against which to assess Supabarn’s performance.
Christine Purdon
73. Christine Purdon was a qualified town planner, with a Master’s degree in Town and Country Planning from the University of Sydney. In her curriculum vitae she claimed skills including:
conceptualisation of issues
analysis of quantitative and qualitative data
report writing
provision of objective advice
74. She described her experience as follows:
In her capacity advising the private sector she has undertaken feasibility studies for development projects, negotiated development applications and land grants, liaised with community organisations, other professionals and government representatives.
She has undertaken evaluations of major State and Commonwealth programs, community consultations and a range of issues, many of which have been sensitive and more recently controversial.
More recently Chris has undertaken a number of planning studies for major developments in both the ACT and NSW.
75. Ms Purdon said that as a planner, she had skill in assessing whether a centre is meeting needs, for instance whether it is “legible” (which among urban planners seemed to refer to the ease with which an area is “understood”) and easy to get to, whether it has active frontages, and whether people want to spend time in “the public realm”, noting that retailers need to get people “coming and staying”.
76. Ms Purdon’s evidence related to the breach issues and the damages issues.
77. Before giving oral evidence, Ms Purdon had prepared:
(a)a report about Kaleen Plaza, dated 19 October 2012, in which she answered a series of questions put on behalf of Supabarn;
(b)a report, dated 2 April 2013, responding to expert reports prepared by witnesses called by Cotrell, Peter Haley and Peter Leyshon; and
(c)a supplementary expert statement dated 15 August 2013.
78. At the beginning of her oral evidence, Ms Purdon qualified her first report to the effect that she could not in fact comment on whether Kaleen Plaza shopping centre had operated as a high quality retail centre operated efficiently, but that her observations in the report had been made from an urban planning or urban design perspective. She also said that her references to “high quality” should be read as references to “higher quality”.
79. In the supplementary expert statement, Ms Purdon provided a summary of the process she had undertaken in assessing the expected performance of the Supabarn supermarket “in terms of earning sales revenue”.
80. The weight that I was willing to give to Ms Purdon’s evidence was affected both by the content of some of that evidence and by her manner of giving it. First, several aspects of her evidence, while convincing as such (for instance, her evidence about the impact of competition faced by Kaleen Plaza, about the mobility of the ACT population, and about planning approaches in the ACT), did not seem to support her conclusions about the impact of Cotrell’s failure to refurbish Kaleen Plaza or to improve the tenancy mix. Other matters detracted in other ways from the credibility, or at least the reliability, of those conclusions.
81. The weaknesses in Ms Purdon’s evidence included:
(a)her reliance on the role of the group centre as the place where people do their “major shop”, despite her recognition of the significance and strength of competition in the relevant market for supermarket sales, and of the high level of “mobility” in the Canberra market (that is, that people will travel beyond the closest group centre if it doesn’t meet their needs);
(b)her inability to explain the source of some of the raw information she had used, or how it had been processed to provide figures then relied on for further conclusions, as well as general confusion in some of her explanations;
(c)her inability to provide information relevant to assessing the value of some of the information she had relied on;
(d)the need while giving oral evidence for Ms Purdon to replace two tables in her first report with corrected versions containing significantly different figures and outcomes.
82. Ms Purdon’s report and oral evidence suggested to me a somewhat cavalier approach to the significance of facts and in particular of statistics: for instance, in one of her calculations, she had relied on a figure of 47% provided by an ACT Planning and Land Authority report, but rounded it up to 50%, which resulted in a conclusion more favourable to Supabarn; in cross-examination, Ms Purdon explained that she had done this because 50% was “the nearest number”.
Luka Vulic
83. Luka Vulic was an air-conditioning design consultant. He had an Associate Diploma of Mechanical Engineering, and had experience in designing air-conditioning capacity systems. Mr Vulic had done air-conditioning design work for the Koundourises; in the previous five years he had done work for them on the air-conditioning designs for Supabarn supermarkets in two Sydney suburbs. His evidence related to the construction issues and the breach issues.
Called by Cotrell
Mark Sukroo
84. Mark Sukroo had known Dr Solomon, the owner of Cotrell, since that company bought the shopping centre in 1994. From 1998 to 2003 Mr Sukroo was the property manager responsible for the operation of Kaleen Plaza. He had also managed the shopping centres in Erindale and Chisholm which are also group centres, and had managed some premises in Manuka.
85. Around February 2003, Mr Sukroo had hired Kevin Armstead as a senior property manager, and Mr Armstead took over as the property manager for Kaleen Plaza. Mr Armstead did not always show Mr Sukroo his communications with either Supabarn or Dr Solomon.
86. Mr Sukroo was cross-examined at length. Much of the cross-examination seemed to be addressed to his credibility; at times in the witness box he could have been seen as somewhat evasive, although this might simply have reflected counsel’s repeated attempts to pin him down to a degree of specificity, and precision in the use of language, that was unfamiliar to him in the context of his professional activities. As it turned out, much of the cross-examination concerned matters that were not in fact particularly significant, while those parts of Mr Sukroo’s evidence that emerged as both relevant and significant seemed to be largely uncontroversial, and mostly supported by documentary evidence.
87. Counsel for Supabarn also submitted that Mr Sukroo in giving evidence had revealed himself as partial rather than disinterested, by giving the following evidence, in cross-examination, about the failure to build an air lock as required by cl 8.1 of the Supplementary Deed:
And the understanding that you refer to rests upon the documents – is this right – that you’ve referred to in your affidavit?‑‑‑Yes, it wouldn’t have been in our interests, or in our client’s interests, to build a structure that wasn’t required by‑ ‑ ‑
I didn’t ask you by‑ ‑ ‑?‑‑‑Koundouris.
88. Counsel for Supabarn submitted that in this evidence Mr Sukroo had shown that he had aligned his interests with those of Dr Solomon. What was not clear was exactly why this answer had driven counsel to make this submission. In complaining that the answer was “non-responsive”, counsel was presumably suggesting that Mr Sukroo had volunteered the answer in the hope of advancing Cotrell’s interests, but in oral submissions counsel also said that he believed that Mr Sukroo’s reference to “our interests” meant that his interests were Cotrell’s interests.
89. Mr Sukroo’s answer may have been technically non-responsive, although it was quite possibly the beginning of an attempt to explain why he had focussed on what he thought Mr Koundouris’s documents had indicated (attempts by lay witnesses under cross-examination to explain themselves are hardly uncommon, and in my experience are rarely sinister). His reference to “our interests, or … our client’s interests” need not have revealed anything more than that, in relation to JLL’s role in managing Cotrell’s investment, JLL and Cotrell had interests in common (relevantly, that Cotrell did not want JLL committing it to unnecessary expenditure and JLL did not want to be seen to be committing Cotrell to unnecessary expenditure).
90. As already noted, Mr Sukroo’s credibility was not in the end particularly significant, but it is fair to point out that despite Supabarn’s submissions, I made no adverse finding about Mr Sukroo’s credibility.
