Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd
[2005] WASCA 174
•16 SEPTEMBER 2005
WARWICK ENTERTAINMENT CENTRE PTY LTD & ANOR -v- ALPINE HOLDINGS PTY LTD & ORS [2005] WASCA 174
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASCA 174 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | FUL:108/2003 | 20 & 21 JUNE 2005 | |
| Coram: | STEYTLER P MCLURE JA PULLIN JA | 16/09/05 | |
| 50 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed Cross-appeal dismissed | ||
| A | |||
| PDF Version |
| Parties: | WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918) WESTGEM HOLDINGS PTY LTD (ACN 050 218 954) ALPINE HOLDINGS PTY LTD EGON KONIG SHELLEY KONIG ROBERT STEELE BRIAN McCUBBING |
Catchwords: | Trade practices Misleading or deceptive conduct Lease for coffee shop in entertainment centre Whether lessee misled and induced to enter lease by representations made by agents of the lessor Whether express terms of the lease negated effect of misleading conduct Trade practices Misleading or deceptive conduct Causation and reliance Whether causation established where lessee relied on numerous representations, only some of which were misleading Effect of exclusion clauses Whether conduct amounting to an affirmation of the lease at common law precluded a finding of reliance on misleading conduct Damages Trade practices Misleading or deceptive conduct Expectation damages Quantification of damages Calculation of interest |
Legislation: | Supreme Court Act 1935 (WA), s 32 Trade Practices Act 1974 (Cth), s 52, s 82(1), s 87 |
Case References: | Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 Andrew Knox Holdings Pty Ltd v ANZ Banking Group Ltd [1997] ANZ ConvR 101 Astley v Austrust Ltd (1999) 197 CLR 1 Bateman v Slatyer (1987) 71 ALR 553 Brothers v Park [2004] NSWCA 241 Byers v Dorotea Pty Ltd (1986) 69 ALR 715 Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 Coghlan v Pyoanee Pty Ltd [2003] 2 Qd R 636 Commonwealth Bank of Australia v Smith (1991) 102 ALR 453 Corbidge v Bakery Fun Factory Fun Shop Pty Ltd (1984) ATPR 40-493 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 79 ALJR 206 Fink v Fink (1946) 74 CLR 127 Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Gilchrist v ATS Amusements Pty Ltd (1982) 41 ALR 558 Gould v Vaggelas (1985) 157 CLR 215 Hardy v Your Tabs Pty Ltd (in liq) [2000] NSWCA 150 Havyn Pty Ltd v Webster [2005] NSWCA 182 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 2) (1989) 40 FCR 76 Henville v Walker (2001) 206 CLR 459 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 Kewside Pty Ltd v Warman International Ltd (1990) ATPR 41-012 Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 Mann Judd (A Firm) v Paper Sales Australia (WA) Pty Ltd, unreported, SCt of WA; Library No 980565; 25 September 1998 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 Mister Figgins v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 Newmarket Corporation Pty Ltd v Kee-Vee Properties Pty Ltd [2003] WASC 157 O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR 41-558 Pallos v Munro [1970] 3 NSWR 110 Petera Pty Ltd v EAJ Pty Ltd (1985) 7 FCR 375 Radferry Pty Ltd v Starborne Holdings Pty Ltd (1999) ATPR 46-189 Ratcliffe v Evans [1892] 2 QB 524 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Tenji v Henneberry & Associates Pty Ltd (2000) 98 FCR 324 Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426 TN Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 110 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 79 ALJR 129 Traill v Baring (1864) 4 De GJ & Sm 318 With v O'Flanagan [1936] Ch 575 IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 Alati v Kruger (1955) 94 CLR 216 Australian Cement Holdings Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 799 Canadian & Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd [1947] AC 46 Coulton v Holcombe (1986) 162 CLR 1 Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (No 2) (1987) 16 FCR 410 Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522 GIO Australia Holdings Ltd v Marks (1996) 70 FCR 559 House v The King (1936) 55 CLR 499 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 Kinberley NZI Finance Ltd v Torero Pty Ltd (1989) ASC 55-943 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 Leichhardt Municipal Council v Green [2004] NSWCA 341 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Metwally (No 2) v University of Wollongong (1985) 60 ALR 68 Morgan v Johnson (1998) 44 NSWLR 578 Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 Seton Laing & Co v Lafone (1887) 19 QBD 68 Talbot v Truslove (1926) 28 WALR 86 Walsh v Lonsdale (1882) 21 Ch D 9 Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 Zonett v Elcom Credit Union Ltd (1990) 94 ALR 445 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : WARWICK ENTERTAINMENT CENTRE PTY LTD & ANOR -v- ALPINE HOLDINGS PTY LTD & ORS [2005] WASCA 174 CORAM : STEYTLER P
- MCLURE JA
PULLIN JA
- First Appellant
WESTGEM HOLDINGS PTY LTD (ACN 050 218 954)
Second Appellant
AND
ALPINE HOLDINGS PTY LTD
First Respondent
EGON KONIG
Second Respondent
SHELLEY KONIG
Third Respondent
ROBERT STEELE
Fourth Respondent
(Page 2)
- BRIAN McCUBBING
Fifth Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : ROBERTS-SMITH J
Citation : ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53
File No : CIV 1208 of 1998
Catchwords:
Trade practices - Misleading or deceptive conduct - Lease for coffee shop in entertainment centre - Whether lessee misled and induced to enter lease by representations made by agents of the lessor - Whether express terms of the lease negated effect of misleading conduct
Trade practices - Misleading or deceptive conduct - Causation and reliance - Whether causation established where lessee relied on numerous representations, only some of which were misleading - Effect of exclusion clauses - Whether conduct amounting to an affirmation of the lease at common law precluded a finding of reliance on misleading conduct
Damages - Trade practices - Misleading or deceptive conduct - Expectation damages - Quantification of damages - Calculation of interest
Legislation:
Supreme Court Act 1935 (WA), s 32
Trade Practices Act 1974 (Cth), s 52, s 82(1), s 87
Result:
Appeal allowed
Cross-appeal dismissed
(Page 3)
Category: A
Representation:
Counsel:
First Appellant : Mr S D Rares QC & Mr N D C Dillon
Second Appellant : Mr S D Rares QC & Mr N D C Dillon
First Respondent : Mr N W McKerracher QC & Mr A Metaxas
Second Respondent : Mr N W McKerracher QC & Mr A Metaxas
Third Respondent : Mr N W McKerracher QC & Mr A Metaxas
Fourth Respondent : No appearance
Fifth Respondent : No appearance
Solicitors:
First Appellant : Williams & Hughes
Second Appellant : Williams & Hughes
First Respondent : Arthur Metaxas & Co
Second Respondent : Arthur Metaxas & Co
Third Respondent : Arthur Metaxas & Co
Fourth Respondent : No appearance
Fifth Respondent : No appearance
Case(s) referred to in judgment(s):
Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353
Andrew Knox Holdings Pty Ltd v ANZ Banking Group Ltd [1997] ANZ ConvR 101
Astley v Austrust Ltd (1999) 197 CLR 1
Bateman v Slatyer (1987) 71 ALR 553
Brothers v Park [2004] NSWCA 241
Byers v Dorotea Pty Ltd (1986) 69 ALR 715
Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367
Coghlan v Pyoanee Pty Ltd [2003] 2 Qd R 636
Commonwealth Bank of Australia v Smith (1991) 102 ALR 453
Corbidge v Bakery Fun Factory Fun Shop Pty Ltd (1984) ATPR 40-493
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 79 ALJR 206
Fink v Fink (1946) 74 CLR 127
(Page 4)
Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Gilchrist v ATS Amusements Pty Ltd (1982) 41 ALR 558
Gould v Vaggelas (1985) 157 CLR 215
Hardy v Your Tabs Pty Ltd (in liq) [2000] NSWCA 150
Havyn Pty Ltd v Webster [2005] NSWCA 182
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 2) (1989) 40 FCR 76
Henville v Walker (2001) 206 CLR 459
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109
Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26
JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378
Kewside Pty Ltd v Warman International Ltd (1990) ATPR 41-012
Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622
Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281
Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535
Mann Judd (A Firm) v Paper Sales Australia (WA) Pty Ltd, unreported, SCt of WA; Library No 980565; 25 September 1998
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Mister Figgins v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388
Newmarket Corporation Pty Ltd v Kee-Vee Properties Pty Ltd [2003] WASC 157
O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455
Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR 41-558
Pallos v Munro [1970] 3 NSWR 110
Petera Pty Ltd v EAJ Pty Ltd (1985) 7 FCR 375
Radferry Pty Ltd v Starborne Holdings Pty Ltd (1999) ATPR 46-189
Ratcliffe v Evans [1892] 2 QB 524
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Tenji v Henneberry & Associates Pty Ltd (2000) 98 FCR 324
Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426
TN Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 110
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 79 ALJR 129
Traill v Baring (1864) 4 De GJ & Sm 318
With v O'Flanagan [1936] Ch 575
(Page 5)
Case(s) also cited:
IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470
Alati v Kruger (1955) 94 CLR 216
Australian Cement Holdings Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 799
Canadian & Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd [1947] AC 46
Coulton v Holcombe (1986) 162 CLR 1
Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (No 2) (1987) 16 FCR 410
Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522
GIO Australia Holdings Ltd v Marks (1996) 70 FCR 559
House v The King (1936) 55 CLR 499
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640
Kinberley NZI Finance Ltd v Torero Pty Ltd (1989) ASC 55-943
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Leichhardt Municipal Council v Green [2004] NSWCA 341
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Metwally (No 2) v University of Wollongong (1985) 60 ALR 68
Morgan v Johnson (1998) 44 NSWLR 578
Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274
Seton Laing & Co v Lafone (1887) 19 QBD 68
Talbot v Truslove (1926) 28 WALR 86
Walsh v Lonsdale (1882) 21 Ch D 9
Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514
Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97
Zonett v Elcom Credit Union Ltd (1990) 94 ALR 445
(Page 6)
1 STEYTLER P: This appeal and cross-appeal raise a number of issues concerning s 52 of the Trade Practices Act 1974 (Cth) ("Act") and the relief which should be awarded in a case of breach of that section. As with so many of such cases, it arises out of misrepresentations which were made to a prospective tenant of commercial premises.
The parties
2 The first and second appellants (respectively "Warwick Entertainment" and "Westgem") are subsidiaries of Westpoint Corporation Pty Ltd ("Westpoint"). Westpoint is owned by its sole beneficial shareholder, Mr Norman Carey. The fifth respondent, Mr Brian McCubbing, was, at the material time, a licensed valuer and real estate agent and a director of Westgem, which traded as Westpoint Realty. The fourth respondent, Mr Robert Steele, was employed by Westpoint Realty. The first respondent ("Alpine") is owned by the second and third respondents, Mr Egon Konig and Mrs Shelley Konig. Mr Konig is a chef. The fourth and fifth respondents were not represented at, and took no part in, the appeal.
The evidence at trial
3 There is little controversy as regards the facts which were found to have been established by the evidence which was led at the trial.
4 In the late 1980's and early 1990's Westpoint and associated companies developed a site in Warwick for the construction of an entertainment centre ("Centre"). The focal point of the Centre was to be a cinema complex. Warwick Entertainment ultimately became the landlord of the Centre. While the Centre was under construction, Westpoint Realty, by Mr McCubbing and Mr Steele, set about finding tenants for it.
