New South Wales Court of Appeal CITATION : Karacominakis v Big Country Developments Pty Ltd & Ors Big Country Developments Pty Ltd v Chadlace Pty Ltd & Ors J W Wall Investment Co Pty Ltd & Ors v Big Country Developments Pty Ltd & Ors Hollingsworth & Anor v Big Country Developments Pty Ltd & Ors [2000] NSWCA 313 FILE NUMBER(S) : CA 40696/97; 40698/97; 40702/97; 40877/97 HEARING DATE(S) : 20, 21, 22, 23, 24, 28 March & 21 August 2000 JUDGMENT DATE : 17 November 2000 Nicholas Karacominakis - Appellant in 40696/97, Fourth Respondent in 40702/97, Fifth Respondent in 40877/97 Big Country Developments Pty Ltd - First Respondent in 40696/97, Appellant/First Cross Respondent in 40698/97, First Respondent in 40702/97 & First Respondent in 40877/97 PARTIES : Peter Herman Hesky - Second Cross-Respondent in 40698/97 J W Wall Investment Co Pty Ltd, John William Wall & Cecilia Ellen Wall - Second, Third and Fourth Respondents in 40696/97, First, Second and Third Appellants in 40702/97, Second, Third & Fourth Respondents in 40877/97 Jeffrey Hollingsworth & Gillian Gai Hollingsworth - Fifth and Sixth Respondents in 40696/97, Second and Third Respondents in 40702/97, First and Second Appellants in 40877/97 Chadlace Pty Ltd, Glen Johnston & Karen Schmitz - Seventh, Eighth & Ninth Respondents in 40696/97, First and Second Respondents/Cross Appellants in 40698/97, Fifth, Sixth & Seventh Respondents in 40702/97, Sixth, Seventh & Eighth Respondents in 40877/97 JUDGMENT OF : Handley JA at 1; Stein JA at 2; Giles JA at 3 LOWER COURT JURISDICTION : Supreme Court LOWER COURT 50306/94 FILE NUMBER(S) : LOWER COURT Bainton J JUDICIAL OFFICER : G C Lindsay SC & C A Marlow - Nicholas Karacominakis B A Coles QC & P P Strasser - Big Country Developments Pty Ltd & P H Hesky COUNSEL : J C Kelly SC - J W Wall Investment Co Pty Ltd, J W Wall & C E Wall V Stefano - J Hollingsworth and G G Hollingsworth C M Harris - Chadlace Pty Ltd, G Johnston and K Schmitz James Soulos, Ashfield - N Karacominakis Denes Ebner, Sydney - Big Country Developments Pty Ltd & P H Hesky SOLICITORS : David Hand, Hurstville - J W Wall Investment Co Pty Ltd, J W Wall & C E Wall Shaddock Baker & Paul, Richmond - J Hollingsworth & G G Hollingsworth Matthew Folbigg, Blacktown - Chadlace Pty Ltd, G Johnston & K Schmitz DECISION : See paragraph 331. THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40696, 40698, 40702, 40877/97 Com Div 50306/94 HANDLEY JA STEIN JA GILES JA Friday 17 November 2000 KARACOMINAKIS v BIG COUNTRY DEVELOPMENTS PTY LTD & ORS BIG COUNTRY DEVELOPMENTS PTY LTD v CHADLACE PTY LTD & ORS J W WALL INVESTMENT CO PTY LTD & ORS v BIG COUNTRY DEVELOPMENTS PTY LTD & ORS HOLLINGSWORTH & ANOR v BIG COUNTRY DEVELOPMENTS PTY LTD & ORS SUMMARY Big Country Developments Pty Ltd (Big Country), a land developer controlled by Mr Hesky, acquired land near Windsor for the staged development of a shopping centre, by the construction first of a squash centre and gymnasium, then a tavern and shops, then a supermarket and more shops. Big Country obtained finance by mortgaging the Windsor land. The mortgages were registered as dealings T424525 and V747997. Mortgages T424525 and V747997 were given to Finance Corporation of Australia Ltd. Mortgage V747997 was later transferred to Esanda Finance Corporation Ltd (Esanda). By deed (24 December 1986) Big Country agreed to lease the tavern to JW Wall Investment Co Pty Ltd (Wall Investment). Wall Investment also took a lease of the squash centre and gymnasium for a ten year term. Mr Wall and his mother Mrs Cecilia Wall (the Walls) guaranteed the lease. As executed (sometime prior to 17 November 1988) the lease contained no entry in the space provided for the noting of prior encumbrances on the land. Wall Investment agreed to sell the squash centre and gymnasium business (the business) to Mr Geoffrey Hollingsworth and his wife Mrs Jillian Hollingsworth (the Hollingsworths). The agreement for sale of the business (5 May 1989) included an indemnity by the Hollingsworths in favour of Wall Investment and the Walls against any action which Big Country might take to enforce the covenants in the lease against them "as a result of default or any action of the Purchasers which could give rise to any such action". By deed of assignment (22 May 1989) Wall Investment assigned to the Hollingsworths "all its right title and interest in and to the lease on and from 22 May 1989". Big Country was a party to the deed and took a covenant from the Hollingsworths to be liable for performance of the lessee's obligations under the lease. The Hollingsworths covenanted to indemnify Wall Investment and the Walls against loss by reason of their failure to perform the lessee's obligations. The Hollingsworths took over the business and entered into possession. Big Country's solicitors sent the executed and stamped lease to Esanda "for consent by your company and return to us". Esanda returned the lease with the addition of a page containing a form of consent to the lease. The lease was lodged for registration at the Land Titles Office which issued a requisition that "mortgages T424525 & V747997 are to be noted as prior encumbrances". Without reference to the outgoing or incoming lessees, Big Country's solicitors caused mortgage T424525 to be noted as a prior encumbrance in the appropriate space in the lease. So supplemented, the lease was registered on 13 July 1990. Shortly thereafter a transfer of the lease to the Hollingsworths was registered. The Hollingsworths agreed to sell the business to Mr Nicholas Karacominakis. By deed (24 April 1992), with Big Country as a party, the lease was transferred from the Hollingsworths to Mr Karacominakis. The Hollingsworths' liability under the lease was preserved and Mr Karacominakis would become liable under the lease. Mr Karacominakis took over the business. A transfer of the lease was executed and registered on May 4 1992. By an agreement for sale (6 July 1993) Mr Karacominakis agreed to sell the business to Chadlace Pty Ltd (Chadlace). By deed (13 August 1993), with Big Country as a party, Mr Karacominakis agreed to transfer the lease to Chadlace. Mr Karacominakis' liability under the lease under the lease was preserved and Chadlace would become liable under the lease, and as well the Johnstons guaranteed Chadlace's obligations. A transfer of the lease in registrable form was executed but not registered. Chadlace took over the business. On 24 December 1993 Chadlace closed the business down and on 29 December1993 it vacated the squash centre and gymnasium. Big Country took possession of the premises on 13 January 1994. In September 1994 Big Country granted a four year lease to Nelville Pty Ltd (Nelville) at a rent much lower than the rent under lease to Wall Investment. At first instance At trial before Bainton J, Big Country claimed the unpaid rent as at 13 January 1994 and, alleging acceptance of a repudiation of the lease by Chadlace, damages calculated as the rent for the balance of the ten year term less the lower rent received under the lease to Nelville. The defendants contested their liability to Big Country on a variety of grounds and brought a number of defensive and other cross-claims, including between themselves in relation to indemnity and false representations. Bainton J upheld Big Country's claims against the defendants other than Chadlace and the Johnstons. The defensive cross-claims were dismissed. The claims for indemnity were dismissed, but a declaration as to entitlement to contribution between the defendants found liable was made. The false representation claims by the Chadlace parties against Big Country and Mr Hesky were dismissed, but the Chadlace parties succeeded in their false representation claims against Mr Karacominakis and obtained damages. The Appeal All parties appealed or cross-appealed. In general terms, Big Country sought to overturn the failure of its claims against the Chadlace parties; each of the Wall parties, the Hollingsworths and Mr Karacominakis sought to overturn the success of Big Country's claims against them or the quantification of the claims; the Wall parties indirectly supported Big Country's claim against Chadlace by seeking to extend the contribution between the defendants to include contribution by Chadlace; Mr Karacominakis sought to overturn the success of the Chadlace parties' false representation claims against him or the quantification of the claims; and Chadlace parties sought to overturn the failure of their false representation claims against Big Country and Mr Hesky. In the course of the appeals the manner in which Big Country claimed against the defendants changed pursuant to amendment, by leave, of its summons. Held (Giles JA, Handley and Stein JJA agreeing) Big Country's claims against the defendants As to the issues on which the claims depended - (a) Whether the lease for a term was effective/ the status of the lease - excluding the Walls' guarantee If the lease became void by operation of the rule in Pigot's case (1614) 11 Coke 26b; 77 ER 1177 in consequence of the addition of mortgage T424525 as a prior encumbrance, on its registration by virtue of indefeasibility under the Real Property Act the lessee's covenant to pay rent became effective. Big Country was entitled to enforce payment of rent under the lease and to recover damages following repudiation. Other cases referred to: Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259; Bahr v Nicholay (No 2) (1988) 164 CLR 604; Boyd v Mayor of Wellington (1924) NZLR 1174; Breskvar v Wall (1971) 126 CLR 376; Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607; Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423; Duncan v McDonald (1997) 3 NZLR 669; Farrow Mortgage Services Pty Ltd (in liq) v Slade (1996) 38 NSWLR 636; Frazer v Walker (1967) 1 AC 569; Garofano v Reliance Finance Corporation Ltd (1992) NSW Conv R 55-640; Goss v Chilcott (1996) AC 788; Grgic v Australian and New Zealand Banking Group Ltd (1994) 33 NSWLR 202; Grundy v Ley (1984) 2 NSWLR 467; Junghenn v Wood (1958) SR (NSW) 327; re Lehrer and the Real Property Act (1961) 61 SR (NSW) 353; Mayer v Coe (1968) 88 WN (Pt 1) (NSW) 549; Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326; Morton v Black (1986) 4 BPR 97250; PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643; Ratcliffe v Watters (1969) 89 WN (Pt 1)(NSW) 497; re Ridgeway and Smiths's Contract (1930) VLR 111; Schultz v Corwill Properties Ltd (1969) 90 WN (Pt 1) (NSW) 529; Sutherland Shire Council v Moir (1982) 49 LGRA 114; In Travinto Nominees Pty Ltd v Vlattas [1972] 1 NSWLR 24; Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238. (b) The status of the Walls' guarantee On registration of the lease the Walls' guarantee was without a subject-matter because the registered lease, with T424525 noted as a prior encumbrance, was not the lease they had guaranteed. The lease the Walls guaranteed was not to be subject to the rights or interest of any mortgagee, but was to be with the consent of any mortgagee. Although Wall Investment was liable to pay rent under the lease, the Walls were not liable for that rent as guarantors. Cases referred to: Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259; Barker v Weld (1884) 3 NZLR 104; Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555; Chan v Cresdon Pty Ltd (1989) 168 CLR 242; Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 Daniker v Fitzgerald (1919) 19 SR (NSW) 260; Iron Trades Employers Insurance Association Ltd v Union Land and House Investors Ltd (1937) Ch 313; Keysen v Gregg (1932) 32 SR (NSW) 288; Parkinson v Braham (1962) SR (NSW) 663; Stranks v St John (1867) LR 2 CP 376; Telado Pty Ltd v Vincent (1996) NSW Conv R 55-786; Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238. (c) Liability in damages for repudiation of the lease The covenant to pay rent was made an essential term, and in the event that rent was overdue for more than 7 days Big Country was entitled by acceptance of a repudiation of the lease to terminate it and, in accordance with Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17, to claim for damages for loss of bargain. If there was repudiation of the lease, the repudiation was accepted. There was repudiation of the lease by Wall Investment, as the original lessee. Wall Investment is liable for unpaid rent and in damages for repudiation of the lease. Section 51 of the Real Property Act 1900 subjects the transferee of a lease to the