Egan v Ferguson [1992] RSLT 8

[1992] QRSLT 8 RETAIL SHOP LEASES ACT 1984 In the matter of Dispute No.35 of 1992 LEAH THERESE EGAN - Tenant - and - PETER DAVID FERGUSON AND JEAN MARIE FERGUSON - Landlord DECISION Coram: P Loewenthal (Chairman) Ms L Peters Mr T Davies Given on 29 October, 1992 Leah Therese Egan claims compensation under the provisions of the Retail -- 1 of 5 -- Decision - Page 2 Shop Leases Act against Peter David Ferguson and Jean Marie Ferguson. For convenience and in terms of normal practice, the parties are referred as "Egan" and "the Fergusons". The claim arises out of the tenancy of a business known as the Helensvale Takeaway which occupies premises in the Helensvale Convenience Centre, owned by the Fergusons. In mid 1989 Egan was employed on a part time basis by the then owners of the Helensvale Takeaway. Egan entered into negotiations for the purchase of the business and agreed to buy it for $70,000 including an element of $40,000 for goodwill. In the course of negotiations with the previous owners the question of the assignment of their lease from the Fergusons was discussed and they offered such an assignment however, according to Egan: "My father thought it was best to have a whole new lease drawn up". In mid 1989 the Helensvale Convenience Centre was only partially developed;. It had nine shops set out according to a plan exhibited to the affidavit of Mr Ferguson. The Fergusons, at that stage, contemplated extending the centre but had no definite plans to do so. This was the position when they entered into a fresh lease with Egan for the period 22nd August, 1989 to 2nd December, 1993 with a further option for four years. We have not been told what form the negotiations took between Egan and the Fergusons in respect of this lease. The only facts from which we can draw inference are the statement of Egan of which we have quoted the relevant extract and a letter from Richard Ellis, the then leasing agents for the Fergusons, dated 1 June, 1989 in which they refer to the difficulty of locating a previous assignment of the lease and stated: "It appears that the simplest way out would be to issue a new lease to the incoming tenant, only on the condition that all rents due and payable by Aldridge and Harris are paid up to date." It seems to us that Egan sought a new lease in preference to an assignment of the existing lease and the Fergusons found it convenient to acquiesce to this request. Mr Gardner, who represented Egan has sought to rely on Section 15(1)(b)(I) of the Retail Shop Leases Act. The relevant portions of that provision read "in every retail shop lease there shall be implied the following provisions - the landlord is liable to pay to the tenant reasonable compensation for injuries suffered by the tenant and attributable to - -- 2 of 5 -- D ecision-P age3 the tenant's entering into a lease, or a renewal thereof, as a result of a false or misleading statement or misrepresentation made by the landlord or any person acting under the landlord's authority"; He has referred us to three decisions of the Federal Court which the Chairman of the Tribunal deals with as follows. Each of the decisions was decided under Section 22 of the Trade Practices Act. Demagogue Pty Ltd -v- Ramensky was a claim based on misrepresentation by a silence. In negotiations between the parties there was, on the finding of the court, an express representation that there was nothing unusual about land under discussion. In fact, there was something very unusual about the land which was not disclosed by the vendor. The court found that failure to disclose, that is, silence on the particular point was a misrepresentation. Waltip Pty Ltd -v- Capalaba Shopping Centre Pty Ltd was a claim for misrepresentation based on the landlord having shown a plan to the tenant of the layout of a proposed shopping centre. This plan omitted a significant detail. It was held that the omission of this significant detail entitled the tenant to relief. Dainford Limited -v- Sanrod Pty Ltd related to the sale of a unit in a high rise building. The plan shown to the purchaser indicated that there were uninterrupted water views from the unit sold. The landlord failed to inform the purchaser of the extent to which the views from this unit would be obstructed by a porte-cochere. It was held, in the light of the representations made by the plan, that this omission amounted to a misrepresentation. The features common to each of the decisions are that there were representations which were misleading in the light of the failure to disclose something unexpected or unusual known to the owner and not known to the other party. The Chairman has therefore directed the Tribunal that, for silence to amount to a misrepresentation, it must be misleading in the light of positive representations being made. On this basis, the Tribunal has come to the conclusion that there has been no misrepresentations by or on behalf of the Fergusons. Egan commenced trading on her own behalf in August, 1989. We accept that