5 In May 1992 Mrs Konig saw a full-page advertisement in the Stirling Times. It advertised tenancies in the Centre. The advertisement revealed that the Centre would be adjacent to an existing shopping centre and that, once completed, it would contain a large cinema complex, an international food hall and restaurants. Mrs Konig showed the advertisement to her husband. At that time he operated two businesses in Perth. Both were located in the Carillon Arcade in the city. They were respectively named Egon's Coffee and Patisserie ("Egon's") and Carillon Beverages. Egon's was owned by Mr and Mrs Konig and Carillon Beverages was owned by Alpine. The Konigs wanted to open a business in the northern suburbs, closer to where they lived. They consequently proposed to sell one of the two businesses in order to enable them to do this.
(Page 7)
6 On 21 May 1992 Mr Konig wrote to Westpoint Realty making inquiries about the Centre. He also spoke, on the telephone, to Mr Steele. Mr Steele invited him to attend a meeting at the offices of Westpoint. He did so. At that meeting, he was told that a number of tenants had already been procured for, or were in the course of negotiations in respect of, the Centre, including Hungry Jack's, Pancake Parlour or a bistro, Kentucky Fried Chicken, Hospital Benefit Fund, a bank and video stores. Mr Konig was shown a plan of the Centre, which was to be built on two levels. This meeting was followed by a second meeting between Mr Konig and Mr Steele at some time between May and July 1992.
7 Towards the end of July or in early August 1992 a third meeting took place. This was attended by Mr Steele, Mr McCubbing and Mr Konig. Mr Konig (who attended the meeting in his capacity as a director of Alpine) was told that a tenancy was available on the upper level of the Centre. Mr Konig claimed that a number of misrepresentations were made to him during this third meeting. These are pleaded in pars 7 and 7A of the statement of claim filed on behalf of Alpine and Mr and Mrs Konig (to whom I shall refer, together, as "the respondents"). It is convenient to set out those paragraphs in full:
"7. During the negotiations … both Steele and McCubbing represented to the Second Plaintiff [Mr Konig] and thereby to him, the First Plaintiff [Alpine] and the Third Plaintiff [Mrs Konig] that:
(a) in addition to the business [proposed to be operated at the Centre by Alpine], the upper level of the Centre would also include an Indian Restaurant, or Bistro, Kentucky Fried Chicken, Hungry Jacks and a Pancake Parlour and such occupancy together with the cinema complex in the upper level would attract patrons to the Business and produce spinoff sales;
(b) the construction of the Centre including car parks, cinema and control of patrons to the Centre would be such as to place the First Plaintiff's shop in a prime location attracting patrons from those attending the cinema as well as those using the parking premises at the entrance to the Centre and availing themselves of shopping facilities in the Warwick Shopping Centre proper;
(Page 8)
- (c) there would be adequate signage on the upper and lower levels of the Centre advertising facilities including the Business;
(d) the tenants in the upper level of the Centre would not be permitted to sell coffee and cappuccino on its own, such sales being preserved for exclusive sales from the Business; which was to be the only coffee shop in the foyer;
(e) no shop in the upper level of the Centre would be permitted to sell drinks, ice creams or any food direct to patrons in the foyer of the cinema complex;
(f) with the exception of the Indian Restaurant, Kentucky Fried Chicken, Hungry Jacks and the Pancake Parlour the Business would be the only shop to operate in the foyer of the cinema.
- 7A. During the negotiations … and contrary to the representations pleaded in paragraph 7(e), both Steele and McCubbing knew but failed to disclose to, and concealed from, the Second Plaintiff and thereby to him, the First Plaintiff and the Third Plaintiff, that there would be a 'Candy Bar' on the premises to be situated in and around the foyer selling food and drinks direct to patrons of the cinema.
PARTICULARS OF FAILURE TO DISCLOSE
During negotiations … McCubbing failed to include the 'Candy Bar' in the proposed tenanted floor plan, when such floor plan was filled in and shown to the Second Plaintiff and thereby to the First and Second [sic] Plaintiffs."
8 The representations referred to in par 7 were said to have been made by Messrs Steele and McCubbing on behalf of Westgem and Warwick Entertainment.
9 Alpine was subsequently approved as a tenant of the Centre and, according to Mrs Konig, at some time between August and October 1992 she and her husband "decided to go ahead with the coffee shop at the complex" and submitted an application accordingly. During this period, a fourth meeting took place. It was between Mr Steele and Mr and
(Page 9)
- Mrs Konig, although Mr McCubbing attended briefly. During the meeting, Mr Konig asked whether other tenants had been signed up for the upper level of the Centre. Mr Steele told him that negotiations were going very well with all tenants.
10 On 18 August 1992 Mr and Mrs Konig entered into a contract for the sale of Egon's. The business was sold for $385,000 and settlement took place on 30 November 1992.
11 Prior to that, on 15 September 1992, a fifth meeting took place. It was held at the Konigs' home and was attended by Mr Steele and Mr and Mrs Konig. Mr Steele brought with him a proposed written agreement to lease the premises proposed to be used for the coffee shop. The Konigs were provided with plans of the Centre at or prior to the meeting. These were consistent with the information which they had been given at the third meeting. Although the agreement to lease which was ultimately executed by the respondents is dated 4 February 1993, Mr and Mrs Konig said in evidence at the trial that they executed it that evening. The trial Judge found, in this respect, that the agreement to lease which was produced by Mr Steele at this meeting was a handwritten draft from which a more formal document was later prepared. Whatever may be the position in that respect, there is no doubt that, by 4 February 1993, the agreement to lease had been executed by the parties to it, being Warwick Entertainment (as lessor), Alpine (as lessee) and Mr and Mrs Konig (as guarantors). The agreement annexed a deed of lease. Clause 7.5 of the agreement to lease provided that, within 14 days from the date of availability of the leased premises for fit-out, Warwick Entertainment would deliver the deed of lease to Alpine and, within seven days thereafter, Alpine and the Konigs would execute it. The term of the lease was to be a period of 15 years.
12 The Konigs began to fit out the shop, styled the "Beverley Hills Café", in January 1993. The fit-out was completed in September 1993. It cost $248,192. In addition, Alpine paid a fee of $300 for approval of the fit-out. The Centre opened on 11 September 1993 and Alpine began trading on 27 September 1993.
13 The Konigs were permitted access to the Centre only a few days before it opened. They then learned, for the first time, that the two fast-food outlets (originally said to have been Kentucky Fried Chicken and Hungry Jack's, but now to be McDonald's and Chicken Treat) would not be located on the upper level of the Centre, on the same floor as the Beverley Hills Café, as they had been led to believe. Instead, they were to
(Page 10)
- be drive-through restaurants in a different part of the Centre. This was a matter of concern to the Konigs because they had expected to achieve a considerable volume of "spin-off" business from these outlets. Moreover, a candy bar for the cinema complex had been built in the foyer directly opposite the Beverley Hills Café. The Konigs were also concerned by the fact that two large pillars had been built in front of the coffee shop's carpark entrance, almost obstructing that entrance (although these had been shown on the plans which had earlier been provided to them). Notwithstanding all of this, because a large amount of money had already been spent on the business, Mr and Mrs Konig decided that they "had to work hard, prepare for the venue opening, and hope for the best".
14 Shortly after opening their business on 27 September 1993, the Konigs received a letter, dated 28 September 1993, from Westpoint Realty enclosing the deed of lease and also plans of the Centre. The Konigs said that this was the first time that they had been given plans which showed that Hungry Jack's and Kentucky Fried Chicken were not to be tenants in the Centre and that the two fast-food outlets which were to replace them were to be in different locations to those which had originally been represented to the Konigs in respect of Hungry Jack's and Kentucky Fried Chicken. These plans also disclosed that there was to be another café, to be known as "Frederico's", which would trade from a location close to the Beverley Hills Café.
15 Matters went from bad to worse when, by early October, the Konigs discovered that another food outlet, "Deadly Desserts", was to open in the Centre close to the Beverley Hills Café. Uncertain as to what they should do, the Konigs "put off" signing the deed of lease. Their business was going badly and the Centre was then still not fully leased.
16 On 6 October 1993 Mrs Konig wrote to Mr Ian Scott of Westpoint Realty. He was its property manager. Alpine had, by then, received an account for rent for the Beverley Hills Café for the period from 15 September 1993 onwards. Mrs Konig's letter objected to this, because the premises had been open only from 27 September 1993. She made a number of other complaints in the letter, including one about the opening of Deadly Desserts. She said that she and her husband had been led to believe that they would have a monopoly in the "coffee shop trade", that their "out of meal time" trade was almost completely cakes and coffee and that this was exactly what Deadly Desserts would be selling. She asked that Alpine be allowed a rent-free period until 15 October 1993, in order to enable its business to be established.
(Page 11)
17 On 27 October 1993 Alpine ceased to operate Carillon Beverages. That business had been sold for $262,000.
18 On 6 December 1993 Mrs Konig wrote, once again, to Mr Scott. Again, she made a number of complaints. She asked that the business be permitted to reduce its hours of trading. She also sought a rent review. She received no response to either request.
19 In December 1993 the Konigs sought legal advice in respect of their position "regarding the lease". They believed that they had been misled. The solicitors approached by them, Murie and Edward, advised them (as Mrs Konig put it) that "because … [they] had signed an agreement to lease … [they] should also sign the lease as … [they] were immediately bound already". She said that Murie and Edward told them that, once they had signed the lease, they could take legal action at a later date if they so wished.
20 On 23 December 1993 Murie and Edward wrote to Mr Scott on Alpine's behalf. The letter was as follows:
"We act for the proprietors of the Beverley Hills Café, the lessees.
Our client has provided us with instructions in relation to difficulties which they have faced in their business arising out of representations made to them by the lessor and/or yourselves as agents prior to them entering into leases in relation to the Warwick Entertainment Centre Complex.
Furthermore, there are also various other complaints relating to unsatisfactory conditions which have had some impact on the profitability of our clients' business and appear to have impeded its future growth. We understand that some of these complaints have been addressed in our clients' letter to you dated 6 December 1993, a copy of which we have sighted.
Would you please note our interest in the matter and respond directly to us in relation to this matter. In the New Year, we will communicate with you again but with a view to opening further lines of communication in the hope that this matter can be resolved without litigation."
21 At around this time (the timing was unclear from the evidence) Mr and Mrs Konig received a letter from Westpoint (which appears not to
(Page 12)
- have been tendered at trial) which told them that they had two working days within which to sign the lease, failing which legal action would be taken at their expense. They ultimately signed the lease, in reliance upon their solicitors' advice, on 21 February 1994.
22 On 5 May 1994, Frederico's Café Restaurant opened for business, close to the Beverley Hills Café. It advertised cappuccinos for sale.
23 Business continued to be bad for the Beverley Hills Café. Mr and Mrs Konig wrote to Mr Carey on a number of occasions, complaining about their trading losses and attributing these to misrepresentations which had been made to them. They sought a rent reduction. They met with Mr Carey to discuss these issues. Their complaints were dismissed and no rent relief was given to them.
24 Alpine had attempted to sell the business from January 1994 onwards. It continued with these attempts. It wanted a purchase price of $195,000. Between August 1994 and September 1996, five agents were appointed in order to sell the business. Only one offer was received. This was at a price of $20,000.
