Antorella Investments Pty Ltd, Lazzaro & Lazzaro v Sunnybank Plaza Pty Ltd [1992] QSC 16

·--·- .. · (: ( "- .· I "" TRANSCRIPT OF PROCEEDINGS State Reporting Bureau, 4th F1oor, The Law Courts, George Street, BRISBANE. 0: . 4Q_QQ Tel. (07) 227 .436( (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MACKENZIE J No 719 of 1991 ANTORELLA INVESTMENTS PTY LTD and ANTONINO LAZZARO and GABRIELLA LAZZARO and SUNNYBANK PLAZA PTY LIMITED BRISBANE .. DATE 12/02/92 JUDGMENT J .. " 1 '· ':·"> I"'_~R'=§V~I.~S~ED~- .-.C-0-P~l.E-S-.IS_S..;;.:U_E_D..,._ , -"'""eo!lrt Pep~rting Bur~au ·' Date: J 9 1 :.{_./9 Z_ First Plaintiff Second ·· Plaintiffs Defendant -- 1 of 19 -- 10 20 30 40 so 60 120292 JUDGMENT HIS HONOUR: The judgment in this matter will be as follows: 1. I dismiss the action of the first plaintiff and 2. the second plaintiffs. On the counterclaim: (a) I give judgment for the defendant in the sum of $43,223.88 against each of the plaintiffs. (b) I order that the defendant recover from the second plaintiff Gabriella Lazzaro possession of the land described as Lots 1 and 4 in Registered 10 0 Group Title Plan No 551 County of Stanley, Parish c=) of Yeerongpilly,,,,.;··~-,r"'tbe .. ·la,nQ.."",q.p,ll;tain~,.J,n ''"l'-·" Certificates of Title Volume 605 Folios 110 and 113. I order the plaintiffs to pay the costs of the action and counterclaim to the defendant to be 30 40 - ..• __ . - . . • ···.:::··.>..~·<· taxed, including reserved costs~ !\ .. :;\A:....~?':;::· ... . ·,: · ·:\1 i"~:-~:d .. I order the application under 0 26 to be adjourned to a date to be fixed. 50 60 2 0 0 -- 2 of 19 -- r;· :Se.. '90<./ orb IN THE SUPREME COURT OF QUEENSLAND Before Mr. Justice Mackenzie No. 719 of 1991 BETWEEN: ANTORELLA INVESTMENTS PTY. LTD. First Plaintiff (." ANTONINO LAZZARO and GABRIELLA LAZZARO Second Plaintiffs ( SUNNYBANK PLAZA PTY. LIMITED Defendant JUDGMENT -MACKENZIE J. Delivered the 12th day of February, 1992. (/ Counsel: Mr. A.B. Crewe for Plaintiffs. Mr. M. Daubney for Defendant. Solicitors: Connolly Suthers for Plaintiffs. Corrs Chambers Westgarth for Defendant. Hearing dates: 2nd, 3rd and 5th December, 1991 -- 3 of 19 -- ( \ IN THE SUPREME COURT OF QUEENSLAND No. 719 of 1991 BETWEEN: ANTORELLA INVESTMENTS PTY. LTD. First Plaintiff ANTONINO LAZZARO and GABRIELLA LAZZARO Second Plaintiffs SUNNYBANK PLAZA PTY. LIMITED Defendant JUDGMENT- MACKENZIE J. Delivered the 12th day of February, 1992. The first plaintiff of which the second plaintiffs were the directors conducted from the 22nd February, 1989 a business of selling fresh and cooked seafood products at the Sunnybank Plaza Shopping Centre owned by the defendant. In late 1988 the Sunny bank Plaza was being expanded. Mrs. Myfanwy Isles, the manageress of the complex, decided on an appropriate "tenant mix" for the area under construction and reduced it to the form of a plan. Amongst the features included was a food court and her wish was to obtain tenants for a seafood retailing shop in the food court. It was predominantly to be for the sale of fresh and frozen seafood ("wet fish") but would also sell cooked fish. As the shop would be situated within the shopping centre it was capable of operating for only S! days a week. -- 4 of 19 -- 2 Mrs. Isles advertised for tenants for the business and the second plaintiffs were two of the people who expressed interest.· At the time they were operating a seafood business known as Pirates at Kedron. Its main activity was selling cooked fish and other takeaway foods. The evidence was that on wet fish lines a profit of 15 to 30 per cent was considered achievable with a few exceptions but on cooked seafood and other lines 100 per cent profit or more could be made. At the time they expressed interest in going to Sunnybank Plaza they had been engaged in () negotiations which broke down for the purchase of Pirates by them from its owners. The resolution of the matter depends in the first instance upon findings whether certain representations were made to the second plaintiffs by Mrs. Isles on behalf of the defendant. The main concentration was upon the issue whether she had represented to them that the shop would have a turnover of $25,000.00 per week. The Pirates business which was quite successful had a turnover of about $5,000.00 per week. The male second plaintiff had also worked previously at Silvio's Pizzas which he described as "very very busy" and which had a turnover at that particular outlet of between $16,000.00 to $18,000.00 per week. The male second plaintiff said that the question of the turn over was discussed on two or three occasions before they had signed the "intention to lease" document. He said it was discussed at the first meeting with Mrs. Isles and, to the best of his recollection, at the third meeting, when his wife was present. He said that the figures had been derived by the lessor's employees from the turnover of a fruit shop in the complex. He () () () -- 5 of 19 -- ( ' ('- 3 was asked about the comparison between a fruit shop and fish business. He said that he thought that they would be comparable because people would buy fruit more often but the price of seafood was such that less frequent purchases would still amount to the same total sum. He said he could recall one occasion when turnover was discussed in the office of the shopping centre and another occasion was when his wife, Mrs. Isles and he were walking through the shopping