Cary Entertainment Pty Ltd v Australian Postal Corporation [2000] RSLT 18

1 [2000] RSLT 18 THE RETAIL SHOP LEASES ACT In the matter of Dispute 110/1999 CARY ENTERTAINMENT PTY LIMITED - Claimant - and - AUSTRALIAN POSTAL CORPORATION - Respondent DECISION Given in Brisbane on 7 September, 2000. -- 1 of 14 -- Cary Aust-v-Aust Postal Corp 2 Decision For the reasons stated hereafter, this claim is dismissed. This matter was commenced by a Notice of Dispute filed in the Retail Shop Leases Registry on 24 September 1999. It went to mediation in accordance with s.56 of the Retail Shop Leases Act 1994 (“the Act”) on 13 October 1999. The mediation was unsuccessful. The dispute was referred to the Chief Executive and then referred by him to a Retail Shop Lease Tribunal. The dispute came before a Retail Shop Lease Tribunal for determination on five days from 8 th May to 12 th May 2000, inclusive. The Tribunal approved Mr Moon of Counsel as agent for the claimant, and Mr O’Sullivan of Counsel as agent for the respondent. The particulars of dispute contained in the Notice of Dispute showed that the claim was for compensation pursuant to ss.42 and 43 of the Act. The primary claim was a claim for compensation pursuant to s.43(2) for loss or damage suffered by the claimant lessee because it entered into the relevant retail shop lease on the basis of a false or misleading statement or misrepresentation made by a person acting under the authority of the respondent lessor. In fact, the claimant alleged several false or misleading statements or misrepresentations. The secondary claim was for compensation for loss or damage suffered by the claimant lessee by reason of action taken by the respondent lessor (other -- 2 of 14 -- Cary Aust-v-Aust Postal Corp 3 Decision than an action taken under a lawful requirement) that substantially restricted or altered access by customers to the leased shop, and the flow of potential customers past the shop, and caused significant disruption to the lessee’s trading in the leased shop – s.43(1) of the Act. The total amount of compensation claimed was in excess of the Tribunal’s jurisdiction, but the claimant abandoned the excess. Dealing first with the primary claim, it is necessary to decide whether it is open to the claimant to rely upon representations alleged to have been made by the respondent’s agent, Paul Smith, to the claimant’s directors Ryan Wellington and Catherine Wellington (then Ms Catherine Savage) on 3 rd September, 1998. The evidence shows that on a date earlier than 3 rd September 1998 the claimant, through its director Ryan Wellington had submitted a written “offer to lease” (which is really an offer to take on lease the premises concerned) which offer contained provision for payment of a deposit and which deposit was paid on 3 rd September 1998, following an attendance by those directors on the respondent’s agent, Paul Smith. The Tribunal considers that it may and does have regard to representations made on behalf of the respondent to Ryan Wellington and Catherine Wellington of the claimant on 3 rd September 1998, and to the Claimant’s conduct following those representations. By paying the deposit the Claimant perfected its offer to take on lease. -- 3 of 14 -- Cary Aust-v-Aust Postal Corp 4 Decision The question remains as to whether the claim is prevented by Item 13 in the Letter of Agreement to enter into Lease that no conduct or representation made by or on behalf of the lessor influenced the lessee to make the offer and to enter into a lease or tenancy. The point can be disposed of quite clearly. If the evidence shows that representations were made which induced the claimant to enter into the lease, then the Tribunal will not exclude those representations merely by reason of manifestly false statements contained in the Letter of Offer. Nevertheless, the disclaimer does bear upon the Tribunal’s attitude towards the evidence given by the witnesses for the claimant. Reverting to the primary claim, questions arise as follows: - (a) What representations were made by the respondent’s agent to the claimant? (b) How did the claimant (i.e. the Board of Cary Entertainment Pty Ltd) interpret the representations? (c) Were the interpretations placed by the claimant upon actual representations reasonably open to the claimant? (d) Were the representations intrinsically, or as interpreted by the claimant, false or misleading? (e) Did the claimant enter into the lease on the basis of a false or misleading statement or representation? Of the claimant’s witnesses, only Ryan Wellington could give direct evidence -- 4 of 14 -- Cary