sneanenses: CATCHWORD TRADE PRACTICES - misleading or deceptive conduct concerning the lease of a shop. Trade Practices Act 1974 ss.51A, 52 VINCENT AGIUS & ANOR. v. LD OTL DEVELOP S__PTY LIMITED No. G278 of 1987 CORAM: FOX J. 12 MAY 1988 SYDNEY (ia 12 MAY 1988 \z FESERAL COURT OF AUSTRALIA PRINCIPAL REGISTRY IN THE FED! COURT OF AUSTRALIA ) NEW SOUTH DISTR REGISTRY No. G278 of 1987 DIVISION BETWEEN : VINCENT AGIUS AND: HAYMOR 2 PTY LIMITED Applicants AND: NEW WORLD OIL AND DEVELOPMENTS PTY LIMITED First Respondent -L.W. (NSW) LIMITED Second Respondent STEPHEN DOWNES Third Respondent DAVID BRIGHT Fourth Respondent KESTRAL PTY LIMITED Fifth Respondent MI OF _ ORD JUDGE MAKING ORDER: Fox J. DATE OF ORDER: 12 May 1988 WHERE MADE: Sydney THE COURT ORDERS THAT: 1. The application be dismissed, with costs. Note: Settlement and entry or orders is dealt with in Order 36 of the Federal Court Rules. IN_THE FEDERAL COURT OF AUSTRALIA NEW SO DISTR STR No. G278 of 1987 GENERAL DIVISION BETWEEN : VINCENT AGIUS AND: HAYMOR 2 PTY LIMITED Applicants AND: NEW WORLD OIL AND DEVELOPMENTS PITY LIMITED First Respondent J.L.W. (NSW) PTY LIMITED Second Respondent STEPHEN DOWNES Third Respondent DAVID BRIGHT Fourth Respondent KESTRAL PTY LIMITED Fifth Respondent CORAM: FOX J. DATE: 12 MAY 1988 FOR J FOX J. These proceedings, which were brought in reliance on 8.52 of the Trade Practices Act 1974 ("the Act") and on common law causes of action, were originally against five respondents. At the hearing, the proceedings against the second and fourth respondents were, by consent, dismissed, each party to pay his own costs. A cross-claim by them against the first respondent remains, which was for an indemnity to meet the situation of them being liable to the applicants, but all that remains is a question of costs, which by arrangement is to be dealt with ata later time. Their counsel was released from attendance. Counsel for the first, third and fifth respondents said at that time that he might wish to consider whether his clients should bring a cross-claim, as for an indemnity, against the parties thus dismissed, but after some debate counsel for the applicants stated that he did not intend to rely on any conduct of theirs to support his case, and those cross-claims have not been instituted. The matter proceeded on the issue of liability, the question of damages, if it arose, to be dealt with later. The case is very much one of fact. Originally, the central question was whether before or at the time the applicants (who may be considered together, the second applicant being a trustee and Mr Agius being one of its directors) took a lease from the first respondent, of a shop ina shopping mall at Casula, the latter, through their agent, Mr Downes (the third respondent) represented that a particular business which has been called Peters Meats, and which was a butcher shop selling chickens as a sideline, was not opening a shop in the mall. The first respondent (which I will call "New World") owned the whole mall, which was a new building. Jones Lang Wootten (second respondent) was engaged in finding tenants and it employed Mr Bright (fourth respondent) as its Retail Manager-Leasing. Mr Downes, who was not an estate agent was at relevant times supervising the installations in the various shops and was "co-ordinating tenancies" on behalf of New World. At some stage he formed the fifth respondent, which perhaps assumed a nominal position, but there is no need to consider this. Mr Downes has been accepted as an agent, in the relevant sense, of New World. There is no doubt that Mr Agius was concerned at the possibility of competition, and especially competition from Peters Meats, which is ina very big way of business, having alone or with a related company in excess of 30 outlets in and around Sydney. He had had previous experience, unhappy experience, of competition from Peters Meats, or its associate. The evidence from him is that, unlike other butcher shops, which often sell whole chickens, Peters Meats also sells all the parts of the bird, and sells them, as Mr Agius put it "at cost". I understand this to mean that the sale price is at or about the cost to Mr Agius, or, Peters Meats being able on occasion or generally to purchase at a lower price, below cost to him. They sell birds of two or more sizes. Chicken sales are said to be used by them as a bait to secure customers for their meat. Mr Agius cannot successfully compete with them, although his operation is fundamentally a take-away food shop, selling mainly cooked but also uncooked birds, or parts of cooked birds. There have been in the mall (and still are), three sources of competition apart from Peters Meats and another butcher - one the K-mart supermarket and another the Cottage Carvery, both of which also sell cooked chickens. The third, Cut-Price Deli sells uncooked chicken. In submissions to me, only s.52 has been relied upon, in conjunction with s.51A. The conduct as now complained of is a failure to disclose to the applicants, before they took their lease, that Peters Meats was coming, or had entered into