lessee's obligations only while the transferee is registered as the proprietor of the lease, so that following a further transfer the transferee is no longer liable under the lease to pay the rent thereafter falling due. The Hollingsworths were not liable under the lease to pay the rent falling due at the end of 1993, and accordingly Chadlace's failure to pay the rent did not bring repudiation of the lease by the Hollingsworths. There was repudiation of the lease (in the sense of breach of an essential term) by Mr Karacominakis. Mr Karacominakis is liable for unpaid rent and in damages for repudiation of the lease. Chadlace was not a transferee of the lease, it did not become liable to pay rent under the lease, and the claim against it was not for repudiation of the lease. Other cases referred to: Andrews v Hogan (1952) 86 CLR 223; Auscott Ltd v Panizza (1988) NSW Conv R 55-395; Ellis v Rowbotham (1900) 1 QB 740; Estates Gazette Ltd v Benjamin Restaurants Ltd (1994) 1 WLR 1528; Grescot v Green (1700) 1 Salk 199; 91 ER 179; Hindcastle Ltd v Barbara Attenborough Ltd (1995) QB 95; Konica Business Machines Australia Pty Ltd v Tizine Pty Ltd (1992) 26 NSWLR 687; J Lyons Co Ltd v Knowles (1943) KB 366; MacDonald v Robins (1954) 90 CLR 515; Mahoney v Lindsay (1980) 33 ALR 601; March v EH & M Stramare Pty Ltd (1991) 171 CLR 506; Measures v McFadyen (1910) 11 CLR 723; Majik Markets Pty Ltd v S & M Motor Repairs Pty Ltd (No 1) (1987) 10 NSWLR 49; Murphy v Harris (1924) St R Qd 187; ex parte O'Neill; re Ryan (1925) 25 SR (NSW) 416 Parker v Webb (1693) 3 Salk 5; 91 ER 656; Paul v Nurse (1828) 8 B & C 486; 108 ER 1123; Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235; Phillips v Bridge (1873) LR 9 CP 48; Renshaw v Mahr (1907) VLR 520; Sargent v ASL Developments Pty Ltd (1974) 131 CLR 634; Shevill v Builders Licensing Board (1982) 149 CLR 620; Spencer's case (1583) 5 Co Rep 16a; 77 ER 72; Wilson & King v Brightling (1885) NZLR 4; Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105. (d) Liability under the deeds In their (incoming) deed of 22 May 1989 the Hollingsworths undertook liability for payment of rent by the lessee "pursuant to the Lease". The Hollingsworths are not liable for payment of rent by the lessee pursuant to the different lease which came about on registration of the altered instrument. The Hollingsworths' (outgoing) deed of 24 April 1992 does not give Big Country a basis for its claims against the Hollingsworths. So far as it preserves the Hollingsworths' liability, it does not assist Big Country; the indemnity the Hollingsworths gave is not as to unpaid rent. Mr Karacominakis is liable for unpaid rent under the lease by his (incoming) deed of 24 April 1992. His contractual liability did not come to an end when he agreed to transfer the lease away. Mr Karacominakis is liable for damages for breach of the contract including compensation for loss of bargain in the same amount as the damages for repudiation of the lease. Mr Karacominakis' (outgoing) deed of 13 August 1993 does not give Big Country a basis for its claims against Mr Karacominakis, see as to the Hollingsworths. Chadlace is contractually liable by their (incoming and only) deed of 13 August 1993 for the unpaid rent and for damages for breach of the contract, including compensation for loss of bargain in the same amount as the damages for repudiation of the lease. The Johnstons are liable as guarantors. Cases referred to: J Lyons Co Ltd v Knowles (1943) KB 366; Estates Gazette Ltd v Benjamin Restaurants Ltd (1994) 1 WLR 1528. (e) The need for a demand Clause 3.2 of the deeds of 24 April 1992 (Hollingsworths' outgoing) and 13 August 1993 (Mr Karacominakis' outgoing) did not make demand a precondition to any liability for the rent and damages to which the Hollingsworths and Mr Karacominakis were already exposed. Cases referred to: Bradford Old Bank Ltd v Sutcliffe (1918) 2 KB 833; Tricontinental Corporation Ltd v HDFI Ltd (1987) 21 NSWLR 689; Wolveridge v Steward (1833) 1 C & M 646; 149 ER 557. (f) Relief from liability under principles of contribution between sureties Principles of contribution between sureties do not come into play. Cases referred to: Burnett v Lynch (1826) 5 B & C 589; 108 ER 220; Carter v White (1883) 25 Ch D 666; Hancock v Williams (1942) 42 SR (NSW) 252; JGL Investments Pty Ltd v Maracorp Financial Services Ltd (1991) 2 VR 168; Marston v Charles H Griffith & Co Pty Ltd (1985) 3 NSWLR 294; Moule v Garrett (1872) LR 7 Ex 101; Williams v Frayne (1937) 58 CLR 710; Wolveridge v Steward (1833) 1 C & M 646. (g) Mitigation of loss The failure to mitigate for which Mr Karacominakis contended is not made out. Big Country did not act unreasonably in the extent of its communication with him, in declining to take up the suggestion of a new lease, or by any delay in re-letting the premises to Nelville. In the result, subject to the defensive cross-claims Big Country can recover the rent and damages from Wall Investment, Mr Karacominakis, Chadlace and the Johnstons, but not from the Walls or the Hollingsworths. Cases referred to: Banco de Portugal v Waterlow and Sons Ltd (1932) AC 452; Bracer v Calder (1895) 2 QB 253; Houndsditch Warehouse Co Ltd v Waltex Ltd (1944) KB 579; Pilkington v Wood (1953) Ch 770; Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd (1976) 1 NSWLR 5; Shindler v Northern Raincoat Co Ltd (1960) 1 WLR 1038; TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130. The defensive cross-claims The only extant defensive cross-claims were by Mr Karacominakis, and were limited to reliance on the Fair Trading Act and the Contracts Review Act . (a) The Fair Trading Act Bainton J's rejection of the misleading representations on which the Fair Trading Act cross-claim was founded should not be overturned. The submission so far as dependent on factual errors is not made good. His Honour's view of Mr Karacominakis' credit is not properly open to appellate review. (b) The Contracts Review Act Mr Karacominakis entered into the deed of 24 April 1992 in the course of or for the purpose of his carrying on the business. Section 6(2) of the Contracts Review Act 1980 precludes the grant of relief in relation to the deed of 24 April 1992. In the result, the defensive cross-claims failed. Cases referred to: Coombs v Bahama Palm Trading Pty Ltd (1991) ASC 56-097; Ellison v Vukicevic (1986) 7 NSWLR 104; Vukicevic v Alliance Acceptance Co Ltd (1987) 9 NSWLR 13 (CA). The claims for indemnity and contribution (i) In favour of Wall Investment Mr Karacominakis was the last legal assignee of the lease. The breach of covenant occurred while he was assignee and he must indemnify Wall Investment. The breach of covenant did not occur while the Hollingsworths were assignee, and they are not liable under the general law to indemnify Wall Investment. The 5 May 1998 indemnity must be read as referring to any default of the Hollingsworths or other action of the Hollingsworths by which the Walls parties were liable to Big Country. There was not such default or other action. The non-payment of rent was not a failure by the Hollingsworths within the 22 May 1989 indemnity, because they were not obliged to pay the rent. Chadlace, albeit only an equitable assignee, undertook direct liability to Big Country under the 13 August 1993 deed. As between itself and Wall Investment it had the full benefit of the lease and was responsible for payment of the rent. Wall Investment is entitled to recoupment from Chadlace if Wall Investment pays Big Country. Wall Investment is also entitled to recoupment from the Johnstons. There is no room for contribution in favour of Wall Investment. Cases referred to: Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342; Becton Dickinson UK Ltd v Zwebner (1989) 1 QB 208; Moule v Garrett (1872) LR 7 Ex 101. (i) In favour of Mr Karacominakis Since Mr Karacominakis must indemnify Wall Investment, he is not entitled to indemnity or contribution from Wall Investment. There is no ground for indemnity or contribution from the Hollingsworths. Mr Karacominakis is entitled to recoupment from Chadlace and the Johnstons. There is no occasion for contribution from them. (ii) In favour of Chadlace Since Chadlace must indemnify Wall Investment and Mr Karacominakis, it is not entitled to indemnity or contribution from either of them. There is no ground for indemnity or contribution from the Hollingsworths. (iii) In favour of the Johnstons (Same position as Chadlace) Since the Johnstons must indemnify Wall Investment and Mr Karacominakis, they are not entitled to indemnity or contribution from either of them. In the result, Wall Investment and Mr Karacominakis are entitled to declarations of their entitlement to recoupment from Chadlace and the Johnstons in the event that either pays the unpaid rent and damages to Big Country. The false representation claims by the Chadlace parties against Big Country and Mr Hesky The business was not making sufficient money to cover the rent and other expenses. There was misleading conduct in what was said about payment of rent on the part of Big Country in which Mr Hesky was knowingly concerned. Mr Johnston, and via him the other Chadlace parties, relied on what Mr Hesky told him in purchasing the business. The Chadlace parties are entitled to recover from Big Country and Mr Hesky the loss or damages suffered by the misleading conduct of Big Country. Cases referred to: Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84; Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608; Gould v Vaggelas (1985) 157 CLR 215; Kabwand v National Australia Bank Ltd (1989) ATPR 40-950; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 46-601; Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649. The false representation claims by the Chadlace parties against Mr Karacominakis Mr Karacominakis made misrepresentations as to turnover and profitability. The Chadlace parties relied on what was said. The Chadlace parties are entitled to recover from Mr Karacominakis the loss or damages suffered by the misleading conduct of Mr Karacominakis. Cases referred to: Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281; McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187; R v Lock (1926) 26 SR (NSW) 272; Selman v Minogue (1937) 37 SR (NSW) 280. Damages in the false representation claims The business had no value when purchased by Chadlace. The trading losses (and other losses so far as properly recoverable) did not cease to be recoverable from mid November 1993 when Chadlace could have realised that the turnover and profitability were not as represented. So far as the damages included Mr Johnston's lost salary and the Johnstons' financing expenses those amounts were recoverable. The damages in the false representation claim against Mr Karacominakis awarded by Bainton J stand and are potentially increased by the amount of the rent and damages if Chadlace or the Johnstons pay that to Big Country. Cases referred to: Burns v MAN Automotive Pty Ltd (1986) 61 ALJR 81; Dodd Properties Ltd v Canterbury City Council (1980) 1 WLR 433; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Gould v Vaggelas (1985) 157 CLR 215; Leisbosch Dredger v SS Edison (1933) AC 449; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; Sanrod Pty Ltd v Dainford Pty Ltd (1984) 54 ALR 179; Toteff v Antonas (1952) 87 CLR 647; Yorke v Ross Lucas Pty Ltd (1982) 45 ALR 299. ___________ CONTENTS Paragraph Handley JA 1 Stein JA 2 Giles JA 3 Outline facts 4 The proceedings below 33 The appeal 40 Big Country's claims against the defendants 43 (a) The status of the lease - excluding the Walls' guarantee 45 (b) The status of the Walls' guarantee 70 (c) Liability in damages for repudiation of the lease 106 (d) Liability under the deeds 157 (e) The need for a demand 176 (f) Relief from liability under principles of contribution between sureties 180 (g) Mitigation of loss 186 The defensive cross-claims 209 (a) The Fair Trading Act 210 (b) The Contracts Review Act 218 The claims for indemnity and contribution 224 (i) In favour of Wall Investment 234 (ii) In favour of Mr Karacominakis 244 (iii) In favour of Chadlace 245 (iv) In favour of the Johnstons 246 The false representation claims by the Chadlace parties against Big Country and Mr Hesky 248 The false representation claims by the Chadlace parties against Mr Karacominakis 273 Damages in the false representation claims 311 Orders 330 THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40696, 40698, 40702, 40877/97 Com Div 50306/94 HANDLEY JA STEIN JA GILES JA Friday 17 November 2000 KARACOMINAKIS v BIG COUNTRY DEVELOPMENTS PTY LTD & ORS BIG COUNTRY DEVELOPMENTS PTY LTD v CHADLACE PTY LTD & ORS J W WALL INVESTMENT CO PTY LTD & ORS v BIG COUNTRY DEVELOPMENTS PTY LTD & ORS HOLLINGSWORTH & ANOR v BIG COUNTRY DEVELOPMENTS PTY LTD & ORS JUDGMENT 1 HANDLEY JA: I agree with Giles JA. 2 STEIN JA: I agree with Giles JA. 3 GILES JA: The trial before Bainton J occupied eight days, excluding submissions which were then made in writing. The hearing of these appeals from his Honour's decision occupied seven days. Many matters were raised, and the arguments were wide-ranging. In some respects the focus of the arguments on the appeals was different from that at the trial. It is not necessary for the disposal of the appeals to decide all the matters raised or canvass all the arguments. Outline facts 4 An outline of facts, to be developed and supplemented as appropriate when dealing with the issues necessary to be decided, will assist in understanding these reasons. 