91. Mr Sukroo gave evidence about the breach issues and the damages issues.
Adrian Purnell
92. Adrian Purnell was a principal of Northrop Consultancy, and had been involved in designing a shopping centre at the Calwell shops, where there was a Woolworths extension. He had a degree in Mechanical Engineering, was a Chartered Member of the Australian Institute of Engineers, and had particular expertise in refrigeration, air conditioning and heating. He gave evidence relevant to the asserted breach of cl 8.1 of the Supplemental Deed.
Peter Haley
93. Peter Haley was a chartered accountant and director of Vincents Chartered Accountants. He prepared four reports about the assessment of loss suffered by Supabarn as a result of Cotrell’s alleged breaches of the Lease.
Michael Armstrong
94. Michael Armstrong had been a shopping centre consultant since 2011, with experience managing shopping centres and as a real estate agent specialising in shopping centres. Before that he had worked for Mirvac, where he managed leasing in new and existing shopping centres, and dealt with “financially disastrous shopping centre assets” (acquired by the Domain Property Fund, which had itself been acquired by Mirvac). While working with Mirvac, he had been involved in the expansion and refurbishment of the Cooleman Court shopping centre.
95. Mr Armstrong gave evidence relevant to the construction issues, the breach issues, and the damages issues.
Peter Leyshon
96. Peter Leyshon was a research analyst and consulting town planner. He had a Bachelor of Arts degree and a Graduate Diploma of Urban and Regional Planning, and had worked in the National Capital Development Commission and the Department of Territories in economics and public policy areas. Since 1985 he had worked in the private sector, initially advising on investment in shopping centres by reference to such things as shopping centre trade areas and the assessment of market share available. In 1987 he formed his own firm, and advised about retail development in one form or another.
Other evidence
Exhibits
97. Affidavits and expert reports prepared by various witnesses were admitted into evidence; they are dealt with in discussion of the relevant issues.
98. There was a substantial volume of other documentary evidence, including the various contracts on which Supabarn’s claims were based, plans drawn up for changes at Kaleen Plaza, management reports provided by JLL to Cotrell, and correspondence (letters, faxes and emails) between representatives of the parties, including several of the Koundourises, Dr Solomon, and employees of JLL. This material is discussed as necessary at relevant points in these reasons.
99. There was also a large bundle of photographs taken at Kaleen Plaza at various times over several years. Few of the photographs were referred to in oral evidence or indeed in submissions. With one exception (at [584] below), there was no argument about what the photographs showed.
The view
On 26 September 2013, the Court undertook a view of Kaleen Plaza and several other shopping centres, mostly located in group centres. Representatives of the parties attended.
It is unnecessary to go into great detail about the results of the view, especially since most of my observations reflected matters that are not in dispute between the parties. However, some comments are usefully made at this point.
The view was conducted over a single day (much of which was spent driving between the various shopping centres, which turned out to be located in two parts of Canberra relatively distant from each other—six in or near the southernmost area of Canberra, known as Tuggeranong, and five in a north-western area known as Belconnen, two of which were in Kaleen itself). The shopping centres visited were:
Belconnen: Hawker, Jamison, Kaleen Local Centre, Kaleen Plaza, Kippax
Tuggeranong: Calwell, Chisholm, Erindale, Kambah, Mawson and Wanniassa
All of the shopping centres except the SupaExpress in Kaleen were in group centres, and the view confirmed what had been assumed throughout the hearing, being that both the Kaleen group centre and the Kaleen Plaza shopping centre were small or very small compared with the other viewed group centres and shopping centres. Details about the size of the shopping centres and supermarkets were not obtained during the view, but for convenience these details have been included in the following material where available from other evidence.
The fact that Kaleen Plaza was a small shopping centre in a small group centre seemed to put it at a double disadvantage, in that quite apart from the size of a shopping centre itself, the size of the group centre affected the number of businesses and services located in the vicinity of the shopping centre, and must have an effect on the shopping centre’s capacity to attract potential customers. For instance, the Calwell group centre had a medium-sized shopping centre anchored by a very large and recently renovated Woolworths supermarket and including around 14 specialty stores and a medical centre. In the vicinity of the shopping centre were a club, a service station, a car wash and a tavern.
Kaleen shopping centres
The Kaleen group centre had a small shopping centre (with a gross floor area of 3,280m2) anchored by a medium-sized Supabarn supermarket (2,244m2) and including 11 specialty shops. In buildings adjacent to the shopping centre were ACTTAB, BWS, LJ Hooker and a medical practice. Beyond the group of buildings housing Kaleen Plaza and the four other businesses mentioned, there were a sports centre and a tavern.
The arcade in Kaleen Plaza (referred to at some points in evidence and submissions as the mall or the common areas) is in the shape of an irregular but right-angled cross, with a shorter corridor running directly between the main entrance and the rear entrance (both of which lead to car parks) and intersecting with a longer corridor running between the entrance to the Supabarn supermarket and the third entry to Kaleen Plaza, which is reached from the car parks along a passage between two smaller buildings each housing another business. All the businesses in Kaleen Plaza open into one of those corridors (together, the arcade) and, with the possible exception of the restaurant, did not seem to be accessible from outside the building. The building has little natural light, although there are some skylights. The Supabarn supermarket can only be reached by walking from any of the three entrances into the centre of the arcade and then, past three other shops, to the end of the Supabarn corridor.
The Kaleen SupaExpress was considerably smaller than the Supabarn, and carried a far smaller range of items, although its range went well beyond the “milk and bread” often mentioned in the context of “convenience” or “top up” stores. Its particular advantage over Supabarn was that it opened directly onto the local centre’s small car park, and offered a much briefer shopping trip for any shopper for whom that narrower range of items would be adequate.
Wanniassa group centre
The Wanniassa group centre contained the only other shopping centre anchored by a Supabarn supermarket (1,550m2). The shopping centre was also relatively small, including around 10 specialty shops as well as businesses such as a gym and a bank, but the group centre seemed to be larger, and included a tavern, a fast food restaurant, a service station and a Kmart Tyre and Auto Service. Mr Leyshon estimated that the Wanniassa group centre contained around 5,100m2 of retail floor space in total, not including the tavern.
The shopping centre was set out in the manner described by Mr Leyshon as “open plan”, in that most of its shops opened to the outside of the shopping centre and faced a large car park.
At one end of the strip of shops opening towards the car park, there was a building consisting of a small arcade into which opened a butchery, chemist, newsagent, Australia Post, and the Supabarn supermarket. The supermarket was immediately inside the arcade, so reaching it required only a very short walk from the shopping centre entrance. A photograph of the arcade (taken several days before the view) showed that it received some natural light from at least one end of the arcade.
Next to that building, a strip of small shops (including a “pizza-café”) occupied the rest of that edge of the carpark, all with external access directly from the carpark (and also access to natural light) but no internal access to the supermarket arcade. A photograph of the café taken during the view showed that it did not belong to any “national specialty retailer” chain of cafés, and that there was nothing in terms of its cosmetic appearance that in my view could be described as “high quality”; on the other hand the chairs and tables outside the café (in the open air, but some or all of them sheltered by an awning), while undistinguished in their appearance, provided what might well have been a pleasant place to have a coffee in most weather conditions.
