Tuggeranong Town Centre Pty Ltd v Brenda Hungerford Pty Ltd (No 2)
[2017] ACTSC 88
•28 April 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Tuggeranong Town Centre Pty Limited v Brenda Hungerford Pty Limited (No 2) |
Citation: | [2017] ACTSC 88 |
Hearing Dates: | 16, 17, 18, 19, 22, 23, 24, 26, 30 September 2014 1, 2, 3, 7, 8, 9, 10 October 2014, 28, 29 January 2015 |
Submission Dates: DecisionDate: | 31 October, 12 and 21 November 2014 28 April 2017 |
Before: | Refshauge ACJ |
Decision: | 1. There be judgment for the plaintiff on its claim in the sum of $88,223.06 with costs. 2. The defendant’s counterclaim be dismissed with costs. 3. There be judgment for the defendant on its third party claim in the sum of $1 377 561.94. 4. The defendant and the third party file and serve any written submissions as to costs of the third party claim on or before 1.00 pm on 5 May 2017. 5. It be declared that the plaintiff was entitled to enter the premises being shops 185A, 186 and 187 on Subleasing Plan 5100 on the land being Block 3 Section 1 Greenway to recover possession of them on or about 31 January 2008 and that the plaintiff was entitled to terminate the sublease of those premises to the defendant on that date under s 115 of the Leases (Commercial and Retail) Act 2001 (ACT). 6. It be declared that the third party is entitled to call on the guarantee given by the National Australia Bank Ltd dated 29 August 2003 on behalf of the plaintiff for so much of the judgment sum in favour of the plaintiff as is secured by the guarantee and to account to the plaintiff for all the funds received from the bank in response to that call. |
Catchwords: | TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – Misleading and deceptive conduct – silence or non-disclosure as a form of misleading and deceptive conduct – non-disclosure need not be intentional – non-disclosure did amount to misleading and deceptive conduct – representations to constitute conduct – s 52 of the Trade Practices Act 1974 (Cth) EVIDENCE – EXPERT OPINION – Concurrent expert evidence – preference of evidence – influence of instructions given – nexus of argument – “in conclave” DAMAGES – ASSESSMENT – Loss and damage must be actual loss and damage suffered – link between reliance of the misleading and deceptive conduct and the loss of damage claimed – causation – reasonableness – mitigation – liability to third parties – compensation payable as a consequence of loss of rent due to abandonment of premises – exit costs – damages for capital outlays – damages for trading losses – damages for borrowing costs – interest payable – s 82 of the Trade Practices Act 1974 (Cth) – s 46 of the Fair Trading Act 1992 (ACT) |
Legislation Cited: | Civil Law (Property) Act 2006 (ACT), ss 5, 205 Civil Procedure Act 2005 (NSW), s 22 Court Procedures Rules 2006 (ACT), rr 302, 302(b), 302(c), 303(2), 1619, 2900, Sch 2 |
Cases Cited: | Adamow v Kirk (1958) 75 WN(NSW) 514 Allman v Country Roads Board [1959] VR 614 Jaldiver Pty Ltd v Nelumbo Pty Ltd (Unreported, Federal Court of Australia, Heeney J, 2 December 1992) Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; 52 NSWLR 705 |
Texts Cited: | Carolyn Sappideen and Prue Vines, Flemings Law of Torts (Thomson Reuters Lawbook Co, 10th ed, 2011) R P Balkin and J L R Davis, Law of Torts (LexisNexis Butterworths, 5th ed 2013) Rawlinsons Australian Construction Handbook (Rawlinsons Publishing, 26th ed, 2008) Colin Lockhart, The Law of Misleading or Deceptive Conduct (LexisNexis Butterworths, 4th ed, 2015) David Wright, Monetary Remedies under the Trade Practices Act” (2002) 22 Australian Bar Review 39 Australian Accounting Standards Board Standard, Employee Benefits (Commonwealth, 2011) AASB 119 PW Young, Declaratory Orders (Butterworths, 2nd ed, 1984) |
Parties: | Tuggeranong Town Centre Pty Ltd (Plaintiff and Cross Defendant) Brenda Hungerford Pty Ltd (Defendant and Counter Claimant) Leda Commercial Properties Pty Ltd (Third Party) |
Representation: | Counsel Mr M Walsh (Plaintiff and Cross Defendant) Mr C Erskine SC and Mr J Masters (Defendant and Counter-Claimant) |
| Solicitors Mills Oakley (Plaintiff and Cross Defendant) Donohue & Co (Defendant and Counter-Claimant) | |
File Number: | SC 616 of 2008 |
REFSHAUGE ACJ:
On 1 September 2003, the defendant, Brenda Hungerford Pty Ltd, to whom I will refer as “BHPL”, became the sublessee by assignment of a sublease of certain premises at the Tuggeranong Hyperdome, a shopping centre in the Tuggeranong district of Canberra. Districts in the Australian Capital Territory are provided for in the Districts Act 2002 (ACT): The Owners of Units Plan No 932 v Marhaba [2017] ACTSC 13 at [21]. Tuggeranong is the southernmost district of Canberra. I shall refer to the centre as “the Hyperdome”. I shall refer to the Sublease as “the Sublease”.
At the time, the third party, Leda Commercial Properties Pty Ltd, to whom I shall refer as “Leda”, was the landlord.
On or about 6 December 2005, Leda sold its interest in the Hyperdome to Tuggeranong Town Centre Pty Ltd, the plaintiff, to whom I shall refer as “TTC”. On or about that date, Leda purported to assign to TTC its interest in the Sublease.
On 31 January 2008, BHPL abandoned the premises the subject of the Sublease. In the ordinary course, BHPL would be required to pay the landlord, then TTC, for the rental and other payments due under the Sublease until the expiry of the term.
As a result, TTC commenced these proceedings claiming the moneys it said BHPL owed it under the Sublease. BHPL defended the claim and counter-claimed for damages caused by misrepresentations it said had been made in connection with its entry into the Sublease.
BHPL also joined Leda as a third party. Both TTC as plaintiff and Leda as third party were represented by the same lawyers. Thus, where the interests of these two parties in the proceedings coincide, I will refer to them as “TTC/Leda”.
Because TTC’s claim was largely undefended, save for its counter-claim, BHPL began the hearing.
The background
In order to render the proceedings and these reasons intelligible, it is appropriate to set out the factual background to the claims and counterclaims. Much of the evidence about these matters was undisputed. I make the following findings.
The Hyperdome
The Hyperdome is a shopping centre located in the Tuggeranong Town Centre in the suburb of Greenway, ACT, in the District of Tuggeranong, occupying the major part of the land bounded by Anketell Street, Athllon Drive, Reid Street North and Pitman Street. It is, from the maps and plans produced and admitted into evidence, a relatively large shopping centre.
To the west of Athllon Drive is a large building containing government offices which housed Centrelink, formerly the Department of Society Security.
Originally, the Hyperdome was bounded on the west by Scollay Street, which was parallel to but east of Athllon Drive, but when the Tuggeranong Markets closed, the Hyperdome expanded into that area and Scollay Street was closed from Reid Street North to Pitman Street.
The Hyperdome then established a building over the former site of the markets in about November 1992 which, in these proceedings, was called the “Lifestyle Centre”. It was located to the west of the main, and larger, Hyperdome building and connected to it through an open space which I will call the Courtyard, about which there was significant evidence given in the proceedings.
To the east of the Courtyard was an entry to the main Hyperdome building which became known, in these proceedings, as the “Target Door”. It led into a large arcade of shops extending towards the Anketell Street boundary of the Hyperdome, though at the upper level at that end; the actual entry from Anketell Street is at the ground level. That mall was called, in these proceedings, the “Target Mall”, because a large Target store was located within it.
While the formal entrance to the Hyperdome is in Anketell Street, there were a large number of other entrances to it, as would be expected. In particular, a further entrance from Athllon Drive was to the west. That entrance opened into the Lifestyle Centre. A mall through the Lifestyle Centre led to the Courtyard and to the Target Door to which I have already referred.
Parallel to but south of the Target Mall was a smaller arcade of shops which, because it included a Coles store, was called, in these proceedings, the “Coles Mall”.
It extended from approximately the Anketell Street boundary of the Hyperdome, but again at the upper level, past the Food Court and on to an entrance which opened into the undercover storey of the multi-storey car park of the Hyperdome which, at that level, was to the south west of the building. There was a further storey of the car park above the car park at that level.
The entry into the Coles Mall from that undercover car park was called, in these proceedings, the “Coles Door”. The Giving & Living store was located in the Coles Mall, a few shops down from the Coles Door.
To the south of the Lifestyle Centre was a large open air ground level car park for government and government employees’ vehicles, at the eastern side of which was a roadway, roughly where Scollay Street had been and which led in a northerly direction to the Courtyard between the Lifestyle Centre and the main Hyperdome building. To the east of that roadway was the multi-storey car park to which I have referred at [16]. Still further east was the Coles Door, accessed through the undercover storey of the multi-stories car park. A pedestrian crossing was marked across the undercover car park to the Coles Door.
Immediately to the north of the Coles Door was a ramp that led to the upper storey of the multi-storey car park and it was serviced by a travelator. At times, it was exposed to the weather. Persons using the travelator could enter the Hyperdome through the Coles Door into the Coles Mall.
In the Coles Mall, there was, a short distance along it and approximately opposite the BHPL leased premises, a ramp to the lower floor of the Hyperdome. It was also serviced by a travelator, which I will call in these reasons the “Coles travelator”.
Directly opposite the entrance from Athllon Drive into the Lifestyle Centre were a set of traffic lights servicing a pedestrian crossing across Athllon Drive from approximately the area of the Centrelink offices. They were installed and commenced operation on 15 August 2003. To the south and diagonally opposite the southern government car park, to which I have referred above (at [18]), at the corner of Athllon Drive and Reid Street North, the Commonwealth had commenced constructing further offices for the Australian Public Service, to be known as the Caroline Chisholm building. Along Reid Street North, opposite the Hyperdome on its southerly side were located various premises occupied by offices and commercial businesses.
The business
One of the stores in the Coles Mall was a retail gift and homewares store called Giving & Living. It had been established for 11 years in 2003 and was managed by the employed staff and occupied its premises under the Sublease.
The business was owned by a company, Giving & Living Pty Ltd, the owners of which were Richard D’Amico and his wife, Nadia D’Amico.
On 21 July 2003, BHPL was registered as a company and, on 21 August 2003, it entered into an Agreement for Sale of Business with Giving & Living Pty Ltd for the purchase of the Giving & Living business it operated at a price of $235 000, plus the cost of stock at valuation. I shall refer to the business in these reasons as “Giving & Living”.
The purchase price was apportioned in the Agreement as follows:
(a) the Business Name $ 1.00
(b) Plant $ 35 000.00
(c) Goodwill $199 999.00
(d) The residue of the Vendor’s Lease $ 1.00
Following completion of the sale, BHPL, on 1 September 2003, took possession of the premises in which the business was conducted.
It appears that the Sublease was formally assigned to BHPL on 4 November 2003 effective from 1 September 2003.