25 In September or October 1996 Mr Konig again met with Mr Carey. Mr Konig suggested that Westpoint purchase the space occupied by the Beverley Hills Café for $50,000 in order to build another cinema. This offer was later refused.
26 Eventually, in January 1997, Alpine found a buyer for the business. It entered into an agreement with a Mr and Mrs Lilburne for the sale of the business for $8000 (including $1000 for stock). The agreement was conditional upon either a satisfactory assignment to the Lilburnes of the existing lease or the grant of a new lease to them. Confident that the sale would go through, Mr and Mrs Konig handed over the business to the Lilburnes in February 1997 and moved to Pemberton. However, the sale agreement fell through when Warwick Entertainment declined to agree to the assignment or to grant a new lease to the Lilburnes. When Mr and Mrs Konig learned of this, they travelled back to Perth. This was in early February 1997. They went to the coffee shop at about midnight and removed all of its chairs, tables, fridges, freezers and other removable items. They took these to Pemberton. They had, by then, been operating the coffee shop for just under three and a half years.
27 On 11 February 1997 Warwick Entertainment terminated the lease and re-entered the premises. It demanded from Alpine, and from the Konigs as guarantors, payment of the sum of $627,581.08. This was said
(Page 13)
- to be the total of the rent payable under the lease, had it not been terminated, and the variable outgoings and rates and taxes payable by Alpine, less the rent and variable outgoings which Warwick Entertainment expected to receive for the premises after reletting them.
The principal issues which arose at the trial and their manner of resolution
28 At the trial, counsel for the respondents contended that, were it not for the misrepresentations which had been made to them, the respondents would not have entered into the lease and suffered the losses made by them. However, the appellants denied that any misrepresentations had been made by them. They said that, in any event, cls 20.1 and 20.2 of the agreement to lease (which I will discuss below) excluded a cause of action for any misleading conduct which might have taken place prior to the execution of that agreement. Counsel for the appellants also contended that, if there had been any misleading conduct, causation and reliance had not been established. He submitted that any misrepresentations made by the appellants did not affect the decision of the respondents to enter into the lease and guarantee. The appellants counterclaimed for unpaid rent and other moneys owing under the lease.
29 The trial Judge was satisfied that the representations pleaded in pars 7(a), (d) and (f) of the statement of claim had been made, that these had been misleading and that the appellants had consequently contravened s 52 of the Act. He also found that these misrepresentations had caused the respondents to enter into the lease and guarantee. He said that the exclusion clauses in the agreement to lease were ineffective because they had not prevented the respondents from relying on the misrepresentations at the time at which they entered into that agreement, as they were then still unaware that the representations were untrue.
30 The trial Judge made an order under s 87 of the Act declaring the lease to be void ab initio. He awarded to Alpine the amount of its estimated trading losses between 23 May 1993 and 6 January 1997, amounting in all to $169,786. He also awarded to Alpine "Forecast profit foregone over 15 year lease period", amounting to $738,510. From the total of those amounts he deducted the balance of a loan owed by Alpine to Mr and Mrs Konig, being $168,436. This produced an amount of $739,860. However, because Alpine had only claimed damages amounting to $548,296, he reduced his award to that sum. He also awarded to Mr and Mrs Konig damages amounting to $309,209, comprising $15,607, being the expenses incurred in selling Egon's, $168,436, being the unpaid balance of the moneys loaned by them to
(Page 14)
- Alpine, and $125,166 in respect of lost wages. In addition, he awarded to each of Mr and Mrs Konig an amount of $10,000 as compensation for distress, inconvenience and anxiety. He ordered that Alpine be paid interest on the sum of $548,296 from 12 September 1997 and that the Konigs be paid interest on $140,773 (the total of the lost wages of $125,166 and the selling expenses of $15,607 incurred in respect of Egon's) from 12 September 1997. He dismissed the counterclaim.
Issues on the appeal and cross-appeal
31 There were originally 10 grounds of appeal. The appellants have since moved to add a further three grounds, each of which has been objected to by the respondents upon the ground that the amendments were moved too late in the proceedings and raise issues which were not raised at the trial and which, if they had been so raised, might have been met by additional evidence. These are proposed grounds 1 (the original ground 1 has become ground 1A), 5A and 6A.
32 Proposed grounds 1 and 5A are related. During closing submissions made on the last day of the trial, on 14 November 2003, Warwick Entertainment applied to amend its defence so as to plead that, when the respondents executed the lease, they knew that they had been misled in the respects pleaded in the statement of claim and were consequently estopped from relying upon those matters, or had abandoned or waived any entitlement to raise them, or had "affirmed their acceptance of the terms of the lease" notwithstanding those matters. The trial Judge refused to allow the amendment. He considered that it might raise factual issues requiring further evidence and that any prejudice to the respondents could not be satisfactorily accommodated by an adjournment of the trial and an order for costs. By proposed ground 1, the appellants contend that these proposed amendments would not have required any additional evidence and that the trial Judge, having "held that on the evidence and (probably) on the pleadings the defences raised by the proposed amendments would be open to the … Appellants in any event", "… should have allowed the amendments". Proposed ground 5A contends that the trial Judge erred in declaring the lease to have been void ab initio and in awarding the respondents damages in circumstances in which, knowing of the falsity of the misrepresentations pleaded in pars 7(a), (d) and (f) of their statement of claim, they had elected to affirm the agreement to lease by executing the lease.
33 Proposed ground 6A challenges the trial Judge's calculation, for the purpose of the damages awarded by him to Alpine, of the annual net profit
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- before tax which Alpine would have earned had the misrepresentations been true.
34 The grounds of appeal which are not objected to are, in essence, as follows:
1A The trial Judge erred in finding that the representation pleaded in par 7(a) of the statement of claim was misleading at the time it was made or that there were then no reasonable grounds for making it.
2 The trial Judge erred in that, having found that the respondents "had failed to prove or falsify three of the pleaded representations and one allegation of Fraud, the representations that were pleaded in paragraphs 7(a), (d) and (f) … caused the loss alleged to have been suffered".
3 The trial Judge erred in finding that the misrepresentations pleaded in pars 7(d) and (f) "were not materially affected by the express terms of the Lease".
4 The trial Judge erred in finding that the respondents relied upon, or were induced by, the misrepresentations pleaded in pars 7(a), (d) and (f) of the statement of claim in entering into the Lease and that any such reliance or inducement was the cause of the loss or damage claimed by them. The appellants rely, in this respect, upon the fact that the respondents knew, at the time of executing the lease, of the inaccuracy of the representations which had been made to them and also upon the terms of cls 20.1 and 20.2 of the agreement to lease (which are set out later in these reasons).
5 The trial Judge erred in failing to give effect to cls 20.1 and 20.2 of the agreement for lease.
6 The trial Judge erred in awarding "expectation" damages to Alpine.
7 The trial Judge erred in awarding Mr and Mrs Konig the amount of $168,486.
7A The trial Judge erred in awarding lost profits to Alpine as well as lost wages to Mr and Mrs Konig.
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- 8 The trial Judge erred in awarding to Mr and Mrs Konig the sum of $15,607 in respect of the expenses of selling Egon's.
10 (Ground 9 was deleted). The trial Judge erred in declaring the lease to have been void ab initio and in dismissing the counterclaim.
35 The grounds of cross-appeal (which, unusually, start with a ground numbered 15) are in essence as follows:
15. The trial Judge erred in limiting the award of damages in favour of Alpine to the sum of $548,296.
16. Alternatively, "and to the extent that the appeal is allowed as regards the award of profits foregone after 7 January 1997", the trial Judge erred, in a number of identified respects (which I will set out later in these reasons), in his calculation of the respondents' damages, and interest, until that date.
17. In the further alternative, "and if the first, second and third respondents' … losses were to be assessed by reference to the tortious measure then the … trial Judge erred in law …", in a number of identified respects (which I will also set out later in these reasons), in his calculation of the damages which should be awarded.
18. The trial Judge erred in calculating interest on the awards made by him from 12 September 1997 rather than from the date of the breach or of the loss.
19. The trial Judge erred in his calculation of the amount in respect of which interest should be awarded to Mr and Mrs Konig.
20. The trial Judge erred in failing to allow a claim for indemnity costs, from 10 October 2002, which had been made on behalf of the respondents.
36 I propose to deal with the grounds of appeal and cross-appeal in order, save that I will defer dealing with proposed ground 1 of the grounds of appeal until I come to deal with ground 5A thereof.
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Ground of appeal 1A
37 I have said that ground 1A challenges the trial Judge's findings as regards the misleading character of the representations pleaded in par 7(a) of the statement of claim. While some written submissions were addressed, also, to the question whether the representations pleaded in pars 7(d) and (f) had been shown to be misleading, the amendments to the grounds of appeal deleted the ground which had formerly existed in respect of these representations.
38 As will be apparent, the representation pleaded in par 7(a) was that the tenants on the upper level of the Centre would include an Indian restaurant or bistro, a Kentucky Fried Chicken outlet, a Hungry Jack's outlet and a Pancake Parlour and that these tenants, together with the cinema complex, would attract patrons to Alpine's business. I have said that this representation was found to have been made at the third meeting. Also, the plan of the Centre that Mr Konig was then given had been marked by Mr McCubbing with the letters "HJ's", "KFC" and "Pancake Parlour" at various places on the upper level of the Centre.
39 It is common cause that none of those tenancies was secured for the Centre. The shop premises that were to have been taken by Pancake Parlour were split into two areas. One of these was taken up by the business "Deadly Desserts" and the other remained vacant for the first 12 months of the operation of the Centre. The premises earmarked for the bistro were ultimately used as office space by a federal member of parliament. One of the sites marked as "HJ's" or "KFC" became Frederico's Café Restaurant. I have said that neither Hungry Jack's nor Kentucky Fried Chicken became a tenant of the Centre, although they were respectively replaced by McDonald's and Chicken Treat. The respondents had no difficulty with the substitution of Hungry Jack's for McDonald's or with that of Kentucky Fried Chicken for Chicken Treat. As I have mentioned, what concerned them was that these fast-food businesses were not to be on the same level as the Beverley Hills Café and were instead to be drive-through facilities in a separate part of the building, with the consequence that their customers did not need to enter the Centre.
40 While all of this is accepted by the appellants, they contend that, at the time at which the representation concerning these tenants was made, that representation was true or there were, at least, reasonable grounds for making it. They argue, also, that the trial Judge gave no reasons for his conclusion that there were not reasonable grounds for making it.
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41 The trial Judge found (at [186]) that, although the representation did not go so far as to assert that these tenancies had been secured, it did go so far as to assert that they, or similar tenancies, "would be" secured. That, he said (at [186]), was sufficient in the circumstances to give rise to an obligation on the part of the appellants to inform the respondents if the position changed. Moreover, he said (ibid) that the representation which was made "overstated the actual position to a misleading extent".
42 The trial Judge also found that the appellants had drawn up new plans for drive-through, fast-food outlets in about August 1992 (possibly after the third meeting). This was, of course, prior to the execution of the agreement for lease by the respondents. He said, in this respect (at [190]), that the representation that the fast-food outlets would be inside the Centre and on the same level as Alpine's business was important to the Konigs. He went on to say (ibid):
"They were not specifically informed when the decision was made to change that and did not become aware of it until after they had committed to the lease. I am satisfied the Konigs were not given a copy of the revised plans until late September 1993. In the circumstances there was a duty of disclosure upon the defendants which they failed to discharge (see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83, 95 and Winterton Constructions Pty Ltd v Hambros Australia Ltd(1992) 39 FCR 97)."
