IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NSW No. G.152 of 19R2 ) GENERAL DIVSION ) BETWEEN: ° . JOHN KONTOS and NICK KONTOS Applicants and MOBILIA PTY. LIMITED, ERIC LESLEY and MICHAEL WTLLIAMS Respondents CORAM: Northrop J. DATE OF ORDER: 26 May 1983 WHERE MADE: Sydney ORDER THE COURT ORDERS THAT: The application be dismissed. There be judgment for the first named responcent, Mobilia Pty. Limited, against the applicants in the sum of $61,178.15. The applicants pay the respondents' costs. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSW No. G.152 of 1982 we wes wv GENERAL DIVISION BETWEEN: JOHN KONTOS and NICK KONTOS Applicants and MOBTLIA PTY. LIMITED, ERIC LESLEY and MICHAEL WILLIAMS Respondents CORAM: Northrop J. DATE OF ORDER: 26 May 1983 WHERE MADE: Sydney REASONS FOR JUDGMENT On 16 October 1979, John Kontos, as lessee, entered into a deed of agreement with Mobilia Pty. Limited, as lessor, for the lease of shop premises situated in a shopping complex known as the Castle Mall in the Sydney suburb of Castle Hill. At the same time Nick Kontos, the father of John, guaranteed to Mobilia the due payment of all monies payable by John under the lease and the due performance of all obligations by John under the lease. On 3 December 1979 John commenced to conduct a fast food restaurant and milk bar business in the shop. In order to carry on that business John leased fittings and equipment from General Credits Ltd. under a lease agreement dated 19 December 1979. The business failed. On 19 January 1981, General Credits Ltd. repossessed the fittings and equipment and at present John owes General Credits Ltd. $46,320.88 arising out of the leasing agreement. After 19 January 1981 John ceased to carry on the business. Under the terms of the lease from Mobilia, John was required to pay rent monthly in advance. He made one payment only. Under the terms of the lease John was required to make other payments. He has not made those payments. Mobilia commenced two separate proceedings in the Supreme Court of New South Wales seeking payment of the monies owed by John and arising under the lease. The amounts owed by John total $61,178.15 being $35,092.46 for the period ending 12 January 1981 and $26,085.69 for the period ending 31 October 1981, when the lease was terminated. The Supreme Court proceedings are stayed pending the hearing and determination of the present hearing in the Federal Court. On 31 August 1982 John and Nick as applicants commenced proceedings in the Federal Court claiming damages and other relief against Mobilia, Eric Lesley and Michael Williams. The two individual respondents at all material times were officers of Mobilia. By their statement of claim, Jonn and Nick sought relief on a number of hases, namely s.52 cm eae Oem Ponearee ad OPS i & PRT LE ere Trade Practices Act 1974, "the Act", s.52A of the Act, fraudulent misrepresentation, negligence and breach of a collateral warranty. All the claims were based on the same two representations. At the conclusion of the hearing of the evidence, counsel for John and Nick announced that the claim was limited to an action based on s.52 of the Act and that the applicants were not proceeding with the other claims based on the other causes of action. Section 52 of the Act is within Part V of the Act and provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Under s.82 of the Act, a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part V of the Act may recover the amount of the loss or damage by action against that other person. Section 86 confers jurisdiction on this Court to hear and determine this action. The applicants claim that in negotiations preceding John entering into the deed of agreement for the lease, Mobilia, by its agents Lesley and Williams, engaged in conduct that was misleading or deceptive. The respondents accept that at all material times Mobilia was a corporation under the Act engaged in trade or commerce and that Lesley and Williams were its agents. The conduct complained of consists of representations alleqed to have been made first in or about the months of August 1979 and September 1979 by Lesley to the applicants that all the shops in the Castle Mall, save the shops numbered 12 and 12A, had been leased that the shop ? eventually leased to John Kontos was the only shop available for leasing and that when the Centre, being Castle Mall, was open to the public all shops in tne Centre should be let and open for business; and secondly, in or about the month of September or October 1979 by Williams to Nick that if John Kontos were to open the business of a fast food restaurant 'and milk bar in any one of the shops in the Centre, the gross takings of the business would be between $5,500 and $6,000 per week. The respondents deny each of those representations and so it becomes necessary to determine that issue of fact. In the year 1979, Mobilia had control of two separate properties known respectively as 4-16 Terminus Street, Castle Hill and 27] O14 Northern Road, Castle Hill. The two properties were separated by Macdougal Lane which was parallel to Terminus Street and 03d Northern Road. The two properties were not directly