GENERAL DIVISION IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. V.G. 41 of 1983 Se BETWEEN: BRADFORD HOUSE PTY. LTD., GORDON HAROLD POOLE and RICHARD DOWNIE Appellants "AND: LEROY FASHION GROUP LIMITED Respondent CORRIGENODA Amendment to the judgment of the Court of 4 August 1983 Page 15 Line 20: For "lease" where second appearing substitute "lessee", B. RAMSAY ASSOCIATE TO THE CHIEF JUDGE CATCHWORDS Trade Practices - Whether conduct of respondent was misleading or deceptive - Whether breach of implied term of lease. Trade Practices Act 1974, ss.52, 53(aa), 53A and 82. BRADFORD HOUSE PTY. LTD., GORDON HAROLD POOLE and RICHARD DOWNIE v. LEROY FASHION GROUP LIMITED Coram: Bowen C.J., Fisher and Lockhart JJ. 4 August 1983 Sydney o . 'a IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION ~~ ew No. V.G. 41 of 1983 BETWEEN : BRADFORD HOUSE PTY. LTD., GORDON HAROLD POOLE and RICHARD DOWNIE Appellants AND: LEROY FASHION GROUP LIMITED Respondent ORDER Judges making order: Bowen C.J., Fisher and Lockhart JJ. Where made: Sydney Date: 4 August 1983 THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. Bradford House Pty. Ltd., Gordon Harold Poole and Richard Downie pay to Leroy Fashion Group Limited its costs of the appeal. IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No.VG 41 of 1983 ) ) GENERAL DIVISION BETWEEN : BRADFORD HOUSE PTY. LTD. GORDON HAROLD POOLE and RICHARD DOWNIE Appellants AND: LEROY FASHION GROUP LIMITED Respondent CORAM: Bowen C.J., Fisher and Lockhart JJ. 4 August 1983 REASONS FOR JUDGMENT THE COURT: This is an appeal from a judgment of Smithers J. sitting as a single Judge of this Court in which he dismissed the claim of the appellants for damages pursuant to s.82 of the Trade Practices Act 1974 ("the Act") and at common law. There is no appeal against the judgment of the learned trial Judge for the respondent on the cross-claim or his dismissal of the cross-action by the respondent against a co-respondent. The proceedings were commenced by the appellants against the respondent alleging contraventions of ss. 52, 53(aa) and 53A of the Act. In addition the appellants alleged breaches of an implied term of a lease between the parties and false representations. The learned trial Judge set out the relevant primary facts very fully in his reasons for judgment and we have drawn to a considerable extent upon his judgment for these facts. The notice of appeal indicates that the appellants do not challenge his primary findings of facts or any inferences drawn by him, but concentrate their attack upon errors which he allegedly made in applying the law to those facts. The proceedings arose in the following circumstances. The appellant Bradford House Pty. Limited ("the company") carried on a substantial business at all relevant times as a printer in Melbourne. In early 1980 it required additional space because it had recently won a contract with the Totalizator Agency Board in Victoria which made it necessary for it to extend its Commercial Forms division. The printing of these forms constituted a large part of the company's business. In January 1980 the appellant Gordon Harold Poole ("Mr Poole"), a director of the company, observed a notice on certain premises comprising a brick building at 64 City Road, South Melbourne. This notice described the premises as a 3. warehouse and showroom and stated that they were available for leasing and that the agents were Messrs McGee, O0'Callaghan, Gill & Co. Pty. Limited. Mr Poole telephoned the agents and arranged to meet the representative who was handling the leasing, one Mr Edwards, on the site. This meeting took place either on Friday 11 January 1980 or Monday 14 January 1980. Mr Poole was favourably impressed with the premises which comprised an area of about 14,500 square feet on which was situated a brick building with partitions anda concrete floor. Mr Edwards took Mr Poole over the building and the latter observed that there was on the northern boundary of the building a loading bay in Bright Street. Inside he observed two partitions across the floor area with openings to permit passage and another partition closing off the office area. Mr Edwards asked Mr Poole what was the purpose for which the company required the building. Mr Poole referred to the contract which the company had recently won and that it needed an area of 10,000 to 15,000 square feet where 1t could store printed and unprinted material. He said that the company had ordered 400 tonnes of board in reel form from the U.S.A. and that it was due to arrive in 5 or 6 weeks. Of this conversation Mr Poole, whom the trial judge found to bea reliable witness, said as follows:- ""...i was asked the type of business and the type of equipment we would be putting in and I explained that we would