43 In my opinion it was undoubtedly open to the trial Judge to find, as he did, that the representation made by the appellants had overstated the position. It was not in dispute that neither Kentucky Fried Chicken nor Hungry Jack's had ever committed to a tenancy and hence that they "would be" tenants. Moreover, while Mr Konig had understood, at the third meeting, that Pancake Parlour was still negotiating for a tenancy, he said that he had then been led to believe that Pancake Parlour and the bistro were competing for the same tenancy in the Centre. His evidence in this respect was obviously accepted by the trial Judge. However, on the face of the evidence, Pancake Parlour and the bistro had never been competing for the same tenancy - I have said that neither became tenants of the Centre.
44 It also seems to me to have been open to the trial Judge to conclude, as he did, that, when it became apparent to the appellants that they would not be able to secure the tenants which had been the subject of the representations made to the respondents, and, most importantly, that the
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- fast-food outlets would be in a different part of the Centre than that which had been represented, they were under an obligation to inform the respondents accordingly.
45 In considering whether s 52 has been contravened, the question is "whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive": Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41, per Gummow J (Black CJ and Cooper J agreeing). Under the common law, when a person makes a representation which he or she knows, or expects, another will rely upon, and the circumstances afterwards alter to the knowledge of the party who made the representation, then that party has a duty to communicate the change to the other: Traill v Baring (1864) 4 De GJ & Sm 318 at 329, per Turner LJ; and With v O'Flanagan [1936] Ch 575 at 583, per Lord Wright MR. This principle has long been held to apply to s 52: Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426. In Demagogue, the Court held that conduct may be misleading or deceptive under s 52 if there is a reasonable expectation of disclosure of information and that information is not disclosed (see also Hardy v Your Tabs Pty Ltd (in liq) [2000] NSWCA 150).
46 The evidence established, and the trial Judge found, that the representations to which I have referred were important to the respondents. That must have been obvious to the appellants, who must consequently have known that the respondents would rely upon them. In these circumstances it was reasonable for the respondents to expect that, if the situation altered, they would be told of this.
47 It follows from all that I have said as regards this ground that the trial Judge's findings in respect of the representation pleaded in par 7(a) of the statement of claim were open to him on the evidence accepted by him and that his reasons for arriving at those findings are sufficiently expressed in his judgment. Ground 1A has consequently not been made out.
Ground of appeal 2
48 By ground 2, the appellants contend that, because the respondents failed to prove that they were misled in the respects contended for in pars 7(b), (c) and (e) and 7A of the statement of claim, and because they had relied, also, on the representations there pleaded (in the case of par 7A, the failure to disclose) in entering into the agreement to lease, the trial Judge erred in finding that their reliance upon the representations pleaded in pars 7(a), (d) and (f) of the statement of claim caused their loss.
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49 It appears from the evidence at trial that the respondents did rely upon the representations or conduct pleaded in pars 7(b), (c) and (e) and 7A of their statement of claim (transcript pages 241 to 243). However, it is well accepted that, for there to be the necessary causal relationship between a contravention of s 52 and loss or damage, so as to satisfy the requirements of s 82(1), it is not essential that the contravention be the sole cause of the loss or damage: Henville v Walker (2001) 206 CLR 459 at 469, per Gleeson CJ. In this case the trial Judge found that the misrepresentations which were proved to have been made played a part in causing the respondents' loss and the evidence undoubtedly left that finding open to him.
50 There was, in particular, a good deal of evidence from each of Mr and Mrs Konig to the effect that the projected customer flow through the Centre was a matter of great importance to them (see, for example, transcript pages 70, 72, 108 and 293) and that the existence of the fast-food outlets inside the Centre and on the same level as the Beverley Hills Café was an important factor in that regard. Moreover, as I have earlier said, they considered that the presence of those outlets on the same level was important in respect of "spin-off" business. Mr Konig said in evidence (transcript page 67) that he considered that "having Hungry Jack's, KFC, etcetera as part of the upper level … [was] a real bonus and incentive, as well as a positive reason … to become part of the centre" and that this "convinced" him "to enter into an agreement … to lease a tenancy on the upper level". He said also (transcript pages 67 - 68) that if he had been told that there were "not going to be such tenants in the upper floor [he] … probably … [w]ould have reconsidered". Mrs Konig's evidence was that if she and her husband had been told "that the tenancy mix was completely different to what … [they] thought it was going to be, that the fast food outlets were going to be completely separate as drive-throughs and would not attract any customers to … [their] business, … [they] would serious[ly] have rethought and … asked for more options and sat back and had another look at it". She said that it definitely "would have been a big hurdle that … [they] would have had to cross" (transcript page 294). She also said that "[their] main concern was that … [they] had Hungry Jack's and KFC there, and with access to the foyer" and that that was "what … [they] were signing up on" (transcript page 287).
51 The trial Judge accepted that evidence and found that causation under ss 82 and 87 had been established. It is consequently irrelevant that the Konigs relied, also, upon other conduct which was not found to have been misleading.
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52 Ground 2 consequently fails.
Ground of appeal 3
53 As ground 3 is particularised, there are two limbs to it. The first challenges the trial Judge's finding of causation upon the ground that the respondents knew of the untruth of the misrepresentations made to them prior to entering into the lease, but nevertheless entered into it. That limb is better addressed in dealing with grounds 4 and 5A (this was the approach adopted by counsel for the appellants) and I will deal with it then. The second limb is that, as to the representations pleaded in pars 7(d) and (f) of the statement of claim, the trial Judge erred in not giving effect to cl 24.7 of the lease. That clause reads as follows:
"24.7 Non-Exclusive Permitted Use
The Permitted Use of the Premises is not exclusive to the Lessee and the Lessor may permit other persons to conduct similar or competing businesses in the Centre."
54 In my opinion this clause provides no answer to the claim advanced by the respondents. On the evidence accepted by the trial Judge, none of the respondents would have entered into the agreement to lease were it not for their reliance upon the misrepresentations made to them. Nor, as he found, would they have entered into the lease were it not for the position in which they then found themselves as a consequence of their reliance upon the appellants' misleading conduct. The fact that the lease contained a provision which provided that Alpine's permitted use of the leased premises was not exclusive does not detract from those propositions.
55 I should add that cl 24.7 is relevant only to the representation pleaded in par 7(d) and that the existence of a right to permit other parties to conduct similar or competing businesses in the Centre does not entirely override a misrepresentation to the effect Alpine's business would, in fact, be the only coffee shop in the foyer and that tenants in the upper level of the Centre would not be permitted to sell coffee or cappuccino on its own.
Grounds of appeal 1, 3, 4, 5 and 5A
56 I propose to deal with this collection of grounds in three stages. First, I propose to deal with that part of ground 4 in which reliance is placed upon cls 20.1 and 20.2 of the agreement to lease and also with ground 5 which deals with the same topic. Then, I propose to deal with the wider issues arising out of the fact of the respondents' knowledge of
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- the untruth of the misrepresentations at the time of their execution of the lease. Finally, I will deal with proposed ground 1.
Clauses 20.1 and 20.2
57 Clauses 20.1 and 20.2 of the agreement to lease read as follows:
"20.1 Document constitutes entire agreement
This document constitutes the entire agreement between the Parties with respect to the subject matter of this Document and contains all of the representations, warranties, covenants and agreements of the Parties in relation to the subject matter of this Document as at the date of this Document.
20.2 Statements etc. not in document void
Any oral statement, representation, undertaking, covenant or agreement made prior to the date of this Document and not contained in this Document is void."
"It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents … whatever they might be."
59 What was there said is of limited assistance in the circumstances of this case. In the case of a claim arising out of a contravention of s 52 of the Act the relevant question, in this context at least, is always one of reliance or inducement. If, as a result of misleading conduct, a person is induced to enter into a contract and suffers loss, the right to a remedy will subsist whatever the parties may provide in their agreement: Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 at 371, per Sheppard J with whom Fox J and, relevantly, Jackson J were in agreement; Petera Pty Ltd v EAJ Pty Ltd (1985) 7 FCR 375 at 378, per Wilcox J; and Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR 41-558
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- at 43,717. Exclusion clauses in a contract will only preclude a remedy under the Act when those clauses demonstrate that the party in question did not, in fact, rely on the conduct or where the conduct could not, as a whole, have been seen to be misleading: Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 557; Kewside Pty Ltd v Warman International Ltd (1990) ATPR 41-012.
60 I have said that, when the agreement to lease was signed by the respondents, they were unaware that they had been misled and, as the trial Judge found, they relied upon the appellants' misleading conduct in entering into that contract. Consequently, their cause of action is not precluded by anything contained within cls 20.1 and 20.2.
Execution of the lease with knowledge
61 That brings me to those parts of grounds 3, 4 and 5 which deal with the issue of execution of the lease by the respondents with knowledge of the untruth of the misrepresentations which had earlier been relied upon by them, and also to proposed ground 5A which, as I have said, raises the issue of affirmation of the agreement to lease arising out of the execution of the lease itself.
62 I should mention, in this respect, that the respondents lodged a notice of contention immediately prior to the hearing of the appeal. In it, they contended that if, pursuant to grounds 4 or 5 of the notice of appeal, the Court was to find that they did not execute the lease in reliance on the misleading and deceptive conduct of the appellants, the judgment of the trial Judge should nonetheless be upheld upon the ground that they executed the agreement to lease in reliance on the appellants' misleading and deceptive conduct and, by execution of that agreement, they were bound by the same covenants as were subsequently contained in the lease. Because I have concluded that grounds 3, 4 and 5 fail, it is unnecessary for me to deal with the notice of contention.
63 The basis for the contentions made on behalf of the appellants in support of the grounds of appeal addressed under this sub-heading, as it emerged in the course of oral argument, is that, when the respondents came to sign the lease, they no longer relied upon the appellants' misrepresentations (knowing of their untruth) and the chain of causation was broken either because of the fact of their execution of the lease with that knowledge or, if the respondents relied upon erroneous legal advice in executing it, by the fact of that advice.
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64 As to the first of these propositions, senior counsel for the appellants points to the principle that a material misrepresentation inducing entry into a contract gives rise to a right to rescind the contract and to the fact that, in this case, the right to rescind the agreement to lease arose prior to execution of the lease itself, the respondents having by then known of the untruth of the representations which were relied upon by them in executing the agreement to lease. That, he said, gave rise to the need for the respondents to make an election whether or not to rescind the agreement to lease or to affirm it by executing the lease itself: see, for example, Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26. He contends that, by electing to affirm, the respondents not only lost any right to avoid or rescind the agreement to lease and, necessarily, to avoid or rescind the lease itself, but also lost any right to complain about the misrepresentations, having consciously chosen to go forward notwithstanding that they had been misled. He submitted, as regards this proposition, that, because the doctrine of election focuses on the words and conduct of the party faced with a choice between inconsistent rights rather than upon an intention to affirm or avoid (as to which see, for example, Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 633 - 634), the fact that the respondents had been given wrong legal advice was irrelevant to the question whether or not they had made an election. He also submitted (relying upon Pallos v Munro [1970] 3 NSWR 110 at 113 and Coghlan v Pyoanee Pty Ltd [2003] 2 Qd R 636 at 639) that, as a consequence of their election, the respondents' rights in respect of the agreement to lease, including those under the Trade Practices Act, merged in the new legal estate they obtained under the lease and any causes of action which they might have had were lost.