5 Big Country Developments Pty Ltd ("Big Country") was a land developer. It was controlled by Mr Peter Hesky. It acquired land near Windsor in New South Wales for the staged development of a shopping centre, by the construction first of a squash centre and gymnasium, secondly of a tavern and shops, and thirdly of a supermarket and more shops. 6 The squash centre and gymnasium was completed in 1980. The premises were a two storey building with squash courts at ground level and a gymnasium on the first floor. From 1985 the squash centre and gymnasium was operated by Mr Alan Chiswick. Mr Chiswick was a long-time business associate of Mr Hesky. The evidence did not disclose the basis on which he occupied the premises. 7 As might be expected, Big Country had obtained finance by mortgaging the Windsor land. The land was Torrens Title land, being the land in Certificate of Title volume 12079 folio 147. As at 1986 and at all material times thereafter mortgages were registered as dealings T424525 and V747997. 8 Mortgage T424525 had been given to Finance Corporation of Australia Ltd ("FCA") in January 1983 to secure an advance of $1,750,000, and mortgage V747997 had been given to FCA in April 1985 to secure a further advance of $1,200,000. By a transfer dated 26 June 1987 registered as dealing W962570 FCA transferred mortgage V747997 to Esanda Finance Corporation Ltd ("Esanda"). There was no like transfer of mortgage T424525. There was no explanation of the different treatment of the mortgages. 9 The transfer of mortgage V747997 by FCA to Esanda was expressed to be for a consideration of $1.00. It was executed by the same person as attorney for both FCA and Esanda, the person's description being that of an officer of Esanda. It is tolerably clear that, at least as at June 1987, there was a relationship of some kind between FCA and Esanda. This was not explored in the evidence. 10 By the end of 1986 the construction of the tavern was planned or in progress, with completion expected in March 1988. By a deed dated 24 December 1986 Big Country agreed to lease the tavern to J W Wall Investment Co Pty Ltd ("Wall Investment") for a term of ten years from the time it was ready for occupation. 11 Wall Investment came also to take a lease of the squash centre and gymnasium. There was no deed similar to the deed of 24 December 1986. According to Mr Hesky, in November or December 1987 Mr John Wall of Wall Investment asked him about taking over the operation of the squash centre and gymnasium, and he referred Mr Wall to Mr Chiswick. He was later told by Mr Chiswick that Mr Chiswick and Mr Wall had agreed on a sale of the squash centre and gymnasium business ("the business") and that Mr Wall wanted "a new lease running concurrently with his tavern lease". According to Mr Wall, Mr Hesky asked if he would be interested in operating the squash centre and gymnasium, and after consideration he said that he would and asked Mr Hesky to submit "the terms on which the premises would be leased". By a letter dated 12 February 1988 Big Country's solicitors sent to Wall Investment's solicitors a lease of the squash centre and gymnasium, in a form appropriate for registration under the Real Property Act 1900 (NSW), for approval and execution. The letter said that the lease was to "run for the same term as the tavern" and that the dates inserted would be advised in due course. The evidence did not amplify the communications or the circumstances in which the lease came about. 12 The lease of the squash centre and gymnasium was executed by Wall Investment as lessee, and by Mr Wall and his mother Mrs Cecilia Wall ("the Walls"; together with Wall Investment, "the Wall parties") as guarantors. It provided for payment in advance and without demand of rent of $8,000 per month and 58 per cent of the "operating expenses" of the shopping centre (hereafter referred to only as rent), with an escalation clause. 13 After execution the lease was returned to Big Country's solicitors. When returned it was undated, and the dates of commencement and termination of the term of ten years were left blank. As executed, the lease had no entry in the space provided for noting of prior encumbrances on the land. The evidence did not disclose when the execution or return to Big Country's solicitors took place, save that it must have been prior to 17 November 1988 when the solicitors sent the lease to their law stationers to be lodged for assessment and payment of stamp duty. When the lease was executed by Big Country did not appear from the evidence. 14 Before sending the lease to the law stationers Big Country's solicitors wrote in 6 April 1988 as the commencement and 5 April 1998 as the termination of the term, the former date apparently being the date on which Wall Investment went into occupation of the tavern and the squash centre and gymnasium. The solicitors also dated the lease 1 November 1988. There was still no entry in the space provided for noting of prior encumbrances on the land. 15 In circumstances which need not be recounted, stamp duty on the lease was not assessed and paid until September 1989. In the meantime, Wall Investment agreed to sell the business to Mr Jeffrey Hollingsworth and his wife Mrs Gillian Hollingsworth ("the Hollingsworths"). The agreement for sale of the business dated 5 May 1989 included an indemnity by the Hollingsworths in favour of Wall Investment and the Walls against any action which Big Country might take to enforce the covenants in the lease against them "as a result of default or any action of the Purchasers which could give rise to any such action". 16 The Hollingsworths took over the business on 22 May 1989. By a deed of assignment dated 22 May 1989 Wall Investment assigned to the Hollingsworths "all its right title and interest in and to the lease on and from 22 May 1989". Big Country was a party to the deed of assignment. It consented to the assignment and took a covenant from the Hollingsworths to be liable for performance of the lessee's obligations under the lease. The Hollingsworths covenanted to indemnify Wall Investment and the Walls against loss by reason of their failure to perform the lessee's obligations. The deed of assignment provided that in all other respects the lease was confirmed. It will be necessary to go to the precise wording of the covenants. 17 In early August 1989 a transfer of the lease from Wall Investment to the Hollingsworths was executed and sent to Big Country's solicitors for the endorsement of Big Country's consent. At this time the lease itself had not been registered, and was still with the Office of State Revenue. 18 Following payment of stamp duty on the lease in September 1989, in October 1989 Big Country's solicitors sent the executed and stamped lease to Esanda "for consent by your company and return to us". In December 1989 the lease was returned by Esanda with the addition of a page containing a form of consent to the lease. So far as the evidence revealed, the consent of FCA to the lease was not sought. The evidence did not disclose why consent was sought from one mortgagee, Esanda under mortgage V747997, but not from the other mortgagee, FCA under mortgage T424525. 19 In January 1990 Big Country's solicitors sent the lease to their law stationers for lodgment for registration. The law stationers were told that the certificate of title would be produced by Esanda, and that must have happened. Why FCA, then the prior mortgagee, did not produce the certificate of title was not explored in the evidence. 20 The lease was lodged for registration at the Land Titles Office as dealing Y837222. After some other requisitions had been made and apparently satisfied, on 27 June 1990 the Land Titles Office issued a requisition in relation to the lease that "mortgages T424525 & V747997 are to be noted as prior encumbrances". Presumably because it was pointed out to the Land Titles Office that mortgage V747997 had been transferred to Esanda and the lease was accompanied by a form of consent from Esanda, again there being no evidence on the matter, nothing was done to note mortgage V747997 as a prior encumbrance. But Big Country's solicitors caused mortgage T424525 to be noted as a prior encumbrance by having "T424525" written into the appropriate space in the lease. So supplemented, the lease was registered on 13 July 1990. 21 On 17 July 1990 Big Country's solicitors sent the transfer of the lease to the Hollingsworths to their law stationers, with Big Country's consent endorsed, with instructions to lodge it for registration. The transfer was lodged for registration, and was registered on 31 July 1990 as dealing Z138646. 22 In April 1992 the Hollingsworths agreed to sell the business to Mr Nicholas Karacominakis. It seems that there was agreement for the sale of the business dated 6 April 1992, but it was not in the appeal papers. 23 Mr Karacominakis took over the business on 24 April 1992. A deed dated 24 April 1992 was executed. The parties to the deed were Big Country as lessor, the Hollingsworths as transferor, and Mr Karacominakis as transferee. The deed did not in terms provide for assignment of the lease. It recited that the Hollingsworths wished to "transfer its [sic] right title and interest in and to the Lease" to Mr Karacominakis "with effect from the date stated in Item 6 of the Reference Schedule ("the Transfer Date")". The date was blank in the Reference Schedule, but it was accepted in the proceedings that the intended date was 24 April 1992. To the extent to which the proceedings involved an agreement to transfer the lease between the Hollingsworths and Mr Karacominakis, the parties proceeded on the basis that the deed evidenced such an agreement. 24 The deed of 24 April 1992 included covenants with Big Country broadly to the effect that the Hollingsworths would remain liable under the lease and Mr Karacominakis would become liable under the lease. The wording of the covenants was taken up in a later sale of the business by Mr Karacominakis, and it will be necessary to consider the precise wording. I will set it out so far as necessary later in these reasons. 25 A transfer of the lease from the Hollingsworths to Mr Karacominakis was executed and the consent of Big Country was endorsed on it. The transfer was lodged for registration, and was registered on 4 May 1992 as dealing E429360. 26 By an agreement for sale dated 6 July 1993 Mr Karacominakis agreed to sell the business to Chadlace Pty Ltd ("Chadlace"). Chadlace was established for the purposes of the sale as the trustee of a family trust of Mr Glenn Johnston and his wife Ms Karen Schmitz (for ease of reference, "the Johnstons"; together with Chadlace, "the Chadlace parties"). The agreement for sale provided that Mr Karacominakis would transfer the lease to Chadlace, that the transfer was subject to the lessor and any mortgagee consenting to the transfer, and that Mr Karacominakis would apply for their consents. 