Aust-v-Aust Postal Corp 5 Decision of what was said up to but excluding 3 rd September 1998. Both he and Catherine Wellington can give evidence of what was said on that date. The witness Patrick Daniel Savage could give no direct evidence at all, he having had no personal contact with the respondent’s representatives before the lease was entered into, but his evidence is relevant to what the Board of Directors of the claimant understood the position to be. Patrick Savage approved the signing by Ryan Wellington on behalf of the claimant of the Letter of Offer to Lease containing Item 13 to the effect that the claimant had not been induced to make the offer to lease by any representation made by or on behalf of the respondent (transcript pp 61 to 64). His explanation (transcript pages 65 and 66) comes somewhat surprisingly from a man of legal background. The Tribunal finds it somewhat unreliable. Alternatively, Patrick Savage believed there was no relevant representation made on behalf of the respondent. Apart from what she says about the conversation with Paul Smith on 3 rd September 1998, Catherine Wellington’s evidence merely relates what she was told by Ryan Wellington. As to what was said on that date, she does little more than say that Paul Smith repeated what he had said to Ryan Wellington, which Catherine Wellington could have known only from what Ryan Wellington had told her. Her explanation of the “no representations” item in the Letter of Offer to Lease is not perhaps convincing from a legal point of view, though perhaps less unconvincing in her case than in the case of Patrick Savage. -- 5 of 14 -- Cary Aust-v-Aust Postal Corp 6 Decision Direct evidence of what representations are alleged by the claimant to have been made by or on behalf of the respondent must be sought in the evidence of Ryan Wellington. Again, his explanation of the “no representations” item in the Letter of Offer to Lease is not convincing, and that lack of conviction does reflect upon his evidence. A further point which gives rise to doubt in the minds of the members of the Tribunal is the extraordinarily selective nature of the electronic diary kept on the claimant’s computer – extraordinary because it recorded even minute details relevant to conversations with and letters to and from and attendances on the respondent lessor’s agent, but contains no entries as to other matters which one might think to be of considerable importance. If details of competitive businesses or complementary businesses were of vital importance as alleged in Ryan Wellington’s evidence ( statement filed 28 February, 2000, paragraph 9), then the diary ought to have been more detailed, precise and complete. Catherine Wellington’s statement sets out criteria which, she says, were to be applied in deciding whether or not to open the proposed business (and obviously, to take a lease of the premises) in the small centre where the business has been (and so far as the evidence shows is still being) conducted. Those criteria are: - (a) We (Catherine Brigid Savage, as she then was, and Ryan Wellington) should only seek to cater for existing needs, not seek to create new. We were to assess the new subdivisions and unit developments to ensure that the higher end of the market was an expanding population. -- 6 of 14 -- Cary Aust-v-Aust Postal Corp 7 Decision (b) We should understand that all markets are limited, and assess who could compete for our market in the Oxford Street precinct. (c) We should only proceed if we were the only operator of our product in a precinct of complementary businesses which generated significant foot traffic. (d) If we could not, after all assessment and inquiry, clearly identify a substantial competitive advantage, we should not consider competing. It is noteworthy that on the evidence the diary contains no entries about criteria (a) and (b) and little about criterion (d). Ryan Wellington says that the representations made by Paul Smith on behalf of McGee’s Real Estate as agent for the respondent were as follows: - (i) That of the relevant premises constructed upon land owned by the respondent lessor, Shop No. 5 was let as a “Mediterranean restaurant” (Wellington forming the clear impression that the business would be of a “takeaway or corner style shop”). (ii) That “the shop next door” was let for the manufacture and retail of chocolate, with the additional representation made on 3 rd September 1998 that “The chocolate shop may serve coffee but will probably close at night”. In oral evidence Ryan Wellington and Catherine Wellington sought to elaborate upon those representations and