65 There is no doubt that, under the common law, where a party affirms a contact in circumstances in which he or she has a right to rescind it, the right to rescind the contract will be lost. That will be so even if the party in question is unaware of his or her right to terminate the contract, so long as that party is aware of all of the facts which give rise to the right: Sargent v ASL Developments Ltd (1974) 131 CLR 634. Senior counsel for the appellants urged upon us the proposition that the common law doctrine is applicable in this case and that it precluded a grant of relief, under s 87 of the Act, in the form of a declaration that the lease is void.
66 However, the courts have often said that common law concepts are not automatically to be transposed into a cause of action for misleading or deceptive conduct under the Act. Section 82 allows a remedy in damages for conduct caused "by" a contravention of s 52. Section 87 has been
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- described as providing a "remedial smorgasbord": Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 at 366 per Mason P. That section reads, so far as is relevant, as follows:
"(1) Without limiting the generality of section 80, where, in a proceeding instituted under this Part … the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in … in contravention of a provision of Part … V … the Court may, whether or not it … makes an order under section 82 … make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention … if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.
…
(2) The orders referred to in subsection (1) and (1A) are:
(a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct … to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order …".
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68 In JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 at 380, the Court (Keely, Hill and Drummond JJ) said:
"The power of the Court to grant relief under the statutory provision [s 87] is wider than the power of the equity court to grant rescission: the bars to rescission in equity, such as affirmation and the non-availability of restitutio in integrum, are no more than discretionary matters that the Court will take into account in deciding whether in a given case to grant relief under the statutory provision: see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 at 564-571; Platz v Creative's Landscape Design Centre Pty Ltd [1989] ATPR 50,309 at 50,312-50,313, approved on appeal in Creative's Landscape Design Centre Pty Ltd v Platz [1989] ATPR at 50,686."
69 Similarly, in Byers v Dorotea Pty Ltd (1986) 69 ALR 715 at 722, and again at 730, Pincus J, after mentioning that affirmation precludes a right of rescission at common law, expressed the opinion that the right to grant relief under the Trade Practices Act is not necessarily brought to an end by affirmation of the contract. Also, in Tenji v Henneberry & Associates Pty Ltd (2000) 98 FCR 324 at 333, French J (with whom Whitlam J agreed at 335) said:
"The effect of an order for avoidance of a contract under s 87 is to be equated only in a limited sense to that of an order for rescission in equity. For orders made under s 87(2)(a) declaring a contract void in whole or in part and ab initio or from a later date have their effect entirely by operation of the statute."
70 See also Tenji, at 330, per French J; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 2) (1989) 40 FCR 76 at 93, per Lee J; Demagogue, above, at 48; Akron Securities, above, at 366; Newmarket Corporation Pty Ltd v Kee-Vee Properties Pty Ltd [2003] WASC 157 at [309]; and Mann Judd (A Firm) v Paper Sales Australia (WA) Pty Ltd, unreported, SCt of WA; Library No 980565; 25 September 1998; but cfAndrew Knox Holdings Pty Ltd v ANZ Banking Group Ltd [1997] ANZ ConvR 101.
71 There is also authority for the proposition that, in the context of ss 52, 82 and 87 of the Act, an election to affirm a contract which was induced by misleading conduct does not necessarily disentitle the person so induced from recovering damage occasioned by the performance of the
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- contract if, at least, the decision to affirm was reasonably made: Tiplady, above, at 464, per Fitzgerald J; and TN Lucas Pty Ltd v Centrepoint Freeholds Pty Ltd (1984) 1 FCR 110 at 118, per Jenkinson J. There is, in this respect, a distinction between an election in respect of contractual rights and one to waive any entitlement to relief under ss 82 and 87.
72 The issue of causation has recently been considered by the High Court in each of Henville and I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109. The effect of what was held in each of those cases is that conduct on the part of a person who has been misled will sever causation only where it is unreasonable, even in circumstances in which the conduct takes place after the misled person has become aware of the misrepresentations. However, as Northrop J pointed out in Mister Figgins v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 at 60:
"Although the difficulties inherent in the traditional problems of deciding whether to rescind a contract or to affirm the contract and sue for damages in the event of deceit are to be avoided as far as possible in proceedings under ss 82 and 87 of the Act, nevertheless some consideration and weight must be given to the actions of the parties after knowledge of the existence of misleading or deceptive conduct. Section 87 enables the court to overcome many of those types of difficulties, but at the same time the conduct of the parties … is relevant to be considered in the exercise of the discretion conferred by s 87 of the Act, and more particularly for present purposes in determining the amount of damages to be recovered under s 82."
73 In that case, Northrop J concluded that the applicant had affirmed leases into which it had entered as a consequence of misleading or deceptive conduct upon which it had relied and found that consequential losses suffered since the affirmation had not been caused by the conduct of the respondent but by the actions of the applicant. He found that the applicant was not entitled to recover damages over and above the difference in value between what it got and what it had bargained to get.
74 As will already be apparent, in the present case the trial Judge considered that the conduct of the respondents in executing the lease did not have the consequence that the chain of causation was broken or that reliance on the misleading and deceptive conduct had not been established. The basis for his conclusion appears from what was said by
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- him when dealing with the representation pleaded in par 7(a) of the statement of claim (at [189]):
"That representation was relied upon by … [the respondents] and it was a strong inducement to them to take up the tenancy for the Beverley Hills Café. The representation was still operative when they signed the agreement to lease and although they became aware of the real situation by the time tenants were given access to the premises, even before the Entertainment Centre opened for business, and so were very much alive to it when they executed the lease, by then it was too late - they were told they were already bound."
"The purchasers' … decision to proceed with the contract was a reasonable decision itself a consequence of entering into the contract under the inducement of the misleading conduct. If the
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- purchasers terminated the contract, they would lose the benefit of their expenditure on the rice crop and the work Mr Park had done. The profit from the rice crop, the product of the expenditure and the work, would go to the vendor, not to them. Mr Park's work in relation to the sheep would be wasted to the purchasers, who would not receive its benefit. Apart from concern over recovery of expenditure, these matters provided a sound basis for a reasonable choice to continue with the contract …".
76 Given the circumstances in which the respondents found themselves, and taking into account the fact of the legal advice which had been given to them (to which I shall return in a moment), I do not consider that their conduct in executing the lease can be said to have been unreasonable and to have broken the chain of causation. Even if it be accepted that the legal advice which was given to the respondents was wrong, their loss and damage after entering into the lease was, for the reasons which I have given, still caused "by" the misleading and deceptive conduct upon which they had relied.
77 Senior counsel for the appellants contended, so far as the legal advice is concerned, that, as a matter of common sense, this was the actual cause of the respondents' loss. He referred to what was said by Wilson J in Gould v Vaggelas (1985) 157 CLR 215 at 238, to the effect that an inference that false misrepresentations played at least some part in inducing a plaintiff to enter into a contract can be rebutted by showing that "… the plaintiff not only actually knew the true facts but knew them to be the truth or that the plaintiff either by his words or conduct disavowed any reliance on the … representations". Because the respondents knew of the true facts at the time of executing the lease (and that they were the truth), he contended that, absent their legal advice, they would either have declined to execute the lease at all (and rescinded the agreement to lease) or executed the lease, thereby disavowing any reliance on the representations.
78 In my opinion, the position was not that simple. Even accepting that no more is known of the legal advice than that it was to the effect that the respondents were bound to sign the lease but could take legal action later, if they wished (this was the evidence of Mrs Konig, elicited in cross-examination - Mr Konig did not refer to the legal advice in the course of his evidence), the situation was, without the benefit of hindsight, not as clear as it might now seem to have been. The misleading conduct which was relied upon was essentially oral. The appellants had made no
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- admission of the fact that the respondents had been misled. The prospect of lengthy, and expensive, litigation against parties with considerable resources must have been a daunting one. So much is apparent from the conciliatory tone of the letter which was written by Murie and Edward on 23 December 1993. Moreover, while the business was already experiencing difficulty, it had, as I have said, by then been operating for only a short time as had the Centre itself. While it is plain, from the fact that the respondents sought advice as regards the question whether they were bound to execute the lease, that they were contemplating not doing so, it is by no means clear, given the considerations to which I have referred, that their legal advice should have been unequivocally to the effect that they should rescind the agreement for lease. Nor is it clear that, if equivocal advice had been given, they would have rescinded the agreement (this issue was not explored in evidence, although Mrs Konig did say, at transcript page 271, that she and her husband had not wanted to sign the lease and that they had signed it after they had sought legal advice and after they had received "letters of legal threat"). In all of these circumstances, and given the considerable dilemma in which, as I have said, the respondents then found themselves, it seems to me that there is nothing in the fact of the legal advice which should be taken to have broken the chain of causation.
79 I am consequently satisfied that there is nothing in the fact of execution of the lease which should have precluded relief in the form granted by the trial Judge under s 87. What his Honour did, in effect, was to avoid the lease from 6 January 1997 (although he said that he did so ab initio). It is plain that he did this in order to reduce the loss or damage suffered by the appellants (that being one of the purposes expressly contemplated by s 87). The authorities to which I have referred support the exercise of a discretion of that kind in circumstances such as those which prevailed in this case.
80 Of course, Alpine remained in possession of the Beverley Hills Café for a further three years after signing the lease and, although it made a number of complaints and representations to the lessor, and sought rent reductions and reduced hours of trading during that time (and also made a number of attempts to sell the business), it did not, during that time, seek to enforce its legal rights against the appellants. However, no argument was put to us to the effect that it was unreasonable for Alpine to have remained in possession of the premises for that length of time. Indeed, an argument of that kind was expressly disclaimed, no such argument having been raised at trial. It is consequently unnecessary to consider that issue.
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Ground 1
81 There remains, so far as the grounds of appeal on the merits are concerned, only the proposed ground 1 relating to the trial Judge's refusal to allow an amendment of the statement of claim so far as it related to the alleged affirmation of the agreement to lease. It is unnecessary for me to consider this proposed ground, given that I have concluded that, even if there was an affirmation, it provided no bar to relief in this case under the Trade Practices Act.
Awards of compensation
82 Before dealing with the remaining grounds of appeal, all of which address issues of damages, I propose to make some preliminary comments.
83 The trial Judge's award of damages in favour of the respondents was underpinned by his finding that they would not have entered into the agreement to lease, or the lease itself, were it not for the misleading conduct of the appellants. The appellants acknowledged, for the purposes of the appeal, that if the misrepresentations were made out, and causation established, the respondents were entitled to some measure of consequential loss. They take no issue with the application of ordinary principles in this respect (as to which see, for example, Corbidge v Bakery Fun Factory Fun Shop Pty Ltd (1984) ATPR 40-493 at 45,688, per Woodward J). However, they contend that the trial Judge erred in awarding various items and amounts of consequential loss.
84 At the trial, the respondents relied upon the expert evidence of a chartered accountant, Mr Russell Morgan, in quantifying their loss. The appellants likewise relied upon the expert evidence of a chartered accountant, Mr Lindsay Stagoll. The trial Judge preferred the evidence of Mr Morgan to that of Mr Stagoll.