On the same date, 4 November 2003, a Variation of the Sublease was executed, though it was a curious document. Despite the date of effect of the assignment of the Sublease, it apparently taking effect on the date it was signed, was nevertheless signed by Giving & Living Pty Ltd as “Lessee” and BHPL as “New Lessee”.
The variation extended the term of the Sublease by two years and provided for further review dates for the rent and the amount thereafter payable for those extra years.
On 31 January 2008, BHPL vacated the premises and ceased to pay rent or other amounts to TTC after that. A new tenant took over the premises on 1 June 2008.
The pleadings issues
As noted above, TTC commenced these proceedings against BHPL seeking payment of moneys due under the Sublease. BHPL defended the proceedings and counterclaimed against TTC and Leda.
The pleadings consisted of a Statement of Claim (the Second Further Amended Statement of Claim dated 15 September 2014), a Defence and CounterClaim (the Second Further Amended Defence to Second Further Amended Statement of Claim and Second Further Amended CounterClaim dated 29 September 2014), a Reply (the Further Amended Reply to Second Further Amended Defence dated 6 October 2014) and Answer to the CounterClaim (Further Amended Answer to Second Further Amended CounterClaim dated 6 October 2014), a Third Party Claim (Further Amended Statement of Claim to accompany Third Party Notice dated 29 September 2014) and a Defence to the Third Party Claim (Further Amended Defence to Further Amended Third Party Claim dated 6 October 2014).
Regrettably, the Defence was drafted in a way that I have described in Canberra Data Centres Pty Ltd v Vibe Constructions (ACT) Pty Ltd [2010] ACTSC 20; 4 ACTLR 114 at 119; [9], as being in “quite inappropriate language”, following what fell from Connor J in Inglis v Moore (1981) 51 FLR 293 at 296, where the drafter denies paragraphs of a pleading instead of denying the allegations or assertions or claims in it.
Nevertheless, a number of the allegations in the pleadings were admitted and these give some further background to the proceedings. From those admitted pleadings, I can make the following further findings.
As required by the principles set out in cases such as Moldex Ltd v Recon Pty Ltd [1948] VLR 59 at 60, the pleadings alleged and I accept that all the parties were corporate entities able to sue and liable to be sued in their respective corporate names.
On 1 September 2000, Giving & Living Pty Ltd became sublessee to Leda from 1 September 2000 until 31 August 2007 of shop premises in the Hyperdome Shopping Centre, being shops 185A, 186 and 187 on subleasing plan 5100 on the land being Block 3, Section 1, Greenway in the Australian Capital Territory. I shall call these premises the “Premises”. It was there that the company conducted the Giving & Living business.
BHPL succeeded Giving & Living Pty Ltd as sublessee of the Premises from 1 September 2003. There was, however, some dispute on the pleadings about the precise mechanism whereby that happened. In essence, TTC asserted that the change in sublessee was effected by an assignment of the Sublease; BHPL asserted that it was effected by the issuing to it of a new sublease with some different terms and conditions.
In any event, the term of occupation was extended to 31 August 2009 and BHPL was required to provide a bank guarantee equivalent to three months rent. It did so by causing the National Australia Bank Ltd to provide the required guarantee.
BHPL says that these were terms of a new lease; TTC says the term of the Sublease, being that originally granted to Giving & Living Pty Ltd were merely varied, and that the requirement for a bank guarantee was a term of the Sublease. When the Sublease was assigned, TTC claimed the requirement simply became an obligation of BHPL. The Sublease was merely varied not replaced by a new Sublease.
The Sublease (whether an assigned sublease or a new sublease) required payment of certain moneys, including base rent, contribution to outgoings, and an amount equal to any goods and services, consumption, value added or similar tax applying to any of the payments, and required BHPL to make payments without set-off, counterclaim, withholding or deduction. The terms and conditions included a provision that expiry or termination of the Sublease would not affect BHPL’s obligations to make payment of any moneys due under it and that BHPL would indemnify TTC against any liability or loss in connection with any breach by BHPL of the Sublease. BHPL, in its defence, relied on the terms and conditions of the actual document without admitting the accuracy of this summary set out in TTC’s Statement of Claim.
Around 31 January 2008, BHPL abandoned the Premises which, by s 115 of the Leases (Commercial and Retail) Act 2001 (ACT), resulted in the termination of the Sublease, though BHPL in its defence denied any breach of the Sublease.
Although BHPL said that “as it did not know the facts it could not admit them”, TTC (although, in error, referring in paragraph 10 of the Second Further Amended Statement of Claim to the “applicant” instead of the “plaintiff”) found a new tenant for the Premises. I am satisfied that I can find that the new tenant took occupation of the Premises from 1 June 2008, thus ending any further obligation of BHPL for payments to TTC.
TTC alleged it had suffered damage by the breach of the Sublease and abandonment of the premises and claimed $52 841 being rent and outgoings for the period from February 2008 to May 2008.
On or about 27 August 2003, BHPL arranged for the National Australia Bank to provide the required guarantee for the benefit of Leda.
A question arose, to which I will refer below, about the enforceability of that guarantee. TTC sought declarations as to its entitlements to the benefit of the guarantee that it and Leda had. BHPL opposed the making of such declarations.
The issues arising out of the Statement of Claim and Defence are as follows:
1. Whether the lease document under which BHPL occupied the Premises was the assigned Sublease from Giving & Living Pty Ltd or a new sublease.
2. Whether Leda had properly and effectively assigned its interest under the Lease (whether a new sublease or assigned sublease) to TTC.
3. What was the status of the bank guarantee that BHPL had given to Leda and whether it had been cancelled or whether Leda could, on behalf of, or accounting to, TTC, call on the guarantee for the moneys owed by BHPL.
4.
In addition, BHPL alleged breaches of various obligations of TTC which, it said, were required of it under the Leases (Commercial and Retail) Act or the leasing documents, by reason of which BHPL was entitled to recover certain
over-charges and that it was unconscionable for TTC and Leda to have charged for certain outgoings which, it was asserted they were liable to refund to BHPL.
5. BHPL further challenged the claim by TTC on the basis of the matters pleaded in the Counterclaim.
The CounterClaim was against TTC alone. It pleaded a series of allegations but the cause of action was clouded by a lack of clarity in the way they were said to render TTC liable.
Thus, the Counterclaim consisted primarily of allegations that officers of TTC or of Leda had made representations which were made in trade or commerce. The representations were said to be false, in that they related to future matters and there were no reasonable grounds for making the representations.
The representations which were said to have been misleading or deceptive were said to have been made by the following persons:
(a) Mr Duane Lord, said to have been made from the beginning of 2007 through to the end of 2007 and in particular on or about 8 and 23 March 2007;
(b) Mr Tim Beirne, said to have been made on or about 10 July 2003;
(c) Mr Shane McCann, said to have been made in about March 2004 and then again further representations by him said to have been made on or about 23 March 2006; and
(d) Mr Bob Cooper, said to have been made from shortly after the time Hot Dollar Australia (Canberra) Pty Ltd occupied shop 190 in the Hyperdome until about mid 2007.
I set out below the various representations in some detail as, unsurprisingly, much of the evidence in the proceedings concerned them, whether they were made, whether they were false, whether they were misleading or deceptive and whether they led to BHPL suffering damage.
It appears that, insofar as the representations were made by officers of Leda, the alleged liability of TTC was said to be a result of the assignment of the Leda’s interests in the Lease as lessor to TTC had the effect of assigning “to” TTC the liabilities that Leda may have had to BHPL.
It was then alleged that BHPL relied upon these representations and, in reliance upon them, was induced to enter into the Sublease and do or refrain from doing other things which resulted in damage to BHPL.
It was said that the conduct in making the representations involved TTC engaging in unconscionable conduct, both in equity and within the meaning of the Trade Practices Act 1974 (Cth), and amounted to misleading and deceptive conduct within the meaning of that Act and the Fair Trading Act 1992 (ACT) and in breach of clause 18.1 of the Sublease.
The Counterclaim also referred to the over-payments to which I have referred above (at [46] 4) and sought repayment of those moneys.
The issues arising out of the Counterclaim and Defence to the Counterclaim are as follows:
1. Whether Mr Lord made certain alleged representations and, if he did, whether they were misleading or deceptive?
2. Whether TTC failed to comply with its obligations in connection with the assessment of claims for and reporting of relevant information about the outgoings to which BHPL was required to contribute and whether the contributions it paid were more than TTC was entitled to receive.
3. Whether, following a grant of rental relief to BHPL by TTC, the rent and contributions to outgoings paid by BHPL was in excess of that it was required to pay.
4. Whether Mr Beirne made certain alleged representations either expressly or impliedly and, if he did, whether TTC was liable for any remedy to which BHPL might be entitled as a result of them.
5. Whether the matters the subject of the alleged representations of Mr Beirne were as described, such that the alleged representations were misleading or deceptive.
6. Whether Leda was required to give to BHPL a disclosure statement and whether TTC was required to do so.
7. Whether Mr McCann made certain alleged representations and, if he did so, whether TTC was liable for any remedy to which BHPL might be entitled as a result of them, especially as BHPL was by then already under a legal obligation to comply with the provisions of the Sublease.
8. Further, whether, when Mr McCann made any of the alleged representations, he knew or ought to have known matters which BHPL alleged were inconsistent with the representations.
9. Whether Mr Cooper made certain alleged representations and, if so, whether he knew matters or ought to have known matters which BHPL alleged were inconsistent with the representations.
10. Further, whether certain matters the subject of the alleged representations made by Mr Cooper were untrue.
11. Whether the claims by BHPL were barred by s 82(2) of the Trade Practices Act and s 11 of the Limitation Act 1985 (ACT).
12. Whether TTC engaged in unconscionable conduct and, if so, whether BHPL suffered loss or damage thereby.
13. Whether TTC is liable for any cause of action BHPL has raised against TTC at a time before it had an interest in the Hyperdome and, if so, the extent to which its liability should be apportioned with Leda whose liability would be concurrent.
14. Whether any loss sustained by BHPL was caused or contributed to by BHPL.
BHPL issued a Third Party Notice to Leda. It was accompanied by a Statement of Claim as required under r 303(2) of the Court Procedures Rules 2006 (ACT). The Third Party Claim was a rather curious claim. The claim was not for contribution or indemnity as is the usual claim made in a third party claim.
That, of course, is not the limits of such third party claims: r 302 of the Court Procedures Rules.
In this case, BHPL sought damages from Leda, not dependent upon any claim by TTC in its Statement of Claim which was for rent and other outgoings unpaid until the Premises were re-leased.
In this sense, it was truly a separate claim. It was, apparently, said to be permitted by virtue of it coming within the terms of r 302(b) and (c) of the Court Procedures Rules or both. That rule is as follows:
A defendant may file a third-party notice if the defendant wants to –
(a) claim a contribution or indemnity against a person who is not already a party to the proceeding; or
(b) claim relief against a person who is not already a party to the proceeding that –
(i) relates to or is connected with the original subject matter of the proceeding; and
(ii) is substantially the same as some relief claimed by the plaintiff; or
(c) require an issue relating to or connected with the original subject matter of the proceeding to be decided not only as between the plaintiff and defendant but also between either of them and a person not already a party to the proceeding.
