Anderson v Geljon [2002] RSLT 17

[2002] RSLT 17 THE RETAIL SHOP LEASES ACT In the matter of Dispute 81/2001 ANIE ANDERSON - Claimant and KEITH AND DENISE GELJON - Respondent DECISION Given in Brisbane on Thursday, 18 April 2002. -- 1 of 14 -- 14 Anderson-v-Geljon Decision - 2 - Anie Anderson ("the Tenant") claims compensation from her landlords ("the Respondents") for loss of profits and damage to the goodwill of her business. She alleges that those losses were caused by the Respondents' failure to honour oral representations made to her prior to her entering into the subject lease and on later occasions. The allegation is that Keith Geljon, on behalf of the Respondents, represented that: [1] The Tenant would have the sole and exclusive right to sell "take away" food in the Respondents' shopping centre; [2] Any proprietor of a certain convenience store in the same centre (now a Mr Ford) was and would continue to be prohibited by his lease and by the Respondents from selling "take away" food. The Tenant was represented by her friend Mr Wightman and the Respondents by Ms Le Grand, solicitor. Although not formally a business partner, Mr Wightman assists the Tenant in the business and takes responsibility for the books of account. He was present at the negotiations for purchase of the business and assignment of the lease and has made relevant representations to the Respondents on the Tenant's behalf. The Tenant purchased the business of Sun Valley Seafoods ("SUN VALLEY SEAFOODS") from Rayner and Francis by contract dated 22 March 1999. The "Form S" declaration for stamp duty purposes shows that the consideration was $91,219, of which $57,000 represented goodwill and $30,000 the price of plant and chattels. She took an assignment of the balance of the term of the vendors’ lease and took over the business on 7 April 1999. The premises of Sun Valley Seafoods are part of a small shopping complex comprising a service station (run by the Respondents), a hairdresser's, a bottle shop, and a convenience store, situated on the outskirts of a regional town, about 2 kilometres from other retail premises. -- 2 of 14 -- 14 Anderson-v-Geljon Decision - 3 - The Tenant uses the premises as a fish and chip shop. No uncooked seafood is sold there but some other hot takeaway products such as Chiko Rolls and dim sims are available. At the end of 1999 the Tenant exercised her option to renew the lease upon the same terms. There was no exclusivity covenant in the assigned lease and there is none in the current lease. However, the Tenant relies on the following term which is her current lease and which also appears (subject to a re-wording to refer to a convenience store) in the lease held by the proprietor of the convenience store, as noted in the letter of Goodwin and Co, solicitors, dated 8 August 2001: “4.1 Permissible use. The lessee will not use or permit to be used the demised premises for any purpose other than for the purpose of a Takeaway Foods and Retail of Fresh Seafoods or other business or use approved by the Lessor (which approval shall not be arbitrarily or capriciously withheld) but which approval shall not be sought by the Lessee for any business which will compete with the substantial part of the business of any other Lessee of the building ….” Although the Notice of Dispute does not clearly articulate a claim under the Retail Shop Leases Act 1994 ("the Act") as distinct from the lease, the claim falls to be considered also under section 43(2)(a) thereof. DETAILS OF THE CLAIM The Tenant says that before she purchased the business she and Mr Wightman met the Respondents at their service station. The date of this meeting -- 31 March 1999 -– is not in issue. The Tenant says that it was very important to her to have the Respondents' assurance that her business be the only shop in the -- 3 of 14 -- 14 Anderson-v-Geljon Decision - 4 - centre to sell "take away" food, as she was paying a high price for the business and competition would affect its value, and that she communicated this requirement to the Respondents. The Tenant says the Respondents' agent and also the previous owner of SUN VALLEY SEAFOODS assured her prior to 31 March 1999 that no other shop in the centre was permitted to sell goods of that kind. She admits that by 31 March 1999 she was aware that the convenience store (now run by Mr Ford) sold pies, sausage rolls and sandwiches and that the male Respondent told her that these were provided to early morning customers before the fish shop opened. The Respondents' service station is used as a truck and meal stop by drivers of heavy transport vehicles. Mr Wightman attended the meeting on 31 March 1999 to assist the Tenant. She is a native of Indonesia and English is not her first