85 Mr Morgan calculated that Alpine's total trading loss over the period of its operation of the Beverley Hills Café amounted to $169,786, including an allowance in respect of the fixtures and fittings that the Konigs were unable to remove from the business premises when they were vacated. The losses also take into account rent paid in respect of the premises up to 28 February 1997.
86 Mr Morgan prepared an assessment of what the income of the business would have been had the representations which were relied upon by the respondents been true. Utilising the trading figures of Egon's, and
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- other comparable businesses, he concluded that the total income of the business would have been $418,723 per annum. He then calculated what would have been its net profit before depreciation and interest expenses as follows:
" Per Annum
Income $
Sales 418,723
Deduct: Cost of sales 167,489
Gross Profit from Trading 251,234
Expenses
Rents and outgoings 53,000
Other overheads 30,000
Wages - Staff 65,000
- Directors 30,000
178,000
Forecast Net Profit Before
Depreciation and Interest Expense$73,234"
Depreciation $24,000
(at a rate of 10% p/a to a total capital expenditure
of $240,000, on estimated life-span of 10 years)
Interest Expenses $24,000
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- the Konigs of money borrowed from them by Alpine (while the evidence of the identity of the lender was somewhat ambiguous, all parties were content to treat the loan as having been made by Mr and Mrs Konig) in order to fund the business during the period of its trading losses. That gave rise to a total loss of $697,266. However, as I have earlier mentioned, because Alpine had claimed losses of only $548,296, the trial Judge awarded it the lower figure.
88 I have earlier said that the trial Judge awarded the Konigs $125,166, being the value of wages or directors' fees which would have been received by them over the 15 years of the lease, had the representations been true, and that he also awarded them the cost of selling Egon's ($15,607), seemingly upon the basis that this was a loss incurred by them in setting up and operating the Beverley Hills Café. Next, he awarded to the Konigs the amount of $211,030 owing by Alpine in respect of the loan, although, in supplementary reasons given by him ([2003] WASC 53(S)), he reduced this by a figure of $42,594 (giving a balance of $168,436) in order to allow for the value of plant and equipment removed from the leased premises by Mr and Mrs Konig for their own benefit. Finally, as I have earlier mentioned, the trial Judge awarded to each of Mr and Mrs Konig $10,000 by way of compensation for distress, inconvenience and anxiety.
89 The appellants take no issue with the proposition that Alpine incurred trading losses amounting to $169,786 over its period of operation of the Beverley Hills Café. There is also no appeal against the award of damages to the Konigs in respect of their distress, inconvenience and anxiety. Consequently, the remaining issues relate to the other heads of loss awarded. These are dealt with in grounds of appeal 6 to 9.
Ground of appeal 6
90 I have mentioned that the trial Judge awarded to Alpine the amount of the net profit which, on Mr Morgan's calculations, it would have earned over the term of the 15-year lease had the representations relied upon by it been true. In his supplementary reasons, he explained the basis for this award (at [10]) as follows:
"[My reasoning] was not that damages for future profits should be awarded to Alpine Holdings because that was what had been promised, but because Alpine Holdings had lost that profit as a result of the misrepresentations. That conclusion was based on the likelihood those profits would otherwise have been made
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- had it not been for the misrepresentations and involved an acceptance of the plaintiffs' expert evidence in that respect."
91 His Honour went on to say (at [14]) that he did not consider that an award of that kind would constitute "expectation damages" in the sense in which that expression has been used in such cases as Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 11 - 12 and 502 - 503, per Mason, Wilson and Dawson JJ.
92 With due respect to the trial Judge, the award for future profits was, in my opinion, undoubtedly one of expectation damages. I have said that Mr Morgan calculated Alpine's loss in this respect by assessing what income it would have earned from the business if the representations relied upon by it had been true. He made no assessment of what income might have been earned by Alpine in some other business, had it not commenced this one.
93 Generally, the law has distinguished, in its approach to damages, between causes of action based on breach of a duty imposed by law and those based on breach of a voluntarily assumed duty: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 501 - 502, per Gaudron J; Astley v Austrust Ltd (1999) 197 CLR 1 at 36, per Gleeson CJ, McHugh, Gummow and Hayne JJ. Damages in tort are not awarded so as to compensate for loss of a promised performance. Rather, they are designed to put the plaintiff in the position in which he or she would have been had the tort not been committed: see, for example, Gould v Vaggelas, above, at 265.
94 The appropriate measure of damages under s 82 of the Act, in the case of a breach of s 52, has been a matter of discussion in the cases for many years. The usual starting point, for the purposes of that discussion, has been Gates. In that case, the applicant had been misled about the extent of cover under an insurance policy. He had been told that he would be entitled to payment if he suffered an injury which prevented him from carrying out his usual occupation a self-employed builder. In fact, the policy provided that he would only be entitled to payment if he was incapable of being gainfully employed. Mason, Wilson and Dawson JJ said (at 11 - 12):
"The Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Pts IV and V. Accordingly, it is for the courts to determine what is the appropriate measure of damages recoverable by a
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- plaintiff who suffers loss or damage by conduct done in contravention of the relevant provisions. Two established measures of damages, those applicable in contract and tort respectively, compete for acceptance. In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss)."
95 Their Honours said (at 14) that there was much to be said for the view that the measure of damages in tort was appropriate in most, if not all, Part V cases, especially those involving misleading or deceptive conduct and the making of false statements. They said that such conduct was similar both in character and effect to tortious conduct, particularly fraudulent misrepresentation and negligent misstatement. They went on to say (at 14 - 15):
"The disappointed expectations of a person induced by a misrepresentation to believe erroneously that his insurance policy entitles him to the payment of benefits on maturity or on the happening of a certain event are sometimes so great as to encourage the thought that compensation on the basis of lost expectations would be appropriate. However, neither authority nor principle offer support for adopting this approach. In all the cases in which a plaintiff has sought to recover damages on the footing that a representation amounts to a collateral contract, a fraudulent misrepresentation or a negligent misstatement, damages for expectation loss have only been awarded when the representation amounted to a collateral contract. Neither the fact that the representation induces entry into a contract nor the fact that it is a statement of the benefits to which the plaintiff will be entitled under that contract is enough to justify compensation for expectation loss."
96 A little earlier in their reasons, their Honours had recognised that, if reliance on a misrepresentation had deprived a plaintiff of the opportunity of entering into a different contract on which he or she would have made a profit, then that plaintiff may recover that profit on the footing that it is part of the loss which has been suffered in consequence of an alteration of
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- position under the inducement of the representation. They said that this may well be so if the plaintiff can establish that he or she could and would have entered into a different contract and that it would have yielded the benefit claimed. In such a case the lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation.
97 More recently, the High Court has said that it is wrong to limit the damages claimable under ss 82 and 87 of the Act by analogy with the law of contract, tort or equitable remedies (Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 501, per Gaudron J; 510, per McHugh, Hayne and Callinan JJ) and that Gates did not hold to the contrary. However, in its award of damages, the Court, in Marks, adopted an approach analogous to that taken in tort. The appellants had been misled into taking out a loan which cost more than was represented to them but which, nevertheless, cost less than any other loan available on the market. The majority (McHugh, Hayne and Callinan JJ) found that the appellants did not suffer any loss and accordingly no order was made under ss 82 and 87.
98 In Henville, an architect had proceeded with a project for the construction of home units in reliance upon misrepresentations made to him by a real estate agent as regards the demand for units and as regards their likely sale price. McHugh J, with whom Gummow J was in agreement, said, at 502 [132]:
"In this case, the most appropriate approach is to identify what Mr Henville [the architect] has suffered by way of prejudice or disadvantage in consequence of altering his position by reason of the breach of the Act … . The measure of that loss is not determined by reference to what he would have received if Mr Walker's representations had been true [Mr Walker was the real estate agent]. As the New Zealand Court of Appeal pointed out in Cox & Coxon Ltd v Leipst [1999] 2 NZLR 15, a case concerned with s 43(1) of the Fair Trading Act 1986 (NZ), a representation can give rise to a claim for a lost benefit or loss of expectation only where there is an obligation to perform the representation. The Court of Appeal held that s 43(1) was directed against the making of a false representation, as opposed to the failure to perform it. Similarly, the wrong which s 52 of the Act prohibits is the making of, not the failure to honour, the false representation."
99 Hayne J adopted a similar approach. He said, at 509 [162]:
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- "The conclusion that the appellants suffered loss requires comparison between the position in which the appellants found themselves after the project was finished, and the position in which they would have been if, instead of relying on what they were told by the respondents, they had not undertaken the project. It does not invite attention to what would have been their position if an accurate estimate of selling price had been given by the respondents [Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 514 - 515 [48] - [52]]. Moreover, the conclusion that the appellants suffered loss neither requires nor permits consideration of some third or intermediate position in which the appellants undertook some project or transaction other than the one they did. It is, therefore, not relevant to consider what the loss might have been if costs had been estimated properly."
100 We were referred by senior counsel for the respondents to Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388, which was said to support the proposition that the respondents might be awarded lost profits in the present case. He relied, in particular, on what was said by the Court (Gleeson CJ and McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ) at 403, to the effect that it would be wrong to assume that in every case of misrepresentation the only kind of damage which may be suffered, and compensated or redressed by orders under Pt VI of the Act, is any difference between price and value or any consequential losses. In that case, the applicants had bought a lease of a unit in a retirement village in reliance upon a schedule given to them by the developers of the village, which provided that the estimated initial outgoings for their unit was $55.71 per week. In fact, the estimate did not include all expenditure actually incurred in the operation of the village. On the evidence, the price paid on entry into the lease exceeded its value at that date. Moreover, the applicants did not contend that, if the estimate had been accurate, they would have paid a lower price for the unit. In addition, the evidence established that the applicants received value for the maintenance fees paid by them. Notwithstanding all of this, the Court considered that, when the developers charged the higher outgoings, the applicants suffered loss or damage which was compensable under the Act and the matter was remitted to the trial Judge for a determination of the quantity of the loss.
101 While it must be accepted that the tortious measure is not the only redress which might be offered in every case of misrepresentation, Murphy is a case which is far removed from the present case. The loss
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- claimed in that case was one which, the Court found, had actually been incurred, in the sense that the applicants had actually paid an amount greater than that which they had been led to believe would have to be paid by them. In the present case the lost profits awarded to the respondents was not a recompense for any loss actually suffered by them. All that had happened was that an expectation which they had been led to hold had failed to eventuate.
102 Recently, in Havyn Pty Ltd v Webster [2005] NSWCA 182 at [117], Santow JA (with whom Tobias JA and Brownie AJA agreed), after reviewing the cases, including Murphy, reiterated that a measure of damages for reliance loss will generally not include damages for loss of an expectation or profits unless it be shown, for example, that reliance has deprived the innocent party of the opportunity of entering into a different contract in respect of which he or she would have made a profit (see also Radferry Pty Ltd v Starborne Holdings Pty Ltd (1999) ATPR 46-189 Cooper, Marshall and Dowsett JJ).
103 In this case, there was no evidence that, had the respondents not relied upon the misrepresentations made to them, they would have entered into a different contract in respect of which they would have made a profit. In my respectful opinion, when regard is had to the authorities to which I have referred, there was no basis, in this case, for an award of damages of the kind made by the trial Judge.