Other group centres
The Chisholm group centre was also “open plan” according to Mr Leyshon’s description, in that most of its shops opened to the outside of the shopping centre rather than to an internal arcade.
The Erindale group centre had a medium-sized shopping centre (with 5,000m2 of retail floor space) anchored by a large Woolworths supermarket (2,930m2) and including at least 15 specialty stores. Around the shopping centre but within the group centre was further retail space of around 2,800m2, including a number of takeaway shops, fast food chains (including McDonald’s) and restaurants, as well as a library, college, swimming pool, gym and local club.
The Jamison group centre, the group centre closest to Kaleen during the period in question, had a medium-large shopping centre (with 9,557m2 of retail floor space) anchored by a large Coles supermarket (roughly 4,000m2) but also including an Aldi supermarket (around 1,400m2), as well as at least 17 specialty shops. There were also a number of other businesses within the group centre.
THE CONSTRUCTION ISSUES
Applicable legal principles
The parties have made submissions about legal principles applicable in the construction of the disputed clauses and other relevant contractual provisions, including specific principles applicable to instruments registered under a Torrens title system, as well as about the applicable burdens of proof in this case. These are dealt with below.
Principles of construction – general
Supabarn made a number of submissions about the general principles of construction that it said should be applied in construing the disputed provisions in the Lease and the Supplemental Deed. Cotrell disputed some of those submissions, or at least the relevant implications of them, as indicated below.
Contemporaneous documents
Counsel for Supabarn submitted (citing The Interpretation of Contracts in Australia, K Lewison and D Hughes, Thomson Reuters (Professional) Australia, 2012, at [3.03]) that:
A document executed contemporaneously with, or shortly after, the primary document to be construed may be relied upon as an aid to construction, if it forms part of the same transaction as the primary document.
Well-settled principles for the construction of commercial instruments
Counsel for Supabarn said that the Lease is a commercial instrument and is to be construed in accordance with well-settled principles for the construction of commercial contracts, citing Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; 240 CLR 45 (Royal Botanic Gardens) in which Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ said at [9] and [10]:
9. In his judgment, Fitzgerald JA referred to well-known passages in the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW respecting the admissibility of evidence of surrounding circumstances to assist in the interpretation of a written contract if the language be ambiguous or susceptible of more than one meaning. In the present case, the difficulty concerns the phrase in para (iv) of cl 4(b) "the Trustees may have regard to additional costs and expenses". Does this mean that the Trustees, in making a determination, cannot have regard to matters other than those additional costs and expenses? If the Trustees may have regard to other matters, what are they? In a context such as cl 4(b), to specify a particular matter to which a party may have regard without expressly stating either that it is the only such matter or, to the contrary, that the specification does not limit the generality of the matters to which regard may be had is likely to result in ambiguity. It does so in the present case. The resolution of the ambiguity requires the application of settled principles of construction.
10. In Codelfa, Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract:
"presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating."
Such statements exemplify the point made by Brennan J in his judgment in Codelfa:
"The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used."
(Citations omitted.)
Counsel for Cotrell pointed to Mason J’s summary in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 (Codelfa) at 352, that:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
Counsel for Cotrell also noted that in Western Export Services Inc v JirehInternational Pty Ltd [2011] HCA 45; 86 ALJR 1 at [3] and [4], Gummow, Heydon and Bell JJ, refusing a special leave application, said:
3. Acceptance of the applicant's submission, clearly would require reconsideration by this Court of what was said in Codelfa Construction Pty Ltd v State Rail Authority of NSW - by Mason J, with the concurrence of Stephen J and Wilson J, to be the "true rule" as to the admission of evidence of surrounding circumstances. Until this Court embarks upon that exercise and disapproves or revises what was said in Codelfa, intermediate appellate courts are bound to follow that precedent. The same is true of primary judges, notwithstanding what may appear to have been said by intermediate appellate courts.
4. The position of Codelfa, as a binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council and it should not have been necessary to reiterate the point here.
(Citations omitted.)
Counsel drew particular attention to Mason J’s comment in Codelfa that although evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning:
it is not admissible to contradict the language of the contract when it has a plain meaning.
Counsel for Cotrell also pointed to the comments of Barwick CJ (McTiernan, Kitto and Windeyer JJ agreeing) in Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 (Upper Hunter County) at 437, contrasting ambiguity with uncertainty about the denotation of a word:
I do not think there is any uncertainty or for that matter ambiguity in the expression "supplier's costs" in cl 5, however wide may be the area of possible disagreement as to its denotation in a particular case. A contract to build a bridge at cost could not, in my opinion, be held void for uncertainty: it could not properly, in my opinion, be said to be meaningless: nor is it, in my opinion, ambiguous. Endless might be the arguments pro and con as to whether or not in marginal cases some item of expenditure is as claimed a cost, or as to how much of an expenditure is a cost, of the particular activity. But to my mind, generally speaking, the concept of a cost of doing something is certain in the sense that it provides a criterion by reference to which the rights of the parties may ultimately and logically be worked out, if not by the parties then by the courts.
Objective determination of meaning from perspective of reasonable person
Counsel for Supabarn said that the meaning of a commercial contract is to be determined objectively by what a reasonable person in the position of a relevant party would have understood it to mean. In Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22], the High Court said:
That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to [the parties], and the purpose and object of the transaction.
Object and purpose of contract
Counsel for Supabarn next submitted that the object of a contract is to be identified by determining “the purpose of reasonable persons in the position of” the parties (Zhu v Treasurer of the State of New South Wales [2004] HCA 56; 218 CLR 530 (Zhu) at [82]; Ryledar Pty Ltd v Euphoric Pty Limited [2007] NSWCA 65; 69 NSWLR 603 at [264], Campbell JA), and that determining the purpose of reasonable persons in the position of the parties requires an understanding of the context in which the contract was formed. In International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; 234 CLR 151 at [8], Gleeson CJ said:
In giving a commercial contract businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract and the objects which it is intended to secure. An appreciation of the commercial purpose of a contract calls for an understanding of the genesis of the transaction, the background, and the market.
(Citations omitted.)
Avoidance of commercial nonsense, commercial inconvenience, unlikely or uncommercial interpretations, and absurd results
Counsel for Supabarn further submitted that commercial contracts are to be construed to avoid a result which would involve a commercial nonsense, or work commercial inconvenience. In support of this proposition, counsel relied on the following matters:
(a)In Zhu at [82] the High Court approved a statement quoted at [81] from the judgment of Sheller JA in the Court of Appeal in Sydney Organising Committee for the Olympic Games v Zhu [2002] NSWCA 380 at [173], where his Honour said:
While courts should give the words of a written agreement the natural meaning that they bear, in giving meaning to the words of an agreement between commercial parties, courts will endeavour to avoid a construction which makes commercial nonsense.
(b)Also in Zhu at [83], the Court said:
It was necessary to construe the Deed Poll so as to avoid it making commercial nonsense or working commercial inconvenience. Its commercial purpose—the purpose of reasonable persons in the position of TOC and the plaintiff—was relevant. That, in turn, required attention to "the genesis of the transaction, the background, the context, the market" in which the parties were operating, as known to both parties.
(Citations omitted.)