gave evidence of impressions they -- 7 of 14 -- Cary Aust-v-Aust Postal Corp 8 Decision formed. Much was made of distinctions between the terms “competing” or “competitive” and “complementary” and again, much oral evidence was given as to the meaning to be attached to the term “upmarket restaurant”. But the evidence did not make clear the significance of those terms in the context of the representations as alleged on behalf of the claimant in Ryan Wellington’s written statement. Catherine Wellington refers in paragraph 13 of her statement filed on 28 February 2000 to the meeting which she attended with Ryan Wellington and Smith on 3rd September 1998 on site. She says “We” (meaning herself and Ryan Wellington) “made it clear that it was important to us that the businesses were not competitive to our business, and in fact would be complementary to our business.” She goes on to say in the same paragraph: “Smith confirmed to us his previous advice to Ryan that the shop next door was for the manufacture and retail of chocolates, and that Shop 5 was an area let for a small Mediterranean Restaurant, virtually a takeaway shop.” Under cross- examination she admitted that “virtually a takeaway shop” was her impression. In the same paragraph she goes on to say, “Smith finished by adding that the chocolate shop may serve coffee but will probably close at night.” The respondent’s witness Jennifer Ann Burley says in her statement filed 12 April 2000, paragraph 9: “Davis and Grant Fine Chocolates Pty Ltd (i.e. “the chocolate shop”) commenced the fit out of their premises in about August 1998. Their premises were essentially finished and the chocolate -- 8 of 14 -- Cary Aust-v-Aust Postal Corp 9 Decision manufacturing component of the business was operating from about 14 September 1998. Tables and chairs were set up within the premises from early October 1998 and would have been apparent to anybody visiting the premises at that time.” It was not until 14th November, 1998, at the earliest, that the claimant commenced its fit out of the shop the subject of this claim. The execution date of the lease itself was 13/11/98. It is not credible that the claimant’s directors were not aware of the fact that the “chocolate shop” was more than just a shop for the manufacture and sale of chocolate, both at the time the claimant executed the formal lease on 13 November 1998, and commenced its fit out on or about that date. Given the general tenor of Patrick David Savage’s evidence and Catherine Wellington’s evidence, it is hard to understand why the claimant did not there and then rescind any agreement to lease on the basis of this knowledge, if it had been significant. Jennifer Ann Burley had no direct communication with any of the directors of the claimant before the claimant paid the deposit on 3 rd September 1998. She cannot give direct evidence of what was said to them by the respondent’s agent. The respondent’s witness Smith says the representations were as follows: - 1. Shop No. 2 would be used as a chocolate shop/café and for the manufacture and sale of chocolate. Smith also stated in his -- 9 of 14 -- Cary Aust-v-Aust Postal Corp 10 Decision written statement that he believes he said to Ryan Wellington that the shop would operate as a café with some basic café food, but can’t be certain he said that; 2. Shop 5 would be a Mediterranean Restaurant, and that Shops 6 and 7 were still available for lease. Smith says that he invited Ryan Wellington to inspect the premises but Wellington declined that invitation. Smith admitted he had not kept detailed notes of the conversations, and that he was speaking from memory as best he could. At this point, the members of the Tribunal comment on the submission by Mr Moon for the claimant and say that the Tribunal does not accept any suggestion that Paul Smith lied in his evidence because of any potential proceedings by the respondent against Smith’s employer or Smith himself. On the balance of probabilities, the Tribunal holds that the representations in fact made were: - 1. As to Shop No. 1 (The Chocolate Shop): - (a) it would be used for the manufacturing and retailing of chocolate; (b) that coffee might be sold from the chocolate shop; and -- 10 of 14 -- Cary Aust-v-Aust Postal Corp 11 Decision (c) that the chocolate shop “would probably close at night.” The Tribunal bears in mind the fact that Smith’s evidence shows that he had no part in the transaction leading to the leasing of the chocolate shop and had no direct knowledge of the negotiations. Furthermore, it appears that Smith did not refer to documentation regarding the lease of the