centre and discussing the shops that were to be in the new section. Mrs. Lazzaro said that the first time that the turnover was discussed with her was when they were walking through the shopping centre to look at the location of the proposed seafood shop. She said that the conversation also included discussion of whether the tills in businesses in the centre were hooked up to the centre's computer so that a check could be kept on turnover. That was relevant in the context of the rental payable. I will say more about this shortly. She said that Mrs. Isles promised a turnover of $25,000.00 a week. She said that she asked how the figure was arrived at and said that she was told by Mrs. Isles that it was done with reference to the turn-over of the fruit shop. She said she raised the question of the validity of the comparison of the seven day a week fruit shop with a seafood shop open for Si days. It is plain that even on Mrs. Lazzaro's account she had reservations about the figure of $25,000.00. However it seems that she and her husband were somewhat influenced by the comparison with a seafood business in the Garden City complex. That led her to believe that that kind of turnover could be achieved in a seafood shop. She believed -- 6 of 19 -- 4 that she had heard that that shop was turning over about $20,000.0'0 per week, so she "knew it could be done". It is not disputed that the turnover of the plaintiffs 1 shop was far less than $25,000.00 a week. The best turnover was in the first week of trading and that was $5, 200. 00. After that the amount decreased. One matter that must be commented upon is that Mr. Lazzaro agreed that he had never raised with Mrs. Isles the alleged misrepresentation as to turnover. Mrs. Lazzaro was asked whether she had made any complaint about the inability to turn over $2S,OOQ.OO per week. She said that she probably did not mention the figure but maintained that she did mention that they were not making the money they were promised. There is nothing to suggest, even on Mrs. Lazzaro 1 s evidence, that this was more than an isolated remark. Further, apart from evidence given by reference to a file note alone by Mr. Frank Roberts who was the Lazzaro 1 s solicitor at that time that Mr. Lazzaro had spoken to him by telephone on 10th August, 1989 about misrepresentation of potential takings there was no verifiable complaint of misrepresentation until the defendant served a notice of default under a mortgage that had been entered into to secure the arrears of rent. It was only then, on the 15th September, 1990, that Mr. Lazzaro raised with a solicitor acting for the defendant that representations were made as to the amount of turnover that he could expect to achieve in the shop and that his position would not have happened to him had Sunnybank not lied to him in the first place. Mr. Roberts 1 file had no record of Mr. or Mrs. Lazzaro telling Mr. Roberts in late 1988 or early 1989 of any such representation. ----~~- ----~ o~ 0 0 0 -- 7 of 19 -- / I, 5 There is another matter that requires comment. Mr. Lazzaro went to Peter Brian Cockroft, a consultant without formal accounting qualifications, for the purpose of preparing financial information for inclusion in an application for finance. It is common ground that Mr. Cockroft phoned Mrs. Isles with a view to discussing the matter with her. His handwritten record of the conversation contains amongst other things the word "sales". Next to that is a question mark. Notwithstanding this, Mr. Cockroft maintained that he had been told by Mrs. Isles that the takings of the shop would be $25,000.00 per week based on the experience of other businesses and the number of people going through the shopping centre. The note records that information was given to him in the call to which the note relates about what other businesses in the centre were achieving by way of turnover and the outgoings of the premises allocated for the seafood business. Mrs. Isles followed that phone conversation up with ( a letter to Mr. Cockroft which specifically refrained from giving ( / any estimate of turnover. Notwithstanding Mr. Cockroft's evidence it is difficult to see why he would have not written the $25,000.00 per week on the sheet upon which he was taking notes if it had been said. Initially he suggested that another sheet of paper with figures upon it was a note of the conversation about turnover. However that is paper of a different colour and the writing on it is in pencil. That piece o~ paper records a figure of "Sales ... $1.2 m". The most obvious way of reaching that figure is to treat $25,000.00 per week as $100,000.00 per month. It also records "Rental $38,000" and "Breakpoint $1,085, 714". He denied that it was a working sheet initially but -- 8 of 19 -- 6 later when it was again put to him that it was his working sheet and not a record of a telephone discussion he replied: "You could probably say it is a combination. The information on that sheet was not concocted by me or came out of my own imagination." Mrs. Isles denied at any time representing to either of the second plaintiffs that the turnover of the seafood business would be of the order of $25,000.00 per week. She agreed that there had been discussions about the turnover of other shops. She said that these conversations had occurred in the context of discussions of rent. There were two levels of rental. The first was the