(c)In Fiona Trust & Holding Corp v Privalov [2007] UKHL 40 at [5], Lord Hoffmann said:
Businessmen in particular are assumed to have entered into agreements to achieve some rational commercial purpose and an understanding of this purpose will influence the way in which one interprets their language.
Furthermore, counsel for Supabarn said, courts prefer a commercial interpretation to an uncommercial interpretation which conforms more strictly with the language of the contract, citing Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 (Franklins v Metcash), in which Allsop P noted at [19]:
a requirement not to approach words in a business contract pedantically or in a manner prone to defeat the evident commercial purpose.
The comment made by Allsop P was, however, made in the course of a longer discussion about the construction of commercial contracts, as follows:
The essential character of the task of construction of commercial contracts can be seen in a number of authoritative decisions of the High Court, and of other courts authoritatively endorsed by the High Court. A commercial contract should be given a businesslike interpretation. Thus, the nature and extent of the commercial aims and purposes of the agreement or parts thereof are part of the essential background circumstances: “the genesis of the transaction, the background, the context, the market in which the parties are operating” The need for a businesslike construction not only informs the nature and extent of the extrinsic material legitimately of assistance, but it also directs the approach to be taken to the ascription of meaning to the words used by the parties. The words should be given a construction so as “to avoid ... [making] commercial nonsense or is shown to be commercially inconvenient” This is not only a reflection of the place of the informing surrounding circumstances, it is also a requirement not to approach words in a business contract pedantically or in a manner prone to defeat the evident commercial purpose. They should be read “fairly and broadly, without [the court] being too astute or subtle in finding defects”. Similar expressions of the correct approach eschewing detailed semantic and syntactical analysis to lead to a construction contrary to business commonsense can be seen in what Lord Diplock said in Miramar Maritime Corporation v Holborn Oil Trading Ltd and Antaios Compania Naviera SA v Salen Rederierna AB. As Gleeson CJ, Gummow J and Hayne J said in Maggbury … what is “business commonsense” is an objectively ascertained matter and thus referable to the evidence, and a matter about which there may be dispute.
(Citations omitted.)
His Honour did not, however, at any point in the lengthy paragraph from which counsel for Supabarn quoted, draw a conclusion in the form asserted by Supabarn: rather, he referred to “the evident commercial purpose”, and also pointed out that:
what is “business commonsense” is an objectively ascertained matter and thus referable to the evidence, and a matter about which there may be dispute.
Counsel for Supabarn also noted that there is a well-established principle of construction by which a commercial document that is elliptical or ambiguous should not be given a construction that is commercially unlikely (National Roads & Motorists Association v Whitlam [2007] NSWCA 81; 25 ACLC 688 at [58], Campbell JA).
Finally in this context, counsel for Supabarn pointed out that if, after considering a contract as a whole and the background circumstances known to both parties, a court concludes that the language of the contract is unambiguous, the court must give effect to that language unless to do so would give the contract an absurd operation (Jireh International Pty Ltd v Western Export Services Inc [2011] NSWCA 137 at [55], Macfarlan JA).
Cotrell did not dispute Supabarn’s propositions generally, but noted that a contract can only be interpreted to achieve its commercial purpose if the court can be satisfied of what its commercial purpose was.
Furthermore, counsel for Cotrell said, the courts are reluctant to impose their views of what constitutes good commercial judgment by a party to a contract (Manchester, Sheffield and Lincolnshire Railway Company v Brown (1883) 8 APP Cas 703 at 716; Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] EWCA Civ 1732 at [22]). Cotrell referred to Maggbury Pty Ltd v Hafele Aust Pty Ltd [2001] HCA 70; 210 CLR 181 at [43], in which Gleeson CJ, Gummow and Hayne JJ pointed out:
It was said by Lord Diplock that:
"if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense."
Of course, what in respect of a particular contract comprises "business commonsense", as an apparently objectively ascertained matter, may itself be a topic upon which minds may differ and in respect of which an imputed consensus is impossible.
(Citations omitted.)
Counsel for Cotrell also quoted Basten JA (Giles and Tobias JJA agreeing) in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5 at [27], where his Honour introduced the remarks by Gleeson CJ, Gummow and Hayne JJ quoted at [132] above by saying:
In support of that approach, his Honour referred to the principle articulated by Lord Diplock in Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 to the effect that “if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense”. Although this principle has often been repeated, it should not be seen as permission for judicial rewriting of contractual provisions to accord with the result said by one party to accord with “commercial reality”, namely its financial interests.
Counsel for Cotrell submitted that preferring a commercial interpretation to an uncommercial one is about avoiding what is commercially nonsensical by favouring commercial common sense, and referred in support of this proposition to comments of Campbell JA, who said in Rava v Logan Wines [2007] NSWCA 62:
54. Further, [the contra proferentem rule] is to be used along with other aids that the law recognises for the construction of a document. Other such aids for construction of a document include the one that says that a contract that has been entered in a business context and is elliptical or ambiguous should be not read in a way that is commercially unlikely to be what the parties intended. Closely allied principles are ones whereby a construction should be avoided if it leads to a capricious and unreasonable result and whereby if a contract is open to two constructions it will receive that construction which will avoid consequences that are capricious, unreasonable, unjust or inconvenient.
(Citations omitted.)
Use of headings
Counsel for Supabarn pointed out that, where headings to provisions in a document are said to be inserted for convenience only, they should be ignored in the construction of the provisions (Franklins v Metcash at [348], Campbell JA).
Need to give meaning to all parts of document
Counsel for Supabarn noted that a document must be construed as a whole and so as to give effect to each part of the document, and that a court will strain against interpreting a contract so that a particular clause is nugatory or ineffective, particularly if a meaning can be given to the clause consonant with the other provisions in the contract (relying on Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402 at 411, Lockhart and Hill JJ).
I am satisfied, by reference to the evidence referred to above, that a refurbishment of Kaleen Plaza in 2004 (of the kind described at [1014] above and even without expansion) would have caused a noticeable but not large increase in custom at Kaleen Plaza for a limited period thereafter, some of which would have directly reflected the novelty value and some of which would have reflected either or both of increased customer loyalty and an increase in loyal customers generated by the refurbishment.
Given the evidence on which this conclusion is based (that a refurbishment would have caused a small and relatively short-lived increase in custom for Supabarn), I am satisfied that the failure to refurbish caused the “novelty value” loss identified by the various witnesses (although not in those terms), and that if Cotrell had been obliged to refurbish as Supabarn said, it would have been liable for a loss of this kind.
Losses suffered – revenue shortfall by reference to loss of protective effect or opportunity to compete
I am not satisfied on the balance of probabilities that either the relevant refurbishment, or the problematic tenancy mix improvement discussed at [516] above, would from 2007 onwards have provided any protective effect, or any useful enhancement of Supabarn’s opportunity to compete with supermarkets in other larger shopping centres (at [1000] above). I am also satisfied that any protective effect, or any improvement in Supabarn’s capacity to compete, provided before the beginning of 2007 would not have been distinguishable from or additional to the “novelty value” effect described above.