104 I would consequently uphold this ground of appeal and set aside that part of the trial Judge's award which compensated Alpine for lost profits.
Ground of appeal 6A
105 The appellants seek, by this proposed ground, to challenge the figures used by Mr Morgan, and hence by the trial Judge, in calculating the lost profits awarded to Alpine over the 15-year term of the lease. Counsel for the respondents objects to the amendment upon the ground that it comes too late. Because of the conclusion at which I have arrived in respect of ground of appeal 6, this ground falls away and it is consequently unnecessary to deal with it.
Ground of appeal 7
106 The appellants contend that the trial Judge erred in awarding Mr and Mrs Konig $168,436 by way of the repayment of the loan to which I have earlier referred. They point to the fact that the money loaned to Alpine was expended by it in the course of its operation of the Beverley Hills
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- Café and hence has been taken into account by Mr Morgan in calculating Alpine's trading losses, with the consequence that the amount has already been accounted for in the sum of $169,786 awarded to Alpine. That this is so appears from Mr Morgan's evidence. It is apparent from his report dated 5 October 1999 (exhibit P14 at the trial) that the money loaned to Alpine was fully expended by it in the course of setting up and operating the business and consequently forms part of its overall trading losses (which included a loss of $75,116 incurred on the disposal of fixed assets). Mr Morgan said, on page 5 of his later report dated 20 February 2001, that Alpine's balance sheets reflected that the increasing accumulated losses of the business were financed by the loans from Mr and Mrs Konig and that "their personal loss of this loan account equals the trading losses incurred by the business of $169,786".
107 Senior counsel for the respondents supports the award in favour of Mr and Mrs Konig by reference to the fact that the amount of the loan was deducted from the total award made by the trial Judge in favour of Alpine. However, that was done in circumstances in which the award encompassed a substantial sum in respect of lost profits. If the award in respect of trading losses is to stand, as in my opinion it should, then it seems to me to be plain, in circumstances in which that award is sufficient to enable Alpine fully to repay the balance due in respect of the loan, leaving it in the position in which it would have been had it not acted in reliance upon the representations made to it, that it would give rise to a double recovery if the amount of the loan was also awarded to Mr and Mrs Konig.
108 I would accordingly uphold ground 7, in circumstances in which I would not disturb the award to Alpine of the sum of $169,786. I would consequently set aside the award of $168,436 in favour of Mr and Mrs Konig.
Ground of appeal 7A
109 I have mentioned that the trial Judge awarded to Mr and Mrs Konig an amount of $125,166 by way of lost wages in addition to the amount awarded to Alpine by way of lost profits. Had the award for lost profits stood, this would have given rise to a double recovery as the Konigs would have taken their wages from the profits received. However, there remains the question whether, the award for lost profits having been set aside, the award for loss of wages should stand.
110 There is no doubt that, when a loss-making business is acquired in reliance on misleading conduct, that may result in the loss, by the
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- purchaser, of the opportunity to earn wages elsewhere: see, for example, Gilchrist v ATS Amusements Pty Ltd (1982) 41 ALR 558 at 562, per Morling J; and O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at 466 [29], per Carr, Moore and Marshall JJ. Moreover, where a lost chance is proved, damages can be awarded in respect of it even if there is a less than 50 per cent likelihood that the chance would have come to fruition: Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 348 - 349. However, it is necessary for an injured plaintiff in that position to establish that wages could, were it not for reliance on the misleading conduct, have been earned elsewhere and that he or she would have taken advantage of any opportunity that presented itself: see, for example, Bateman v Slatyer (1987) 71 ALR 553 at 566, per Burchett J; and Commonwealth Bank of Australia v Smith (1991) 102 ALR 453 at 479, 481, per Davies, Sheppard and Gummow JJ. Once that is established, mere difficulty does not relieve a court from the task of estimating the damages (Fink v Fink (1946) 74 CLR 127 at 143; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411), but the amount of the damage must be proved with as much certainty as is reasonable in the circumstances: Ratcliffe v Evans [1892] 2 QB 524 at 532 - 533; O'Neill at 467 [33].
111 In this case the respondents allege, in their statement of claim (par 22A(b)), that in order to enable Alpine to fund the business, they "sold successful businesses from which they would otherwise be continuing to derive substantial income and instead, despite their best endeavours, have earned no income or no significant income from the Business …". In the paragraphs in which their consequential losses are pleaded (pars 22A(d)(i) to (iv)), there is no plea of income which Mr and Mrs Konig might otherwise have earned, although they claim the "capital gains tax-free escalating value of the sold businesses …". In their further particulars of loss and damage, provided separately, they refer (par 8.1) to Mr Morgan's report and, in the course of estimating Alpine's total loss, include the sum of $125,166, described as "Estimated Director salaries at commercially realistic rates". They also include, in Mr and Mrs Konig's "actual estimated losses" (par 8.5), the same figure of $125,166, described as "Estimated director's salaries not recovered by the Directors from … [Alpine] during the period from 23 May 1993 to 6 January 1997".
112 In their evidence at the trial Mr and Mrs Konig made no effort to prove any lost wages other than upon the basis, already rejected, of the wages that they would have earned by the operation of the Beverley Hills Café had the representations which were relied upon by them been true. They gave no evidence of what they might have done had they not gone
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- into that business (except that Mr Konig said (transcript page 86) that he and his wife "had previously explored the prospect of relocated [sic] to the Whitfords area in preference to Warwick") and nor did they formulate any claim before the trial Judge upon that basis. Mr Konig, when asked, in the course of cross-examination, about the allowance of $30,000 per annum by way of director's fees (that sum had been allowed, by Mr Morgan, for him, and a further sum of $6,000 per annum had been allowed for Mrs Konig) said (transcript pages 185 - 186) that this was the sum which he had estimated he was going to pay himself by way of profit from the operation of the Beverley Hills Café.
113 While there was evidence of the earnings which could have been generated by Egon's, had it not been sold, that evidence was provided only for the purpose of assisting Mr Morgan in his calculation of what would have been earned by the Beverley Hills Café if the representations had been true. Moreover, as I shall more fully explain under the next heading, it was not the fact that, were it not for their reliance upon the misrepresentations, the respondents would have continued to operate Egon's. The evidence established that they would have sold it in any event.
114 There was also evidence from Mr Morgan (transcript pages 371 - 372) to the effect that he had "had quite a number of opportunities to examine the financial statements of coffee lounges" and that he believed that the earnings figures calculated by him were "quite conservative". However, this, too, was said in the course of supporting his calculation of the Konigs' loss upon an "expectation" basis and there was no need, at the trial, for the appellants to challenge his conclusions upon any other basis or to put up, themselves, any evidence as regards the earnings which might have been achieved by the Konigs had Alpine not acquired the Beverley Hills Café.
115 Most importantly, perhaps, there was, on the appeal, no ground of cross-appeal or notice of contention or any oral submission supporting any alternative basis for an award in respect of loss of income on the part of Mr and Mrs Konig, other than their contention that they would have continued to profit from Egon's had they not relied on the appellants' misrepresentations in setting up and operating the Beverley Hills Café. Consequently, once the stated basis for the claim for lost wages falls away, as it has done, the Court is left with no other basis for an award of that kind, none having been advanced on behalf of Mr and Mrs Konig at the trial (as to which see Water Board v Moustakas, above) or by way of
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- cross-appeal and there being no evidence to support any alternative award. It follows that the award for lost wages cannot stand.
Ground of appeal 8
116 The appellants contend that the trial Judge erred in awarding to Mr and Mrs Konig the expenses of $15,607 incurred in the course of the sale of Egon's. This sum was included by Mr Morgan in his computation of the respondents' losses arising out of their reliance on the appellants' misrepresentations upon the basis that his "instructions … [were] that they sold that business in order to invest the funds in Beverley Hills Café" (transcript page 397).
117 The trial Judge's findings in this regard are, with due respect, not entirely consistent. At [261] he did not accept that, at the time when the contract of sale of the business of Egon's was entered into in mid-August 1992, Mr and Mrs Konig had already made up their minds to enter into, or have Alpine enter into, the agreement to lease premises in the Centre. He said that he was satisfied that the Konigs had decided to sell Egon's in any event, as part of their general intention to restructure and relocate their business activities and that they had done so at a time when they had made no firm decision on exactly what form their subsequent business activities would take. His Honour went on to say that, at that stage, Mr Konig was still toying with the possibility of establishing a coffee shop at another centre.
118 However, later in his reasons, at [327], his Honour said:
"Morgan included the selling costs as a loss associated with the Beverley Hills Café on the basis that the reason the Konigs sold Egon's … was to obtain funds to set up and operate the Beverley Hills Café. Although the evidence was not particularly specific about that, I accept it was so."
119 In my opinion, the evidence supported the latter part, at least, of the finding of fact made by his Honour at [261]. I have said that the contract for the sale of Egon's was entered into on 18 August 1992, some weeks prior to the signing of the agreement to lease. In the course of his evidence, Mr Konig said that, by then, he was confident that Alpine would be granted a lease of premises in the Centre and that Egon's was sold "in order to set up the café at the Centre". However, this evidence must be considered in the light of that given by Mrs Konig. She said (transcript 256) that her husband had mentioned to her on several occasions that, because more office workers were moving out of Perth, he
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- thought that it would be better to open a business in the suburbs and that, when she saw the advertisement concerning the Centre, she said to him, "Maybe this is what you're looking for." While she said (transcript page 292) that she knew that her husband would not sell Egon's until he was certain that the two of them had another business to go to, it seems plain from her evidence that Egon's was always going to be sold, with the only uncertainty in that regard being one of timing, in that Mr Konig did not want to sell it until another business had been found. Her evidence in this respect was consistent with that given by Mr Steele, who said that the Konigs "were very keen to secure a tenancy at the Centre as they were going to be selling their two businesses in Perth and wanted a business closer to their home in the northern suburbs" (transcript pages 679, 803, 833 and 850). Mrs Konig also said that Egon's was sold for "a very good price".
120 When the trial Judge's (unchallenged) findings at [261] and [327] are read, together, against the background of this evidence, it seems plain enough that he accepted Mrs Konig's evidence and, while also accepting that the sale proceeds of Egon's were used to set up the Beverley Hills Café, found that the former business would have been sold in any event, and that the sale proceeds would have been used to fund whatever other business might have been acquired by the Konigs (or Alpine) in the suburbs, had the Beverley Hills Café not been acquired by them. There was consequently no basis for any award of the sum of $15,607 as damages arising out of the misleading and deceptive conduct of the appellants.
121 Ground 8 should consequently be upheld.
Ground of appeal 10
122 For the reasons already given in the course of addressing grounds 1, 4, 5 and 5A, this ground fails.
Ground of cross-appeal 15
123 It follows from my conclusions in respect of ground 6 of the grounds of appeal that this ground fails.
Ground of cross-appeal 16
124 By cross-appeal ground 16 the respondents contend that, if the appeal is allowed as regards the award of "profits foregone after 7 January 1997", the trial Judge should have awarded to Alpine "profits foregone" until 7 January 1997, and interest, as well as the amount of $169,786, and
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- interest. However, the claim for lost profits assumes that Alpine is entitled to be "restored to the position it would have enjoyed had the representations been made good". I have rejected that contention in dealing with ground 6. This part of ground 16 consequently fails.