chocolate shop. 2. As to the Mediterranean Café “Bulimba Bean”: - (a) This shop would be used as a Mediterranean Café. No mention was made by the respondent’s agents and no question asked by the claimant’s directors as to tables and chairs on the footpath. So far as the interpretation by the Board of Directors of the Claimant is concerned, the evidence (particularly that of Catherine Wellington) shows that they added subjective impressions to the actual statements made by Paul Smith on behalf of the Respondent. In view of the importance said to have been placed by the Claimant upon the possibility of competing businesses, the impressions were not evidence on which it was reasonable for the Claimant to rely. It remains to decide whether the actual representations as found by the Tribunal were, or any of them was, false or misleading within the meaning of s.43.(2)(a) of the Act. A “false or misleading statement” is sufficient. -- 11 of 14 -- Cary Aust-v-Aust Postal Corp 12 Decision The Tribunal holds on the balance of probabilities that the representations made in respect of the chocolate shop were false and misleading; while the representations made in respect of Shop No. 5, “Bulimba Bean,” were not false and that to the extent, if any, to which the claimant was misled, it was misled by its directors’ assumptions and impressions. That is not the end of the matter. A claimant lessee is entitled to reasonable compensation for loss or damage incurred by the lessee because “the lessee entered into the lease….on the basis of a false or misleading statement or misrepresentation made by the lessor or any person acting under the lessors authority”. That is, the mere making of a false or misleading statement or misrepresentation does not, of itself, entitle the claimant lessee to compensation pursuant to s.43 (2)(a) of the Act. The right to compensation arises where the entry into the lease has been caused by the false or misleading statement or misrepresentation. The burden of satisfying the Tribunal that the claimant lessee entered into the lease on the basis of a false or misleading statement or misrepresentation lies upon the claimant – that is, the claimant lessee must satisfy the Tribunal that the claimant would not have entered into the lease had the particular statement or representation not been made. The Tribunal is not satisfied, on the overall evidence both written and oral, that Cary Entertainment Pty Ltd would not have entered into the lease if the -- 12 of 14 -- Cary Aust-v-Aust Postal Corp 13 Decision representations found by the Tribunal to have been made had not been made. In other words the Tribunal is not satisfied, on the evidence, that the claimant entered into the lease on the basis of a false or misleading statement or misrepresentation. Rather the Tribunal holds that the claimant, at least in the persons of Ryan Wellington and Catherine Wellington (then Catherine Savage) had decided to open a restaurant in the Oxford Street area and had selected the site now the subject of the lease. Earlier in this decision the Tribunal dealt with item 13 in the Letter of Agreement to enter into the lease, and held that that item did not, of itself, defeat the claim. But the Tribunal did state there that the disclaimer does bear upon the Tribunal’s attitude towards the evidence given by witnesses for the claimant. See further the comments in this decision on the evidence of Patrick Savage concerning the disclaimer. The claimant not having satisfied the onus of proof upon it, the Tribunal rejects the claim for compensation pursuant to s.43(2)(a) of the Act. So far as the secondary claim based on s.43(1) of the Act is concerned, there is no evidence before the Tribunal to enable it to calculate an appropriate amount of compensation, if indeed any compensation at all should be awarded. The claimant simply has not established its proposition that the respondent took action which substantially restricted the lessee’s access to the leased shop or access by customers to the leased shop or the flow of potential customers past the shop. Similarly the Tribunal is not satisfied on -- 13 of 14 -- Cary Aust-v-Aust Postal Corp 14 Decision the evidence that the respondent caused significant disruption to the lessees trading in the leased shop. The claim pursuant to s.43(1) of the act is dismissed. The members of the Tribunal have given careful consideration to the submissions made on behalf of the respective parties in reaching the conclusions set out above. It is not necessary to deal in further detail with all those submissions. A W Couper, Chairman. -- 14 of 14 --