27 Chadlace took over the business on 18 August 1993. A deed dated 13 August 1993 was executed. The parties to the deed were Big Country as lessor, Mr Karacominakis as transferor, Chadlace as transferee, and the Johnstons as guarantor. Like the deed of 24 April 1992, the form and language of which it generally adopted, the deed did not in terms provide for assignment of the lease. It recited Mr Karacominakis' wish to transfer the lease to Chadlace in like language to that in the deed of 24 April 1992, and contained the covenant shortly mentioned to lodge a transfer of the lease for registration. Again the Transfer Date in the Reference Schedule was left blank. In the circumstances later described, Bainton J considered that because the Transfer Date was not stated, the deed of 13 August 1993 had no effect. It was accepted in these appeals that the intended date was 18 August 1993 and that the deed had effect as if that date were stated; so it was accepted that, to the extent to which the proceedings involved an agreement to transfer the lease between Mr Karacominakis and Chadlace, the deed evidenced such an agreement. 28 Again like the deed of 24 April 1992, the deed of 13 August 1993 recorded covenants broadly to the effect that Mr Karacominakis would remain liable under the lease and Chadlace would become liable under the lease, and as well the Johnstons guaranteed Chadlace's obligations; the deed also recorded a covenant by Mr Karacominakis and Chadlace with Big Country "to lodge or cause to be lodged a Transfer of Lease at the Land Titles Office immediately after the Transfer Date". The corresponding clauses of the deed were materially in the same terms as the clauses in the deed of 24 April 1992. Different counterparts of the deed were executed by all of Big Country, Mr Karacominakis, Chadlace and the Johnstons. It follows from the acceptance that the deed had effect as if the date 18 August 1993 were stated in the Reference Schedule that the deed had effect so far as containing these covenants. 29 A transfer of the lease in registrable form was executed by Mr Karacominakis as transferor and by Chadlace's solicitor on behalf of the transferee. However, the transfer was not registered. The evidence did not go into why it was not registered - indeed, it seems that until Bainton J made the point in his reasons the parties gave no thought to whether or not it had been registered. 30 Chadlace was unable to operate the business profitably. By the end of November 1993 it was in arrears with the rent, which had increased over the years pursuant to the escalation clause. On 24 December 1993 Chadlace closed the business down, and on 29 December 1993 it vacated the squash centre and gymnasium. 31 On 7 January 1994 the solicitor for the Chadlace parties wrote to Big Country advising that Chadlace had vacated the premises "due to our client's inability to make the business trade at all profitably". On 13 January 1994 Big Country took possession of the premises. Its solicitors wrote to Chadlace's solicitors saying that Big Country had "exercised its rights of re-entry into and has repossessed the premises, and accordingly the Lease herein has been determined". 32 At the request of Mr Hesky, on 16 January 1994 Mr Chiswick took over the operation of the squash centre and gymnasium. He arranged for Ms Vicki Morley to manage it. A deal of work was done refurbishing the premises. In September 1994 Big Country granted a four year lease of the premises to Nelville Pty Ltd ("Nelville"), a Chiswick company, at a rent much lower than the rent under the lease to Wall Investment. The proceedings below 33 Big Country claimed the unpaid rent as at 13 January 1994 and, alleging acceptance of a repudiation by Chadlace of "the lease", damages calculated as the rent for the balance of the ten year term less the lower rent received under the lease to Nelville. It claimed against Wall Investment "pursuant to the lease" and against the Hollingsworths, Mr Karacominakis and Chadlace "pursuant to the lease, each respective deed of assignment, Section 70A of the Conveyancing Act 1919 and the general law"; it also claimed against the Walls and the Johnstons as guarantors of the obligations of their respective companies. In due course I will come to the complications flowing from the manner in which the allegation of a repudiation and the claims were expressed. 34 The defendants contested their liability to Big Country on a variety of grounds, including by defensive cross-claims brought by the Hollingsworths, Mr Karacominakis and the Chadlace parties against Big Country. In the defensive cross-claims - (a) the Hollingsworths claimed relief from the deed of assignment of 22 May 1989 on unconscionability grounds; (b) Mr Karacominakis claimed relief from the lease and the deed of 24 April 1992 on grounds of estoppel, misleading conduct within the Fair Trading Act 1987 (NSW), injustice within the Contracts Review Act 1980 (NSW), and unconscionability; and (c) the Chadlace parties claimed relief from the deed of 13 August 1993 on grounds of misleading conduct within the Trade Practices Act 1974 (C'th) and the Fair Trading Act. 35 The defendants brought a number of other cross-claims. They may be summarised as follows - (a) the Wall parties claimed indemnity from the Hollingsworths and indemnity or contribution from Mr Karacominakis and Chadlace; (b) the Hollingsworths claimed indemnity or contribution from Mr Karacominakis and Chadlace; (c) Mr Karacominakis claimed indemnity from the Chadlace parties, plus some relatively minor relief to do with fitness equipment said to have been leased by Mr Karacominakis to the Johnstons and used by Chadlace in the business; and (d) the Chadlace parties claimed damages from Big Country and Mr Hesky, and from Mr Karacominakis, alleging that they had purchased the business and given the guarantee in reliance on false representations broadly as to the turnover and profitability of the business. 36 Bainton J upheld Big Country's claims against the defendants other than the Chadlace parties, and judgment was entered against each of them for $517,311. The claims by Big Country against the Chadlace parties were dismissed. The defensive cross-claims were dismissed. The critical difference between the Chadlace parties and the prior occupants of the premises, in his Honour's view, was that there was neither a registered transfer nor an operative equitable assignment of the lease to Chadlace. 37 The claims for indemnity were all dismissed, but his Honour held that the Wall parties, the Hollingsworths and Mr Karacominakis were under co-ordinate liabilities to Big Country so that there should be contribution between them. 38 Mr Karacominakis' claim for relief to do with fitness equipment was effectively dismissed. His Honour said that he was not satisfied as to part of the claim but that the whole claim, if correct, would be cancelled out by a corresponding increase in the damages in the claim by the Chadlace parties against Mr Karacominakis. 39 The false representation claims by the Chadlace parties against Big Country and Mr Hesky were dismissed, but the Chadlace parties succeeded in their false representation claims against Mr Karacominakis and obtained damages. Judgments were entered against Mr Karacominakis for $119,263 in favour of Chadlace and for $65,087 in favour of the Johnstons. The appeal 40 All parties appealed or cross-appealed. In general terms, Big Country sought to overturn the failure of its claims against the Chadlace parties; each of the Wall parties, the Hollingsworths and Mr Karacominakis sought to overturn the success of Big Country's claims against them or the quantification of the claims; the Wall parties indirectly supported Big Country's claim against Chadlace by seeking to extend the contribution between the defendants to include contribution by Chadlace; Mr Karacominakis sought to overturn the success of the Chadlace parties' false representation claims against him or the quantification of the claims; and the Chadlace parties sought to overturn the failure of their false representation claims against Big Country and Mr Hesky. 41 Notices of contention were filed by Big Country and by the Chadlace parties, the effect of which is taken up in the issues the subject of these reasons. 42 As I have said, many matters were raised in the hearing of the appeals. The proceedings before Bainton J were marked by deficiency or obscurity in the summons and defences, the cross-claims and defences, the evidence, and the submissions. The formulation and extent of the grounds of appeal and cross-appeal and the contentions in the appeals brought their own difficulties to establishing and giving effect to the rights and obligations between the parties in relation to the lease, the premises and the business. Rather than attempt a more detailed analysis of the grounds of appeal and cross-appeal and contentions, I consider it preferable to deal with the issues thrown up by the arguments and necessary to establish the rights and obligations of the parties. Big Country's claims against the defendants 43 In brief, the issues on these claims went to (a) whether the lease for a term was effective; (b) whether the Walls' guarantee was effective; (c) whether the defendants were liable in damages for repudiation of the lease; (d) whether the Hollingsworths, Mr Karacominakis and Chadlace were otherwise liable for the rent or damages under the various deeds; (e) whether the provisions of the deeds of 24 April 1992 and 13 August 1993 meant that the Hollingsworths and Mr Karacominakis were not liable for the rent or damages in the absence of a demand; (f) whether principles of contribution between sureties operated to discharge any liability; and (g) whether there had been a failure by Big Country to mitigate its loss. 44 An element of the arguments was the effect on the lease, as a lease and so far as the document included the Walls' guarantee, of the writing in of mortgage T424525 as a prior encumbrance and the addition of the page containing Esanda's consent, and of the registration of the document in that form. As will appear, in my view attention should be concentrated on the lease as registered for the rights and obligations of the parties. (a) The status of the lease - excluding the Walls' guarantee 45 All of the defendants, possibly with the exception of Mr Karacominakis, submitted that Big Country could not claim either rent under the lease or damages for its repudiation because the lease had been avoided pursuant to the so-called rule in Pigot's case (1614) 11 Coke 26b; 77 ER 1177. They relied on alteration of the lease after its execution by Big Country through its solicitors, by having mortgage T424525 written into the space in the lease as a prior encumbrance, and by adding to the lease the page containing the consent of Esanda. If the lease had been avoided, it was said, then as at the end of 1993 the premises were occupied by Chadlace under a tenancy at will determinable on one month's notice pursuant to s 127 of the Conveyancing Act 1919 (NSW), and Big Country was not entitled either to rent under the lease or to damages for its repudiation. 46 Big Country accepted that, if there were no more than the tenancy at will, its claims to the outstanding rent under the lease and to damages for its repudiation would fail. It would follow that the claims against the Walls and the Johnstons as guarantors would fail for want of a primary indebtedness or obligation. Big Country did not fall back on a claim to recover from Chadlace any rent unpaid under the tenancy at will. But it denied that the rule in Pigot's case had been brought into operation, and said that, in any event, the immediate indefeasibility gained by the lease upon registration relevantly cured any invalidity. 47 Sufficiently for present purposes, by the rule in Pigot's case where a deed or other written contract is, after execution, materially altered by the obligor without the consent of the obligee, it becomes void. To greater or lesser extents there are debates over aspects of the rule, including whether or when the rule also operates in the event of alteration by a stranger, whether the alteration must have been made with a fraudulent intention, and whether the deed or other written contract is voidable rather than void. The rule had its origin in considerations now largely inapplicable, its operation is to be confined to cases which fall strictly within its ambit, and it is to be interpreted as liberally and reasonably as possible: see Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1978) 17 SASR 259; Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238; Farrow Mortgage Services Pty Ltd (in liq) v Slade (1996) 38 NSWLR 636. 