occupation of a shop in the mail. (As it happened this was an adjacent shop). This in the face of what was known of the applicants concern about competition from Peters Meats, and perhaps, their sensitivity to close competition in general. Reliance is principally placed on a conversation on 18 July 1986 between Mr Downes and Mr Agius in which the former, in answer to a question, said that two butchers (not including the name of Peters Meats), were coming, (and by clear implication that Peters Meats was not), and, on Mr Agius' account there was added a positive statement by Mr Downes that Peters Meats was not among those coming. The evidence is that up to a point of time, in late July 1986, Peters Meats was not coming as a tenant. Another butcher shop, Michael Rodgers Quality Meats ("Michael Rodgers") was, until it advised to the contrary on or about 22 July. On or about that day Mr Downes asked Peters Meats if it would come instead and it accepted. It moved into the shop left vacant in mid to late August, and started fitting it out. Mr Agius says he knew nothing of its presence until 12 September 1986, when he saw the "Peters Meats" sign on the shop. An agreement for lease to the second applicant was signed on or about 21 August 1986. The contest is a straight conflict onthe evidence. Nothing has turned on the fact that the second applicant was to (and did) take the lease in a trust capacity. As I have said the applicants can be regarded as one. The parties had prepared their cases in the form of affidavit evidence, and the proceedings continued in this way, with cross-examination of several witnesses. It is convenient to set out a number of dates with a short statement of the events to which they respectively relate, and some explanatory material. Except in one or two respects, which I will mention, the dates have been accepted on both sides as accurate, or sufficiently accurate. March 1986 Mr Downes commences as tenancy co-ordinator of Casula Mall, then in the course of construction. 15.5.86 Letter from New World to Michael Rodgers confirming details for lease of shop 9 (this was the shop later occupied by Peters Meats). 7.7.86 Instructions from second respondent to Simons & Baffsky (New World's solicitors) for the preparation of a lease of shop 9 to Mr Agius. 11.7.86 Letter from Paul Pritchard & Co. (the then solicitors for Mr Agius) to the second respondent. 15.7.86 Letter from second respondent to Stampede Meats (a butcher which subsequently went into occupation) about its tenancy. 15.7.86 Letter from second respondent to Michael Rodgers about tenancy. 16.7.86 Letter from Simons & Baffsky to Paul Pritchard & Co. forwarding draft lease, memorandum containing standard terms and deed of agreement for lease. 18.7.86 Mr Downes cails Mr Agius concerning fit-out. The ensuing converation is important in the applicant's case and as mentioned is in dispute. I will return to it again. 22.7.86 Mr Downes was informed by Mr Rodgers that Michael Rodgers Quality Meats was not proceeding with shop 9 (or taking up any other shop in mall). Mr Downes contacts by telephone Mr Lederer of Andrews Meats (a butcher known to him) who 24.7.86 28.7 86 29.7.86 30.7.86 5.8.86 14.8.86 15.8.86 15.8.86 19.8.86 says he would need time to consider the proposition, and Mr Peters of Peters Meats who says that he will take the = shop. Deposit ($27,000) paid by Mr Agius to Olympia Refrigeration Pty. Limited, pursuant to an agreement made in early July, to provide for refrigeration and equipment necessary for the shop. Second respondent books advertising space in Sydney Morning Herald for a large advertisement which will show that Peters Meats, and other named people, have committed themselves to come into the mall. Olympia Refrigeration quotes Mr Agius for fit-out of shop 6 (this shop abuts, at right angles, shop 9). Mr Agius accepts the quote. The second respondent requests that Simons & Baffsky send a draft lease to Peters Meats. The second respondent, in writing, invites Mr Agius to attend a meeting of tenants to be held on 19 August (Mr Agius did not attend, Dut a representative of Peters Meats did). The advertisement earlier referred to appears in the Sydney Morning Herald. (Reference therein to Peters Meats is prominent). (Mr Agius says that he did not see, or hear about this advertisement). Pritchard & Co. write to Simons & Baffsky and say that Mr Agius is not prepared to accept a particular clause in the draft lease (cl.27.12, which provides, in short, that the lessee is not given an exclusive franchise and that the lessor may admit as tenants to such shops as it decides upon, whomever it wishes). Simons & Baffsky reply saying that the clause must stand. Peters Meats commences occupation of shop 9 about this time (Mr Agius says he did not realise that it was Peters Meats which was moving in). Pritchard & Co. write to Simons & Baffsky saying that proposed cl.27.12 must be changed. Telephone reply that clause will not be changed. The notified tenants meeting, held at a convention centre, attended by about 25 people. Mr Quinn announced to the meeting that he was the representative of Peters Meats. Mr Downes (and Mr Agius) not in attendance. 