Losses suffered – revenue shortfall by reference to other group centre supermarkets
The two expert witnesses who provided assessments of a revenue shortfall after 2004 based on the Supabarn supermarket’s location in a group centre shopping centre, Ms Purdon and Mr McKinnon, provided very different assessments, and in relation to the amount of the loss Supabarn relied mainly if not entirely on the evidence of Mr McKinnon, who gave evidence of a gross profit loss of over $12 million (later reduced to a net profit loss of nearly $8 million) by reference to the market share that “should” have been achieved by Supabarn if Kaleen Plaza had been a high quality retail shopping centre.
None of the evidence I heard from any witness suggested that a refurbished Kaleen Plaza anchored by a relatively small (2,500m2) Supabarn supermarket could have competed satisfactorily, even for customers doing their “weekly chore-based shopping”, with a refurbished Jamison shopping centre not only anchored by a very large Coles supermarket but also containing an Aldi supermarket and three or four businesses offering coffee; in particular there was no evidence suggesting that a refurbished Kaleen Plaza could have competed with any degree of success among customers in the catchment area shared by Kaleen and Jamison.
Accordingly, I could not see how, even if a refurbished but unexpanded Kaleen Plaza had generated a small increase in customer loyalty or in loyal customers, such increases would have been sufficient, or sufficiently durable, to have enabled Supabarn to compete in any measurable way with the refurbished and expanded Jamison Centre from the end of 2006.
Supabarn might have retained a minor competitive advantage over the Jamison Centre and other larger shopping centres because of attributes such as:
(a)convenience to shoppers living or working in Kaleen Plaza’s trade area; and
(a)perhaps for some shoppers, the convenience provided by a smaller centre in which the relatively shorter distance between the parking area and the supermarket outweighs the attraction of access to a larger selection of businesses.
Those, however, were attributes that had nothing to do with refurbishment, the cosmetic appearance of the shopping centre, or even the presence of a “national” café or bakery; they would not have been affected at any point by Cotrell’s asserted breach, and would have endured throughout the years from 2006.
Noting the significance of the kinds of risks to which a plaintiff has been exposed (at [700] and [701] above), I mention also that it was clear from all the evidence that competition is central to the retail shopping centre industry, and that very little if any of the risks of competition faced by Kaleen Plaza could have been addressed in any lasting way by a cosmetic refurbishment, or even the introduction of a “national” bakery or coffee shop, in a shopping centre that was permanently exposed to significant, and probably ever-increasing, competition by its location, its size, and developments in the relevant planning policies and practices.
No material contribution to losses after 2006
For reasons set out above, I am not satisfied, on the balance of probabilities that Cotrell’s failure to refurbish Kaleen Plaza, or its failure to improve the tenancy mix at Kaleen Plaza, made a material contribution to any loss suffered by Supabarn as a result of the increased competition Kaleen Plaza suffered from various other shopping centres from 2007 onwards.
Damages
It is necessary for completeness to comment on the damages claimed, and the damages that might have been awarded if Cotrell had been found to be liable for any of the asserted losses.
The “novelty value” loss
There was evidence from several witnesses about the possible quantum of a loss by Supabarn of sales revenue that might otherwise have resulted from the novelty value of the refurbishment said to have been required. None of the evidence was very helpful, but taken as a whole it was adequate to provide a rational basis from which I could estimate the value of the loss.
I note that the evidence concerned related to the effect of a refurbishment on a shopping centre rather than on the supermarket located in the shopping centre. Especially in the circumstance that Supabarn had already, by dint of its own refurbishment, achieved dramatic increases in the revenue of the supermarket, it is hard to see that the shopping centre refurbishment would have produced a greater increase in custom for the supermarket than it would have produced for the shopping centre itself. That is, the size of Supabarn’s increase in sales suggests that from 2003 until 2006 it had attracted many customers who came despite Kaleen Plaza’s condition, rather than that there was a substantial untapped group of customers who wanted to shop at Supabarn but would not enter the unrefurbished Kaleen Plaza. Accordingly, I am not satisfied that any novelty value increase in Kaleen Plaza’s custom would have generated anything more than an equivalent increase in Supabarn’s custom.
The evidence summarised at [1015]–[1017] above suggested a novelty value increase in sales of anything from 7–15% (Mr McKinnon) and 7–10% (Mr Armstrong) down to “marginal” (Mr Leyshon); there was also evidence suggesting that refurbishments without any kind of expansion were rare. The evidence given, and submissions made, about the expectation of regular refurbishments (see, for instance, at [325(b)] and [922(m)] above) indicated that, in general, the effect of a refurbishment would taper off over several years and disappear entirely within about seven years. In the current case, I am satisfied that the effect of the refurbishment would have disappeared much earlier, probably shortly after the opening of the expanded Jamison shopping centre in 2007; this is because the impact of the fairly superficial refurbishment identified in evidence would have come almost entirely from its novelty value rather than its ongoing quality, and because of the dramatic differences in the offerings that would have been provided by a refurbished Kaleen Plaza (even with a somewhat improved tenancy mix) and the refurbished and expanded Jamison shopping centre.
I am satisfied that it would be generous to estimate the increase in Supabarn’s sales that would have resulted from the novelty value of the hypothetical refurbishment as:
(a)in the order of 3% in the first year, calendar year 2005; and
(b)in the order of 1% in calendar year 2006.
I have already indicated (at [1027] and [1028] above) my view that any increase in Supabarn’s sales that reflected an increased capacity to compete, being competitive capacity resulting from any refurbishment-driven increase in customer loyalty or loyal customers, would have been even smaller than the novelty value increase in 2005 and 2006, would also not have survived the opening of the expanded Jamison shopping centre, and would not be “assessable”. I consider that any such increase would have been sufficiently accounted for in what I have already identified as generous estimates of 3% and 1% for any lost novelty value increases in Supabarn’s sales in 2005 and 2006.
The evidence about increased sales derived from actual rather than hypothetical refurbishments was presumably based on comparisons between actual sales before and after refurbishment. Accordingly, in the absence of submissions about this matter, I have calculated the “lost” sales for each of 2005 and 2006 by reference to the actual sales in the year of the hypothetical refurbishment (2004) rather than by reference to the actual sales of 2005 and 2006 or, for 2006, the adjusted 2005 sales. A “novelty value” effect on custom would decrease in the second year after refurbishment, and would not logically apply to any increased custom generated in the first year of the “novelty value” effect.
The relevant calculations, using Supabarn’s sales figures set out at [687] above and the gross profit percentages used by Mr McKinnon for the relevant years, were as follows:
2005 2006 2004 gross revenue $24,780,000 $24,780,000 Percentage of sales lost through absence of refurbishment 3% 1% Gross revenue lost $743,400 $247,000 Gross profit percentage (relevant year) 18.65% 20.97% Gross profit lost $138,644 $51,795
This calculation was flawed to the extent that it applied the novelty value increases to a financial year result reflecting sales to mid-2004 rather than to sales for the calendar year 2004 (after which the hypothetical refurbishment would have taken effect).