48 I will assume that the lease became void by the operation of the rule in Pigot's case, excluding for the present any effect on the guarantee, because in my view on registration any invalidity was cured sufficiently to entitle Big Country to enforce the payment of rent under the lease and to recover damages following repudiation measured by the lost rent. 49 Remarkably, Big Country had not relied on indefeasibility before Bainton J. His Honour had briefly referred to it, saying that "It is possible to subserve the Real Property Act provisions to the Pigot case principle, but all learning as to the effects of that Act is to the contrary". Big Country did not initially rely on indefeasibility in the appeals. It was given leave to rely on it, without opposition from the defendants. 50 By s 41 of the Real Property Act the lease was not effectual to pass any interest in the premises until registered, but on registration the leasehold interest passed "in manner and subject to the covenants, conditions and contingencies set forth and specified in such dealing, or by this Act declared to be implied in instruments of a like nature". Section 42 of the Real Property Act provides so far as relevant that the registered proprietor for the time being of an estate or interest in land recorded in a folio of the register shall - " … except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded … ". 51 The effect of these provisions is that upon registration of the lease, fraud not being suggested, Wall Investment had an indefeasible title to the leasehold estate. The registration of the lease conferred title, and did not merely record a title acquired under the lease (Frazer v Walker (1967) 1 AC 569 at 584; see also Breskvar v Wall (1971) 126 CLR 376; Bahr v Nicholay (No 2) (1988) 164 CLR 604). Registration of a void instrument may be effective to confer title, as in registration of a forged instrument (Frazer v Walker; Mayer v Coe (1968) 88 WN (Pt 1)(NSW) 549; Ratcliffe v Watters (1969) 89 WN (Pt 1)(NSW) 497; Schultz v Corwill Properties Limited (1969) 90 WN (Pt 1)(NSW) 529; Grundy v Ley (1984) 2 NSWLR 467; Garofano v Reliance Finance Corporation Ltd (1992) NSW Conv R 55-640; Grgic v Australian and New Zealand Banking Group Limited (1994) 33 NSWLR 202), registration of an instrument void because of statutory prohibition or failure to meet statutory requirements (Boyd v Mayor of Wellington (1924) NZLR 1174; Breskvar v Wall; Sutherland Shire Council v Moir (1982) 49 LGRA 114), and registration of an instrument avoided by the operation of the rule against perpetuities (Consolidated Development Pty Ltd v Holt (1986) 6 NSWLR 607). There is no reason why registration should not cure invalidity from the operation of the rule in Pigot's case, and in Morton v Black (1986) 4 BPR 97250 it was held that it does. (Indeed, it was held that in any event the rule has no operation in respect of a registered document; no-one argued this point, and it is not necessary to consider it.) 52 Registration does not cure a defective transaction if the instrument itself is ineffective, for example because purporting to create an interest not known to the law (re Ridgeway and Smith's Contract (1930) VLR 111) or purporting to grant a lease but void for uncertainty of the term (re Lehrer and the Real Property Act (1961) 61 SR(NSW) 353). It was suggested in the appeals that, because the operation of the rule in Pigot's case would avoid the lease, there would be nothing to be made indefeasible. That flies in the face of the established effect of s 42, the point of the cases last mentioned being that the instrument was inherently incapable of having effect even by virtue of s 42. The lease was not an instrument of that kind. 53 The further question is whether and to what extent, as well as conferring title to the leasehold estate, registration gave validity to the contractual rights and obligations under the lease, and in particular whether (on the same assumption that the lease became void by the operation of the rule in Pigot's case) it entitled Big Country to enforce payment of rent by the lessee. 54 I considered a related question in PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643, namely, whether registration of a void mortgage entitled the mortgagee to enforce the personal covenant in the mortgage to pay the money it secured. It is convenient to repeat part of what I there said (at 677-9), as a way of referring to earlier authority - "In Travinto Nominees Pty Ltd v Vlattas [1972] 1 NSWLR 24, a lease had been registered containing an option to renew which was void for non-compliance with statutory requirements. It was held that registration of the lease did not make the option enforceable. Asprey JA (with whom Holmes JA agreed) observed (at 41) that the indefeasible title by registration was conferred on an estate or interest in land, that contractual rights and obligations were not affected, and that the registration of the lease did not confer on the lessee an indefeasible right to obtain the grant of a further lease pursuant to the option. Mason JA dealt with the matter more widely, saying (at 48): 'But a problem of a special kind arises when it is sought to apply the principle of indefeasibility to a registered lease which contains covenants, including an option to renew. Are the ordinary covenants in the lease enforceable by the parties, notwithstanding that the instrument, apart from the effect given to it by registration, is expressed to be void and illegal by statute? Is the option to renew enforceable? The leasehold estate vested in the lessee on registration of a memorandum of lease is held upon and subject to the covenants contained in the memorandum. I am prepared to assume that the indefeasibility of title which arises in virtue of registration is not something which exists in the abstract, independently of the provisions of the lease, but that it relates to the terms and conditions upon which the estate is held, certainly so far as they have a direct application to the term vested in the lessee by registration. Thus it may be that a consequence of registration is that within the limits which I have mentioned the covenants in the lease are enforceable between the parties. If so, in an action brought on those covenants the defendant could not successfully plead the invalidity of the lease as a defence because to do so would be to deny the effect of registration.' His Honour characterised the option to renew as an incident of the estate vested in the lessee, notwithstanding that its exercise created a fresh term. After pointing out that the relevant statutory provisions made the option as well as the lease illegal and void, and concluding that the option to renew would not be capable of specific performance because the court would not lend its assistance to the enforcement of an illegal agreement, his Honour continued (at 49-50): 'To hold that the option to renew is an illegal agreement incapable of specific performance is not in my opinion a finding which is inconsistent with the indefeasible title which arises from registration. As I have already remarked, registration of a void lease will vest the leasehold estate in the lessee; as well it may enable enforcement of the covenants referable to the term thereby vested. Even if registration can have a like effect in relation to a covenant creating an option to renew such a lease, it cannot do so when that covenant is made void and illegal by statute. There is no reason why the indefeasiblity which arises from registration should extend to a future and distinct estate which has not been registered and which can arise, if at all, from the exercise of an option under a covenant which is itself made void and illegal by statute. In such a case there is no estate unless the exercise of the option given by the covenant is capable of specific performance; because it is void and illegal it is incapable of specific performance. Whatever may be the effect of registration on the lease for its terms of five years and the covenants referable to that term, it does not confer an indefeasible title to an option for renewal of the lease.' The case went on appeal ((1973) 129 CLR 1), where it was again held that registration of the lease had not given the lessee an indefeasible right to renew. Two different paths were taken to that conclusion. Barwick CJ, with whom McTiernan J and Stephen J agreed on this point, considered the critical circumstance to be that the relevant statutory provisions made the option illegal and thus unenforceable by specific performance. His Honour found it unnecessary to decide whether an equitable interest arising on the grant of an option, which when exercised was capable of specific performance, formed part of the interest in the land which the registration of the lease protected, but some of his Honour's observations bore upon the extent of the indefeasibility obtained on registration. His Honour said (at 17): ' ... Though as a term 'indefeasibility' is convenient enough, it must always be remembered that it is the title to and possession of the land or of the interest in the land of which there is a registered proprietor which is rendered secure by the registration. In the case of a leasehold it may be and frequently is the case that the extent of the leasehold interest is not merely described by reference to a term of years but must of necessity be determined by reference to the operation and effect of those terms and conditions of the lease which affect or qualify the interest in the land which the lease purports to create. It may be noted that the Real Property Act recognizes that there may be terms and conditions in the memorandum of lease, see the Real Property Act, s53(3). These considerations seem to me to result in the conclusion that registration of the memorandum of lease does not ensure the validity of every term and condition of the lease or indeed of the enforceability of every covenant it contains. In my opinion, it must depend on the nature of the covenant and its relation to the limitation of the interest created in the land by the memorandum of lease itself. For example, a collateral covenant tying the lessee to the lessor in respect of some matter of trade does not obtain any validity or consequence simply because the memorandum of lease is registered. The validity or enforceability of such a covenant will remain a question under the general law. The same, in my opinion, is true of the option to renew the lease. It does not mark out the extent of the term created by the lease. It is an agreement to grant a new lease contingently on the exercise of the option and the observance during its term of the covenants of the lease. Whether such an agreement creates an immediate though defeasible equitable interest must ultimately depend on the specific enforceability of that agreement.' Gibbs J, with whom Menzies J agreed on this point, gave effect to the invalidating statutory provisions as later provisions prevailing over those of the Real Property Act 1900, and did not deal with the extent of indefeasibility obtained on registration. The general position thus indicated is, I think, as follows. That which is attained by registration is, in the words of s 42, an estate or interest in the land. Registration does not validate all the terms and conditions of the instrument which is registered. It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor." 55 In PT Ltd v Maradona Pty Ltd I held (at 679-80), referring to s 52(1) of the Real Property Act by which the right to sue upon the mortgage passed on registration of a transfer and to Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423, that the mortgagee's cause of action to recover the debt due from a mortgagor would be included in the rights rendered secure by registration, being necessary to assure to the mortgagee his interest in the land since without the debt his security would be nugatory. In Consolidated Trust Co Ltd v Naylor Dixon and Evatt JJ had said that, in prescribing how mortgages might be transferred and with what consequences, the Real Property Act - " … is concerned with the mortgage transaction in its entirety as it affects the land, and, therefore, extends to the personal liability of the mortgagor for the mortgage debt because that liability is intimately connected with the rights of property arising out of the mortgage transaction." 