This was a very similar situation to that in Jardine v Vaughan (No 3) [2015] ACTSC 33, where unpaid sale price instalments were sought from the defendant by the plaintiff and the defendant sought damages from the third party for misleading and deceptive conduct in connection with the sale. In that case, the third party proceedings were heard separately from the proceedings between the plaintiff and the defendant: see Jardine v Vaughan (No 3) at [8]-[9]. The defendant was awarded damages. Though that award was overturned on appeal, the Court of Appeal did not suggest the procedure was in any way defective: Clarkson Williams Partners Pty Ltd v Vaughan [2016] ACTCA 1.
There is no doubt that the Third Party Claim was substantially the same as the Counterclaim BHPL has made against TTC. Indeed, the final version of the Third Party Claim (that is the Further Amended Statement of Claim to accompany Third Party Notice dated 29 September 2014) was in substantially identical terms as the Counterclaim save for claims that were only maintainable against TTC, such as in relation to the subsequent variation of the Sublease.
Indeed, so similar were the two pleadings that, as in the Counterclaim, the Third Party Claim referred to BHPL as “the Defendant” and TTC as “the Plaintiff”, but Leda was referred to, not as “the Third Party”, which might have suggested some independent consideration of how the Third Party Claim should be pleaded but as “Leda” as in the Counterclaim. I suppose this says something about the use of computers to copy text without the need for independent thought.
Interestingly, BHPL asserted in the Third Party Claim that it had purchased an Assignment of Lease from Leda giving it entitlement to occupy the premises and that, on or about 4 November 2003, Leda varied the terms of the lease, pleadings which, at first blush, seems inconsistent with some of the defences it raised to the Statement of Claim.
The Third Party Claim repeated a number of the allegations of misrepresentation that had been included in the Counterclaim and alleged, as a result, that Leda had engaged in unconscionable conduct both in equity and within the meaning of the Leases (Commercial and Retail) Act and the Trade Practices Act and had engaged in misleading and deceptive conduct within the meaning of the Fair Trading Act and claimed damages.
The representations for which BHPL said Leda was responsible and which was said to have constituted the culpable conduct were those said to have been made by Mr Beirne, and the first 2004 representations said to have been made by Mr McCann.
In addition, BHPL alleged that, in or about April 2006, a prospective purchaser of the Giving & Living business from BHPL was instead offered an alternative tenancy in the Hyperdome by the shopping centre management, even though the purchaser had been introduced to the shopping centre by BHPL.
Curiously, BHPL also claimed, in the Third Party Claim, that Mr Lord’s alleged representations, from beginning 2006 to end 2007 and particularly on or about 8 and 23 March 2007, had been made on behalf of Leda, even though it had sold its interest in the Hyperdome to TTC on 6 December 2005.
Leda filed a Defence to the Third Party Claim. It was, unfortunately, quite confusing. It denied that it or anyone on its behalf had made the certain representations alleged but then addressed other allegations as though they repeated certain parts of the defence even though it did not appear that they did so. It also appeared to controvert allegations that were not made in the Third Party Claim.
In the proceedings, no point seemed to be taken of the disconnect between the claims actually made in the Third Party Claim and the Defence to it.
So far as I could make them out, the issues arising out of the Third Party Claim and the Defence to the Third Party Claim were as follows:
1. Whether Mr Beirne made certain alleged representations, either expressly or impliedly, and, if he did, whether the matters the subject of the representations were, as described, such that the representations were misleading or deceptive.
2. Whether Mr McCann made certain alleged representations and, if he did, whether he knew or ought to have known matters which BHPL alleged were inconsistent with the representations.
3. Whether Mr Lord made certain alleged representations and, if he did, whether they were misleading or deceptive.
4. Whether Leda was responsible for any remedy to which BHPL might be entitled as a result of any representations made by Mr Lord.
5. Whether a prospective purchaser of the balance of the term BHPL had in the Sublease was improperly persuaded to enter into a lease of premises elsewhere in the Hyperdome.
6. Whether the procedures required to be followed in setting of and requiring payment for the outgoings payable by tenants were followed by Leda and whether BHPL had been overcharged for the contributions to outgoings it had paid.
7. Whether Leda had been required to give BHPL a disclosure statement under the Leases (Commercial and Retail) Act.
8. Whether the Third Party Claim was barred by s 82(2) of the Trade Practices Act or s 11 of the Limitation Act.
The representations
Central to these proceedings was the issue of the representations. Accordingly, it is appropriate to set them out here.
The first representations pleaded in the proceedings were said to have been made by Dwayne Lord, who was employed from April 2006 to January 2008 as the Centre Manager of the Hyperdome.
BHPL alleged that, from the beginning of 2006 to the end of 2007, and, in particular, on or about 8 and 23 March 2007, Mr Lord, on behalf of TTC, represented that:
(a) TTC wanted to keep BHPL’s shop in the Hyperdome because it was a good shop;
(b) TTC was actively looking to relocate the shop to a better location in the Hyperdome; and
(c) in particular, from about March 2006 until December 2007, on approximately a weekly basis, the travelators near to the shop would be fixed soon.
These representations were known as the “Lord representations” and it was alleged that they were made in circumstances where Mr Lord knew or ought to have known that:
(a) TTC was not actively seeking to relocate the Giving & Living store to a better location;
(b) the Giving & Living store’s turnover had fallen significantly and was, as a result, running at a loss; and
(c) TTC had no intention of fixing the travelators.
It was alleged that, in reliance on these representations, BHPL:
(a) was induced to remain in the same location;
(b) was induced not to take steps to sell the business;
(c) was induced to invest money in the business; and
(d) was induced not to terminate the lease and thereby mitigate its damages.
It was also alleged that, at all material times, TTC was aware that BHPL was relying on the Lord representations.
The first in time but second pleaded representations were alleged to have been made on or about 10 July 2003 by Timothy Beirne to Ms Hungerford. These were called “the Beirne representations”.
Mr Beirne was, from January 2002, the Retail Manager at the Hyperdome. As such, he described himself as “dealing ... day-to-day with the tenants and the marketing of the Centre”.
In the conversation with Ms Hungerford, Mr Beirne is claimed to have represented:
(a) that the Hyperdome was a good location in which to have a shop such as the Giving & Living store;
(b) the Giving & Living store’s location was a good one because the Coles Door, nearest to the store, had passing through it the second highest foot traffic in the Hyperdome;
(c) there was nothing that BHPL should know about the Hyperdome that could impact upon the Giving & Living business; and
(d) the rent for the lease was market rent.
It was also said that, arising from these representations, it was impliedly represented:
(a) that the layout of the Hyperdome was not expected to alter during the term of the Sublease in any way that could affect the correctness of those representations;
(b) that the then volume of the foot traffic would not fall during the term of the Sublease in any way that Leda was then aware would affect the correctness of those representations; and
(c) the marketing and promotion of the Hyperdome was not expected to alter during the term of the lease in any way that would affect the correctness of those representations or, in the alternative, the Hyperdome would pursue best industry practices in marketing and promotion to ensure that the volume of the foot traffic would not fall during the term of the Sublease in any way that could affect the correctness of those representations.
BHPL claimed that, at the time of making the Beirne representations, Mr Beirne knew or ought to have known that:
(a) Leda had already planned extensive development works, integrating or linking the original Hyperdome block with the Lifestyle Centre, which would be likely to divert foot traffic away from the Coles Door and be in breach of clause 18.5 of the Sublease or disturb BHPL’s tenancy;
(b) Leda had already planned to introduce paid parking to the Hyperdome which would be likely to cause a substantial fall in the turnover of the shop and be in breach of clause 18.5 of the Sublease or to disturb BHPL;
(c) Leda had received a Market Research Report from AMRS recommending the implementation of many strategies to address identified shortcomings that negatively affected foot traffic in the Hyperdome; and
(d) the rent was substantially above market rent.
BHPL alleged that the representations related to future matters and that there were no reasonable grounds for making the representations. It was then claimed that, in reliance on the representations, BHPL:
(a) was induced to enter into the lease;
(b) was induced to remain in the same location;
(c) was induced not to terminate the lease notwithstanding the breaches of it;
(d) was induced not to take steps to sell the business; and
(e) was induced to invest money in the business.
BHPL also claimed that Leda was aware at all times that BHPL was relying on the representations made in the Beirne representations.
I pause to note that the allegation that the rent was market rent was not a representation as to a future matter and there was no pleaded allegation that the allegation was false. By implication, however, the pleading that Mr Beirne knew or ought to have known that the rent was substantially above market rent may be seen, despite the inadequacy of the pleadings, to raise the falsity of that representation. This was just another challenge for the Court to address arising from the rather inadequate pleadings.
The third pleaded set of representations were alleged to have been made by Shane McCann on behalf of Leda in or about March 2004. Mr McCann was employed at the Hyperdome as Retail Manager from October 2002 and in late 2003 or early 2004 was appointed Centre Manager at the Hyperdome, taking up his role in early 2004 until April or May 2006.
It was alleged that he first represented that Leda intended to lease a shop opposite the Giving & Living shop (the Hot Dollar shop), to a company, Hot Dollar Australia (Canberra) Pty Ltd, which would lift the turnover of the Giving & Living shop. This was known as the first McCann representations.
It was then alleged that, contrary to the representation, the Hot Dollar shop, would not be likely to draw any foot traffic appropriate to the Giving & Living shop.
The fourth set of pleaded representations were said to have been made, on or about 23 March 2006, by Mr McCann, again said to have been made on behalf of Leda, though it had by this date assigned its interest in the Hyperdome. Mr McCann was said to have represented to BHPL that Leda would negotiate with prospective purchasers of BHPL’s business in good faith regarding the reduction of the shop space and continuity of rent relief, which BHPL was then in the process of negotiating with Leda. This was known as the second McCann representations. BHPL alleged that the second McCann representations were made when Leda knew or ought to have known that it was not intending to engage in those negotiations.
A further, third representation was said to have been made that same date when Mr McCann, adding, on this occasion, that the representation was also said to have been made on behalf of TTC, was said to have represented that TTC would negotiate rent relief with BHPL in the order of 50 per cent to 30 per cent. This is known as the third McCann representations
BHPL said that all the McCann representations also related to future matters and that there were no reasonable grounds for making the representations. BHPL said that, in reliance on the representations, BHPL was:
(a) induced to enter the lease (a matter, I interpolate, that could not be so since the representations post-dated BHPL entry into the Sublease);
(b) induced to remain in the same location;
(c) induced not to terminate the lease notwithstanding the breaches alleged;
(d) induced not to take steps to sell the business (which, again, is odd in that the second McCann representation was that Leda would negotiate in good faith with prospective purchasers of BHPL’s business); and
(e) induced to invest money in the business.
BHPL further alleged that at all material times Leda (curiously not TTC as well, instead or at all) was aware that BHPL was relying on the first, second and third McCann representations.
Finally, the last set of representations alleged were said to have been made by Robert Cooper, who was employed from October 2004 to late 2008, as Retail Manager and then a leasing executive at the Hyperdome.
BHPL alleged that, after Hot Dollar Australia (Canberra) Pty Ltd moved into the Hot Dollar shop opposite the Premises, Mr Cooper, on behalf of Leda and subsequently of TTC, represented to BHPL that that company would be moving out of the space and would be replaced by a “good new retailer”. This was known as the Cooper representations.
