RADLEY INVESTMENT CO PTY LTD v AMQUE CLOTHING PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER and HANDLEY JJA, and POWELL AJA 23 September 1993, 28 October 1993 [1993] NSWCA 308 FACTS: The respondents signed a lease for a shop without having been told of plans to refurbish the shopping centre. Although the plans were never implemented, he succeeded against the landlord in an action for lost profits under s52 of the Trade Practices Act, on the grounds that he would not have taken up the lease had he been appraised of the plans. No rent was paid. HELD:(per curiam) The findings of fact are not able to be disturbed, but the case falls outside s52. Silence can only amount to misleading or deceptive conduct if it concerns a matter which the party induced to contract was entitled to expect to be told about: Warner v Elders Rural Finance Ltd (1992) 113 ALR 517 at 523. That was not the case here, where negotiations with the landlord only concerned whether the lease would be assigned or a new lease entered into. The incoming tenant conducted the rest of the negotiations with an agent of the former tenant. Meagher JA This is an appeal by a landlord, Radley Investment Co Pty Ltd, froma judgment of his Honour Garling DCJ, in favour of a tenant Amque Clothing Pty Ltd, of whom the directors and shareholders were Heinz and Norma Salzberger. Amque Clothing Pty Ltd is a company which is a manufacturer and wholesaler of clothing, in particular jeans and lingerie. Before February 1989, it conducted this business at Gladesville. In early October 1988 Heinz Salzberger saw, in the Chatswood office of real estate agents called Goldman and May, an advertisement for the sale of the fixtures and fittings of a shop at Crows Nest. The tenant of the shop was a Mrs Menzlekov. The agent with whom he dealt at Goldman and May was a Mr Rosewarne. He discussed with Mrs Menzlekov the fixtures and fittings; he did not discuss or indeed look at the books or records of the business. This was because at this stage he did not propose to purchase either the business or its goodwill or an assignment of Mrs Menzlekov's lease. However, things changed rapidly, and by 11 October Mr Salzberger was anxious that his company should take a lease of Mrs Menzlekov's shop. He bought the fixtures and fittings for $1,800, and sought to obtain an assignment of the tenancy. Mr Rosewarne informed him that a Mr Dalley would have to approve of any assignment. Mr Dalley was the chief executive of the landlord company. Thereafter, he had a discussion with Mr Dalley; he pressed for an assignment; Mr Dalley pressed for the grant of a new lease. Within a very short time a new lease was signed. His Honour the trial judge made no finding as to its date of execution. The actual document seems to indicate execution on 8 November 1988. A memorandum in the handwriting of Mr Rosewarne suggests execution on 28 October 1988, but it would be wrong to place too much faith in this document, since it seems unlikely Mr Rosewarne was present at the execution. Further, Mr Salzberger gave evidence the lease was executed on 8 November, and his Honour found Mr Salzberger a witness of truth. It seems, then, that the lease was executed on 8 November 1988. 2 UNREPORTED JUDGMENTS The tenant company went into possession of the premises. That possession did not last long. It went out of possession on 31 December 1988. It seemed to pay no rent during its period of occupation. It made trading losses whilst there. The tenant has in effect sought to blame the landlord for the losses which it incurred. It sought to do this through the medium of s52 of the Trade Practices Act, 1974. It alleged that the landlord's conduct had been misleading and deceptive in three ways: (a) that the landlord had represented to the tenant that the shopping centre, of which the demised premises formed part, contained forty shops, whereas it contained a lesser number; (b) the landlord represented that the Centre was a profitable one, which would enable the tenant to make between two to three thousand dollars per week; and (c) although the landlord knew that renovations to the Centre were proposed, involving an escalator near the outside of the tenant's shop, it did not disclose the existence of such proposals to the tenant. The proposed renovations were never effected. They remained paper proposals. The trial judge found against the tenant on (a) and (b), but for it on (c). This latter finding was firmly and emphatically based on credibility. Mr Salzberger said, and his Honour believed him, that if he had known of the existence of the proposals he would never have executed the lease. His Honour's finding on ground (c) is a little odd as a finding of fact. It is in these circumstances not easy to see why his Honour must have rejected Mr Salzberger as a witness of truth on grounds (a) and (b), but not on ground (c). It is even less easy when the proposed alterations were not even mentioned in the stream of written remonstrances and complaints which the Salzbergers directed at the landlord until a fairly late stage. Indeed, they were not originally relied on in the present action, only being inserted in the Statement of Claim by a late amendment. I find it nearly impossible to understand the finding when, in addition to the factors I have mentioned, it seems that Mr Salzberger certainly knew of the building proposals by 9 November when they were discussed at a tenants' meeting, notice of which must have been received by him some days before, so that the lease was executed when the tenant had knowledge of the proposals. However, odd or not, it is not wholly irrational, and, being based on credibility, must bind