21.8.86 Mr Agius signs the lease documents and Pritchard & Co. sends them to Simons & Baffsky under covering letter of same date. 25.8.86 Mr Downes telephones Mr Agius. The content of the conversation is in dispute. I discuss it hereunder. 28.8.86 It is stated by Mr Agius, and dented by Mr Downes that a telephone conversation took place between them on this date. 12.9.86 There is another conversation the content of which is in dispute. 5.9. The shopping centre opens. The date of opening was apparently fixed at least some weeks before, possibly much earlier. Both the applicant and Peters Meats commenced business there. The lease to the second applicant is expressed to commence on this day. The second applicant refused to pay rent from October 1986 and went out of occupation on 20 June 1987. The amount claimed as unpaid rent is the subject of a cross-claim by New World. The lease was one for three years, with an option to renew for a futher three years. The title to the land is under the Rea] Property Act, 1900. The applicants accept that the date as at which the applicants became committed to the lease was 21 August 1986, although the expressed commencing date of the three year lease was 15 September 1986. The most critical dates, therefore, in considering the conduct of the respondents, were those before 21 August, although what was thereafter said and done is not unimportant. In the conversation of 18 July, Mr Agius says that he also asked specifically about Peters Meats and was told that that firm was not coming. As I have said, this was the fact at the time. Mr Downes denies that this part of the conversation took Place. It is very difficuit to resolve a dispute such as this. I suspect the probability is that Mr Agius made a mental appreciation that Peters Meats, which was a large and well-known organisation of butchers was not included in the names given, and Mr Downes did not make any positive statement that they were not coming. The change which took place was of course a matter of importance to Mr Agius, and of little or no importance to Mr Downes, beyond the fact that he had secured a tenant for the shop; probably he also wanted a tenant who was a butcher. Mr Downes deposes to having been very busy at the time, principally about the fitting out of shops. It is possible that he has failed to remember, and he may not have heard anything said by Mr Agius about Peters Meats. One conclusion that does seem reasonable, and which I draw, is that anything that was said about Peters Meats was not said with such force or emphasis that Mr Downes did, or could reasonably have been expected, to know or bear in mind that Mr Agius had particular concern in this direction, to the point at which he might wish to pull out of the intended lease arrangement, if Peters Meats came upon the scene. It is part of Mr Agius' evidence that he spoke to this effect to Mr Downes at the time, but I am not satisfied that he did so. The challenge to cl.27(12) to which I have referred did not take place in the context of any one tenant, or any particular class of tenant that might be approved by the first respondent. The objection was general. The telephone conversation shown in the chronology I have set out as occurring on 25 August may not have been exactly on that date but nothing turns on that circumstance. Mr Agius Places it as having occurred a little earlier, a few days after the tenants' meeting, which in his affidavit he says he believed occurred on 13 August. It is Mr Downes who says the conversation was on 25th, and in that regard I think he is likely to be more accurate. It is common ground that in the conversation there was a discussion about the meeting, and Mr Agius' absence from it. The evidence is to the effect that Mr Agius said that he did not think he could attend the meeting because he was not then a tenant. He had however received a direct invitation, at a time when he was only a prospective tenant, apparently not qualified by his having to become a tenant before he could attend the meeting. He said in his affidavit that he told Mr Downes on this occasion that he was worried "about the lease and the two butchers". He was then told, so he says, that Peters Meats was not coming, and that there was not going to be another chicken shop. I think it highly unlikely that this part of the conversation occurred, and, at the least, I am not satisfied that it did. There had been at that time at least two widely publicised statements that Peters Meats was becoming a tenant. There was the advertisement and there was the announcement at the meeting. About that time, Peters Meats had started to fit out the shop, the entrance to which was only a few metres from the entrance to Mr Agius' shop. On Mr Downes' evidence, Peters Meats had taken "commercial occupation" of the shop on or about 15 August 1987. Mr Agius alleges a conversation with Mr Downes on er about 28 August in which he again asked whether Peters Meats was coming and was told no. This conversation is disputed. It 10. is