BHPL alleged that the Cooper representations were made when he knew or ought to have known that that company had moved into the shop opposite the Premises and that there would not be a “good new retailer” moving into that shop, which retailer would not be likely to draw any foot traffic appropriate to BHPL’s business.
Again, BHPL alleged that this representation related to a future matter and there were no reasonable grounds for making the representation and that, in reliance on it, BHPL was induced to:
(a) enter the lease (which, again, cannot be true since the representation was made well after BHPL had entered into the Sublease);
(b) induced to remain in the same location;
(c) induced not to terminate the lease notwithstanding breaches of the lease;
(d) induced not to take steps to sell the business; and
(e) induced to invest money in the business.
BHPL alleged that, at all material times, Leda was aware that BHPL was relying on the Cooper representations.
I note that, again, there was a deficiency in the pleadings in that, despite suggesting that the Cooper representation was made on behalf of TTC, as well as on behalf of Leda, there was no allegation that TTC was aware that BHPL was relying on the representation.
In all, once again, the pleadings were deficient and inadequate in a number of respects. In the result, none of these inadequacies were other than to make my task more complicated and, in requiring me to work out what was meant, delaying somewhat the completion of these reasons.
Consideration of representations
Only the Beirne representations were referred to in the written submissions of BHPL. These will need to be considered at some length below.
The failure to mention the other representations might imply, although it was not expressed, that the claims based on those representations were not pressed.
Extensive submissions were filed as to these representations by TTC/Leda.
In my view, it is not necessary to consider the representations, other than the Beirne representations, in any great detail.
I am prepared, however, on the basis of the evidence before me, to make the following findings.
The Lord representations
I have carefully read the evidence, including, especially, the evidence of Mr Lord and documents that he created or were created during his time at the Hyperdome.
I am satisfied that, at the time of the alleged representations, TTC was actively seeking to re-locate BHPL’s shop, contrary to the pleaded claim.
I am also satisfied that, while Mr Lord was aware that the BHPL turnover had fallen significantly, this did not render any statement he made to be false, misleading or deceptive.
I am also satisfied that the Coles travelator and the travelator outside the Coles Door were not inoperative on many occasions as alleged and certainly had no continuing mechanical problems. I am satisfied that, initially, the travelator outside the Coles Door was switched off during wet weather but that, subsequently, Leda or TTC arranged for a non-slip substance to be applied to it and that it could then be used when wet. I am also satisfied that it could still be used when not moving. In addition, the evidence which I am prepared to accept was that, if a travelator was broken, it would be fixed quickly.
Accordingly, I am not satisfied that any representations made by Mr Lord as alleged were misleading or deceptive or constituted unconscionable conduct.
The McCann representations
In relation to the first McCann representations, BHPL gave no evidence in relation to it. Mr McCann denied making any such statement and it was not put to him in
cross-examination that he had made the representation.
In any event, the representation was inconsistent with what appear to be the facts relating to the occupation by Hot Dollar Australia (Canberra) Pty Ltd of a tenancy in the Hyperdome.
Accordingly, I am not satisfied that the first McCann representation was made.
The second McCann representations involved an assertion of Leda’s willingness to negotiate with prospective purchasers in good faith regarding the reduction of the shop space and continuity of rent relief.
This can conveniently be dealt with at the same time as third McCann representations, namely the allegation that TTC represented to BHPL that TTC would negotiate rent relief for BHPL in the order to 50 per cent to 30 per cent.
The evidence came from Ms Hungerford who said:
I said to Mr McCann, ‘The store is not doing well. The sales figures are continuing to decline. My original plan was to sell the business in two to three years after I purchased it. I need to know if I can get some relief from the Hyperdome.’ He responded to me by saying – and it was a weird way that he put it, and that’s why I remember it – ‘Would 50 to 30 per cent rent relief assist you?’ We were talking about various rent relief, but ’50 to 30 per cent’ I recall. I also – and, ‘If I did obtain rent relief, would that be passed on to a buyer?’ Because at that point in time, in 2005, I had appointed a broker to assist in the selling and marketing of my shop, and I had paid him marketing, and ... I said to Mr McCann, ‘A broker has been employed, and I have paid a sum of money to the broker to assist in the selling of the shop. How would it affect the sale if I was able to have some assistance from the Hyperdome?’ Mr McCann said to me, he would be able to look at the circumstances at the time that I had a buyer.
It is not in contest that TTC did grant BHPL a rent relief of $20 000 in the 2006/07 financial year and $32 000 in the 2007/08 financial year, though these were less than the 30 per cent minimum suggested by Ms Hungerford.
I am not satisfied that Mr McCann was offering a rent relief in the order of 50 per cent to 30 per cent of BHPL’s rent. He was, as would be expected and appropriate, inquiring as to what level of rent relief was being sought. I cannot interpret what Mr McCann said as a representation that any particular level of relief would be granted.
If Ms Hungerford, who held herself out as an astute businesswoman, had wanted some clarity or certainty, she should have asked further questions. There was no evidence that she did so.
As to the representations alleged to have been made about passing on any rent relief to a purchaser of the Giving & Living business, Mr McCann did not say that it would be passed on. On Ms Hungerford’s evidence, he merely said, very vaguely, that “he would be able to look at the circumstances at the time”.
I note, too, that there was no reference in this evidence to any reduction in the floor space of the Giving & Living shop as had been pleaded.
Further, there was no evidence that any purchaser was found by BHPL or her broker or was ever presented to Mr McCann or anyone else for the relevant negotiation.
Accordingly, the evidence as a whole does not support the claim.
Insofar as the representation to negotiate with prospective purchasers is concerned, the highest it came was when Mr McCann is alleged to have said that he “would be able to look at the circumstances at the time that I had a buyer”. That may be taken to have implied that Leda would negotiate. As no buyer was submitted, however, there is no evidence to suggest that Leda was not intending to engage in those negotiations. If Ms Hungerford wanted greater certainty, she could have, as an astute business woman, asked further questions or perhaps obtained a written assurance to pass on to her broker or any prospective purchaser.
So far as the allegation that TTC would negotiate rent relief in the order of 50 per cent to 30 per cent, the evidence of BHPL does not rise that high. On Ms Hungerford’s evidence, Mr McCann was simply suggesting a possibility. Indeed, BHPL clearly understood that it was not necessarily going to be provided when she said, “If I did obtain rent relief, would that be passed on to a buyer?”.
That BHPL did not obtain rent relief between 50 per cent and 30 per cent does not make what Mr McCann said in this representation to be false, misleading, deceptive or unconscionable conduct.
Mr Lord had sent an email to BHPL on 11 May 2006. In it, he said:
1. Rental Subsidy – we are prepared to look at this option if you can provide us with a certified P&L’s [sic] for the last 2 years from your accountant. As a precursor to a decision on this, we encourage you to take advantage of the options to try and increase your sales we discussed i.e casual leasing, P.A announcements, in-centre signage etc.
BHPL conceded that this was consistent with what Mr McCann had said to her making it clear that there was no guarantee or offer that the subsidy would be 50 per cent to 30 per cent.
Accordingly, I find that Mr McCann did represent that TTC would negotiate with prospective purchasers and that this representation was not misleading or deceptive. I also find that Mr McCann did not represent that the rent relief would be in the order of 50 per cent to 30 per cent but that it would be negotiated and, no doubt, that figure would be considered.
Accordingly, I do not find any of Mr McCann’s second or third representations to be false, misleading, deceptive or unconscionable.
The Cooper representations
Finally, I consider the Cooper representations.
As I have noted above, this allegation is inconsistent with the allegation in the Third Party Claim. One alleges that Hot Dollar shop, had already moved in, while the other that the company was going to move into the shop area opposite the Giving & Living shop.
These representations were not mentioned in the oral evidence Ms Hungerford gave. Mr Cooper’s evidence was that he had no recollection of making any such representation.
In cross-examination, Mr Cooper agreed that there was a period of one to two weeks when the shop opposite the Giving & Living shop ceased to trade by reason of a
lock-out. It was not, however, put to Mr Cooper that he had said anything to Ms Hungerford about the shop or the company.
Indeed, the company’s occupation of the Hot Dollar shop pre-dated BHPL’s occupation of the Premises and the assignee, Hot Dollar Australia (Canberra) Pty Ltd, continued to trade under the same name and, it appeared, in the same way with more years left on the lease than BHPL had in the Sublease for the Giving & Living shop.
I am not prepared to find that Mr Cooper made the claimed representation.
Conclusion on representations
As a result, so far as the claims based on the Lord representations, the first, second and third McCann representations, and the Cooper representations are concerned, BHPL’s claim must be dismissed. The result of this that judgment will be given for TTC on the Counterclaim.
Respective liabilities of TTC and Leda
It is appropriate at this stage to deal with an issue that I must address about which there were no submissions.
As I have noted above, the Counterclaim, which was a claim against TTC alone, did, however, claim against it in respect of all the representations, not only those of its officers for whom it may properly be said to be vicariously liable. TTC would be liable ordinarily for misrepresentations, misleading or deceptive conduct or unconscionable conduct by its employees acting in the course of their employment without any allegation other than the allegation of employment or agency. See Creedon v Measey Investments Pty Ltd (1988) 91 FLR 318 at 320-1.
As for representations said to have been made by the employers or agents of Leda, however, there was little explanation of how it was alleged by BHPL that TTC was liable for any such misrepresentations or misleading, deceptive or unconscionable conduct. The highest the allegation came was in paragraph [12] of the Second Further Amended Counterclaim as follows:
If (which is not admitted) the effect of the assignment referred to in paragraphs 5 and 6 of the Statement of Claim also assigned to the Plaintiff the liabilities of Leda to the Defendant, in respect of the matters set out in the following paragraphs, the Defendant further says as follows.
For completeness, I note that paragraphs [5] and [6] of the Statement of Claim (in identical terms in the relevant pleading of TTC, the Second Further Amended Statement of Claim) were as follows:
5. On or about 6 December 2005 Leda’s interests as lessor in the Sublease were assigned to the plaintiff.
6. The assignment of the reversion and the benefits of covenants by the defendant in the Sublease were transferred by Leda to the plaintiff on registration of the transfer of the land which included the Premises to the plaintiff on 28 June 2006.
The assignment, however, is not a method whereby at law, the obligations of an assignor incurred prior to the assignment can be transferred to the assignee. They remain as obligations of the assignor. See Provident Financial Corporation Pty Ltd v Hammond [1978] VR 312 at 318; Mitchell v Purnell Motors Pty Ltd (1961) 78 WN (NSW) 26 at 28-9; Stoddart v Union Trust Ltd [1912] 1 KB 181 at 194.
Such a transfer could have been effected by novation. See, for example, Tattock v Harris (1789) 3 TR 174 at 180; 100 ER 517 at 521; Olsson v Dyson (1969) 120 CLR 365 at 388.
Of course, some of the obligations of Leda are transferred by an assignment of a lease because they are obligations that run with the land. See City of London Corporation v Fell [1993] 4 All ER 968 at 973-4. It does not seem to me, however, that a breach of an obligation not to engage in misleading, deceptive or unconscionable conduct is other than a personal obligation and could only be assigned by novation.