125 As to interest on the amount of $169,786, the trial Judge made an award of interest pursuant to s 32 of the Supreme Court Act 1935 (WA) on the sum of $548,296 awarded by him to Alpine, with the interest to commence from 12 September 1997 (par 3.1 of the orders made by him pursuant to his supplementary decision given on 14 July 2003, although cf par 43 of his reasons in which he considered it appropriate to allow interest "for profit of $541,574 foregone over 11 years" as calculated in an outline lodged on behalf of the respondents, plus interest of the balance of $6,722 from 30 June 1999). All that is left of the award made by the trial Judge in favour of Alpine is that in respect of its trading losses, $169,786 in total. It seems to me to be appropriate that those losses should bear interest at the rate of 6 per cent per annum (the figure used by the parties) from the dates upon which they were incurred, for practical purposes being, respectively, 30 June 1993, 30 June 1994, 30 June 1995 (part of this loss was reduced during the year which ended 30 June 1996) and 6 January 1997. I would leave it to the parties to bring in an agreed minute of the calculation of interest, the calculation appearing in ground 16.4 of the cross-appeal being deficient in a number of respects.
126 I should add, before leaving this point, that, while senior counsel for the appellants suggested that it was appropriate to award interest only from the time at which Alpine vacated the premises, because, he suggested, it was only then that the loss became "crystallised", I am not persuaded that there is substance to that submission. Rather, as I have said, the more appropriate basis for an award is to compute interest from the date upon which the losses were actually incurred.
Cross-appeal ground 17
127 Cross-appeal ground 17 assumes that the respondents' losses should have been assessed by reference to the tortious measure. On that assumption, the respondents contend that Alpine should have been awarded its trading losses of $169,786, plus interest (grounds 17.1(a) and (b)) and "wasted set-up costs" amounting to $168,436, plus interest (grounds 17.1(c) and (d)); and that Mr and Mrs Konig should have been awarded the selling expenses of Egon's, plus interest (grounds 17.2(a) and (b)), lost wages of $125,166, plus interest (grounds 17.2(c) and (d)) and lost profits from the sale of Egon's amounting to $380,000, plus interest
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- (grounds 17.2(e) and (f)). They contend, in this last respect, that the trial Judge found that, but for the representations, Mr and Mrs Konig would not have sold Egon's and (implicitly) that they would have continued to profit from it over the period of operation of the Beverley Hills Café (although they acknowledge that they did not, at the trial, particularise a claim for loss and damage in that way and that no such case was advanced at trial).
128 It will be apparent from what I have already said in respect of ground of appeal 8 that the evidence established and, as I read his judgment, the trial Judge found, that Egon's would have been sold in any event. For the reasons already given in respect of that ground (and even putting to one side what might be thought to be the insuperable obstacle that a case of this kind was not advanced at the trial) it follows that grounds 17.2(e) and (f) fail (as, of course, do grounds 17.2(a) and (b)). Also, for the reasons given in respect of ground of appeal 7A, grounds 17.2(c) and (d) fail.
129 As to grounds 17.1(a) to (d), I have said, so far as (a) is concerned, that I would not interfere with the award of $169,786 made by the trial Judge. I have also dealt with the question of interest on that sum. That leaves only the claim for wasted set-up costs. Because these have been included in the calculation of Alpine's trading losses by Mr Morgan in his report dated 5 October 1999, there is no basis for any separate award in that respect as there would otherwise be a double recovery.
Cross-appeal grounds 18 and 19
130 By cross-appeal grounds 18 and 19 the respondents challenge the trial Judge's award of interest on the compensation awarded to the first three respondents as from 12 September 1997, rather than from the dates upon which their losses were actually incurred. I have already dealt with the question of interest on the sum of $169,786. Because the other awards fall away, save for those in respect of distress, inconvenience and anxiety in respect of which there is no claim for interest, it is unnecessary for me to deal with these grounds.
Cross-appeal ground 20
131 Essentially, this ground contends that, because the first three respondents offered to compromise their claims for $310,000 plus costs in May 2000 and for $350,000 plus costs on 10 October 2002, they should have been awarded indemnity costs, given that the trial Judge awarded them significantly more than either sum. However, the effect of those grounds of appeal which have succeeded is that the damages which will
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- now be awarded to the respondents amount to less than the sum of $310,000. This ground consequently falls away.
Conclusion
132 It follows from what I have said that I would allow the appeal to the extent that I would set aside the awards made in favour of the respondents by the trial Judge and substitute in lieu, a total award of $169,786 in favour of Alpine (the amount of its trading losses), together with interest calculated in the manner set out above and one of $20,000 in favour of Mr and Mrs Konig (the award for distress, inconvenience and anxiety). Save as regards the issue of interest on the sum of $169,786, I would dismiss the cross-appeal. I would hear further from the parties as regards the amount to be awarded by way of interest and also as regards the issue of costs.
133 MCLURE JA: I agree with Steytler P.
134 PULLIN JA: I have read a draft of the reasons of Steytler P. His Honour has set out the findings based on the evidence at trial and has identified the issues between the parties at trial and on this appeal. This saves me the task of doing likewise.
135 I agree with Steytler P's reasons and add the following observations concerning the effect of the execution of the lease and that part of the award of damages which was calculated by reference to estimated future profits of Alpine.
Execution of the lease with knowledge
136 By the time the respondents executed the lease, the respondents knew that the representations which had induced them to execute the agreement for lease were false. In those circumstances it is arguable that there would be no justification at common law or in equity for the lease being other than enforceable. The High Court in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 79 ALJR 206 said:
"The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it (L'Estrange v Graucob Ltd 1934] 2 KB 394). The parol evidence rule (Hoyt's Pty Ltd v Spencer (1919) CLR 133), the limited operation of the defence
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- of non est factum (Petelin v Cullen (1975) 132 CLR 355) and the development of the equitable remedy of rectification (Taylor v Johnson (1983) 151 CLR 422), all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondents' case that the operative agreements between the parties were wholly oral, and reached earlier than the execution of the written agreements, was the proposition that the written agreements subsequently executed not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum, or able to have it rectified. The respondents attempted neither".
137 The respondents in the Equuscorp case, however, did allege misrepresentations (despite what the above passage states). They alleged a contravention of s 52 of the Trade Practices Act The High Court remitted the respondent's claim about misrepresentation to the Queensland Supreme Court.
138 The order made by the trial Judge in this case was relief granted pursuant to s 87 of the Trade Practices Act. That section confers very broad powers. The power to grant the relief is conditioned by the requirement that the "Court finds that a person who is a party to the proceedings has suffered … loss or damage by conduct of another person that was engaged in … contravention of … Part … V …" In this case the condition was satisfied. The condition having been satisfied, the section then confers power on the Court to "make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subs (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage."
139 If the lease had been entered into in reliance on the misrepresentations, then there would be no doubt that an order could be made under s 87. This would be because the legal obligation to make lease payments for 15 years would be loss incurred in reliance on the misleading conduct and recoverable as damages. Thus, an order setting aside the lease would reduce the damage. The appellants, however, submits that the lease payments do not amount to recoverable reliance loss. The appellants submit that the lease payments were not induced by the misrepresentations because the respondents knew that the
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- representations were false and with that knowledge executed the lease. This is true, but those submissions concentrate solely on the lease payments. The respondents had been induced to set up a business on the leased premises. The lease payments were just one component of the total expenses of the business. Other expenses were the usual ones. Wages, stationery, interest, etc. The other expenditure continued so long as the business continued. The commitment of these type of expenses can rarely be instantly terminated. Employment contracts run on, interest on borrowed money runs on as an expense. Thus, there was ongoing damage induced by the misrepresentations. The Court's jurisdiction under s 87 was therefore enlivened. There was no challenge to his Honour's implicit conclusion that it was reasonable for the respondents to have continued on in the business until 1997.
140 The Court, in making the order under s 87 to terminate the lease, reduced the ongoing loss associated with the conduct of the business which had been started in reliance on the misrepresentations. The evidence reveals that by August 1994 the respondents had commenced trying to sell the business. They appointed five agents to try and do so. If they had simply abandoned the business they would have been accused of not trying to mitigate their loss. Although some potential buyers were located, sales were not completed. In early February 1997 the respondents removed their equipment and moved out. The appellants then terminated the lease and re-entered the premises on 11 February 1997. The respondents reasonably continued operating the business until that date.
141 I agree with Steytler P's conclusion that the respondents' conduct in executing the lease was not unreasonable. As the President's reasons reveal, the respondents had begun making complaints about the effect of the misrepresentations before they signed the lease. They asked for a rent review which would have reduced the damage and they deferred signing the lease. They received no response to the complaints and none to the request. Alpine's solicitor wrote a letter complaining about the representations which had been made. The only response was a threat by Westpoint that it would take legal action if the lease was not signed. In the face of this threat the lease was then signed. This history does not reveal any intention on the part of the respondents to waive the right to relief under s 87.
142 Some time was spent in the submissions dealing with the effect the advice of the respondents' solicitors had on the outcome. The contention of the appellants was that the advice to sign the lease was wrong advice.
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- Even if that were so (as to which I reach no conclusion) the nature of the advice given was irrelevant. In my opinion the advice given is not relevant, in the circumstances of this case, to the issue about what orders could be made under s 82 or s 87. I have given reasons above about why I consider that jurisdiction to make an order was enlivened and why the respondents were shown not to have acted unreasonably in signing the lease.
Expectation loss
143 The Court's power to award damages under s 82 of the Trade Practices Act is not shackled by reference to the principles governing the award of damages or compensation which apply in common law or equitable forms of action or suit; that is, the amount which may be recovered under s 82 should not be "limited by drawing some analogy with the law of contract, tort or equitable remedies" Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at [38]; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388.
144 To do so would give rise to the danger that the measure of damages which applies in other cases will harden into artificial rules which would stultify the broad power conferred by s 82. Further, it is not even correct to say that losses in the nature of expectation loss will never be awarded in tort. As McHugh J said in Henville v Walker (2001) 206 CLR 459 at [133]:
"The loss that the plaintiff can recover includes consequential losses flowing directly from the misrepresentation including losses from opportunities foregone."
145 Reference was made by his Honour Justice McHugh to Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 where Mason, Wilson and Dawson JJ said at 13:
"Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the
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- plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed."
146 This was the outcome in Sellarsv Adelaide Petroleum NL (1994) 179 CLR 332, where the High Court held that the damages could be awarded for lost benefits under a contract that would have been entered into with another party.
147 Having recognised the possibility that, in tort, compensation may be awarded for expected benefits, does not mean that expectation losses are always recoverable. The object is to award damages which would compensate the plaintiff for proven losses. So, for example, if a litigant proves that in reliance on misrepresentations it decided not to purchase another business which it was shown would have made a profit, then those losses would be recoverable. In the absence of any such evidence, an award of interest will normally compensate for the loss of the use of the money invested in a business purchased in reliance on misrepresentations.
148 In this case, Alpine claimed and was awarded expectation loss being estimated profits for the 15 years it would have occupied the premises under the lease. In the circumstances, and on the evidence, the trial Judge erred in making that award. To award such damages turned the representations into warranties. There was no justification for doing so.
149 I agree with the orders proposed by Steytler P.
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