during the period from 23rd August, 19989 to 30th December, 1990, Egan deducted $770.00 per week from her cash takings to pay the following expenses - RENT for her private residence $190 Repayment of loan to her father $280 -- 3 of 5 -- D ecision-P age4 GROSS wages for herself $300 ==== TOTAL $770 We accept this figure in spite of there being no record of it for the reason that it seems to us to be highly probable that she would have had to draw money for her own living and to repay her father. This Tribunal has had substantial experience in dealing with the bookkeeping practice of small retailers and we find that it is the rule that cash takings are used to meet recurrent expenses or drawings without any record being kept. We further accept that from 11 September, 1989 to 31 March, 1991, Egan paid her staff directly from her cash takings. The total involved is $10,970. We find that Egan traded successfully until the end of 1990. Thereafter, there was a substantial and sustained decline in her business. We look at the reasons for this decline. The Fegusons had increased the numbers of shops at the centre by adding shops 9, 10, 11 and 12. One of the shops (shop 12) on the first floor was a restaurant selling pizzas on a takeaway basis. Another shop was a Hot Bread Shop which also sold pies and sausage rolls in direct opposition to Mrs Egan. Both of these new shops in opposition to Egan commenced trading in late 1990 or early January, 1991. Several explanations have been put before us as to the decline in business. We examine these:- (a) That Egan was incompetent in running her business. If Egan was incompetent, then such incompetence would have lead to a decline of the business within a short time of her taking it over. On the experience of members of this Tribunal who have sustained knowledge of the operation of retail businesses, such decline would have become evident within, at the most, six months. (b) The opening of other takeaway businesses in the vicinity. There is evidence of takeaway foods being sold at two service stations in the vicinity, the opening of a MacDonalds and a Red Rooster Takeaway and the subsequent opening of a fish and chips shop in the convenience store. We are not given definite times for the opening of these businesses but they obviously opened over a period. There does not appear to us to be any distinct correlation between the opening of such businesses and the decline of Egan's business. © The opening of a large retail shopping centre known as the Helensvale Plaza. The evidence is that this plaza is some 1.7 kilometres from the -- 4 of 5 -- D ecision-P age5 convenience centre. There appears to be little correlation between the date of its opening and the decline of business. (d) The building of the new shops at the Convenience Centre. This has been looked at by us, bearing in mind three possibilities: (I) A reduction in potential customers; (ii) Opposition from other businesses opened; © Alteration in exposure of the business to passing traffic. There is no evidence of a decline in the total number of persons coming to the centre. It seems probable to us that, if anything, the addition of further shops would have increased the number of persons using the Shopping Centre. The decline is in the number of persons purchasing goods from the takeaway store. The opening of the two additional takeaway food outlets, that is, the Bakery and the Pizza Restaurant, do correlate in time and must be a cause in the claimant's decline in turnover. There is no provision in Egan's lease giving her an exclusive right to a takeaway type business in the centre. The change in exposure appears to us to be minor. We are influenced by the plans attached to Mr Ferguson's statement and the comprehensive video which we have been shown. Interference with exposure is limited as the original exposure was in itself not substantial. There was always an overhead awning which interfered with exposure together with the existence of shops 6A and B. The video indicates that the growth of some shrubs or greenery may have reduced exposure by a small amount. We have given some thought and, in particular, the Chairman has directed his mind to whether the phrase "the flow of potential customers past that retail shop" appearing in Section 15(1)(a)(iii) refers to the total number of customers passing the shop or to customers interested in takeaway food. We do not think that the legislator intended to make this fine distinction and only had in mind potential customers generally. We have been directed to a change in access in that additional stairs have been introduced at the end of the passageway past Egan's shop. These were designed to increase flow and, if anything, would have had this effect. We have come to the conclusion that the only reason shown to us for the decline in Egan's business is the opening of competitors' businesses. As there was no prohibition against this, we have come to the conclusion that her claim for compensation fails. P V Loewenthal, Chairman. -- 5 of 5 --