As pointed out in Mitchell v Purnell Motors Pty Ltd however, this may not have the effect of preventing a party in the position of BHPL from seeking to set-off its damages claim against the TTC claim for costs, but not to claim any damages over and above those for which it was liable. In this case, however, there is no claim by Leda against which BHPL can counterclaim or seek a set-off.
The consequence is that any claim for damages to which BHPL is entitled as against Leda is not recoverable from TTC. This will have to be considered in the final orders to be made.
Breach of the Leases (Commercial and Retail) Act 2001 (ACT)
In addition to the various misrepresentations or misleading or deceptive conduct which BHPL complained had been made by TTC/Leda or in which they had engaged, BHPL complained of breaches of the Leases (Commercial and Retail) Act.
There were, however, ultimately no submissions made by BHPL about this aspect of its claim. It is, therefore, necessary to say little about it, though, on the evidence adduced, only one aspect of the claim seemed to me to have any substance.
There were four claims:
· an alleged failure by Leda to give BHPL a disclosure statement under s 30 of the Leases (Commercial and Retail) Act;
· an allegation that TTC/Leda had engaged in unconscionable, harsh or oppressive conduct in dealing with BHPL, contrary to s 22 of that Act; and
· that TTC/Leda had made representations that were and TTC/Leda knew or should reasonably have known were, false or misleading is a material particular in the course of the negotiations; and
· the claim by TTC/Leda for a contribution to outgoings was excessive and not authorised by law so that BHPL was overcharged $77,895.97.
Disclosure Statement
The issue of the disclosure statement depended on the alleged assignment of the Sublease being regarded as the grant of a new lease. In its defence, BHPL had pleaded that the leasing arrangements with Leda following the sale of the Giving & Living business by Giving & Living Pty Ltd to BHPL was the issuing of a new lease and not an assignment of the existing lease. As such a new lease, it would appear to be a “proposed lease”, so that s 30 of the Leases (Commercial and Retail) Act required Leda to give to BHPL a disclosure statement. A prescribed form of disclosure statement (AF2003-4), made under s 157A of the Act, is an eight page document prescribed on 11 March 2003 and so applicable here. It requires a good deal of information to be disclosed, such as details of the premises the subject of the lease, details of rent and other outgoings, finishes and make good details, and details of agreements and representations. In particular, for shopping centres, it requires additional details to be given, especially relevant in the context “changes or developments planned by the owner and timing of any changes or developments for: 1. Shopping Centre, 2. Surrounding roads”.
In this case, the term of the lease was extended and provision made for review of the rental for extra years. It appears that BHPL relied on the variation to say that this constituted a surrender of the current Sublease and a re-grant of the Sublease. This would be in accordance with what was held by the Privy Council in Take Harvet Ltd v Liu [1993] 2 All ER 459 at 467, as follows:
In Jenkin R Lewis & Son Ltd v Kerman [1970] 3 All ER 414 at 419, [1971] Ch 477 at 496 Russell LJ, delivering the judgment of the Court of Appeal, summarised a set of circumstances in which, on well-established principles, a lease will be treated as having been surrendered by operation of law:
If a tenant holding land under a lease accepts a new lease of the same land from his landlord he is taken to have surrendered his original lease immediately before he accepts the new one. The landlord has no power to grant the new lease except on the footing that the old lease is surrendered and the tenant by accepting the new lease is estopped from denying the surrender of the old one. This “surrender by operation of law” takes effect whether or not the parties to the new lease intend it to take effect. Moreover, even if there is no express grant of a new lease the old lease will be surrendered by operation of law if the arrangements made between the landlord and the tenant are such as can only be carried out so as to achieve the result which they have in mind if a new tenancy is in fact created.
The question of whether there has been a surrender and re-grant is, however, a question of fact. As Young J said in Pascoe-Wabbe v Nusuna Pty Ltd (1985) 3 BPR 97,231 at 9622:
Up until fairly recently courts would usually take the view that unless there was some relatively minor alteration in the terms of the lease the parties must have intended a surrender and a regrant, see eg Lewis & Cassidy Landlord and Tenant Law, (1966) p 122. However, such a question is a question of fact (Wirral Estates Ltd v Shaw [1932] 2 KB 247 at 257 as applied by the Court of Appeal in Stedman v Shaw (1970) 91 WN (NSW) 190 at 196) and courts have been more ready to infer a mere variation, especially in cases of adjustment to the rent, in the last 20 years and the present law is probably accurately summed up in the 4th edition of Halsbury vol 27 para 448. That summary includes the statement that normally where the term of the lease is altered it is difficult to satisfy the court that there has been a mere variation.
I am not satisfied, on the balance of probabilities, that the evidence was sufficient in this case to make a finding as to the relevant facts, though it would seem from what Young J said that the variation may have been found to be a surrender and re-grant.
While the issue about whether the leasing arrangements constituted an assignment of the Sublease originally granted to Giving & Living Pty Ltd or the issuing of a fresh lease was not the subject of submissions by BHPL. Nevertheless, it is appropriate that, I confirm as part of the TTC claim for rent and other expenses that BHPL was bound.
The lease to Giving & Living Pty Ltd, which commenced on 11 September 2000, was in evidence. Also in evidence was a transfer of the lease from Giving & Living Pty Ltd to BHPL executed by both parties. That transfer was registered (registered number 1358384).
Sections 77 and 78 of the Land Titles Act 1925 (ACT) makes provision for the effect of registration of such a transfer. The sections are relevantly as follows:
77(1) On the registration of a transfer, the interest in land described in the transfer, shall pass to the transferee.
...
78By virtue of every transfer of a ... lease, the right to sue upon the memorandum of ... lease, and to recover any debt, sum of money, annuity or damages thereunder (notwithstanding that the right may be deemed or held to constitute a chose in action), and all interest in any such debt, sum of money, annuity or damages shall be transferred so as to vest it in the transferee thereof.
In Danel Investments Pty Ltd v Nexstar Investments Pty Ltd (No 2) [2011] ACTSC 120 at [269], Foster J explained the effect of the registration of the instrument of transfer of a sublease. His Honour said:
269. In the ACT, a registered sublease may be assigned at law by the execution and registration of a form of Transfer of Sublease in the prescribed form. Upon the instrument being registered, the estate or interest of the assignor (the named sublessee in the registered sublease) as specified in the instrument of transfer will pass to the assignee. Thereafter, the assignee will become subject to and liable for all of the same requirements and liabilities to which the assignee would have been subject and liable if he or she had originally been named in the sublease (see ss 77 and 78 of the Land Titles Act). It is registration which completes the transaction and which effects a transfer of the legal estate.
I respectfully agree with his Honour’s analysis. Thus, BHPL was bound by the terms of the Sublease.
The approach is consistent also with similar considerations of this issue in other cases. See Queensland Premier Mines Pty Ltd v French [2007] HCA 53; 235 CLR 81 at 100-1; [55]-[56]. See also Provident Capital Pty Ltd v Printy [2008] NSWCA 131 at [31].
It is unclear, but BHPL may have been relying on a construction arising from s 15 of the Leases (Commercial and Retail) Act for its Defence. I reject any such argument. That section simply provides that where an assignee conducts its activities in a way that would exclude the lease from the application of the Act by virtue of s 12, then the Act does not apply while the assignee is a lessee of the premises. That has no relevance here.
A second, somewhat different argument is relevant to the liability of BHPL, though not directly relevant to the issue of whether the arrangements constituted a new lease or an assignment.
TTC’s Statement of Claim alleged that on or about 6 December 2015, following the sale of the Hyperdome to TTC, Leda’s interest as lessor in the Sublease was assigned to TTC.
BHPL declined to admit this allegation but further said that no notice of any such assignment had been given to BHPL. In its reply, TTC did not assert that any notice had been given to BHPL but relied on the operation of law.
As with a number of the other matters to which I have referred, this was not the subject of express further submissions. Nevertheless, it seems to me that there is no basis for the pleaded Defence by BHPL relating to this issue.
I am satisfied that, as pleaded in the Statement of Claim, Leda’s interests as sublessor in the Sublease were properly, legally and effectively assigned to TTC. The transfer was registered under the Land Titles Act, as noted above (at [153]). As a consequence, by s 78 of the Land Titles Act, the interest Leda had in any debt, sum of money or damages payable under the assigned lease was transferred to and vested in TTC.
Any requirement for notice in respect of the assignment of a debt arose under s 205 of the Civil Law (Property) Act 2006 (ACT). That Act, however, does not apply where it is inconsistent with any provisions of the Land Titles Act: s 5 of the Civil Law (Property) Act. For the reasons already stated, the Land Titles Act provisions are inconsistent.
Accordingly, the lack of notice, if there was such, did not affect the right of TTC to sue under the lease: Property Builders Pty Ltd v Adelaide Bank Ltd [2011] NSWCA 266; 15 BPR 98,491 at 29,418; [40].
Further, BHPL did pay rent to TTC after the assignment and, it is clear from a number of exhibits, including emails to Ms Hungerford, and letters she sent to BHPL by TTC as landlord, that she knew there was a change of landlord.
This seems to me to constitute an attornment by BHPL. An attornment is an acknowledgement by a tenant of the change of owner of the reversionary interest in the premises: Cornish v Searell (1828) 8 B&C 472 at 476; 108 ER 1118 at 1119. As Brereton J pointed out in Adamow v Kirk (1958) 75 WN(NSW) 514 at 518 “[t]he commonest and simplest form of attornment is by tender and acceptance of rent”. The tenant must, of course, be aware of the change: Fenner v Duplock (1824) 2 Bing 10 at 11; 130 ER 207 at 208. Such an attornment then creates an estoppel: Partridge v McIntosh & Sons Ltd (1933) 49 CLR 453.
Thus, BHPL cannot deny that it was a tenant of TTC.
What is particularly unclear is that, because of the circumstances of the variation which showed Giving & Living Pty Ltd as the lessee, it may be that the disclosure statement was required to be given to Giving & Living Pty Ltd and not BHPL. I am fortified in this by the terms of s 15 of the Leases (Commercial and Retail) Act which provides for the application of that Act in the case of an assignment.
Nevertheless, the Leases (Commercial and Retail) Act makes no provision for the sanction, if any, that flows from the failure to provide a disclosure statement. None of the provisions for compensation or other orders under that Act on which BHPL relied, namely ss 22, 37 and 81, make provision for the response to a failure to provide a disclosure statement.
I note that, when BHPL sought to amend the Counterclaim to insert the pleading that relied on the failure to provide a disclosure statement, no point was taken as to the consequences, if any, of such a failure: Tuggeranong Town Centre Pty Ltd v Brenda Hungerford Pty Ltd [2014] ACTSC 197.
Otherwise, there appears to have been no consideration of this issue and I can find no relevant authority on the question.
Section 117 of the Leases (Commercial and Retail) Act gives a tenant a right to terminate a lease on 14 days’ written notice if the landlord has not given a disclosure statement as required, if the disclosure statement is false or misleading in a material particular or if it omits such a particular. This sanction does not assist BHPL for that time has now long passed. There is no provision for an extension of time.