market rate which she had fixed for the premises in question at $38,000.00 per month. She said that that was all that the landlord defendant was interested in. However because it was desirable for the purpose of statistics and market research to have an indication of turnovers from businesses it was necessary to have a provision in the lease for payment of a rental based on turnover so that that information could be required of tenants. Mrs. Isles said that having regard to the fact that the landlord was interested only in fair market rental the break point at which the alternative method of calculating rent came into force was set at a high level that was unlikely to be achieved by the shopkeeper. In the case of this particular lease the break point was calculated on the basis that when 3.5 per cent of turnover exceeded $38,000.00 the higher rate would be applicable. The turnover necessary to achieve this was $1,085,714.00 which appears on the sheet of yellow paper from Mr. Cockroft's records. I should mention that on a "Report of Interview" form completed by Mrs. Isles the figure of 0 0 0 0 -- 9 of 19 -- 7 $760, 000.00, which represents a breakpoint calculated on the basis of 5 per cent rather than 3.5 per cent of turnover, appears to have originally suggested. Mr. Crowe submitted that this would have meant that the plaintiffs would, if their turnover reached $25,000.00 per week, have to pay increased rent very quickly. He submitted that the fact that it was altered supported the proposition that the turnover prediction alleged by the Lazzaros had been made. On the other hand, Mrs. Isles came back to the point that the landlord was not interested in more than the $38,000.00 rental and that if, in the course of ( negotiations, the potential lessee was concerned with the level of the breakpoint, she would adopt a different percentage to allay those concerns. Indeed, a number of other "Report of Interview" forms show percentages ranging from 3 per cent to 10 per cent. One other matter tha~ should be noted is that according to ( Mr. Cockroft and Mr. Lazzaro the calculation for the purposes of the application for finance was done on the basis of a turnover (' of $1 million. It will be noted that that represents a turnover of approximately $20,000.00 per week, the figure which Mrs. Lazzaro believed that she and her husband had been told by people in the fishing industry was being turned over by the shop at Garden City. On the issue of the making of representations evidence was called from a shopkeeper in the seafood business Michael Matic. He said that some time in 1988, and probably a few months before July, he had heard that Sunnybank Plaza had vacant shops for leasing because they were extending. He said that he rang up and -- 10 of 19 -- 8 enquired about the lease of a seafood shop in Sunnybank Plaza. The manageress was not available on the first occasion but he picked up information about the premises from the shopping centre. Then he made another phone call and asked to speak with the manageress. The woman on the phone identified herself as the manageress and he said that there was some discussion about rent and the difficulty of operating a Si day business in competition with 7 days a week fish shops. He said that he was told that a good operator would take $20,000.00 per week. Mr. Matic said that he had told the person to whom he was speaking that the fish 0 shop would not do very well because of the competition in the () area and the Si day working week. When it became apparent that he could not have a 7 day operation he did not pursue the matter any further. Mr. Matic fixed the period in which he had the call by reference to the time when he acquired premises at Breakfast Creek. He placed it, at least inferentially, as occurring before that, which happened in July, 1988. Mrs. Isles denied being the person involved in that discussion. The problem with the conversation is that it appears to be too early to relate to the period when the second plaintiffs were pursuing the matter and Mr. Matic did not purport to identify Mrs. Isles as the person to whom he spoke. In view of her evidence that she was the manageress of the shopping centre during the relevant period I was invited to infer that she was the person with whom the conversation occurred. As against that, there was evidence led without objection from Alan John Pryor who went into carvery premises adjacent to the seafood business, opening in about July 1989. He said that 0 0 -- 11 of 19 -- 9 no representations were made to him by Mrs. Isles about the turnover that he might achieve. I mention in passing that Mr. Pryor also gave quite forthright evidence that in his opinion, at least during the period when he was able to observe the conduct of the seafood business, it was not well run either in respect of the quality of the stock or the attentiveness of Mrs. Lazzaro to potential customers. Also without objection, evidence was called from Patricia Evans Walsh who worked initially in the centre management and later in an oriental restaurant which was adjacent to the seafood business on the ( opposite side to the carvery. She gave evidence that within the \ close confines of the office she was able to observe Mrs. Isles' "patter" when dealing with potential lessees of premises. She said that she never heard Mrs. Isles predicting turnovers to them. Mrs. Walsh also gave evidence that