be bringing down three or four presses and it appears the interest was more with our company as to how long we had been established and whether we were a creditable company because that was the line of questions, more than on what we were going to use it for. I discussed the fact that we would he using a large quantity of printing board which had to be moved around... ---i discussed with Mr. Edwards that we would have to work out traffic ways for material plus areas for machinery..." Subsequently Mr Poole, Mr Edwards and Mr Cass (the company's production manager) inspected the premises. After measuring up the premises and considering the lanes upon which a forklift would carry the paper board, Mr Cass was of the opinion that the premises were admirable. Mr Edwards was told that about 20 tonnes of paper board would be moved each week about the premises by forklift and that the openings in the partitions would have to be enlarged to permit the passage of the forklift. Mr Edwards said that there would be no difficulty in enlarging the openings. It appears that Mr Edwards made no comment concerning the movement by forklift of the paper board nor did he ask any questions concerning the sort of loads the forklift would carry. When told of the use to which the company proposed to put the building Mr Edwards did not say anything which caused Mr Poole to have any reservation about the strength or surfacing of the floors. Mr Poole stated, however, that he believed, prior to deciding to lease the premises, that the floors would be strong enough to withhold the strains and weight of moving the paper board. He said that he came to hold that belief as follows:- "My reasoning was that it was a commercial building. The use that we would put it to would be no more than that we would put and have put to any other commercial building in that area, and I have put to any other building in the last 30 years, and I have not had this sort of problem. The equipment we were using was not in the printing trade considered to be heavy equipment. The machinery itself is relatively light and the forklift itself is not one of the larger types. It 1s a medium type forklift which you will see in virtually any printing establishment every day." The trial Judge found that the appellants' case was put as strongly as it could be in certain answers which Mr Poole gave under cross-examination. He set out these answers in full as follows:- "MR NEESHAM: How did he deceive you; what did you do?---He leased premises with a floor which was unsuitable for a commercial or light industrial floor and he led me to believe the premises were to that standard. How did he lead you to believe that the premises were to that standard?---He asked me the type of business we were conducting. I then told him the type of business I wished to conduct at these premises. I went through it in great detail, explaining the particular contract. He was involved, even by standing around when we were putting passage ways, thoroughfares down, laying machinery down. In my opinion as a professional agent for a company that is either selling or leasing industrial or commercial properties, his knowledge should be such that if he leases or sells that property to me, that property should be to that standard. What I was putting to you was this: that as you see the situation, is not what you are really saying that Mr. Edwards was under a duty to you to find out what the condition of the floor was and to tell you?--~I feel Mr. Edwards had a duty, if he was leasing me a commercial or industrial 6. premises, to know that they were to that standard. In this case I believe the floor was not. Whether Mr Edwards knew or not. Iam not debating that point. When your statement of claim accuses Mr Edwards of concealing the fact that the concrete floor of the premises was incapable of standing the weight required, you donot believe he had concealed anything do you?---I cannot answer that question." After correspondence between the parties which set out the terms of a proposed lease the company went into occupation of the premises on 1 March 1980. Subsequently a lease was executed of which the two individual appellants were guarantors. In May 1980 Mr Poole observed that the floor at the opening of one of the partitions was breaking up. In the first instance that was a consequence of a wheel of the forklift going through the cement floor. Thereafter the state of the floor deteriorated to the extent that by mid 1981 almost every day work at the company's premises was brought to a standstill while the company's staff was engaged in extracting the loaded forklift which was bogged in a hole in the concrete floor. By November 1981 the company was losing about 12 to 14 hours production time a week and the forklift itself was damaged. The company ceased to pay the rent under the lease in May 1981 and on 6 August 1981 the respondent gave notice of re-entry. The premises were vacated by the company in November 1981. These were the circumstances in which the appellants took proceedings against the respondent contending that it, through Mr Edwards and by advertising the premises as available for letting as a warehouse and by submitting a lease containing paras. 