Breach of tenancy mix obligation
I have concluded that if the Lease had obliged Cotrell to achieve a high quality tenancy mix in Kaleen Plaza at whatever cost, then Cotrell had breached the Lease. There was no specific evidence before me about the impact of attracting one or two “national” specialty tenancies to Kaleen Plaza; that is, while there was general evidence suggesting that tenants representing recognised chains were attractive to customers, no witness sought to put a figure on the value of having such tenants. Given that the significance of getting recognised specialty tenants into a shopping centre presumably reflects the fact that such tenants bring their reputations with them, I could see no particular “novelty value” resulting from enticing a known specialty tenant into Kaleen Plaza. In the absence of evidence, I could not conclude that Kaleen Plaza with, for instance, a Coffee Club and a Supabarn would become a more appealing location for one’s “weekly shop” than another shopping centre with a Coffee Club, a Woolworths or a Coles, and almost certainly (given the size of Kaleen Plaza) a greater range of other specialty tenants.
Accordingly, there is no basis for calculating an award of damages for Supabarn that would address Cotrell’s breach of any asserted obligation that amounted, in effect, to an obligation to entice a “national” specialty tenant into Kaleen Plaza.
Loss of market share expected for group centre supermarket
On the assumption that, if it had been located in a high quality retail shopping centre, the Supabarn supermarket at the Kaleen group centre should have achieved a similar market share to other supermarkets located in high quality group centres, Mr McKinnon had calculated the gross profit said to have been lost between 2003 and 2011 as $12,046,093.
In Supabarn’s first written submissions, a net lost profit of $8,087,193 was claimed, by reference to Mr McKinnon’s evidence and several subsequent corrections and adjustments made during the trial, including by Theo Koundouris. These adjustments included:
(a)removing the amounts calculated for the years before 2005;
(b)including an amount for the 2012 year; and
(c)making further adjustments to account for a number of variable costs that would have increased with increased sales (for instance freight costs and bank charges).
In Supabarn’s final submissions, counsel noted that the figure claimed as the net profit lost for “2005” (that is, the 2004/2005 financial year) should be reduced by 50% to account for the fact that Cotrell’s asserted breach was said to have begun halfway through that financial year (on 1 January 2005); that gave a total of $7,831,991.50 for the lost net profit claimed by Supabarn.
As noted at [989] above, I have concluded that that Supabarn’s location in a group centre shopping centre did not provide any basis for concluding that Supabarn should have achieved a market share comparable with those achieved by a select group of supermarkets in what were said to be high quality retail shopping centres located in other group centres. I note at this point, although it is not immediately relevant, that if I had been persuaded that Supabarn’s basic proposition about shopping centres in group centres had been established, the many issues raised in relation to Mr McKinnon’s benchmarking would have cast significant doubts on the specific results of his calculations.
Losses suffered – conclusions
Thus, if I had concluded that the Lease obliged Cotrell to refurbish Kaleen Plaza by the end of 2004:
(a)I would have awarded Supabarn damages reflecting a loss of net profits calculated by reference to gross profits of just over $190,000; but
(b)I would not have awarded any damages calculated by reference to a loss of net profits resulting from a loss of market share that Supabarn “should” have achieved if it had been located in a high quality retail shopping centre in a group centre (as calculated by Mr McKinnon, Ms Purdon or otherwise).
As noted at [1045] above, Supabarn made submissions about the end result of a calculation of net profits by reference to gross revenue and gross profits, but these were far from transparent. I have not attempted to infer an equivalent process which could be applied to the gross profits that would have been awarded as mentioned at [1048(a)] above.
Leases (Commercial and Retail) Act 2001
Section 81 of the Leases Act was relevantly as follows:
81Compensation for disturbance
(1) The lessor is liable to pay the tenant reasonable compensation for loss or damage (other than nominal loss or damage) suffered by the tenant if the lessor—
(a) materially inhibits access by the tenant to the premises; or
(b) takes action that would materially inhibit or alter the flow of customers to the premises; or
(c) fails to fix a breakdown of plant or equipment under the lessor’s care and maintenance as soon as practicable; or
(d) for premises located in the retail area of a shopping centre—does not adequately clean, maintain or repair the shopping centre (including common areas); or
(e) otherwise adversely affects the trade of the tenant by the lessor’s conduct without reasonable cause, whether by act or omission.
My finding that Cotrell breached the Lease in respect of the provision of cleaning services would entitle Supabarn to “reasonable compensation” under s 81(1)(d). However, Supabarn has conceded that even in reliance on this provision, it would be entitled to an award of no more than nominal damages.
FINAL MATTERS
Conclusions
I have concluded:
(a)at [389] and [390] above, that the Lease required Cotrell to operate Kaleen Plaza in a manner befitting a high quality retail shopping centre, but did not oblige it to turn Kaleen Plaza into such a shopping centre by refurbishing it, or improving its tenancy mix to the standard of a high quality retail shopping centre, by the end of 2004 or at all;
(b)at [518] above, that if the Lease had required Cotrell to turn Kaleen Plaza into a high quality retail shopping centre in its cosmetic aspects by refurbishing it, as sought by Supabarn, by the end of 2004, then Cotrell had breached the Lease;
(c)at [519] above, that if the Lease had required Cotrell to achieve a high quality tenancy mix in Kaleen Plaza at whatever cost, then Cotrell had breached the Lease;
(d)at [520] above, that if the Lease had required Cotrell to make reasonable efforts to improve the tenancy mix in Kaleen Plaza, then Cotrell had not breached the Lease;
(e)at [579] above, that Cotrell did not breach the obligation to operate Kaleen Plaza in a manner befitting a high quality retail shopping centre so far as it required Cotrell to keep Kaleen Plaza structurally sound as regards water leaks;
(f)at [603] above, that Cotrell breached the obligation to operate Kaleen Plaza in a manner befitting a high quality retail shopping centre by failing to provide cleaning services at Kaleen Plaza to an appropriate standard;
(g)at [683] above, that Supabarn is entitled to an award of nominal damages, which I set at $20.00, in respect of the breach of the cleaning obligation;
(h)at [639] above, that Cotrell had not breached cl 8.1 of the Supplemental Deed in relation to the air conditioning system provided for the common areas in Kaleen Plaza;
at [680] above, that although Cotrell had failed to install an airlock at the main entry to Kaleen Plaza as required by cl 8.1 of the Supplemental Deed, Supabarn was estopped from complaining about that breach;
(j)at [1042] above, that even if the Lease had required Cotrell to achieve a high quality tenancy mix in Kaleen Plaza at whatever cost, there was no evidence by reference to which I could have found Supabarn entitled to an award of damages or assessed an amount of damages, for a breach of that obligation;
(k)at [1048] above, that if the Lease had required a refurbishment of Kaleen Plaza by the end of 2004, Supabarn would have been entitled to an award of damages of something less than $190,000.
Costs
Supabarn has been successful in one small aspect of its claim, and has been found to be entitled to an award of nominal damages. I have found that even if Supabarn’s claim about the proper construction of the Lease had been upheld, it would have been entitled to an award of damages of something less than $190,000 rather than, as claimed, an award of damages in the vicinity of $7.8 million.