when she worked in the restaurant she spent substantial time but by no means all of the ( day in a fast food section where she could observe the food court. Her evidence was similar to that of Mr. Pryor as to the conduct of the business. Mrs. Walsh also gave evidence that the ( office staff, on receiving an enquiry from a potential lessee, referred it to Mrs. Isles or made an appointment for the person to see her. The office staff never discussed any details over the phone. She was asked in cross-examination in a leading way, and in general terms, about what was said by Mrs. Isles over the phone. The actual form of the question was: "You said Mrs. Isles did the negotiations. I suppose it would depend upon the availability of a prospective tenant, whether that was all done over the phone or an appointment or whether it was a -- 12 of 19 -- 10 combination of the two." Mrs. Walsh simply answered: "Yes." Mr. Crowe relied on this as an indication that Mrs. Isles may well have discussed turnover figures with Mr. Matic over the phone. ·However I would have found this particular cross-examination of more assistance had it been rather less leading and more specific than it was. Having regard to the evidence that I have outlined above and the impressions that the witnesses created upon me I remain unpersuaded that Mrs. Isles represented to the second plaintiffs that the turnover of the business would be $25,000.00 per week. Having regard to this it is not established that the defendant through its agent engaged in conduct that was misleading or deceptive or likely to be misleading or deceptive. It is unnecessary to comment further in view of this finding. However it is difficult to understand the basis upon which the second plaintiffs could have had any real expectation 0 0 that figures of that order could. be achieved. The second 0 plaintiffs each had experience of the turnover levels at Pirates and the male second plaintiff had experience of the turnover at a branch of Sil vio' s Pizzas. Both of those businesses were acknowledged to be busy. In addition they were going from a business where 80 per cent of the turnover involved the relatively high profit lines of cooked food and the range of such foods which they were selling at Pirates was greater than the range they expected to sell at Sunnybank Plaza. Twenty per cent of the turnover at Pirates was the relatively low profit line of wet fish which was to be the predominant product sold at Sunnybank Plaza. In that context the impression that the Garden 0 -- 13 of 19 -- 11 City shop was doing well and that other potential competitors in the area were not doing well may have had some importance in the formulation of their decision to go into business at Sunnybank Plaza. There were a number of other representations relied on. One of these was that all the shops in the new section of the shopping centre were leased except for the premises to be leased by the plaintiffs. Associated with this was an alleged /-, ( representation that when the shopping centre had its "grand opening" in February 1989 all fi t-outs would be completed and all ( businesses in the new section would commence trading. It is quite plain that at the time when the second plaintiffs were being shown around the premises prior to signing any documentation the shops had not all been let. Indeed it seems that probably what was said to them was that it was the intention that various kinds of shops would go in various kinds of location ( , and that there was discussion of commitments by tenants to ( \ operate those shops. However I am not satisfied that the representation was made that all shops in the new section of the shopping centre were leased except for the subject premises. The other associated representation in my view is not established either. Another matter raised was an alleged representation that no-one in the shopping centre apart from the plaintiffs would be able to sell fish and chips. It is apparent that at the time when the premises were being leased there were existing businesses or at least one existing business which had fish and chips on its menu. The policy of the operators of the shopping -- 14 of 19 -- 12 centre was not to give exclusivity but to define the kinds of business that could be carried on in particular premises. There is no doubt that during the period when the plaintiffs were occupying the premises other establishments both in and out of the food court area sold fish and chips. The second plaintiffs rais.ed this with Mrs. Isles and she took up their complaints with some of the other establishments. It appears that her approach to this was that if these other establishments encroached upon the legitimate area of business of the plaintiffs, she may have to authorise them to diversify into areas which were not strictly 0 within the scope of a fish shop such as the sale of hamburgers 0 and the like. In at least one instance this resulted in a decision being taken by the proprietor of the other premises to take the fish dish off his menu. I am not satisfied that it was represented to the plaintiffs that they would have the exclusive right to sell fish and chips within the complex and therefore that allegation is not established. There were also associated allegations that approximately 86,000 people would pass through the doors of the shopping centre each week, that the public entrance immediately