intermediate courts of appeal (Abalos v Australian Postal Commission (1990) 171 CLR 167)! That means the case must be approached on the basis that the landlord's silence as to renovations was relied on by the tenant when executing the lease, in the sense that if disclosure had been made the tenant would not have exercised it. Nonetheless, in my view the landlord's appeal should succeed. In my view, its silence was neither misleading nor deceptive. The question of whether silence can be misleading or deceptive within s52 of the Trade Practices Act, 1974 has been the subject of a number of decisions in the Federal Court, the most recent of which are Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 and Warner v Elders Rural Finance Ltd (1992) 113 ALR 517. At common law there certainly would have been no duty of disclosure. On the facts any action of deceit against the landlords would be doomed to failure. S52 can have the effect of rendering some silences misleading even if they were non actionable under the general law, 1. But apparently not ultimate courts of Appeal, Smith v New South Wales Bar Association (1992) 176 CLR 256. URBADLEY INVESTMENT CO PTY LTD v AMQUE CLOTHING PTY LTD (Handley JA) 3 but in order to do this one must find that the plaintiff had an "entitlement to expect" disclosure: See per Hill J in Warner's Case at 523. In the present case I can discern no element of such an "entitlement to expect". There are yet more problems for the respondent tenant. In effect his Honour made an award of damages against the appellant landlord equal to the totality of the tenant's losses whilst it was in possession. This seems to me to be erroneous. After all, the tenant enjoyed premises which were at all times in exactly the same state as when they were inspected, and in exactly the state which the tenants anticipated they would always be in. The conduct of the business on the demised premises was in no way affected by the presence or absence of the renovations, or by the existence or non existence of an escalator. In these circumstances it seems to me unfair to a degree to make an award of damages of the kind made here even if but for misleading conduct the lease would never have been executed: see Netaf Pty Ltd v Bikane Pty Ltd (1990) 12 ATPR 51,219 at 51,223 per Sheppard and Pincus JJ. However, in the view I take questions of quantum do not arise. In my view the following orders should be made: A. In proceedings 6413 of 1989 (1) Appeal allowed. (2) Judgment below be set aside. (3) In lieu thereof enter judgment for the appellants. (4) Order the respondents to pay the appellants' costs in the Court below and on appeal, but to have a certificate under the Suitor's Fund Act in respect of its costs on appeal. (5) Order that the security provided by the appellants be released and repaid. B. In proceedings 8783 of 1989 (1) Appeal allowed. (2) Judgment below be set aside. (3) In lieu thereof order that the respondents pay the appellants the sum of $9,876.04 together with interest. (4) This judgment to take affect from 14 June 1993. (5) Order the respondents to pay the appellants' costs in the Court below and on appeal, but to have a certificate under the Suitor's Fund Act in respect of its costs on appeal. Handley JA In this appeal I have had the benefit of reading in draft form the reasons for judgment of Meagher JA. I agree that this appeal succeeds. I prefer to decide this case on the simple basis that Mr Dalley for the landlord made no statement to Mr Salzberger for the incoming tenant that was itself misleading or deceptive, or, although literally true was incomplete and without further disclosure misleading and deceptive. In these circumstances the respondents must rely upon the silence of Mr Dalley and mere silence cannot be misleading or deceptive unless, as Hill J said in the case referred to by Meagher JA, the party in question was entitled to expect disclosure. In this case there was minimal contact between the landlord and the proposed tenant prior to the lease being signed. Such contact as occurred was directed to the question whether a new lease should be granted or the existing lease should be assigned with consent. The commercial negotiations were with the agent for the outgoing tenant who was not acting as agent for the landlord. There was, in my opinion, no basis for a finding in these circumstances that Mr Salzberger was entitled to expect Mr Dalley to disclose the landlord's proposals for alterations to the shopping centre. 4 UNREPORTED JUDGMENTS I agree with the orders proposed by Meagher JA. Powell AJA I have read in draft the Judgment of Meagher JA. I agree with His Honour's conclusions and the Orders which he proposes. A. In proceedings 6413 of 1989 (1) Appeal allowed. (2) Judgment below be set aside. (3) In lieu thereof enter judgment for the appellants. (4) Order the respondents to pay the appellants' costs in the Court below and on appeal, but to have a certificate under the Suitor's Fund Act in respect of its costs on appeal. (5) Order that the security provided by the appellants be released and repaid. B. In proceedings 8783 of 1989 (1) Appeal allowed. (2) Judgment below be set aside. (3) In lieu thereof order that the respondents pay the appellants the sum of $9,876.04 together with interest. > (4) This judgment to take affect from 14 June 1993. (5) Order the respondents to pay the appellants' costs in the Court below and on appeal, but to have a certificate under the Suitor's Fund Act in respect of its costs on appeal. Counsel for the Appellant: G SEGAL/KA DRAYTON Instructed by: RL KREMINZER and CO Counsel for the Respondent: P BRERETON/R WEINSTEIN Instructed by: GILBERT and TOBIN