I have also noted various problematic aspects of the manner in which Supabarn has conducted its case, including:
(a)changes in the content of its case at least in the four years after the case was begun in the Magistrates Court, and in some respects after the trial began;
(b)the provision of multiple (often but not entirely repetitive) submissions, coupled with a failure to articulate the vital assumptions on which its case depended;
(c)the making of unreliable, misleading or question-begging submissions; and
(d)internally organised (even excessively organised) submissions which were remarkably difficult to follow (see endnote 1).
Having regard to the minimal scope of Supabarn’s final success, and to Supabarn’s disproportionate contribution to the unnecessary complexity of this matter, my inclination is to order Supabarn to pay Cotrell’s costs. However, I shall hear the parties before any costs order is made.
| I certify that the preceding one thousand and fifty-five [1055] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice Penfold. Associate: Date: 10 March 2020 |
Appendix A: Kaleen Group Centre – Core Zone (CZ1)
Appendix B: Benchmark Results Summary
| Kaleen Plaza | Benchmark index | Kippax Fair | Wanniassa Shops | Mawson Southlands | Manuka Terrace | Chisholm Village | Erindale | Kambah SC | Jamison Plaza | Calwell SC | Cooleman SC | |
| 1. Centre Exposure | 2 | 3.5 | 2.8 | 3.0 | 3.2 | 4.6 | 3.6 | 2.8 | 4.2 | 4.0 | 3.6 | 3.4 |
| 1.1 Centre position on major road? | 3 | 4 | 2 | 5 | 3 | 4 | 4 | 3 | 5 | 3 | 4 | 4 |
| 1.2 Visibility of centre from road? | 3 | 4 | 3 | 4 | 3 | 5 | 4 | 3 | 4 | 4 | 4 | 3 |
| 1.3 Quality of centre signage? | 1 | 3 | 3 | 3 | 5 | 3 | 3 | 4 | 4 | 3 | 3 | |
| 1.4 Quantity of centre signage? | 1 | 3 | 3 | 1 | 3 | 4 | 3 | 2 | 4 | 4 | 4 | 3 |
| 1.5 External tenant exposure? | 2 | 4 | 3 | 3 | 4 | 5 | 4 | 3 | 4 | 5 | 3 | 4 |
| 2. Centre Access/Car parking | 3.2 | 3.9 | 3.8 | 4.0 | 3.4 | 3.6 | 4.0 | 3.6 | 3.6 | 4.6 | 4.0 | 4.0 |
| 2.1 Ease of ingress/egress? | 4 | 4 | 4 | 4 | 3 | 3 | 4 | 3 | 4 | 5 | 4 | 4 |
| 2.2 Car park layout and ease of navigation? | 4 | 4 | 4 | 4 | 4 | 3 | 4 | 3 | 4 | 5 | 3 | 4 |
| 2.3 Quality/amenity of car park? | 2 | 4 | 3 | 4 | 3 | 4 | 4 | 4 | 3 | 5 | 4 | 4 |
| 2.4 Access to centre entrance? | 4 | 4 | 3 | 4 | 4 | 3 | 4 | 4 | 4 | 4 | 4 | 4 |
| 2.5 Separation of truck servicing/ loading? | 2 | 4 | 5 | 4 | 3 | 5 | 4 | 4 | 3 | 4 | 5 | 4 |
| 3. Centre Amenity | 2.2 | 3.8 | 3.2 | 3.8 | 2.3 | 5.0 | 4.0 | 4.0 | 1.3 | 5.0 | 2.8 | 5.0 |
| 3.1 Adequacy of climate control? | 2 | 4 | 3 | 4 | 5 | 4 | 5 | 2 | 5 | |||
| 3.2 Quality/effectiveness of lighting? | 3 | 4 | 4 | 3 | 5 | 4 | 5 | 3 | 5 | |||
| 3.3 Overall centre cleanliness/ adequacy of cleaning? | 3 | 4 | 3 | 4 | 3 | 5 | 4 | 4 | 1 | 5 | 3 | 5 |
| 3.4 Does centre have ‘modern’ feel? | 1 | 4 | 3 | 4 | 2 | 5 | 4 | 4 | 1 | 5 | 3 | 5 |
| 3.5 Quality of facade/external entry statement? | 2 | 4 | 3 | 4 | 2 | 5 | 4 | 4 | 2 | 5 | 3 | 5 |
| 4. Internal Layout / Design | 1.8 | 3.8 | 2.6 | 3.2 | 2.8 | 4.4 | 4.3 | 4.4 | 3.0 | 4.6 | 3.6 | 4.8 |
| 4.1 Quality of public rest/common areas? | 1 | 4 | 3 | 3 | 2 | 5 | 4 | 4 | 3 | 4 | 3 | 5 |
| 4.2 Quality of internal signage/ information? | 1 | 3 | 2 | 3 | 2 | 4 | 4 | 2 | 4 | 3 | 5 | |
| 4.3 Internal tenant visibility/ continuity? | 2 | 3 | 2 | 3 | 2 | 4 | 4 | 4 | 3 | 5 | 3 | 4 |
| 4.4 Use of natural light? | 3 | 4 | 2 | 3 | 5 | 5 | 5 | 4 | 5 | |||
| 4.5 Appropriate position of major(s)/ anchors? | 2 | 5 | 4 | 4 | 5 | 4 | 5 | 5 | 4 | 5 | 5 | 5 |
| 5. Tenancy Mix / Retail Offering | 1.8 | 3.8 | 3.4 | 4.2 | 2.6 | 4.8 | 3.8 | 4.2 | 2.6 | 4.4 | 3.2 | 5.0 |
| 5.1 Level of occupancy? | 2 | 4 | 4 | 5 | 3 | 4 | 4 | 4 | 4 | 5 | 4 | 5 |
| 5.2 Quality of major? | 4 | 4 | 4 | 4 | 4 | 5 | 5 | 5 | 3 | 5 | 4 | 5 |
| 5.3 Quality of specialities? | 1 | 4 | 3 | 4 | 2 | 5 | 3 | 4 | 2 | 4 | 3 | 5 |
| 5.4 Overall specialty fit out quality? | 1 | 4 | 3 | 4 | 2 | 5 | 4 | 4 | 2 | 4 | 3 | 5 |
| 5.5 Proportion of ‘national’ tenancies? | 1 | 3 | 3 | 4 | 2 | 5 | 3 | 4 | 2 | 4 | 2 | 5 |
| Overall Quality Rating | 2.2 | 3.8 | 3.2 | 3.6 | 2.9 | 4.5 | 3.9 | 3.8 | 2.9 | 4.5 | 3.4 | 4.4 |
| AVERAGE | HIGH | GOOD | HIGH | GOOD | VERY HIGH | HIGH | HIGH | GOOD | VERY HIGH | GOOD | HIGH |
Appendix C: Assessed losses
| Table 6.2 Cumulative Impact on Gross Profit | |||||||||
| Source: Colliers International | |||||||||
| 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
| Kaleen Supabarn MAT | $23,154,902 | $24,781,885 | $27,476,113 | $28,290,196 | $27,927,625 | $27,467,623 | $26,788,851 | $27,179,676 | $27,337,319 |
| Percentage of Trade from Beyond | 10% | 10% | 10% | 10% | 10% | 10% | 10% | 10% | 10% |
| Trade Area Population | 23,606 | 23,638 | 23,672 | 23,708 | 24,114 | 24,538 | 24,981 | 25,444 | 26,124 |
| Supermarket Expenditure Per Capita | $4,655 | $4,702 | $4,749 | $4,797 | $4,846 | $4,895 | $4,944 | $4,994 | $5,045 |
| Supermarket Expenditure Pool | $109,882,720 | $111,141,566 | $112,425,719 | $113,735,707 | $116,849,241 | $120,104,976 | $123,509,698 | $127,070,519 | $131,783,622 |
| Kaleen Supabarn Market Share | 18.97% | 20.07% | 22.00% | 22.39% | 21.51% | 20.58% | 19.52% | 19.25% | 18.67% |
| Trading Projection (assuming 25% low scenario) | $30,522,978 | $30,872,657 | $31,229,367 | $31,593,252 | $32,458,123 | $33,362,493 | $34,308,249 | $35,297,366 | $36,606,562 |
| Trading Differential | -$7,368,076 | -$6,090,772 | -$3,753,254 | -$3,303,056 | -$4,530,498 | -$5,895,230 | -$7,519,398 | -$8,117,690 | -$9,269,243 |
| Supabarn Reported Gross Profit[1] | 20.07% | 19.82% | 18.65% | 20.97% | 21.65% | 21.74% | 22.45% | 23.69% | 22.60% |
| Impact on Gross Profit | -$1,478,556 | -$1,207,069 | -$700,075 | -$692,489 | -$980,687 | -$1,281,631 | -$1,688,024 | -$1,922,713 | -$2,094,849 |
| Cumulative Impact | -$1,478,556 | -$2,685,625 | -$3,385,700 | -$4,078,189 | -$5,058,876 | -$6,340,507 | -$8,028,531 | -$9,951,244 | -$12,046,093 |
[1] Profit and Loss Statement for Kaleen Supabarn – 2003-2010. The percentage gross profit for 2011 is based upon the average of the previous 3 years.