opposite each other but the north western corner of the Terminus Street property was diagonally opposite the south eastern corner of the Old Northern Road property. In co-operation with others, Mobilia was causing the Castle Mall to be constructed on the two properties. The two properties were to be connected by a footbridge to be constructed over Macdougal Lane linking the upper level of the Mall on the Terminus Street property with the upper level of the Mall on the Old Northern Road property. Because of the slope of the land between Old Northern Road and Macdougal Lane, the Mail connecting the two buildings to be erected was on the same level as the footpath of Old Northern Road. The Mall on the upper level of the Terminus Street property was connected towards its eastern end by way of a footbridge over Macdougal Lane to another ' arcade which opened on to 01d Northern Road. The Castle Mall project was being developed in two stages. Stage 1 involved the construction of a building containing two levels of shops on the Terminus Road property. A major tenant on the lower level of that new building was to be the proprietor of a supermarket known as "Franklins". Franklins was conducting its business in the 01d Northern Road property and upon the completion of Stage 1, Franklins was to move its business into its neW shop. Thereafter Mobilia planned to enter upon Stage 2 of its development by demolishing the building then standing on the Old Northern Road property and erecting a new building containing two levels of shops; the Mall on the upper level was to be connected by the footbridge with the Mall on the upper level of Stage 1 of the project. In the latter half of 1979 Mobilia was promoting the leasing of shops in Stage 1 of the Castle Mall. That stage was due to open in about November 1979. Mobilia had not engaged estate agents for that purpose, prospective lessees being sought by Williams. Mobilia had placed advertisements in newspapers. It had placed advertising signs on the site. Mr. Williams had been instrumental in the Planning of the concept of the Mall and in its implementation. He was concerned to ensure the financial success of the project. To assist this a tenant mix had been prepared under which different types of businesses were to be carried on in specified shops pursuant to Jong leases to encourage stability of occupancy and trade. On 27 August 1979 Lesley commenced his employment with Mobilia. He was engaged to be the manager of the Mall. He did not attend at the Mall until the week commencing Monday, 3 September 1979. John Kontos in evidence said that in August he and his father Nick were at the Mall and saw Lesley. He said that they told Lesley that they were interested in leasing a shop for a take-away food or similar business. He said that Lesley told them that there were no shops left on the lower level. They then went to the upper level and Lesley had told them that the only shop available was Shop 12 and an adjacent area described as Shop 12A, and that there was no other shop available on the upper floor. Ue said that Lesley told them the other shops were "all let". Mr. Lesley did show them another area which could be used as a coffee kiosk. John said that a few days later, but still during August, they saw Lesley again. He said that Nick asked Lesley what the takings would be if Shops 12 and 12A were used as a restaurant and that Lesley had said "$5,000 to $5,500 per week". John said that at this meeting Lesley qave him an "Application for Retail Space" form. John said that some weeks later at a further meeting Lesley had told them that all the shops were taken and that if he, John, was interested, the form should be filled in and returned. The contents of the form will be referred to later. Nick, the father, is Greek. His English is not perfect but he appears to understand the spoken word and to make his answers in a form which can be understood fairly easily. In evidence he said that he and John first met Lesley on about 16 or 17 August 1979. He said that Lesley told him that all the shops on the ground floor level were let and that all the shops on the upper level, except Shops 12 and 12A and the coffee kiosk, had been leased. He said that in September he was told by Williams that he, Nick, should get about $5,500 to $6,000 per week from his business in the shop. Mrs. Kontos, the wife of Nick and the mother of John, gave evidence. She said that in August, Lesley told them that everything was leased except two shops upstairs. In this case the credibility of the applicants' witnesses is of crucial importance. After seeing and hearing those witnesses I cannot accept' their evidence on this crucial issue. John was an unsatisfactory witness. He was evasive. John and Nick did not have a qood recollection of what had been said. Where written documents are in existence the dates appearing on them are inconsistent with the evidence given by the applicants' witnesses. Mrs. Kontos could not be believed on any of the relevant issues of fact. In addition there are a number of matters which must cast doubt upon the credibility of Nick and John. They disagreed with each other as to who had made