In any event, this is not what BHPL sought, but it claimed damages for breach of the obligation. This was a civil action purportedly based on a breach of a statutory duty.
Because there was no submissions on this issue by either party, I need, I believe, to make only the briefest reference to it. I have carefully considered the helpful analysis of when a statutory duty gives rise to a civil action in Carolyn Sappideen and Prue Vines, Flemings Law of Torts (Thomson Reuters Lawbook Co, 10th ed, 2011) at 424-8; [18.20]; and R P Balkin and J L R Davis, Law of Torts (LexisNexis Butterworths, 5th ed 2013) at 515-23; [16.10]-[16.25].
In addition, I note that the Leases (Commercial and Retail) Act does provide identified remedies for other breaches of the Act itself or conduct which the Act prohibits. See
ss 22, 37, 57, 58, 81, 84-7, 89-91, 112 and 122.
The fact of these specific provisions, together with the specific provision in s 117 of the Leases (Commercial and Retail) Act relating to a sanction for the failure to provide a disclosure statement, leads me to conclude that there is no civil action for damages for a breach of the obligation to provide a disclosure statement. See Martin v Western District of Australasian Coal & Oil Shale Employees’ Federation (1934) 34 SR (NSW) 593 at 596.
Unconscionable conduct
The Counterclaim also alleged that the Hyperdome engaged in unconscionable, harsh or oppressive conduct. The pleading was somewhat difficult to follow here as it made a kind of omnibus claim for these other matters. There appeared on the pleadings to be three sources of this: the alleged misrepresentations of Mr Beirne; the failure to provide a disclosure statement and the carrying out of building works on the Hyperdome, including the establishment of the Lifestyle Centre and upgrading of the Courtyard between it and the Target Mall; the erection of pipe railings and a sign in the undercover car park leading to the Coles Door pointing to shops away from the Coles Door; and the introduction of paid parking.
Whether conduct is unconscionable has been considered by a number of authorities in the context of the Trade Practices Act. It is clear that its meaning, in that context, is wider than its meaning in the context of “the unwritten law”, that is according to principles of equity. See Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133; 146 FCR 292 at 299; [24].
In Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; 200 ALR 491 at 544; [184]-[185], Selway J provided the following helpful discussion:
184 The ordinary or dictionary meaning of the word “unconscionable” was explained in Hurley v McDonald’s Australia Ltd (2000) ATPR 41-741 at [22]:
For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated - Cameron v Qantas Airways Ltd (1994) 55 FCR 147 at 179. Whatever ‘unconscionable’ means in s 51AB and s 51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable - Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term ‘unconscionable’ import a pejorative moral judgment - Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 283-4 and 298.
185 In order to find that conduct is “unconscionable” it is necessary to do more than merely show that the behaviour is misleading or deceptive, or otherwise in breach of some other provision of the TPA. What is necessary is to show that the conduct is so unacceptable that it can properly be described as “unconscionable”. Normally it might be expected that behaviour would only be “unconscionable” if some moral fault or responsibility is involved. Normally it might be expected that this would involve either a deliberate act, or at least a reckless act. Mere unreasonableness or unfairness may not be sufficient, at least in the absence of some moral fault. This is why it was critical to the conclusion he reached in Simply No-Knead that Sunberg J was able to find an “overwhelming case of unreasonable, unfair, bullying and thuggish behaviour”. Of course, those words are not a definition of “unconscionable”. But having made that finding it is quite apparent that the behaviour could properly be characterised as “unconscionable”.
I deal with the representations of Mr Beirne later and also the matters relating to the building works.
So far as the failure to give a disclosure statement is concerned, I do not consider it comes, in the circumstances, to being even close to amounting to unconscionable conduct.
The establishment of the Lifestyle Centre cannot be regarded as such conduct because it was established prior to the sale to BHPL of the Giving & Living business.
So far as the other works are concerned, I deal with those at some length below. There is, however, no basis for the allegation that the development of those works constituted, unconscionable, harsh or oppressive conduct within the proper meaning of the term. It is, therefore, unsurprising that there were no submissions by BHPL on this issue.
Representations and misleading or deceptive conduct
So far as any representations or misleading or deceptive conduct might be actionable under the Leases (Commercial and Retail) Act are concerned, there is the same conduct for which claims are made under the Trade Practices Act and the Fair Trading Act.
The only basis for such a claim is under s 22 of the Leases (Commercial and Retail) Act, namely that such representation or conduct is unconscionable or harsh or oppressive. It is not clear what, if anything, “harsh and oppressive” adds to the notion of conduct being unconscionable.
Even if any representations are made or TTC/Leda engaged in any misleading or deceptive conduct, I am not satisfied that such conduct in this case could come near the correct application to it of the term unconscionable as interpreted by the High Court in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; 214 CLR 51. See, for example, per Gleeson CJ at 64; [14]. There was here none of the “high degree of moral obliquiry” required by Spigelman CJ in Attorney-General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at 583; [121].
Contribution to outgoings
The pleadings did raise the issue of the contribution BHPL was required to make to the outgoings of the Hyperdome. It was alleged that TTC/Leda had overcharged BHPL for its contribution because of a failure to give required notices to BHPL, that the amounts claimed were not in accordance with ss 70 and 71 of the Leases (Commercial and Retail) Act and an expenditure statement and auditor’s report as required by clauses of the Sublease.
BHPL alleged that the conduct of TTC/Leda breached ss 65, 66, 70 and 71 of the Leases (Commercial and Retail) Act because of these alleged failures as well as various terms of the Sublease.
Even where companies entered into a lease of a business, such as in W P Kidd Pty Ltd v Panwell Pty Ltd, the individual workers were also applicants and it was they who were remunerated.
Relevantly, Ms Hungerford was not a party to these proceedings. There appears to be no liability that BHPL has to her; there is no contract, implied or express, which sets out any of the terms and conditions which would constitute a binding employment contract such as to constitute a loss by BHPL for which it could seek to be compensated by TTC.
There is, in my view, no liability of TTC or Leda to BHPL for any wages or superannuation in respect of them that Ms Hungerford might seek from it.
(c) Interest on funds advanced
BHPL was incorporated for the purpose of purchasing the Giving & Living store. Accordingly, it had no capital of its own. Ms Hungerford provided it with funds for the purchase of the business and provided further funds from time-to-time.
Mr Haley, in his Report, calculated $984 899 to be owing in interest by BHPL to Ms Hungerford. After conferring with Mr Meredith prior to preparation of the joint report (which included substantial differences between them on some aspects), the amount he then put forward was $907 531, based on errors identified by Mr Meredith.
In his Report, Mr Haley used the Indicator Lending Rates for Small Businesses for variable small overdrafts, published by the Reserve Bank of Australia, as the rate for the interest. He expressed the opinion that this was “an appropriate interest rate to apply to the loan”.
He had to apply this rate because there was no documentation or other contemporaneous material that could provide the terms of the loan and, in particular, the interest rate payable under it.
Mr Meredith expressed the view that there was no information from which any terms of a loan and, in particular, the interest on it, could be determined. While he accepted that there had been loans, he considered that they were shareholder’s loans advanced interest free.
Any loss of her interests by Ms Hungerford was a third party claim and not compensable by TTC/Leda.
It was apparent from Mr Meredith’s analysis that the evidence did not disclose:
(a) any loan documents;
(b) any interest charged to BHPL by any party; or
(c) any loan repayments.
This was important, for the loans came from various sources and the evidence was silent on who was the lender. This would, of course, be important to determine the basis on which a loan was made and the terms. The various sources are noted above (at [339]-[340]).
In the absence of this evidence, other evidence was required to prove that any interest bearing loan had been made. In the absence of such evidence, there was no way of determining what the terms of the loan were and, in particular, whether it was, instead of an interest bearing loan, either:
(a) a shareholder’s loan interest free; or
(b) an injection of capital.
Ms Hungerford did give some evidence about some loans. It was as follows:
MR ERSKINE: ... Ms Hungerford, you have – right at the start of your evidence you told us about a loan that you took out from, I think, the National Bank in connection with buying BHPL? --- Yes.
Sorry, buying Giving and Living. I beg your pardon? --- Yes.
In whose name was that loan? Which entity? --- There was a loan in the company name that I took out.
Just, sort of perhaps at this stage, can you identify which entities of yours were in existence ... from 1 September when you were actually starting in the business? --- From 1 September, BHPL was then in existence. Hungerford Management Pty Ltd was in existence, which was the trustee for my superannuation fund as well as a unit trust and I think that was it – and me personally.
You had the relevant extensions under what’s called the Bingie facility? --- The Bingie facility was a flexi mortgage from National Bank which was used as a business loan basically facility which was secured against my home.
Thank you.
HIS HONOUR: Who was the borrower? --- Brenda Hungerford.
Personally; you personally? --- Yes.
Yes, all right.
MR ERSKINE: From the time that you took over the Giving and Living business, which was the time that – or let’s just continue it – in terms of the business, the Giving and Living business in Sydney and vacated Tuggeranong, did BHPL borrow any money? --- I’m sorry. Can I just ask – was that from the first – from when I purchased Giving and Living?
HIS HONOUR: From 1 September.
MR ERSKINE: From 1 September in the period that BHPL was running the store in Tuggeranong? --- Yes.
Did the company have occasion to borrow money? --- Yes.
From whom? --- The company borrowed money from – in the company loan from the NAB as well as borrowing money from me.
Without going into every single transaction, could you explain to his Honour the process by which it borrowed money from you? --- Yes. The – in most cases, the Bingie facility was used as the vehicle to pay money from – into the company and every or pretty much every transaction was marked as a loan from me to Giving and Living and there was also interest payments for the business that came out of that facility.
So it is mentioned on a bank statement. Is that what you mean? There was some annotation on a bank statement? --- Yes. When I made the – when I made the transaction, I put ‘Loan G and L’ ---
Something like that? --- ‘--- or ‘BHPL’ or whatever it was.
HIS HONOUR: I don’t quite understand. The interest, do you want to explore that?
MR ERSKINE: What did you mean by interest? --- Interest on the growing facility, the growing Bingie facility, was paid out of that and also ---
Out of what; sorry, was paid out of what? --- Sorry, out – was paid from the Bingie facility. When I had to sell down my assets, I paid them into the Bingie facility to pay interest as well paying money into the company.
...
MR ERSKINE: Why was money being lent by you to BHPL? --- Because the income from the Tuggeranong store was declining and therefore, I wasn’t able to pay the necessary costs out of the income from the Tuggeranong store.
How long did these loans go on for? --- They are still in existence. They have decreased as I have sold everything but they are still in existence.
I found this evidence somewhat confusing and unhelpful. The situation was never clarified. It certainly did not provide any evidence of the terms of any loans made by Ms Hungerford. Insofar as she made loans, there was no evidence that they were not interest free loans. There was no explanation as to why I should not treat them as injections of capital.
In this regard, it is to be noted that, by the time Ms Hungerford gave her evidence, Mr Meredith’s Report had been served on BHPL. It was not as if the issue of the absence of documentation or other evidence as to the loans had not been a live issue in the proceedings.
Mr Haley did calculate interest, as noted above (at [1151]). When asked how he determined the terms of the loan or loans, he said that he had been instructed to this effect. Those instructions, however, were never to become admissible evidence.