56 Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 considered the effect of registration on a right of renewal in a lease, free from the illegality which was critical to the result in Travinto Nominees Pty Ltd v Vlattas. Barwick CJ said (at 338-9) that the right of renewal was "part of the delineation of the lessee's total interest in the land" and that, because it was specifically enforceable, it created "an interest in the land commensurate with the extent of the covenant"; the right of renewal obtained indefeasibility on registration of the lease. Gibbs J said (at 345) that the right of renewal was "so intimately connected with the term granted to the lease, which it qualifies and defines that it should be regarded as part of the estate or interest which the lessee obtains under the lease", and although his Honour specifically addressed priority rather than indefeasibility his reasoning would lead to the same conclusion. Stephen J (at 351-2) regarded a right of renewal as "intimately concerned with the existing relationship between lessor and lessee" and as "in a sense, definitive of the term of a lease", as "an incident of the lease creating an interest in the land and forming part of a lessee's interest in the land", and as such entitled to the protection afforded by registration. 57 In Duncan v McDonald (1997) 3 NZLR 669, a decision of a five member bench of the Court of Appeal in New Zealand, it was held that registration of a void mortgage validated it to the extent of the charge in favour of the mortgagee but no further, so that the mortgagee could exercise a power of sale over the land but could not recover any deficiency from the mortgagors. In delivering the judgment of the Court, Blanchard J said (at 682-3) - "What registration of an otherwise void mortgage gives the innocent mortgagee in these circumstances is the right of recourse to the security for such value as the land may have. The charged property is rendered liable for the debt by the registration. The covenants to pay and supporting covenants given by the registered proprietor then become operative to such extent only as is necessary to enable realisation of the security and recovery of the advance or part thereof by that means." 58 This recognised validation of the personal covenant to pay the mortgage debt up to a point, as a necessary underpinning to recovery from the security. Of more importance for present purposes, his Honour had emphasised the particular nature of covenants in a mortgage, and had distinguished them from covenants in a lease, saying (at 682) - "In the case of registration of an otherwise void transfer, ordinarily the instrument will be effective in its entirety. Its function is no more than the conveyance of title, perhaps with the benefit or burden of covenants affecting the land (for example, creating or preserving an easement of right of way); such covenants add to or subtract from the ordinary incidents of the unencumbered title. Likewise, the covenants in a memorandum of lease setting forth the conditions upon which the leasehold interest is held are intimately related to the title under the Act created by its registration. The position of covenants in a mortgage or charge is different because the property interest serves a more limited and collateral purpose. The primary transaction is the incurring of an obligation by A to B. That does not involve any dealing with property. Collaterally A provides security over property to B subject to a right of redemption. If the security takes the form of a memorandum of mortgage over land and is registered it operates as a legal charge on the estate or interest of the mortgagor. It is intended to give the mortgagee an interest in the land for, and only for, a particular purpose - in order that in the event of default, the mortgagee may have recourse to the land to satisfy the obligation secured by the mortgage. It is therefore only the right of recourse for the principal, interest and expenses in the event of default which is integral to the mortgage. See Whenuapai Joinery (1988) Ltd v Trust Bank Central Ltd (1994) 1 NZLR 406 at p 411. A registered mortgage consists of a covenant to pay and other supporting covenants by the mortgagor and a charge to secure their performance. Where, apart from registration, the mortgage would have been a nullity, registration protects the charge. In that situation the covenants are effective and enforceable to enable the charge to operate and moneys owing to be recovered by that means, but the covenants are not enforceable against the mortgagor separately from the right of recourse by means of a proceeding for the recovery of debt." 59 Duncan v McDonald differs from PT Ltd v Maradona Pty Ltd in the extent of the operation given to the mortgagor's personal covenant. The Wall parties submitted that the operation given to a lessee's covenant to pay rent would be akin to that given to the mortgagor's personal covenant in Duncan v McDonald, so that the lessor could re-enter on failure to pay rent but could not sue to recover unpaid rent. Whatever be the position as to a mortgagor's personal covenant, in my opinion registration would give wider operation to a lessee's covenant to pay rent, entitling the lessor to enforce the covenant. Payment of the agreed rent is an essential part of the transaction between the lessor and the lessee. The lessor gives the lessee an estate or interest in land in return for the lessee giving the lessor rent, rent being "a sum issuing out of the land demised payable by the lessee to the lessor for the right to occupy that land and all that went with it": Junghenn v Wood (1958) SR (NSW) 327 at 330 per Owen J. The covenant to pay rent, to adopt the words of Blanchard J in Duncan v McDonald, is a condition upon which the leasehold interest is held and intimately related to the lessee's title created upon registration; taking up concepts found in Travinto Nominees Pty Ltd v Vlattas and in Mercantile Credits Ltd v Shell Co of Australia Ltd, because of its connection with the continuance of the lessee's interest in the land, it delimits or defines that interest. 60 Hence, in my view, if the lease became void by the operation of the rule in Pigot's case, on its registration the lessee's covenant to pay rent became effective and Big Country was entitled to enforce payment of rent under the lease. 61 The Wall parties submitted that, even if the covenant to pay rent became effective, the common law entitlement to damages for repudiation of the lease if rent were not paid was in a different position, because the obligation to pay damages was not necessary to assure the continuance of the lessee's title or otherwise intimately related to the lessee's title. Indeed, it was said, the obligation was the antithesis of something necessary to assure the continuance of the lessee's title, because it arose only upon termination of the lease. So, it was said, Big Country's entitlement to damages would be lost if the lease were avoided by the operation of the rule in Pigot's case, and would not become effective on registration of the lease. 62 The reasoning is astray. If the lease were avoided by the operation of the rule in Pigot's case, that would not avoid an entitlement to damages. There would be no obligations to repudiate, no repudiation, and so no damages for repudiation, but the reason why there would be no damages for repudiation would be avoidance of a primary obligation, not avoidance of a common law entitlement to damages. Equally, if the covenant to pay rent becomes effective on registration of the lease, and failure to pay rent is a repudiation in consequence of which damages are payable, the damages may be recovered. The common law so far as it attributes consequences to a breach of contract is outside the areas of avoidance by the operation of the rule in Pigot's case and validation by the provisions of the Real Property Act. 63 At the time the lease was registered, 13 July 1990, Wall Investment was no longer in occupation of the squash centre and gymnasium. By the deed of assignment of 22 May 1989 it had assigned to the Hollingsworths "all its right title and interest in and to the lease on and from 22 May 1989", and the Hollingsworths had entered into occupation. But at the time Wall Investment was a tenant at law, having entered and paid rent, and it was also a tenant in equity on the terms of the unregistered lease. Although no doubt oblivious of any operation of the rule in Pigot's case, it must have intended that the lease be registered. If the lease had not become void by the operation of the rule in Pigot's case Wall Investment was liable as periodical tenant or tenant at will to pay rent and, from registration of the lease, liable under its covenant to pay rent, and if the lease had become void by the operation of the rule in Pigot's case there was liability to pay rent under the lease upon and from its registration. Wall Investment had both the benefit and the burden of the indefeasibility conferred by the provisions of the Real Property Act. 64 The Wall parties did not dispute that, as the original lessee, after its registration Wall Investment remained liable to pay the rent under the lease notwithstanding the transfer to the Hollingsworths. That was undoubtedly so by privity of contract if the rule in Pigot's case did not operate, and it was not suggested that the validity given by registration to an otherwise ineffective covenant to pay rent created any lesser liability. The deed of assignment of 22 May 1989 did not relieve Wall Investment from their responsibilities in relation to payment of rent. Accordingly, Big Country was entitled to enforce payment of rent under the lease as against Wall Investment. 65 The Hollingsworths took a transfer of the registered lease. The transfer was registered. Whether or not the lease had become void by the operation of the rule in Pigot's case, upon its registration Wall Investment had an estate or interest in the premises which it transferred to the Hollingsworths. By force of s 51 of the Real Property Act, at least until transfer away (see later in these reasons) the Hollingsworths became subject to and liable for the same requirements and liabilities to which Wall Investment had been subject and liable, including the requirement and liability to pay rent. Putting aside for the present their direct covenant with Big Country in the deed of assignment of 22 May 1989, both the benefit and the burden of the indefeasibility extended to them, so that any pre-registration avoidance of the lease by the operation of the rule in Pigot's case was overcome in relation to their interest in the land and their obligation to pay rent. Accordingly, at least until transfer away Big Country was entitled to enforce payment of rent under the lease as against the Hollingsworths. 66 Mr Karacominakis also took a transfer of the registered lease, and the transfer was registered. As with the Hollingsworths, and again putting aside for the present his direct covenant with Big Country in the deed of 24 April 1992, by force of s 51 of the Real Property Act he became liable to Big Country to pay rent, at least until transfer away. Accordingly, at least until transfer away Big Country was entitled to enforce payment of rent under the lease as against Mr Karacominakis. 67 Chadlace did not take a transfer of the lease, although the deed of 13 August 1993 evidenced an agreement to transfer the lease between Mr Karacominakis and Chadlace. Under the deed of 13 August 1993 Chadlace covenanted with Big Country to the effect that it would become liable under the lease, but it was not liable to pay rent to Big Country by force of s 51 of the Real Property Act: it was liable by force of that covenant. Even if the lease was void at an earlier time by the operation of the rule in Pigot's case, as at July 1993 and thereafter there was in effect a lease, with a covenant by the lessee to pay rent, which could be the subject of Chadlace's covenant. But its liability arose not from the covenant to pay rent in the lease, but from the covenant in the deed of 13 August 1993, and Big Country was not entitled to enforce payment of rent under the lease as against Chadlace. 