4.l(a) and (b), had engaged in misleading conduct contrary to the provisions of ss. 52, 53(aa) and 53A of the Act. The trial Judge dismissed these contentions. By their notice of appeal the appellants contended that his Honour erred in law in deciding that the respondent had not breached these provisions of the Act. The appellants contended in the alternative that 1t was an implied term of the lease that "the premises had a concrete floor that was not sub-standard", and that the respondent had breached this term with consequential damage to the company. The appellants' argument was directed primarily to the alleged contravention of s.52. Although counsel for the appellants did nat abandon their case on ss. 53(aa) and 53A no separate argument was addressed to us on those sections. Counsel for the appellants said, in essence, that if the appellants failed on their arguments as to s.52 they could not succeed in relation to the other two sections. Contravention of s.52 requires that there be conduct of the respondent that constitutes misleading or deceptive conduct or conduct that is likely to mislead or deceive. The appellants identified the relevant conduct under four heads which we shall eonsider in turn. i. The notice on the premises described themas a warehouse and showroom available on lease and stated that the agents were McGee, O'Callaghan, Gill & Co. Pty. Limited of South Melbourne. The appellants contended that the condition of the premises was such that they could not be correctly described as a "warehouse" and therefore, by so advertising the premises the respondent engaged in misleading or deceptive conduct. Counsel for the appellants adopted the following passage from the judgment of the Lord President of the Court of Session an Colvine v. Anderson & Gibb (1902) 5F (Ct of Sess.) 255 at p.259 as accurately defining a warehouse: ",..it involves the idea of a place normally of considerable size, mainly used for the storage of goods in bulk, or in large quantities, and in which consequently the dangers incident to the handling of goods in bulk or in large quantities might naturally arise." There are many reported cases where the meaning of the word "warehouse" was discussed, but they are generally cases where the word was construed in the context of particular legislation. In ordinary usage a "warehouse" is a building used for the storage of merchandise. In a narrower sense it is described as a building used for the storage of merchandise and for the exposure of that merchandise for sale by wholesale: A.G. Campbell (Properties) Limited v. Parramatta City Council £1961] N.S.W.R. 542 per Sugerman J. at p. 543. Generally as to the meaning of the word see Buckingham v. Fulham Corporation (1905) 9. 53 W.R. 628 per Cozens-Hardy L.J. at p.629; R. v. Hill (1843) 174 E.R. 348 per Rolfe B. at p. 349 and Haynes v. Ford £1911] 2 Ch. 237 per Kennedy L.Jd. at pp. 256-7. In the present case the notice on the premises described them as a warehouse and showroom availabie for letting. In our opinion that description conveys that the premises were available for letting for the purpose of the storage and display of merchandise. Plainly the floor of the premises was not strong enough to carry the weight and stress of a forklift moving paper and cardboard. But it was not established that the floor lacked sufficient strength to carry the weight of other goods. A warehouse can be used for the storage of a diverse range of goods. It is clear that many different types of goods could have been stored in the premises without 1ts floor being incapable of bearing the strain. The notice did not incorrectly describe the premises. 2. The second respect in which the respondent's conduct was said to be misleading or deceptive was the failure of the respondent or its agent to inform the appellants of the condition of the floor, in particular that it had only a thin layer of concrete, was uneven and lacked reinforcement. 