[1] For instance:
·Supabarn’s first set of submissions contained substantive headings which were brought together in a useful table of contents. The submissions in reply, however, dealt with the fundamental issue in the case (construction of the Lease) by summarising Cotrell’s submissions and then replying to them one by one, under headings referring not to the topics dealt with, and not to relevant paragraphs of Cotrell’s submissions, but by reference to the number of that one of the 16 paragraphs in the submissions in reply where Supabarn had summarised Cotrell’s submissions. This meant that, for any particular topic, considering Cotrell’s submission and Supabarn’s reply involved starting with Cotrell’s relevant submission, finding the part of Supabarn’s submissions in which all Cotrell’s submissions were summarised, finding the particular paragraph in which Cotrell’s relevant submission was summarised, returning to the table of contents to find where Supabarn had dealt with that paragraph in the extended submissions, and then finding the identified section of those extended submissions.
·Counsel for Supabarn, in the section of the first set of submissions dealing with the legal principles applicable in relation to damages, began (sensibly) by identifying his paragraphs using bracketed lowercase letters, but then for some reason also chose to introduce each proposition he relied on using ordinal numbers (first, second, etc). This would have been a mere curiosity, except that the sequence of the lettered paragraphs and the ordinal numbers quickly ceased to be synchronised: paragraph (b) began the point identified as “second”, but paragraphs (c) and (d) also contain material apparently relevant to the “second” point, so that paragraph (e) contained the point identified as “third”, and thereafter the paragraph letter and the point number did not match. Possibly because of the confusion engendered by using two different, non-aligned, numbering sequences for the same set of paragraphs, paragraph (k) purported to set out the “ninth” point, but the entire content of the ninth point was, somewhat unhelpfully: “Ninth, the ninth proposition applies to claims for damages for breach of contract”.
[2] In oral evidence, Theo Koundouris corrected his affidavit of 28 August 2013, which had become Exhibit L, by noting that on page 4, the reference at [22] to $25.78m should be to $27.337m.
[3] “The ‘retail shopping centre’ referred to in the second line is to be read as referring to a high quality retail shopping centre.”
[4] “The Centre referred to in the second line, is the Centre complying with clause 10.7. That is the Centre operated as a high quality retail shopping centre.”
[5] “The obligation in clause 10.13 was to do all things for the essential operation of the retail shopping centre the subject of this Lease—a high quality retail shopping centre. It directs attention to what is essential for the operation of a high quality retail shopping centre.”
[6] “Any other construction would be inconsistent with the operation of clause 10.7. That is because the Centre which clause 10.7 speaks of, is a high quality retail centre.”
[7] This definition did not have a para (b).
[8] The evidence referred to at [581] and [590] above about the identity of the cleaning contractor from time to time may be inconsistent, or may indicate that changes in cleaning contractors involved only differently named entities in the Pickwick Group.
[9] The letter appears to have been prepared for Eric Koundouris’s signature, since it refers to Eric Koundouris’s letter dated 29 August 2003 (at [643(r)] above) as “my letter … in which I pointed out that a number of matters had not been attended to one year after the opening of the supermarket”.
[10] See also Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 174–175.
[11] I have understood counsel’s reference to attributing “any specific breach to specific loss” as a reference to attributing any specific loss to any specific breach.
[12] I have understood counsel’s reference to “a cause of its breach” as a reference to a consequence of its breach.
[13] For instance, in one of Ms Purdon’s reports, the increase in retail sales at the Kaleen Supabarn “between 2002 and 2006” was said to be the “direct result” of the refurbishment and expansion of the supermarket “in 2002/2003”. It is hard, however, to see how changes made to the supermarket between mid-2002 and mid-2003 (if the reference to “2002/2003” is a reference to a financial year rather than the two year period covering both of the calendar years mentioned) could have explained the 26.77% increase identified as relating to “2002” but apparently referring to a financial year which must be presumed to be the financial year running from mid-2001 to mid-2002.
[14] The ranges specified for the secondary trade area figures reflect Ms Purdon’s evidence that the shopper survey had shown 19% of shoppers coming from the secondary trade area but that she had used 15% because 19% “seemed a bit high”.
[15] However, Kaleen Plaza’s scores on the two “key drivers” largely outside the control of the shopping centre owner were closer to the benchmark indexes than its scores for the three key drivers largely within the control of the owner, so it cannot be said that a reassessment would have been to Cotrell’s benefit.
[16] For instance, if each shopping centre had scored “3” for the other three “drivers”, Wanniassa would have scored 2.5 for “Centre Exposure” while Kaleen Plaza, despite having one more sign than Wanniassa, would have scored 2.2. If Wanniassa had been scored at “0”, rather than having been given no score, it would in this example have scored 2 (rather than 2.5).
[17] 26,124 × $5,045 = $131,795,580
[18] Although since each percentage reduction or increase relates to a different revenue amount, the percentages are not in fact directly comparable.
Key Legal Topics
Areas of Law
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Contract Law
Legal Concepts
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Contract Formation
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Breach of Contract
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Construction and Interpretation of Contracts
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Compensatory Damages
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