68 On the assumption, contrary to his holding, that the lease was avoided by the operation of the rule in Pigot's case, Bainton J considered whether principles of unjust enrichment could assist Big Country. Founding himself on Goss v Chilcott (1996) AC 788, he thought that if by reason of Pigot's case Wall Investment's contractual liability to pay rent ceased, with Wall Investment nonetheless having a legal interest in the premises consequent on registration of the lease, it would be unjustly enriched. There may be a number of difficulties in this, and more difficulties in its consequences for the liability of the Hollingsworths and Mr Karacominakis. I prefer to express no view on unjust enrichment. 69 I do not think that the status of the lease is materially advanced, for the purposes of Big Country's claims, by its alternative argument that the Hollingsworths, Mr Karacominakis and Chadlace (and presumably also the Johnstons) were estopped by the recitals in the deeds to which they were parties from asserting the invalidity of the lease. The deed of assignment of 22 May 1989 incompletely recited that Big Country, by a lease the date of which was not completed, had leased the premises to Wall Investment. The deeds of 24 April 1992 and 13 August 1993 incorrectly recited that Big Country, by a lease registered as dealing Y837222, had leased the premises to the Hollingsworths and to Mr Karacominakis respectively. Whether the recitals gave rise to an estoppel in favour of Big Country, and what estoppel, need not be decided. (b) The status of the Walls' guarantee 70 The Walls submitted that the alteration of the lease earlier described avoided it by the operation of the rule in Pigot's case in relation to the guarantee in the lease, as well as in relation to the lease itself. They submitted in the alternative that either on the alteration of the lease or on the registration of the altered lease they were discharged from their obligations as guarantor. For the first limb of the alternative submission they said that avoidance of the lease by the operation of the rule in Pigot's case left the guarantee without a subject-matter. For the second limb of the alternative submission they said that, whether or not the lease had been avoided but validated by registration, on its registration the guarantee was without a subject-matter because the registered lease was not the lease they had guaranteed. 71 When considering the status of the lease excluding the Walls' guarantee I assumed that the lease became void by the operation of the rule in Pigot's case. I do not think it necessary when considering the status of the Walls' guarantee to go into the operation of the rule in Pigot's case in relation to the lease or the guarantee in the lease. As I have said, attention should be concentrated on the lease as registered for the rights and obligations of the parties, and that exposes the second limb of the Walls' alternative submission. 72 It is necessary for that submission, however, to determine whether the registered lease was relevantly altered in comparison with the lease as executed, which Big Country denied. Alteration was part of the argument over the operation in this case of the rule in Pigot's case, but has independent significance to the status of the Walls' guarantee. 73 I first address alteration by having mortgage T424525 written into the space in the lease as a prior encumbrance. 74 By s 53(4) of the Real Property Act, a lease of land which is subject to a mortgage is not valid or binding on the mortgagee unless the mortgagee has consented to the lease before it is registered. It may be otherwise if the lease is granted pursuant to the power in s 106(1) of the Conveyancing Act, but that provision authorises only a lease for less than five years; in any event, mortgages T424525 and V747997 provided that Big Country could not exercise the power without the previous written consent of FCA or Esanda. It may also be otherwise if the lease is granted pursuant to a power in the mortgage, but it was not suggested that mortgages T424525 and V747997 included an appropriate power. In the absence of consent from FCA and Esanda, Wall Investment would have had a flawed entitlement to possession of the squash centre and gymnasium, being liable to be dispossessed by the mortgagees in the event of default by Big Country under the mortgages: Iron Trades Employers Insurance Association Ltd v Union Land and House Investors Ltd (1937) Ch 313; Parkinson v Braham (1962) SR (NSW) 663. 75 When Big Country's solicitors sent the lease to Wall Investment's solicitors, Big Country offered to lease the squash centre and gymnasium to Wall Investment on the terms of the lease document. When the executed lease was returned to Big Country's solicitors, the offer was accepted. As between Big Country and Wall Investment the lease was to be either with the consent of the mortgagees or without their consent. Which was it? 76 Looking only at the lease, Big Country offered to give to Wall Investment an estate or interest in the premises, and an entitlement to possession, unqualified by the existence of a prior encumbrance. It did not offer to give Wall Investment an estate or interest which was flawed because ineffective as against a mortgagee. The fact that there was no entry of a mortgage in the space for prior encumbrances indicated that the lease was not, as between Big Country and Wall Investment, to be subject to the rights or interest of any mortgagee. Thus as between Big Country and Wall Investment the lease was to be with the consent of any mortgagee, because only in that way would Big Country give Wall Investment an estate or interest effective as against the mortgagee. 77 Big Country submitted that an estate or interest effective as against any mortgagee was not to be taken as a starting-point, because the covenant for quiet enjoyment under a lease does not protect the lessee's term against a person claiming by title paramount and there is no implied covenant for title in a lease. It cited in particular Daniker v Fitzgerald (1919) 19 SR (NSW) 260. This led to submissions on whether Daniker v Fitzgerald was confined to a parol lease and whether it was nonetheless open to an intending lessee to require that the lessor show good title (referring inter alia to Halsbury's Laws of England, 4th ed, vol 27 para 68 and cases there cited, in particular Stranks v St John (1867) LR 2 CP 376). In my opinion, the submission and its sequelae were misdirected. The question is not what was to be implied in the lease once granted, or what the lessee was entitled to require in an investigation of the lessor's title. It is what Big Country offered to the Wall parties, and the Wall parties accepted, specifically whether from the lease document the lease was not, as between them, to be subject to the rights or interest of any mortgagee. 78 Apart from looking at the lease itself, what was agreed between Big Country and Wall Investment? This was not the subject of direct evidence. In my view, however, the proper conclusion is that the lease was to be with the consent of the mortgagees, and that the consent was to be obtained by Big Country. 79 When Big Country's solicitors sent the lease to Wall Investment's solicitors by the letter of 12 February 1988, they also sent a memorandum of costs and disbursements. It included $120 for "Mortgagee solicitors fees (estimated)". This could have been only a production fee, but other evidence shows that $120 was paid to Esanda's solicitors as their costs in relation to obtaining consent: it must have been more than a production fee, and those familiar with scales of costs would have understood it as the costs in relation to obtaining consent. By a letter dated 29 August 1989 Big Country's solicitors told the Hollingsworths' solicitors that the transfer of lease could not be registered until the lease had been stamped "and the mortgagee's consent obtained thereto". Big Country did obtain Esanda's consent to the lease, although for unexplained reasons not that of FCA. Albeit scanty, this sufficiently founds an inference that Big Country and the Wall parties had agreed that the consent of the mortgagees (which as has been seen were related, so one fee should have covered both) would be obtained by Big Country. This is consistent with, and explains, the absence of a reference to the mortgages as prior encumbrances. It may be accepted that, from the reference to "Mortgagee solicitors fees" if not otherwise, the Wall parties knew of the existence of the mortgages, at least through their solicitors. But that prompts the enquiry; it does not answer it, and does not go against the inference. 80 Contrary to Big Country's submision, nor does regard to the agreement for lease of the tavern or the lease of the tavern go against this inference. The lease of the tavern was also registered in July 1990. As registered, it noted both mortgage T424525 and mortgage V747997 as prior encumbrances. There was no evidence of when the mortgages were written in - for all that appeared, they also were added to the lease of the tavern in June 1990. Curiously, mortgage V747997 was noted although the lease of the tavern was accompanied by a form of consent from Esanda in the same terms as the form of consent to the lease of the squash centre and gymnasium. The agreement for lease of the tavern both authorised the lessor's solicitors to complete the lease by inserting "details of any prior encumbrances applicable to the land as at the commencement of the Lease" (cl 4(b)(vi)) and provided that the lessor would "at its own cost and expense obtain any mortgagee's consent to this Agreement on reasonable terms" (cl 8). None of this was explored in the evidence. On balance, the lease of the tavern seems to have been intended to be with the mortgagees' consent, although there was inconsistency at the time. 81 Mr Neville Moses, who gave expert evidence as to conveyancing practice, said that the consent of the mortgagee was "something which the lessee's solicitor would always be requiring", and that it would be usual for the lessor's solicitor to make known any conditions of the consent affecting the position of the lessee. Inherent in this is that, unless otherwise agreed, a lease will be understood to be with the consent of the mortgagee, obtained by the lessor. The expert evidence of Mr Peter Cornelius reflected the same practice. 82 This must, indeed, have been the understanding of Mr Robert Ebner of Big Country's solicitors, who prepared the lease. He said, speaking of the lease to Wall Investment - "It was my practice at the relevant time to obtain the consent of the mortgagee of my client to the lease after receiving the lease executed by the lessees from the lessee's solicitors. Once consent was obtained from the mortgagee it was attached to the lease prior to lodging the lease for registration at the Land Titles Office." Given this evidence, which explains the statement in the letter of 29 August 1989 that the lease could not be registered until the mortgagee's consent had been obtained, the conclusion earlier reached is confirmed. 83 The question then is whether writing mortgage T424525 into the space in the lease as a prior encumbrance was an alteration to the lease. Big Country submitted that it was not, saying that the lease was always subject to mortgage T424525. I do not think that is correct. The land in Certificate of Title volume 12079 folio 147 was always subject to mortgage T424525. But the lease was not, because it was to be with the consent of the mortgagees. The note of prior encumbrances was not just a record of the encumbrances on the land. The form of lease provided that the lessor "leases to the Lessee … the premises above described, subject to the following PRIOR ENCUMBRANCES … ". What was expressed to be subject to prior encumbrances was the lease, not the land. As between Big Country and the Wall parties, putting mortgage T424525 in the space in the lease as a prior encumbrance instead of having FCA's consent to the lease converted it from a lease valid and binding as against FCA to a lease entirely subject to FCA's rights as mortgagee. 84 Conveyancing practice reflected the significance of noting a mortgage as a prior encumbrance. Mr Moses gave evidence that, in order that a lease of mortgaged land be registered, either the mortgage had to be noted as a prior encumbrance or the lease had to be accompanied by the mortgagee's consent. The edition of Baalman and Wells, Land Titles Office Practice, current at the time was to the same effect, see para 290: "Where a lease is accompanied by the consent of a mortgagee or chargee the mortgage or charge need not be noted in the memorandum of prior encumbrances in the lease". (This has been deleted in the edition current at the time of these reasons.) Consent of the mortgagee made it unnecessary to note the mortgage as a prior encumbrance, because it effectively meant that the lease was not subject to the mortgage and that the lease was not entirely subject to the rights of the mortgagee. 