10. It is possible that in some circumstances silence, in the sense of refraining from making comment, may amount to engaging in conduct contemplated by s.52 of the Act (see para. 4(2)(c)). Thus circumstances may arise where a person is aware that his silence is conveying an erroneous impression to another. He may in such a case come under an obligation to speak. If he does not doso, he may inthe words of the definition be refraining, otherwise than through inadvertence, from doing an act, i.e. speaking out. The argument in the present case rests upon the proposition that the respondent or its agent owed a duty to the appellant to inform it of the condition of the floor. No specific inquiry was made by the appellants or the respondent or its agents as to the condition of the warehouse floor. Nor was any specific statement about the floor's condition made by the respondent or its agents to the appellants. Nor is there any evidence that the respondent or its agent knew about the condition of the floor or that it was unsuitable for the use to which the company proposed to put 1t. Even Mr Poole himself said that he believed the floor was in good condition and that he had no reason to believe otherwise. 11. The trial Judge said: "It is said that the respondent through Mr. Edwards concealed the fact that the floor was 'incapable of withstanding the weight required of it' by the company for the purpose of conducting its business, and misled it in that respect. It is said that once Mr. Edwards had been told of the nature of the company's business and in particular that rolls of paper or board would be moved around the premises by means of a forklift there was a duty upon him to inform the company that the floor would not stand the traffic, or that 1t might not stand the traffic, or that the respondent had no knowledge of the strength of the floor. On the evidence I cannot find a basis for concluding that there was any such duty. It is clear on the evidence that Mr. Poole at no time gave Mr. Edwards information of any precision as to the degree of strain likely to be imposed on the flocer. Even when Mr. Poole was describing the company's business procedures i1t was clear to Mr. Poole that Mr. Edwards was not giving the attention that one would expect from a man expected to give important assurances concerning the suitability of the premises. Rather it appeared that his real interest was in testing the applicant's financial quality as a prospective tenant. And it is impossible to find in the evidence any suggestion that Mr. Poole was actually seeking from Mr. Edwards any assurance as to the strength of the floor. Certainly Mr. Edwards said nothing on the subject. The situation was one in which the applicable rule was caveat emptor. Although on the leasing of a chattel there may be implied by law a warranty of fitness for a particular purpose, the rule in relation to the demise of land is that even where land is let for use in a particular way there is no implied warranty that it is fit for such use. See Halsbury 4th Ed. Vo. 27 pp. 205, 210, Hill v. Harris [1965] 2 9.B. 601, Elder v. Auerbach C1950] 1 K.B. 359, Holiday Wise Koala Pty. Ltd. v. Queenslodae Pty. EBtd. £19771 V.R. 164 Woodfall 25th Ed. p. 1460 Cruse v. Mount £19333 Ch.D. 278." We agree with these findings. 12. 3. The appellants then contended that the respondent engaged in misleading or deceptive conduct through Mr Edwards by continuing to offer to the company a tenancy of the premises after it had been given an outline of the way in which the company carried on and would carry on its business including an indication that the use of a forklift to convey substantial loads of otherwise unspecified weight would be involved. The trial Judge said in relation to this submission: "But this is entirely consistent with the applicant company being left to decide for itself, and deciding for itself, whether it should regard the premises, including the floor, as satisfactory for its purposes. The applicant company was the only party with precise knowledge of the weight to be carried and the manner of carrying it. The essence of the matter in my opinion is that Mr. Poole inferred from his own observation and from the fact that the premises were commercial in character and were presented as such, that they, and in particular the floor, were suitable for his purposes. But none of this involved any conduct of a misleading or deceptive nature on the part of Mr. Edwards or the respondent. For all that appears they may well have believed like Mr. Poole that the floor would be sufficiently strong for the purposes in hand. Even had Mr. Edwards permitted Mr. Poole to think that he, Mr. Edwards did have that belief, such conduct would not have been misleading or deceptive in any sense." We agree with this finding of the trial Judge. 4. The appellants then relied on certain clauses of the lease from the respondent to the company of the premises and in particular paras. 