Elfox Holdings (Australia) v Swadlincote Pty Ltd [1996] RSLT 9

___________________________________________________________________________ [1996] RSLT 9 RETAIL SHOP LEASES ACT In the matter of Dispute No 38 of 1996 ELFOX HOLDINGS (AUSTRALIA) ACN 050506212 - Claimant -and- SWADLINCOTE PTY LTD - Respondent DECISION Given on 10 September, 1996 in Brisbane _____________________________________________________________________________ _ -- 1 of 5 -- Elfox-v-Swadlincote 2 Decision The claimant carries on business as a fast food preparer and seller under the name of "Gobblers" from shop 274 in the Sunshine Plaza Shopping Centre, Maroochydore. An agreement for lease dated 27 July, 1994 was signed by the claimant and by representatives of Lendlease Retail Projects Pty Ltd. We are satisfied on the material before us that Lendlease Retail Projects Pty Ltd was at all times acting as the agent of the respondent. The claim is for compensation based on misrepresentation and on an allegation that the area of the shop is different to that set out in the agreement for lease. We deal with the latter claim first. In terms of a tenancy proposal dated 23 December, 1993 and the statement of particulars of the proposed lease dated 11 July, 1994 the area of the shop was given at 65.7 square metres. The actual area of the shop is 59 square metres. It may well be that normal commercial practise is that business rentals are quoted on a rent per square metre and that the applicant approached this lease on that basis. However, the discrepancy in the area was brought to the attention of Mr Terence Bates, the person in control of the claimant, before the lease was signed on behalf of the claimant. He raised the discrepancy with representatives of the respondent but nevertheless, the claimant completed the lease document by adding its seal to the document with full knowledge of the smaller area. In the circumstances, we hold that the claimant cannot now go behind this written document. With regard to the claim or misrepresentations inducing the lease this can be divided into two headings. The claimant says that it was induced to enter into the lease because of representations relating to the nature and type of the development in which the shop was placed, including representations as to its drawing power and the like. The second basis is that there were representations that at least three restaurants in the area in which food outlets were placed would remain open for night trading until at least 9 p.m. The statements which are claimed to appear to misrepresentations are statements of a very general nature. These include statements that the centre would be the focal point for the social and cultural entertainment of the people of the Sunshine Coast, the centre would be the Maroochydore Town Square, -- 2 of 5 -- Elfox-v-Swadlincote 3 Decision "bigger than Ben Hur", the centre would be the Southbank of the Sunshine Coast, the centre would be developed as an entertainment venue which would attract customers to the centre such that it was not only a shopping centre, the water precinct would be a meeting and focal point of the community, a place to linger and browse and there would be activities on the water such as bumper boots, pontoons and other features, the eatery would be as effective as an anchor as a department store being an attraction in its own right and would become the dominant eating venue in the Maroochydore region. The claim with respect to trading hours is based on statements to the effect that the eatery would be designed so that it could operate independently of the centre, there would be night trading for the eatery which would be used by customers going to the cinema, the eatery would be such that it had access to the Riverwalk, the doors to the exterior of the centre would be open for lengthy hours. A further allegation is that the applicant could expect an annual turnover of over half a million dollars. This allegation is based on a conversation between Mr Bates and Mr Ron Levin in which turnover figures were mentioned. There is, on our finding, nothing to support the allegation that a representation of this nature was made and we deal with it no further. Reverting to the claim based on what we refer to as the general statements alleged to be misrepresentations, we have considered these separately and taken together. The general impression when taken together is a statement that when the shopping centre was completed and operating, it would be an attractive area drawing people from the whole of the Maroochydore area. Nothing specific with regard to anticipated trade or customer flow or anything of that nature is specified. The statements referred to what will happen in the future and not what applied at the time of the making. We have come to the conclusion that these statements do not amount to representations of present facts but anticipation of what would happen in the future and should have been treated by the claimant as such. They are generally what has been referred to in the authorities as "mere puffing". At a promotion meeting held on 5 January, 1994 Mr Bates was handed two -- 3 of 5 -- Elfox-v-Swadlincote 4 Decision documents. The one was referred to as "The Centre Rules" and the other as "Sunshine Plaza Eatery". In terms of clause 4.6 of The Centre Rules, the management of the respondent was given the right to close all the exterior of the centre between 10 p.m. and 6 a.m. Monday to Friday and 6 p.m. to 6 a.m. on Saturday and Sunday. In terms of the document headed Sunshine Plaza Eatery it was stated that the eatery would have 13 specialty food tenancies and that the trading hours of eatery tenants would be for all operating hours of the centre with three of the 13 tenants trading beyond normal operating hours at night. It was always the claimant's intention to trade at night. The presence of other traders operating at night was a most important aspect to draw food customers into the centre at night. The Tribunal is aware that restaurants may change their trading hours based on trading experience. We are also aware that there are limitations on what a landlord may do to compel tenants to remain open beyond certain core trading hours. Nevertheless, we regard the statement that "three of the 13 tenants will trade beyond normal operating hours of the centre at night - seafood, patisserie and Italian" was not a representation as to what would happen in the future, but a statement based on existing facts, that is that the respondent was in possession of factual material that these three tenants would be open for night business for at least a reasonable time after the centre opened. What is a reasonable time is a question of fact, based on all the circumstances. We have looked at the circumstances and made use of the expert knowledge of the lay members of the Tribunal and come to the conclusion that a reasonable time is that time necessary to observe and establish trading figures and would be at least six months. We feel that the claimant is entitled to be compensated for loss of night trading over the period of six months after the centre opened, such loss being limited to that due to the three food outlets named having progressively closed some soon after the centre opened and not remaining open for six months. The calculations with regard to such loss have been dealt with by Mr Norling in a supplement to his latest statement. Trading figures, as prepared by him, indicate that the gross turnover of the claimant was $380,000.00 for the first 12 -- 4 of 5 -- Elfox-v-Swadlincote 5 Decision months of operation. These include the first few months of the centre being opened or the so-called "honeymoon period" when new centres can anticipate substantially greater trading figures than in the succeeding months. These figures also include periods when the other three restaurants were open. For the purposes of calculation of the loss of sales after normal operating hours, we have accepted the calculation of Mr Norling and take gross turnover for the first six months as $150,000 for the reasons stated above. We accept Mr Norling's figure that the loss of after 5 p.m. sales amounts to 6 percent of total turnover, i.e. $9000. On a 60 percent gross profit the loss to the claimant is $5400. The lease documents contained provision for additional costs incurred by after hours trading to be divided between the after hours traders. While the three restaurants were open the costs were shared four ways. With progressive closing of other restaurants the contribution by the claimant was increased. When it was the only restaurant opening it paid the full costs. On the figures given by Mr Norling, the additional cost to the claimant until 27 January, 1996 was $175. Thereafter, he was charged $50.00 per week which amounted to a total of $3750 until 12 May, 1996. He should have paid no more than $25 per week if the other restaurants were open. Taking half of the sum of $3750 and adding it to $175 (for the period ending 27/1/96) we come to a total of $2050. Adding this to $5400 referred to above the total is $7450.00. We direct that the respondent pay to the claimant the sum of $7450.00. -- 5 of 5 --