adjacent to the business premises of the plaintiffs was one of the three main entrances to the shopping centre and would bring large numbers of customers to the area of the plaintiffs' premises and that upon the opening of the new section a fire exit door next to the Coles supermarket would be closed to the public. The allegation as to a deficiency in the number of patrons was abandoned shortly before trial. Figures that were led in evidence tend to suggest 0 0 -- 15 of 19 -- c 13 that the number of patrons was generally of the order alleged or, at least, not strikingly less. It is true that the public entrance immediately adjacent to the plaintiffs' premises was one of the main entrances to the shopping centre. However the complaint really was that large numbers of customers did not come to the area of their premises. I am not satisfied that that constitutes a misleading or deceptive representation in all of the circumstances. So far as the fire exit door is concerned the passageway in question led to the offices of the operator of the shopping centre and to public toilets. The passageway was also used by Coles employees to return trolleys left in car parks to the store. The door at the end of the passageway led into the staff car park. However it was alleged that patrons coming from another car park tended to use the passageway to come to Coles supermarket and then depart without venturing into other areas of the shopping centre. The evidence was left in a rather ( incomplete and unsatisfactory state in this respect and I am not satisfied that any case for relief is made out in respect of this. So far as an allegation that the common area would be well lit and present an attractive image is concerned, no evidence was led in that respect except to the extent that it was alleged by Mrs. Lazzaro that dust and noise from the ongoing work of fitting out shops created a dust and noise problem which rendered the area unattractive. There is nothing in the evidence before me to suggest that the intrinsic nature of the area was unattractive. Mrs. Walsh who was in adjoining premises did not -- 16 of 19 -- 14 consider the dust and noise to be a real problem. I am not satisfied that any case for relief is made out in this respect. So far as directories and a large "totem pole" sign are concerned, the allegation was that directories would be placed strategically at entrances to the shopping centre directing people to the food court and that the totem pole sign would be visible from the roadway giving details of the various shops within the shopping centre. There was evidence in respect of the totem pole sign that this was discussed at Merchants' Association 0 meetings and that decisions were taken that it was premature to erect signs while some shops remained untenanted. In the 0 circumstances even assuming that there was a representation that such a totem pole was to be established, the subsequent events make it difficult to establish that there were not reasonable grounds for making the representation at the time when it was made. The Merchants' Association was a body representing the tenants at the centre and the fact that decisions were Q subsequently taken by it in conjunction with management to my mind makes it difficult to find that relief should be extended in respect of this allegation. I have concentrated to this point on the Trade Practices Act relief that has been sought by the plaintiffs. In my opinion no case has been made out for such relief. It follows that insofar as misrepresentation is also relied on, the evidence does not establish that therewere representations made which were known to be false or were made with reckless disregard or whether the representations were true or false or without having any 0 -- 17 of 19 -- 15 reasonable grounds for making them. This aspect of the relief is also not established. Turning to the counterclaim, the claim is for the amount of outstanding rent together with interest, and against the female second plaintiff, an order that the defendant recover possession of premises which were the subject of a mortgage to secure the debt. That mortgage was entered into when the second plaintiffs approached the defendant with a proposition that they sell the business. It was a requirement of the defendant that the outstanding debt in respect of unpaid rental be secured by a / second mortgage of a home unit in the name of the female second ( plaintiff. It was agreed that so far as the debt was concerned, to the date of trial it amounted to $42,043.45. To date of judgment, an additional $1 , 1 8 0 • 4 3 has accrued. It was not disputed that, in the event that I found that the plaintiffs were not entitled to relief, the other relief by way of counterclaim ( ! lay. Accordingly:- 1 • ! dismiss the action of the first plaintiff and the second ( plaintiffs. 2. On the counterclaim:- (a) I give judgment for the defendant in the sum of $43,223.88 against each of the plaintiffs. (b) I order that the defendant recover from the second plaintiff Gabriella Lazzaro possession of the land described as Lots 1 and 4 in Registered Group Title Plan No. 551 County of Stanley, Parish of Yeerongpilly \ -- 18 of 19 -- ( 16 being the land contained in Certificates of Title Volume 605 Folios 110 and 113. 3. I order the plaintiffs to pay the costs of the action and counterclaim to the defendant to be taxed. . .: 0 0 0 0 -- 19 of 19 --