Indeed, Mr Haley accepted that, if interest was payable and not accrued so as to be reflected in the financial accounts of BHPL submitted to the Australian Taxation Office, those accounts would not accurately affect the affairs of BHPL. Indeed, that result would seem to be an inevitable consequence of the instructions he was given.
Mr Haley explained:
[S]imilar to the bank is entitled to interest for its funds put in, Ms Hungerford intended to receive a return on her funds lent to the company as well. And the reason for not doing it was because the company had losses anyway. So from a tax – the reason why the actual entry wasn’t put through – that would only increase the losses in BHPL and result in taxable income to her personally which, given the overall position if you want to take it on a consolidated thing and sort of lump the company and her together and her other things.
Despite this, however, Ms Hungerford herself did not give any such evidence.
The issue came to a head in this exchange between Mr Haley and Mr Meredith:
MR HALEY: When you sit down and prepare a set of accounts at the end of the year in circumstances like this, the company’s accounts are basically – the profit is the taxable income. So most people wouldn’t even prepare accounts if they didn’t have to do a tax return. So you only put in there as expenses the things you intend to claim as deductions. So whether there was an obligation or not is not necessarily always reflected in the accounts because the accounts are only reflecting what actually occurred, and I think we’re all in agreement, there was no interest paid.
HIS HONOUR: No. All right. Do you want to comment on that?
MR MEREDITH: The only thing, accounts should be prepared in accordance with accounting standards. If there was a loan which was interest bearing, the interest should have been at least accrued, and it wasn’t in the financial statements.
HIS HONOUR: Do you want to say anything further? I mean, I think ---
MR HALEY: Well, just that doesn’t happen in the real world.
In submissions, BHPL said that “it is in defiance of common sense to argue that Ms Hungerford would lend BHPL interest free”. That seemed to be the sum total of the argument; it relied on no evidence of any kind that might set out the terms of the loan, including a relevant rate of interest, where any demand had been made for it or any of it paid or, indeed, accrued. In particular, it gave no explanation of why it was not capital, in the absence of the terms of a loan. It was simply unexplained in the evidence.
Ms Hungerford’s counsel pointed out that, from a tax perspective, Ms Hungerford would be likely to be taxed on a cash basis so that any accrual would not cause her problems with the Australian Taxation Office requiring her to pay tax on moneys not received.
I am not satisfied that BHPL can recover from TTC/Leda any interest applicable to any loans from third parties, including Ms Hungerford.
(d) Opportunity cost
A further head of damage was said by BHPL to have been caused because the misleading or deceptive conduct induced Ms Hungerford to enter into the purchase of the business, including entry into the Sublease and thus lose the opportunity for those funds to be invested elsewhere more productively.
There is no doubt that such damages are recoverable: South Australia v Johnson (1982) 42 ALR 161 at 170. This was directly applied to the situation where a party harmed by misleading and deceptive conduct was induced to purchase a business by such conduct, but would have purchased another profitable business the profits of which would have accrued to the party and so were allowed as part of the damages awarded: TN Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 110 at 134.
The evidence for this was complicated by the difficulty of separating a claim by Ms Hungerford, who was, of course, not a party to the proceedings, and by BHPL.
BHPL was, of course, a corporate vehicle established for the purpose of purchasing the Giving & Living business. It had no assets of its own and all the capital it had for that purpose came from Ms Hungerford and entities associated with her, either through loans or by the investment of capital.
There was no doubt that Ms Hungerford was intimately involved with the dealings; indeed, she was the operative and only human behind the operations of BHPL; nevertheless, she was separate from BHPL once it was incorporated.
It is notable that the tenancy application made to Leda was, in fact, made by Ms Hungerford herself, dated 14 July 2003. By the time the Agreement for the Sale of the business of Giving & Living was signed on 21 August 2003, however, BHPL was incorporated and was the purchaser.
The basis of the claim for loss of opportunity was a projection for anticipated annual turnover prepared by Ms Hungerford and submitted with the Tenancy Application. This showed an increase of profit in the business by 10 per cent each year.
It was submitted that this was a reasonable projection, even though Ms Hungerford’s evidence was that her retail plan was based on the fact that:
[t]he business has been trading for 10 years and will continue unchanged except for upgrade of accounting procedures.
Support was said to come from the Report of Mr Stephens who stated that for the years June 2003 to December 2007, specialty shops in the Target Mall of the Hyperdome achieved increases in sales of an average of 48 per cent.
These figures, however, are unhelpful. A percentage increase can be large if the initial sales are low when a small absolute increase will show a large percentage increase. This also is expected from a new rather than an established business. The evidence was that the Target Mall was still “young” and, therefore, the shops there were growing, not established as was the Giving & Living store where growth might reasonably be expected to be more modest.
The approach, however, was somewhat supported by the table produced by Mr Stephens which showed that the turnover increase of shops in the Target Mall between these dates was from $2806/m2 to $3440/m2. I am not sure what differences there are, for that table was for nine shops in the Target Mall, showing an increase of 23 per cent, while the 48 per cent increase was for seven of those shops only.
If that latter figure is accepted, and it was not challenged, it would show that an increase of 10 per cent per year on average was attainable. That, however, does not show that the same investments made by BHPL would produce that same growth. For example, there was no history given of any of the seven shops in the Target Mall and what base sales they had had at the beginning of the period. This can be a problem with averages and percentages, for an individual case of stellar performance can distort the picture.
Further, it is to be noted that these figures are increases in turnover, not in profit which is the assertion by BHPL, making the likelihood of achieving that result even less, as Mr Haley acknowledged. No evidence as to profits over the period was produced.
It is, of course, to be accepted, as did Mr Duane, that businesses wish to make profits and to increase sales over time, but that intention is far from showing the reality in the way required to prove this claim.
There was no evidence that any store in the Target Mall making such increases in turnover was for sale during the relevant period.
Some support was sought to be drawn from the fact that the relevant figures for proposed cash flow had been provided to Leda at the time of making the application for a tenancy and that this gave some imprimatur to the figures, assuming that some kind of evaluation of the likelihood of such a plan be achieved. No evidence was sought by BHPL from Mr Beirne or any other witness called by TTC/Leda to justify that assumption. In the absence of such evidence, it cannot be accepted.
As to the evidence about what Ms Hungerford would have done with the funds that she otherwise invested in BHPL, the evidence was as follows:
At the time I did not need to buy a shop to work in, and I had other projects and other business projects that I was working on, as well as real estate developments that I could have done with my existing real estate portfolio.
She also gave evidence of share trading but, apart from denying that these were in amounts of $65 000, $50 000, $30 000 or $25 000, she gave no further information about the profitability of that trading.
After the purchase of the Giving & Living business, Mr Roberts, the agent who introduced that business to her, provided her with information about other businesses though she said she took none of the proposals any further.
There was, in reality, no real evidence that BHPL, as opposed to Ms Hungerford, would have invested in any other business had it not purchased the Giving & Living business. Ms Hungerford may not have had to incorporate a company for such another investment. The continuation of real estate projects and share trading was all activity of Ms Hungerford and none of it was ever suggested to have been intended or likely to have been conducted by BHPL.
The court decisions in which the opportunity for investment in other businesses to have been an alternate investment denied to a person who is harmed by a misrepresentation was held to be recoverable as a head of damage have all relied on relatively clear evidence that the alternatives were not only available, but likely to have been taken up but for the misrepresentations and that they would have likely produced an income or profit for which compensation was payable. See, for example, Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2003] FCA 329 at [70] (overturned on appeal but on a different point which effectively re-affirmed this finding: Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119; ATPR¶ 42-005), Mark Bain Constructions Pty Ltd v Avis [2012] QCA 100 at [141]-[143]. This is not a comparable situation to that submitted on behalf of BHPL.
There was simply no evidence that BHPL would have invested in an alternative business or other investment and that it had, thereby, lost an opportunity that it is likely to have taken up and so suffered a loss for which it was entitled to be compensated.
This was reinforced by email correspondence between Mr Haley and BHPL’s lawyers in which he complained that the claim had not shown any “alternative business involved” for a claim “based purely on the cash flow statement”. Strangely, the test that BHPL’s lawyers could suggest to Mr Haley was that TTC was “put on notice with respect to the foreseeability of the quantum of damages”. This is far from the evidence necessary to found the claim. Mr Haley relied on instructions, for which there was, at the hearing, no admissible, probative evidence.
The submissions on behalf of BHPL were, in effect, statements of expectation not showing what had actually occurred in any likely place that would have sustained the claim made.
Even were Ms Hungerford to have herself been a party to the proceedings, which she was not, and to have been entitled to be compensated for the losses she may have sustained by the failure to invest, the evidence fell far short of showing exactly what was likely so that any finding could be made on the balance of probabilities as to what those losses would have been.
In my view, BHPL has shown neither an entitlement to damages nor evidence of proved loss under this head of damages. Any damages that could be proved under this head of damages would be payable to Ms Hungerford who was not a party to the proceedings.
Disposition
Applying these principles, I make the following findings on the claims brought by BHPL and TTC/Leda.
1. Rights of TTC
By abandoning the premises, BHPL breached the terms of the Sublease and became liable to TTC for the moneys payable under the Sublease until the premises were
re-let, whereupon any liability of BHPL to TTC ceased.
I am satisfied that TTC had a right to re-enter the premises to recover possession of them and that the tenancy of BHPL was terminated on 31 January 2008 under s 115 of the Leases (Commercial and Retail) Act.
TTC seeks a declaration as to the right to re-enter. Section 115 of the Leases (Commercial and Retail) Act gives that power to the Magistrates Court to make a declaration that a landlord has a right to re-enter abandoned premises. There is, however, no material in the Act that suggests such a right is exclusive to that Court and that the power of this Court to make binding declarations of rights is somehow abrogated in this area.
The Court’s power to make declarations is set out in r 2900 of the Court Procedures Rules. The pre-conditions for such a declaration set out in PW Young, Declaratory Orders (Butterworths, 2nd ed, 1984) at 9-10; [202], have all been met. In the circumstances, TTC is entitled to such a declaration.
The compensation payable as a consequence is the loss of rent and outgoings for the period between the abandonment of the premises by BHPL and when TTC was able to re-let the premises.
While BHPL denied the claim, it did not mount any substantive defence to it, other than the alleged breach of lease in respect of outgoings, which I have rejected, but rather relied on its Counterclaim. I deal with that below.
In those circumstances, it is appropriate for the sum claimed by TTC to be ordered to be paid by BHPL. The amount is the rent for each of February to May 2008 of $11 645.90 per month and outgoings of $1564.30 for each of those months, making a total of $52 841.00. TTC is entitled to interest on that sum, which I calculate at: $35 382.06
TTC also sought a declaration entitling TTC to call upon the bank guarantee given by BHPL in accordance with the requirements made when transferring the Sublease. Given that I will dismiss BHPL’s claim for damages for misrepresentation, it is appropriate for such a declaration to be made.
2. Rights of BHPL
In its Counterclaim and Third Party Claim, BHPL sought damages, repayment of amounts said to have been overcharged by TTC, compensation, a declaration that it lawfully terminated the Sublease, orders under ss 82 and 87 of the Trade Practices Act and s 46 of the Fair Trading Act, and costs.