language. Wightman's recollection of that meeting is similar to the Tenant's. He says that Mr Geljon, the first Respondent, then stated that the fish shop was the only shop in the block to sell take-away food and described the take-away customers of the convenience store as “early morning shoppers”. Despite the apparent conflict between this advice and the professed desire of the Tenant to be free from "take away" competition neither she nor Mr Wightman raised any objection. Both she and Mr Wightman say that Mr Geljon said that he expected tenants to co-operate in relation what each one sold or did not sell. Mr Wightman said that he was satisfied that the Respondents would exercise any necessary control over the proprietor of the convenience store, but did not specify the statements or assurances, if any, which led to his satisfaction. Mr Wightman supported his testimony with several pages from his diary that he declares are contemporary notes. An entry on the page for 31 March 1999 reads: “* Conv store definitely cannot sell takeaways”. Such material is -- 4 of 14 -- 14 Anderson-v-Geljon Decision - 5 - admissible evidence of the facts asserted even in a court of law1 but it is not corroborative evidence in a court or a tribunal.2 In March 2000 the Tenant learned that the convenience store had been bought by Mr Ford. She and Mr Wightman were concerned to hear this because Ford had previously operated a cooked fish business in the same town. Wightman expressed this concern to the Respondents and was assured, so he says, that Ford did not intend to sell take-away food. However, in September 2000 the Tenant was alarmed to see cooking and hot food display equipment installed in Ford's convenience store. In October 2000 Mr Wightman raised this matter with the Respondents. He says that they then assured him that hot cooked chickens were the only "take away" product Mr Ford proposed to sell. Mr Wightman raised no objection to that, provided that no other kind of "take away" food was sold by the convenience store. (The Tenant did not sell cooked chickens.) But soon after October 2000 the Tenant noticed that other "take away" lines that she did sell were being sold at the convenience store. Mr Wightman contacted the Respondents once more, and their solicitors wrote to Mr Ford asking him to end such competition with the Tenant. Ford’s solicitor replied, asserting his client’s right to sell the items in question. But later, according to the Tenant, Ford agreed to cease selling them. The Respondents have lodged in the Tribunal a document to that effect but it is unsigned, and the undertaking to which it refers has not been observed by Ford or enforced by the Respondents. Mediation was not successful. The Tenant complains that the convenience store's sales of dim sims, Chiko rolls, crumbed sausages and possibly poultry items other than whole chickens 1 Evidence Act 1977 ss 92, 101. Here the assertion should probably be understood as "Respondents said that the convenience store definitely cannot sell takeaways". 2 Herrman v Nurses Board of South Australia (1993) 61 SASR 325. -- 5 of 14 -- 14 Anderson-v-Geljon Decision - 6 - diminish her turnover by about $300 per week. She has been trying to sell her business for about 2 years (commencing about one year after she took it over) and in that time she has had only one offer; the price offered was about $46,000. It will be recalled that she paid $91,219 for it in 1999. The Tenant's accountant, Mr Crocker, states that her gross turnover decreased by 8.3% in the period 1 July 1999 to 1 July 2001. He also states that this downturn is more than 2½ times greater than the State average recorded for that period by the Australian Bureau of Statistics ("the ABS"). Mr Crocker attributes that result to an “unfair trading situation”. Apparently that opinion is based on an erroneous belief that the Tenant's lease contains an exclusive trading covenant.3 The Tenant's evidence includes a character and work reference from a former employer who speaks highly of her diligence and capacity for hard work. It also includes a copy of a "sales presentation" of Sun Valley Seafood which she obtained from a Mr Blessington who was agent for the previous owner of Sun Valley Seafoods. That document contains the trading profit and loss statement of Sun Valley Seafoods for a period immediately before the Tenant took that business over. THE RESPONDENTS' REPLY The case for the Respondents may be summarised thus: [a] The parties met on 31 March 1999 as the Tenant states. The Respondents then told the Tenant and Mr Wightmanthat the convenience store sold "take-away" foods, namely pies, sandwiches, sausage rolls and “other hot and cold baked goods”. [b] They did not tell the Tenant or Mr Wightmanthat no other business in the centre would be permitted to sell "take aways". 