said to have taken place outside shop No. 9 (that of Peters Meats), an extraordinary venue in which to be making the alleged denial. Mr Agius says that seeing the fitting out of shop 9, at or before the time of the alleged conversation, he got the impression that it was like the set-up used by Peters Meats. So far as the evidence goes, he did not mention this matter to Mr Downes. I can understand repeated requests for assurances if they flow from substantial misgivings, but Mr Agius does not admit to misgivings flowing from any circumstance, except the fitting-out aspect I have just mentioned, which he did not say anything about. On his own account, he had been told twice before that Peters Meats was not coming, yet he did not tell Mr Downes of any matter that gave him any reason to suspect that it might be doing so. The alleged conversation was of course a week or so after the date agreed upon as that upon which he had become committed to the lease. It is submitted nevertheless that he could have taken some steps either to avoid the lease (or tenancy, or agreement for lease) or to avoid further expense in fitting up the shop, if he had known the truth on 28 August. At this stage, of course, any statement such as that attributed to Mr Downes would have been untrue, and quite deliberately untrue, but I am not satisfied that it took place. In this regard, I prefer Mr Downes evidence. Mr Agius says that on 12 September he saw the sign of Peters Meats being erected in shop 9. On his account, this was the first knowledge he had of the advent of this firm. He says that he became upset and sought out Mr Downes. The ensuing conversation is totally in dispute. Mr Agius says it was in part il. as follows: EAgius] "Why didn't you tell me that Peter's is coming?" Stephen Downes said: "Oh, he just came in at the last minute and we had not time to tell you." CAgius] "You had plenty of time. The last time we met I had time to pull out." Stephen Downes said: "I couldn't tell you because it's too close to the opening and we like to fill the centre." It seems to me quite likely that Mr Agius did remonstrate with Mr Downes at some stage, having in mind the change made in the occupiers of the butchers shops, but I am unable to say that the conversation as set out took place when it did, or in the terms stated. Although Mr Agius was not himself a butcher, he did specifically ask who the butchers were who were coming in. At some point he could reasonably have expected from Mr Downes some advice about the change, as a matter of courtesy, but only if, I think, the change was not likely to have come to the attention of Mr Agius. I am not satisfied however that the circumstances were such that it was misleading or deceptive for Mr Downes not to have told Mr Agius before 21 August that one of the two butchers had been changed. I find it hard to believe that after the advertisement and after the meeting, Mr Agius had not become aware that Michael Rodgers was not coming, and, that Peters Meats was, or probably was. After the fitting out of shop 9 had progressed some distance it seems to me highly likely that he knew that Peters Meats was moving in. Before leaving this branch of the argument, I should say that Mr Agius' de facto wife gave evidence with a view to supporting his case. In this she 12. failed. I found her evidence completely unreliable and do not accept it. The case for the applicant is also put on broader lines. It is submitted that on any basis, both Mr Downes, and his principal, New World, knew the nature of Mr Agius' business. It was essentially a take-away chicken business. The respondents, it is put, must be taken to have known that butchers shops, and particularly those admitted as tenants also sold chickens, and that Peters Meats sold parts of chicken, as well as the whole, and in more than one size. In those circumstances it is said they owed the applicants a duty to disclose the names of the butchers' firms which were coming, and of any change. The alleged duty would of course not have been one enforceable under the general law, but was used as a principal ingredient in the concept of misleading and deceptive conduct. In this case, the leap is too big a one. In my view what was done, or left undone, did not constitute conduct of this nature. The other causes of action were not relied upon. The application should therefore be dismissed with costs. There remains a question of the disposition of the cross-claim, and the costs with regard thereto, upon which submissions are to be made. I certify that this and the eleven (11) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Fox. Associate: Sharon Lolhne Date: 12 May 1988 13. Counsel for the Applicant: Solicitors for the Applicant: Counsel for the 2nd,4th Respondents: Solicitors for the 2nd,4th Respondents: Counsel for list,3rd,Sth Respondents: Solicitors for lst,3rd,5th Respondents: Dates of hearing: Date judgment delivered: Mr N.F. Francey Mr P. Lever-Nalor Snelgrove Mucsnik & O'Brien Mr P.M. Biscoe Moore & Bevins Mr J.C. Kelly Simons & Baffsky Sydney: 20,21 April 1988 Sydney: 12 May 1988