4.1 (a) and (b) which not only prohibited the respondent from using the premises otherwise than as "printers" 13. (4.1 (a)), but required the company to use the premises for this purpose (4.1 (b)). Clause 4.1 (a) and (b) of the lease is as follows:- "4.1 THE lessee further covenants with the Lessor as follows - (a) The Lessee shall use the demised premises only for the business use or purpose specified in the Schedule hereto and shall not without the prior consent of the Lessor use the demised premises or permit them to be used for any other purpose whether industrial commercial or residential and whether temporary or permanent. (b) Throughout the term of this Lease the Lessee shall carry on and conduct in and from the demised premises and in a businesslike and reputable manner a business falling within the use or purpose specified as aforesaid and shall keep the demised premises open for business on the days and during the hours usual for businesses of that kind in the area in which the demised premises are situated and shall keep the demised premises and the said business properly and sufficiently stocked fitted and equipped with good quality merchandise fittings plant and equipment suitable and appropriate for the conduct of such a business." The appellants submitted that, by presenting a form of lease containing these provisions, when the floor of the premises was unsuitable for use as a warehouse for the storage of paper and the movement of a forklift bearing loads of paper and board, the respondent engaged in misleading or deceptive conduct. In our opinion these provisions in the lease do not support the appellants' contentions. The fact that the respondent required the company to use the premises for the 14. purpose of "printers" does not cast a duty upon the respondent to inform the company of the actual condition of the floor of the premises or to ensure that the floor is in fact capable of withstanding the weights and strains to which the company proposed to subject it. The word "printers" in the context of this lease is somewhat curious, but we assume that it includes within its scope the use of the premises as a warehouse for the storage of paper and other goods as an adjunct to the company's printing business. The appellants failed to estabiish that the trial Judge erred in finding no contravention of s.52. As we mentioned earlier the case on ss. 53(aa) and s. 53A was not pressed. In our opinion the appellants fail in relation to those sections also. We turn to the remaining question in the appeal namely, whether the respondent breached an implied term of the lease that "the premises had a concrete floor that was not sub-standard." The conditions necessary to sustain the implication of a term were said by the majority of the Judicial Committee in B.P. Refinery (Westernport) Pty. Limited v. President, Councillors and Ratepayers of Shire of Hastings (1977) 52 A.L.J.R. 20 at p. 26 to be as follows:- "(1) it must be reasonable and equitable; (2) 21t must be necessary to give business efficacy to the contract, so that no term will be implied if the contract 1s effective without it; 15. (3) 1t must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." See also Codelfa Construction Pty. Limited v. State Rail Authority of New South Wales (1982) 56 A.L.J.R. 459, especially per Mason J. at p. 461. Counsel for the appellants conceded that, in the absence of an express covenant to this effect, no warranty of fitness for any particular purpose is implied by law. He conceded that this was so even when it was known to the lessor that the lessee was leasing the premises for the exclusive purpose of using them in some particular way. However he contended that it was otherwise if the lease contained a covenant by the lessee that it would use the premises in a specified way. In this regard he relied upon Clause 4.1 (a) and (b) of the lease. The trial Judge said that he would have been favourably inclined to this submission but for the provisions of clause 4.12 of the lease to the effect that the lease should not bring heavy machinery plant or equipment on to the premises. a 16. Clause 4.12 1s in the following terms: "4.12 SAFES AND HEAVY MACHINERY PLANT OR EQUIPMENT The Lessee shali not bring upon the demised premises any safes heavy machinery or other plant or equipment unless reasonably necessary or proper for the conduct of the Lessee's use of the demised premises as herein provided and in no event shall any such machinery plant or equipment by virtue of its nature weight or size or through nolse or vibration in its operation or on any other way be such as to cause or in the reasonable opinion of the Lessor be likely to cause any structural or other damage to the floors or walls or any other part or parts of the demised premises. Before bringing any such safes machinery plant or equipment upon the demised premises or the common areas the Lessee shall inform the Lessor of the Lessee's intention so to do andthe Lessor may direct the routing