3 Letter Derek Cockings & Associates to Ms A A, 8 April 2002, tendered by Claimant. -- 6 of 14 -- 14 Anderson-v-Geljon Decision - 7 - [c] There is no term of the subject lease which promises any such prohibition and the Tenant did not seek any such term. [d] Mr Wightman’s complaint to Mr Geljon in October 2000 was limited to the possible selling of fish and chips by Mr Ford. In relation to that line of food, and that line only, Mr Geljon, for the Respondents, did tell Mr Wightman that sales by other shops in the centre were "not on". [e] In January 2001 Mr Wightman complained that Mr Ford was selling dim sims and Chiko rolls. Mr Geljon then spoke to Ford and sought legal advice and letters were exchanged between his solicitors and Ford's. According to Mr Geljon the Respondents have taken all proper and reasonable steps to settle the differences between the Tenant and the proprietor of the convenience store. [f] The Respondents say that the Tenant's business has declined for reasons other than competition from Ford's convenience store. Mark Rayner, a prior co-owner of Sun Valley Seafoods, does not recall telling the Tenant (as she claims) that his was the only shop selling take-away food in the centre. But he did point out to her that there was no exclusive right to do so in the lease. He considers that most of Sun Valley Seafoods’ trade is in the evening, in response to orders by telephone. In his opinion sales of hot chickens by Mr Ford tend to assist the Tenant's business by increasing her sales of chips. Shane Ford, the present owner of the convenience store states that when he -- 7 of 14 -- 14 Anderson-v-Geljon Decision - 8 - bought his business in March 2000 it sold pies, sandwiches, cakes and similar food products. He installed equipment for the sale of hot chickens because of a demand for them in the area. He has never sold potato wedges. He also sells other chicken lines. He says that SUN VALLEY SEAFOODS does not sell chicken products. 4 His equipment includes a small deep-fryer. In January 2001 he began selling a few dim sims, Chiko rolls and crumbed sausages before the Tenant's shop opened for the day. He averaged about 8 such sales per day, for which his gross receipts were about $9.00 per day. Mr Ford states that he has legal advice that he is entitled to sell dim sims and Chiko rolls provided that he does not do so in direct competition with the Tenant -- that is, at times when her shop is open. He claims that he has followed that advice. He adds that he has successfully conducted a business similar to the Tenant's and in his opinion the Tenant has not "put in the hours" needed for success. Mr O’Shea was the solicitor for both parties when the Tenant acquired her business. He denies telling Mr Wightman that a clause in the lease of the convenience store would prevent it from competing with the Tenant's business. He also told the Tenant that Mr Ford’s lease contained a covenant similar to her clause 4.1, as set out above. Kevin Blessington acted as estate agent, on the sale of Sun Valley Seafoods to the Tenant. It does not appear that he was at any material time an agent for the Respondents. Blessington says that at no time did he tell the Tenant or Mr Wightman that Sun Valley Seafoods had exclusive trading rights by virtue of the lease, or otherwise. 4 SUN VALLEY SEAFOODS have introduced some chicken products eg chilli chicken, but apparently not those products sold by F: Ms A transcript p 60 -- 8 of 14 -- 14 Anderson-v-Geljon Decision - 9 - Judith Reynolds is the Respondents' accountant. She has not had an opportunity to study the trading records of Sun Valley Seafoods prior to its takeover by the Tenant; they were not made available until the day before the hearing. Ms Reynolds says that any decline in the value of goodwill or in the turnover of such a business is unlikely to be due to any one cause. She has tendered a list of factors which, in her opinion, are likely to be relevant here. THE ALLEGED REPRESENTATION The parties differ as to the precise words used by Mr Geljon (the first Respondent) on 31 March 1999. Geljon says that on that occasion he told the Tenant and Wightman that the convenience store sold “hot and cold baked food”. According to the Tenant and Wightman, Geljon clearly said that it sold no "take-aways". It is difficult to accept either version without reservations. It is common ground that in March 1999 the convenience store was already selling some take-away food. In our view it is unlikely that Mr Geljon then drew any clear distinction between "hot and cold baked food" and "take-aways", if indeed any such distinction is possible. In any event, we seriously doubt whether he could