the representations concerning the anticipated takings of the business. I should state that where any conflict appears in the evidence between that of the applicants' witnesses and that of Williams and Lesley, I accept the evidence of the latter two. In August 1979, John had just turned nineteen years of age. During that year he attended high school full time. In 1980 he attended technical school full time. Nick had had prior experience in conducting a delicatessen business. He had been il] and was receiving, and is continuing to receive, an invalid pension. He wanted to make financial provision for the benefit of John. The Application for Retail Space had been given to Nick by Williams on 17 August. The form was filled in by John and his sister originally in the name of Nick but later the name Nick had been changed to John. All details inserted in the form relate to Nick, including his previous experience in retail business and his current assets. The form was dated 22 August 1979 and signed by John who had written in that date in his own handwriting. John had given evidence that he had signed the form much later but could give no satisfactory explanation of the discrepancy. The form had been filled in and signed at a time before Lesley had commenced his employment with Mobilia. At all times Nick had intended to conduct the business himself, helped where necessary by his wife. He in fact did this and worked in the shop. Apart from the od occasion, John did not work in the shop. Nevertheless, Nick continued to receive his invalid pension. John kept a record of the takings of the business. For the year ended 30 June 1980 the total of the takings was recorded as showing $37,634. In his tax return for the year ended 30 June 1980, John disclosed the takings of the business at $19,844, He could not explain that discrepancy. As the evidence of the applicants' witnesses is not accepted, their claims fail. Nevertheless I propose to state shortly the facts found on that issue. Mr. Williams first ~10- met Nick on 17 August 1979. Prior to that date Nick had telephoned Williams and an appointment had been made to meet at Shop 12 on the upper level of Stage l. Nick was on his own « Nick told Williams that he wanted to conduct a restaurant and coffee shop. The only shop on Level 2 which had the appropriate plumbing and ventillation facilities for cooking purposes was Shop 12. Mr. Williams indicated the layout of the proposed Shop 12 and 12A. The total area was specified and the rent and other charges to be paid were explained to Nick. Mr. Williams gave Nick the Application for Retail Space form. Subsequently, the form was filled in by members of the Kontos family and returned to Williams, but the method of return and the date of return is not clear. It was within a few days after 17 August. Until the lease was prepared, Williams thought that the lease was to be given to Nick, the man with whom he had been talking. Mr. Williams next saw Nick on Saturday, 8 Septmeber 1979. He had received a telephone call from Nick asking about the application. On 8 September a meeting took place at the site of Shop 1?. John was on the site but was tooking around the floor area and was not present when a conversation took place between Nick and Williams. Nick asked Williams what he thought the takings of the shop would be. Williams said he did not know but that he, Nick, should have an idea of what he expected to take. Williams said that he had heard that a coffee shop in Westfield, Paramatta, had takings ranging from $3,900 to $6,000. rT, ae pave Are eee oneal -ll- On the following Monday, 10 September, Williams gave instructions for the preparation of a letter of offer to be signed by Nick. The details of the letter were left to be completed by Lesley. The letter was signed py Williams and was dated 10 September. It was accepted by John on 17 September. The deed of aqreement for lease was executed on 16 October 1979. Mr. Williams denied making the representations stated by Mick. Mr. Williams denied also that he had said that all the shops had been let. He did say that Shop 12 was the only shop available for use as a restaurant since it was the only one with facilities allowing cooking to be undertaken. In all] prohability Nick, on a reconstruction basis, assumed that statement to mean that all the other shops had been let. Mr. Lesley had a number of conversations with the applicants concerning the lease and the area to be leased. He negotiated special arrangements relating to access to fire stairs, the installation of rolier shutter doors and the extension of the lease to include part of Shop 1] in the area to be leased by John. All his discussions were on the basis that John was taking the lease and that aqreement had been reached that the lease be taken. He denies making the representations alleged by John and Nick. Bidens le ayer ms wee ee -12- On these findings the application must be dismissed. The parties agreed that if the applicants failed in their claim, there should be judgment for Mobilia against John and Nick on the cross-claim amounting to $61,178.15. Accordingly, there will be judgment for Mobilia against John and Nick.