installation and location of all such machinery plant and equipment and the Lessee shall observe and comply with all such directions." The trial Judge found that the lessor and lessee contemplated that the premises were to be used for the conduct of the lessee's printing business and that a forklift would be used to move rolls of paper and other materials around the premises. However he was of the opinion that clause 4.12 dealt with the possibility that the floor of the premises might not sustain the operation of heavy machinery which might ordinarily be used in the conduct of the lessee's business. He considered that the burden of avoiding damage to the floor in consequence of the operation of heavy machinery, even where reasonably necessary for the conduct of the company's business, was imposed on the company. The trial Judge made a further finding of fact, namely that the forklift used by the company was heavy machinery and 17. that the damage caused to the floor was caused by the operation of the forklift when heavily loaded. He conciuded that the provisions of clause 4.12 related directly to the circumstances of the matter before him and imposed a burden on the company additional to that of clause 4.1(b) supra. These provisions were expressly concerned with heavy machinery reasonably necessary for the conduct of the company's business, permitting it to be brought onto the premises subject to the condition that it should not cause damage to the premises by virtue of its nature, weight or size etc. The finding of fact by the trial Judge that the forklift used by the company was "heavy machinery" within the meaning of that expression in clause 4.12 of the lease is correct. It seems to us however that it is sufficient to bring the forklift within the scope of clause 4.12 that 1t answers the description of "plant or equipment" whether heavy or not. Clause 4.12 isa clause designed to protect the building, including its floors, from structural or other damage. Hence it requires that the only safes, heavy machinery or other plant or equipment that can be brought onto the premises are those reasonably necessary or proper for the conduct of the company's use of the premises as "printers", and that it prohibits any heavy machinery, plant or equipment being brought on to the premises which, by virtue of its nature, weight or size or through noise or vibration in its operation or in any other way is such as to cause or, in the reasonable opinion of the respondent, would be likely to cause 18. any structural or other damage to the floors or walls or any other part or parts of the premises. The adjective "heavy" qualifies "machinery" in clause 4.12, not plant or equipment. Plainly the forklift is plant or equipment. Hence it falls within clause 4.12 as plant or equipment or heavy machinery. The provisions of clause 4.12 relate directly to the circumstances of the present case and impose a burden on the company additional to the requirement of para. 4.1(b) that the company shall use the premises for the purposes of "printers". The two provisions are not mutually inconsistent, but the implication of the term for which the appellants contend would be inconsistent with the express requirements of clause 4.12. Clause 8 of the lease also requires examination. Sub-clauses 8.3 and 8.11 provide as follows:- "8.3 SUITABILITY OF THE PREMISES The Lessee acknowledges that no promise representation warranty or undertaking has been given by or on behalf of the Lessor in respect of the suitability of the demised premises for any purpose or for any business to be carried on therein or as to the fittings finish facilities and amenities of the demised premises and all warranties (if any) implied by law are hereby so far as legally possible expressly negatived. 19. 8.11 EXCLUSTON OF IMPLIED TERMS This document embodies the entire understanding and the whole agreement between the parties hereto relative to the subject matter hereof and all previous negotiations representations warranties arrangements and statements (if any) whether expressed or implied (including any collateral agreement or warranty) with reference to the subject matter hereof or the intentions of either of the parties hereto are merged herein and otherwise are hereby excluded and cancelled." In our opinion it would be inconsistent with these sub-clauses to imply the term in question. Nor are we satisfied that any of the other four conditions stipulated in B.P. Refinery (Westernport) Pty. Limited v. President, Councillors and Ratepayers of Shire of Hastings (supra) is satisfied in the present case. We would dismiss the appeal with costs. | certify Yoot thir and the 1% host di pages are a true copy of the reasons for judgment herein of the Court Con E - Assotlate Bated 4/2/73 VY oS