accurately and confidently recall such a statement three years afterwards. Counsel for the Respondents cross-examined Mr Wightman on his diary entry for 31 March 1999, suggesting that he may have embellished or even fabricated his purported contemporary note. However, her cross-examination was based on a photostat copy of the note, which is hardly the best method of checking a possible alteration or fabrication. She did not call for the original document. The Tribunal has since called for it, and it was readily produced. This is an issue that the parties canvassed,5 although as appears below nothing turns on it here. The Tribunal is not prepared to draw conclusions adverse to the Tenant 5 Contrast Keller v Drainage Tribunal [1980] VR 449 -- 9 of 14 -- 14 Anderson-v-Geljon Decision - 10 - from its inspection of the original, although we note that the words recording Geljon's alleged statement appear to be more cramped than other nearby entries. However, it is unnecessary to pursue this matter any further because we attach no weight to the evidence based on the diary note. SECTION 43(2)(a) OF THE ACT The sub-section relevantly states: "The lessor is liable to pay to the lessee reasonable compensation for loss or damage suffered by the lessee because (a) the lessee has entered into the lease ... on the basis of a false or misleading statement or misrepresentation made by the lessor ..." The Tenant's case is that before she purchased the business or took an assignment of the lease she was asked to meet the Respondents. A letter to her from Mr O’Shea, dated 29 March 1999, is in evidence and confirms that invitation. It is common ground that the parties met on 31 March 1999. However, the contract of sale of Sun Valley Seafoods is dated 22 March 1999 and was not subject to finance. Accordingly, when the Tenant met the Respondents on 31 March 1999 she was already committed to the purchase from Rayner and Francis, and to the assumption of their rights and obligations under the lease as it then stood. It was not the Respondents who effectively "sold" her the balance of the lease; it was Rayner and Francis. On her own account of the affair there was no basis on which she could lawfully withdraw from the transaction with Rayner and Francis. We find that Mr Rayner told the Tenant, before 31 March 1999, that the lease contained no exclusive trading covenant. In these circumstances, even if the Respondents made the alleged representations on that date -- and we are not satisfied that they did -- she did not, in our judgment, reasonably rely upon the same. Unreasonable reliance is not an effective reliance at law. -- 10 of 14 -- 14 Anderson-v-Geljon Decision - 11 - While the Tenant would no doubt have welcomed an assurance of exclusivity on 31 March 1999 or at any other time, no such assurance, in our judgment, caused her to take over the balance of the original lease. When she first communicated with the Respondents the die was cast; she was contractually bound to acquire the business and the balance of the lease, which, as Rayner told her, conferred no exclusive right of trade. She had (or could readily have sought) legal advice in relation to the contract of sale, and the lease which accompanied it. Mr O’Shea denies that he told the Tenant that the convenience store could not lawfully compete with SunValley Seafoods, and we accept his evidence on that point. It is hardly necessary to point out that the Tenant subsequently exercised her option to enter into a fresh lease, on the same terms, evidently without any protest or attempt to secure an amendment in her favour. In our view the Respondents' communications with Mr Ford after the Tenant took over the Sun Valley Seafoods lease were simply bona fide efforts to "keep the peace", and cannot be construed as admissions, contractual promises or estoppels of any kind. LEASE OF THE CONVENIENCE STORE: COVENANT 4.1 It has already been noted that this clause (as quoted above, but re-worded to refer to a convenience store) appears in the lease between the Respondents and Mr Ford. It is curiously worded. It is no doubt aimed at actual competitive conduct, but taken literally, it forbids even a request for permission to act in that way. Of course there can be no question of the Tenant enforcing that provision against Mr Ford; the Tenant's right, if any, is against the Respondents for a breach of their covenants with her, or of some representation which caused her to enter into that lease. As we have already indicated, we are not satisfied that any such breach has occurred. We observe in passing, although nothing now -- 11 of 14 -- 14 Anderson-v-Geljon Decision - 12 - turns on this point, that on the uncontradicted evidence of Mr Ford, his sales of the take-away