In the circumstances and given my findings, it is not appropriate to make the declaration sought.
BHPL adduced no evidence and made no submission sufficient to enable me to make any finding about amounts alleged to be overpaid to TTC/Leda. I decline to make the order sought.
The claims for damages, compensation, and orders under ss 82 and 87 of the Trade Practices Act or s 46 of the Fair Trades Act, are effectively seeking the same result, namely the payment of damages in compensation for the harm suffered by BHPL as a result of the misleading or deceptive conduct. Only one such order should be made. No submissions were made to the contrary.
So far as the damages are concerned, I shall address them under the heads for which they are claimed.
(a) Capital Outlays
BHPL claimed $281 451 and TTC/Leda submitted that, if they or one of them were liable, the amount should be $358 895. The difference arose because Mr Meredith, for TTC, included in the capital outlay the amount paid for stock in addition to the purchase price, principally goodwill as well as plant and equipment.
In order for the capital outlay to be recoverable, it needs to be shown that what was purchased was less valuable than what was paid. Mr Meredith considered that, on the basis of the financial statements for the business up to the end of 2002, the price was a fair price.
He pointed out, however, that the future maintainable earnings at the time of purchase could reasonably be reflected in the trading of the business after purchase which, in any event, was experiencing a decline in sales from June to October 2003, though it did improve between December 2003 and August 2004, according to the Hyperdome turnover reports. According to Mr Stephens, the growth was negative from December 2003.
Using the capitalisation of future maintainable earnings method, to value the business, Mr Meredith opined that the business would be valueless. In the circumstances of where BHPL would not have purchased the business if the misrepresentations or misleading conduct had not been made, this seems to me the preferable approach.
Mr Haley calculated the goodwill from what appeared in the financial statements of BHPL. I have some concern about the accuracy and reliability of those statements. In any event, the contract shows that the purchase price, which was the actual capital outlay of BHPL, was $225 000 and that this included goodwill, plant, the business name, and the residue of the Sublease. Mr Haley used the financial statements also to suggest that there would have been other amounts, such as legal fees and stamp duty, and that the amount shown for plant suggests that further plant or equipment was purchased during the year. There was no evidence about any such amounts.
I am not satisfied that the financial statements are necessarily sound. There was no evidence given about these other matters. In that event, I am not prepared to proceed on the basis of what in reality is speculative inference on the part of Mr Haley. The additional amounts may or may not be as inferred. In the absence of evidence based on appropriate primary sources, I do not think it is proper to go beyond the documents that have been admitted into evidence, such as the contract for the sale of the business and on which there can be proper consideration, assisted by cross-examination.
I see no reason not to use that figure of $225 000. The amount attributed in the accounts does not represent the outlay, though, if accurate, it may represent the value of what was purchased but, in this case, I do not need to consider that.
Mr Haley did not include the stock as part of his calculation of the capital outlay as he included that in his calculation of the trading losses.
I prefer to include it as part of the capital outlay. This is, in part, influenced by the fact that I prefer Mr Meredith’s calculations concerning the trading losses because he has not included the losses from the Manuka and Yarralumla stores.
Accordingly, I find that, had the misrepresentations not been made, BHPL would not have purchased the business and so is entitled to recover the price paid, namely $358 895.
(b) Borrowing costs
BHPL claimed under this head $139 407. TTC/Leda submitted that, if they or either of them were liable for these costs, then they should be assessed as at $66 449. This is because Mr Haley included the borrowing costs of the Manuka and Yarralumla stores.
For the reasons already identified, I do not consider that TTC/Leda or either of them are liable for any of the costs involved with the Manuka or Yarralumla stores. I have also found that BHPL should have mitigated its loss by abandoning the premises at the end of financial year 2005 and so reduce the amount assessed by Mr Meredith by $43 544.
Accordingly, I am satisfied that the borrowing costs should be fixed at $22 905.
(c) Trading Losses
BHPL claimed for trading losses was in the sum of $701 531. TTC/Leda submitted that, if they or either of them were liable, the amount should be assessed as at various amounts depending on when the exit point should be determined.
Again, I prefer the approach of Mr Meredith, particularly as his calculations exclude the losses from the Manuka and Yarralumla stores.
Mr Meredith calculated the trading losses to 30 June 2005 in the sum of $298 355, excluding exit costs. The exit costs are dealt with by the judgment sum BHPL must pay TTC. He did so on the basis that this assessment was on the basis of the misrepresentations alleged to have been made after BHPL had entered into the Sublease. I have not found any of those misrepresentations were made.
Included in Mr Meredith’s calculations, however, was an amount for the cost of unsold stock. It seems to me, however, that, since I propose to award damages for the capital outlays which includes the cost of stock, to include that amount would amount to double counting, though attributable different items of stock, of course, and so I have deducted that.
I have also ignored the “exit costs”, that is the costs of abandoning the Premises and surrendering the Sublease for that will be included in the amount which, as losses payable to TTC, will be recovered from Leda. I deal with that below.
Accordingly, I will award $263 492 as damages under this head of damages.
(d) Interest on Funds Advanced
For the reasons already outlined, I do not consider that any allowance should be made for this head of damage.
(e) Remuneration of Ms Hungerford as director and manager
For the reasons already outlined, I do not consider that any allowance should be made for this head of damage.
(f) Opportunity Cost
For the reasons already advanced, I do not consider that an allowance should be made for this head of damage.
(g) Exit costs
On the assumption that BHPL would abandon the premises at the end of the 2005 financial year, it would then become liable for the costs of such abandonment. That would include rental payments, the outgoings payable under the Sublease and any payment it was liable to make for “making good” the premises.
In 2008, it abandoned the Premises on 31 January 2008 and TTC re-leased them from 1 June 2008. It is, of course, unclear whether this would have happened in 2005, though there was evidence in a very limited way that Mr McKennal was, in 2006, interested in locating into the Hyperdome, so it cannot be accepted that the Premises would not be re-leased.
In my view, the four months it took in 2008 to re-lease the Premises is a general guide.
That would, in 2005, have been, so far as I can tell from the evidence available to me from Mr Meredith’s very helpful calculations, amount to $59 705.
Mr Meredith said that these costs, however, are only relevant if there is a cause of action in respect of those representations being misleading or deceptive conduct made after BHPL entered into the Sublease. That is not the situation here.
On the other hand, the exit costs in fact payable to TTC are recoverable as they constituted a loss that is attributable to the entry into the Sublease and the need to abandon it. Accordingly, that must be taken into account. This will be the amount payable on the TTC claim. That amount should then be included.
(h) Interest
Under r 1619 of the Court Procedures Rules, the Court may include in the damages it awards, interest on those damages until judgment. That interest is payable to compensate BHPL for the loss of being kept out of the amount of damages since the cause of action arose: Grincelis v House [2000] HCA 42; 201 CLR 321 at 328-9; [16]. That interest is properly categorised as part of the damages: Haines v Bendall (1991) 172 CLR 60 at 66.
There is no good reason not to award such interest in this case and so it should be awarded: Ruby v Marsh (1975) 132 CLR 642 at 644.
Under Sch 2 of the Court Procedures Rules, that rate of pre-judgment interest will be nine per cent per annum until 30 June 2010. From there, the rate for every six months is the rate that is four per cent above the cash rate published by the Reserve Bank of Australia before the start of each period or 1 January or 1 July each year. I shall calculate the interest on the amounts to be paid in accordance with these rules.
So far as the capital outlays are concerned, the interest should date from BHPL taking over the business and entering into the Sublease, namely 1 September 2003.
As to the borrowing costs, the amount does not warrant special treatment and so I will calculate the interest from to 30 June 2005.
As to the trading losses, I shall calculate interest on the first year’s loss assessed by Mr Meredith of $38 640 for 10 months from 1 September 2003 to 1 July 2004 and then the full amount thereafter.
Calculating these amounts, the interest will be:
1. Capital outlay on $358 895.00: $393 852.28
2. Borrowings costs on $ 22 905.00: $21 357.63
3. Trading losses on $263 492.00: $228 836.97
(i) Who is liable?
The unity of interest of TTC and Leda in the proceedings has masked an issue that I need now to determine.
The only misleading or deceptive conduct I have found for which BHPL is entitled to damages is that engaged in by Mr Beirne by silence or omission. He was, at the relevant time, employed by Leda. Thus, Leda is, under the Third Party Claim, liable to BHPL.
On the other hand, TTC has no liability for this conduct. As noted above (at [144]), any liability of Leda was not transferred to TTC by the assignment.
The consequence of this is that there must be judgment for TTC on its claim and BHPL’s Counterclaim must be dismissed. There must be judgment for BHPL on the Third Party Claim.
Summary
The amount payable to TTC by BHPL is $52 841 plus interest from 1 June 2008 which I calculate as $35 382.06. Thus, there will be judgment for TTC against BHPL in the sum of $88 223.06.
The damages payable to BHPL by Leda are as follows:
Capital outlay $ 358 895.00
Interest $ 393 852.28
Borrowing costs $ 22 905.00
Interest $ 21 357.63
Trading losses $ 263 492.00
Interest $ 228 836.97
Total $1 289 338.88
I will enter judgment for BHPL against Leda for this amount together with the amount of the exit costs payable to TTC.
Costs
While TTC has obtained judgment on its claim and dismissal of the counterclaim, it should have its costs of both of its claim and of the Counterclaim.
While BHPL has succeeded in obtaining judgment on its Third Party Claim against Leda, it should have its costs of that claim. There were, however, significant issues at the hearing on which ultimately BHPL did not ultimately rely. On some of these, I found against it. These included the post lease representations, about most of which, no submissions were made.
Much was also made of the effect of the developments constructed by TTC and Leda on the foot traffic in the Coles Mall. Despite all this evidence, the Coles Door remained the door with the second highest foot traffic in the Hyperdome.
While I accept that the works did reduce the traffic past the BHPL store, I would not have found on the evidence that this was intended by the works or created any unfairness to BHPL. There was no unconscionable conduct involved.
Ultimately, I would not have found for BHPL on this basis.
Accordingly, I consider that it is appropriate for the costs payable to BHPL on the Third Party Claim to be moderated in this case. While I could make an order as to costs of issues, I consider that a reasonable assessment would be that BHPL should have two fifths of its costs of the Third Party Claim.
I will, however, hear BHPL and Leda as to these costs.
I will enter judgment and make declaration and orders in accordance with these reasons.
I sincerely regret that the pressure of business of the Court has delayed the delivery of judgment in this matter. I have been working on it for much of the time since the hearing. I have carefully read the entire transcript and so much of the exhibits as were relevant and referred to by the parties directly or indirectly. I have read my contemporaneous notes and have listened to parts of the audio recording of the proceedings. I have also had detailed and comprehensive written submissions from the parties which I have also carefully read a number of times. These have resulted in a good recall of the witnesses giving evidence, notwithstanding the passage of time.
| I certify that the preceding one thousand two hundred and fifty-eight [1259] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Chief Justice Refshauge. Associate: Date: 1 May 2017 |
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Amendment
1 May 20171. In paragraph 10 the word “Society” should be replaced with “Social”.
2.Please see additional paragraph “1259”.
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