food to which the Tenant objects, namely dim sims, Chiko rolls and crumbed sausages, occurred when the Tenant's shop was closed, and receipts from that source seldom exceeded $9.00 per day. We accept that Mr Ford’s total gross takings from all takeaways including chickens and other items to which the Tenant does not object) amounts to about $25 per day.6 The Tenant’s written statement of evidence -in –chief contains no statement as to the proportion of her sales being non fish and chip products. She was unable in cross examination to estimate the decrease in the sale of those lines. Almost as an afterthought she volunteered that these lines amounted to 40 per cent of sales. If a substantial part of her business was the sale of food other than seafood, we would have expected some clear evidence of the proportion in relation to total. As the evidence stands we could not be satisfied that Ford’s sales amounted to "substantial" competition with the Tenant, within the meaning of Clause 4.1 of F's lease. What remedy is available to a tenant in the event that another tenant breaches clause 4.1 in its lease? There is no remedy in this Tribunal against the other tenant. The only remedy is against the landlord should it fail to enforce the covenant. In the present dispute Mr Geljon took the matter up on behalf of the Claimant and on the assurance of the other tenant that he had not contravened his lease, the landlord went no further. Mr Geljon did concede in cross examination that he thought the other tenant was being “a bit unfair” but we do not take this concession as an admission that the landlord made the representations claimed by Ms Anderson, nor as evidence that the other tenant had breached his lease. We interpret the landlord’s intervention with the other tenant as evidencing a natural wish in the circumstances to preserve good relationships between the tenants. QUANTUM 6 Mrs G -transcript p 70 -- 12 of 14 -- 14 Anderson-v-Geljon Decision - 13 - In view of our findings of fact and conclusions on the issue of liability, it is not strictly necessary for us to deal with the issue of quantum. However, in due respect to the parties' submissions, we shall set out our views on this matter in short form. We have compared Sun Valley Seafood's profit and loss accounts for the periods July 1997-June 1998, July 1998-January 1999, 7 April 1999-30 June 1999, 1 July 1999 –30 June 2000 and 1 July 2000-30 June 2001 with the valuable assistance of a member of the Tribunal with accounting expertise. In our judgment the following points emerge from a careful analysis of those documents: • From the time the Tenant took over Sun Valley Seafoods on 7 April 1999 to 30 June 1999 turnover fell by 20.2 per cent; • In 1999-2000 there was a further fall in turnover of 2.77 per cent; • In 2000-2001 there was a fall of 8.34 per cent. That result appears to be fairly consistent with ABS statistics relating to takeaway food retailing for that period, due to the impact of the new Goods and Services Tax; • Gross profit remained fairly consistent over the period reviewed, although the Tenant did achieve an increase in her gross profit/sales ratio in 2000/2001, probably by increasing prices; • Sun Valley Seafood’s expenses increased immediately after the Tenant took over. Although they have since decreased they remain 20 per cent higher than they were immediately before the takeover. A schedule of the Tribunal's analysis of the Tenant's quantum evidence is Appendix "A" to this decision. According to the Tenant and Mr Wightman their real objection was to the convenience store's sale, from January 2001, of fried comestibles such as dim -- 13 of 14 -- 14 Anderson-v-Geljon Decision - 14 - sims and Chiko rolls, which Sun Valley Seafoods also offers for sale. They do not object to his selling whole cooked chickens. The Tenant's grave difficulty is that significant falls in Sun Valley Seafood's income occurred before January 2001, when the competition to which she objects did not yet exist. As noted above, the downturn began immediately after the tenant bought the business and the lost ground has never been reversed. The onus of proving loss caused by unlawful conduct of the Respondents, as well as the onus of proving such conduct, is upon the Tenant, as the initiator of these proceedings. Assuming (without deciding) that some loss was so caused we are not satisfied, on the evidence, that it relates to competitive trading by Mr Ford, nor that it is represented by any significant monetary figure. CONCLUSION The Tenant has not produced evidence to resolve the issue of liability, or the issue of measurable loss in her favour. Accordingly the application is dismissed. There will be no order as to costs. A F FORBES Chairman -- 14 of 14 --