85 In Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 the transferee inserted in a transfer of land notification of a mortgage as a prior encumbrance, contrary to the transferor's wish to transfer the land free of the mortgage. Dixon J, with whom Rich J agreed, thought that this was a material alteration, in part because the transfer would be of an encumbered and not an unencumbered estate (see at 605-6). Latham CJ thought otherwise (see at 591-2). The difference between their Honours, apparent from what each said about Barker v Weld (1884) 3 NZLR 104, was in the regard given to the transferor's wish. Latham CJ seems to have looked only at the transfer, taking the view that it was necessarily subject to the mortgage and that inserting the notification of the mortgage simply stated the fact. Dixon J paid regard to the transferor's wish, saying that both parties to the transfer intended that its registration should follow the discharge of the mortgages. Inserting the notification of the mortgage did more than state an existing fact, and went contrary to the intention of the parties. 86 In the circumstances of the present case, the reasoning of Dixon J is applicable. The comparison is between the lease agreed between Big Country and the Wall parties, on the one hand, and the lease as registered, on the other hand. 87 Keysen v Gregg (1932) 32 SR (NSW) 288 preceded Brunker v Perpetual Trustee Co Ltd, although it was not referred to in that case. The lessor inserted a number of things in blank spaces in a lease and added a note of two prior encumbrances. One of the encumbrances was a mortgage. Davidson J, with whom James J agreed, held that the insertion of the mortgage was a material alteration, saying (at 293) - "There being no evidence to show that anything was ever said about a mortgage, if reference to it had been included before the execution of the document the appellants would have been in the position of having to require the consent of the mortgagee before securing any title to their lease. On the face of the document which they executed there is no such qualification and if any authority may be implied from the leaving of blanks in a document, in my opinion it could not extend to the addition of matters which would evidence something destroying the title purported to be created by the document. From a business point of view it may well have been the case that if the reference to the mortgage had been included in the first instance the document would not have been executed at all until the respondent procured the consent of the mortgagee to the lease. Moreover in the memorandum of lease put in evidence which was registered after the alteration, there appears the notice 'subject to the consent of the mortgagee,' which is a qualification on the title and on what is evidenced by the document as executed." 88 Halse Rogers J dissented, but on the ground that the lessee had not proved that the mortgagee's consent had not been obtained, and so had not proved that what was done was an alteration of the bargain as distinct from a more complete record of the bargain. His Honour must have regarded the bargain as being a lease subject to the mortgage unless otherwise established. That is not this case. 89 Big Country submitted that, because he said there was no evidence to show that anything was ever said about a mortgage, Davidson J must have considered that knowledge of a mortgage would have meant that the lease was subject to the mortgage. I do not think that is so. What his Honour saw as requiring the lessees to obtain the consent of the mortgagee, that is, themselves to overcome the subjection of their lease to the mortgage, was inclusion of the mortgage as an encumbrance. Knowledge of a mortgage does not indicate whether the lessor is to grant a lease with the mortgagee's consent or whether, as between the lessor and the lessee, the lessee must take a lease subject to the mortgage and be exposed accordingly. 90 Keysen v Gregg was referred to in Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd, in which Bray CJ said (at 278) that the decision in the earlier case turned on "the addition of a reference to a mortgage which affected the title of the plaintiff". In Warburton v National Westminster Finance Australia Ltd Hope JA, with whom Samuels and McHugh JJA concurred, agreed with Bray CJ's explanation of the decision in Keysen v Gregg. In neither case was this basis for the decision doubted. 91 In the present case the alteration to the lease was without the consent of Wall Investment or the Walls. Neither the Wall parties nor their solicitor was shown to have known of what Big Country's solicitor did, and if, as between Big Country and the Wall parties, the lease was to be with the consent of the mortgagees, agreement to having mortgage T424525 written into the space in the lease as a prior encumbrance can not be implied. This was not a case like Warburton v National Westminister Finance Australia Ltd, where the completion of blanks in the instrument was in conformity with, and intended to give effect to, a common contractual intention. No doubt there was a common contractual intention that the lease be registered, but that says nothing about whether it was to be registered accompanied by the mortgagees' consents or whether it was to be registered with the mortgages noted as prior encumbrances. If the former was the intention, authority can not be implied to complete the lease by writing in something inconsistent with the intention. 92 It is not necessary to address alteration by adding to the lease the page containing the consent of Esanda. What occurred should, however, be noted in more detail. 93 The form of consent provided by Esanda gave consent without prejudice to Esanda's rights, powers and remedies - " … which shall remain in full force and effect as if this consent had not been given, except that so long as the covenants conditions and provisions of the said Lease and of these presents are duly observed and performed the Mortgagee will in the event of the exercise of the power of sale or other power or remedy of the Mortgagee on default under the said Mortgage exercise the same subject to the then subsisting rights of the Lessee under the said lease." 94 The form of consent also purported to express agreement by the lessee to obtain Esanda's consent or approval, as well as that of the lessor, when the lessor's consent was required under the lease, and agreement by the lessee that if Esanda gave notice of entry into receipt of the rents and profits of the premises the covenants and agreements in the lease would be "deemed to have been entered into by the Lessee with the Mortgagee" and the lessee would pay the rent to Esanda. Neither Wall Investment nor, if relevant, the Hollingsworths knew of, let alone assented to, either agreement. 95 It seemed to be accepted in submissions that authority to attach to the lease a document satisfactorily evidencing Esanda's consent could be implied. However, the defendants said that the form of consent provided by Esanda was conditional, and that the reservation of Esanda's rights, powers and remedies took away with one hand what had been given by the other; further, that the form of consent purported to impose additional obligations on the lessee. This, it was said, materially altered the lease to the detriment of the lessee. 96 The form of consent may be thought unsatisfactory: whether it brought alteration of the lease, for the purposes of the rule in Pigot's case or otherwise, may be left for another occasion. 97 In what follows I assume that the guarantee in the lease was not avoided by the operation of the rule in Pigot's case or, if avoided, was revived on registration of the lease. The latter assumption in particular might be thought doubtful in the light of Consolidated Trust Co Ltd v Naylor, and notwithstanding that Big Country submitted that s 36(11) of the Real Property Act independently gave the guarantee effect. It is not necessary to decide this question. 98 The guarantee in the lease, in cl 21, began - "21.2 In consideration of the Lessor at the request of the Guarantor entering into this Lease and as separate severable covenants, guarantees and indemnities the Guarantor does hereby covenant and agree with the Lessor that the Guarantor will be jointly with the Lessee and severably liable to the Lessor for the due and punctual performance by the Lessee of all the terms covenants and conditions to be observed fulfilled and performed on the part of the Lessee contained in the Lease and in particular but without limiting the generality of the Guarantee hereby given ... ". There followed particular statements of the guarantor's obligations, relevantly with respect to "rent payable pursuant to this Lease" and otherwise in regard to "the Lease" or "this Lease". 99 Clause 21 was part of memorandum V979061 filed on 4 October 1985, incorporated into the lease with variations not presently relevant. The only definition of "the Lease" or "this Lease" in the lease or the memorandum was the unhelpful definition in cl 1.6 of the memorandum that "the Lease" meant "the Lease including any Schedule and annexures hereto". At the time the lease was executed by the Wall parties and returned to Big Country's solicitors, thereby accepting Big Country's offer of a lease on the terms of the lease document, the lease was not to be with a mortgage noted as a prior encumbrance, but with the consent of the mortgagees. That was the lease the Walls guaranteed. They did not guarantee the altered lease which came about following the addition of mortgage T424525 as a prior encumbrance and the registration of the lease with that notification. 100 In Chan v Cresdon Pty Ltd (1989) 168 CLR 242 a lease of land under the Real Property Act contained a provision that guarantors (who were parties to the lease) guaranteed the performance by the lessee of its obligations "under this lease". The lease was not registered, but the lessee went into possession and paid rent. It was held that, as a matter of construction, even if there was an equitable lease for the term it did not fall within the guarantee: see per Mason CJ and Brennan, Deane and McHugh JJ (at 256-8) - "What they guaranteed was the 'obligations [of Sarcourt] under this lease', that is, the instrument of lease in its character as a lease. In our view, only a lease at law would meet this description for the purposes of the guarantee. In Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [(1987) 162 CLR 549, at 56], Mason ACJ, Wilson, Brennan and Dawson JJ observed: 'At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety.' In the light of this settled principle governing the interpretation of contracts of guarantee, there is no justification for reading cl 23.01 as extending to obligations which, at best, as between the landlord and the lessee, arise, not under the lease at law but under an equitable lease which is the equivalent of the lease at law. … If we assume that the agreement for lease would have been specifically enforced in equity and that, as a result, an equitable lease for a term of five years came into existence between the respondent as lessor and Sarcourt as lessee, that equitable lease is a thing different from the unregistered form of lease executed by the parties. Although such an equitable lease would incorporate the terms of the unregistered lease, by virtue of s 43 it necessarily arises not from the instrument but from the agreement which lies behind it. On this score alone, it would be impossible to conclude that a liability to pay rent under the equitable lease was an obligation "under this lease" within the meaning of cl 23.01." 101 Chan v Cresdon Pty Ltd has been distinguished when the guarantee provided that it should bind the parties as if the lease had been registered (Telado Pty Ltd v Vincent (1996) NSW Conv R 55-786). The point for present purposes is that it is necessary to ask what the guarantor guaranteed. The lease in the present case was to be registered, and it may be accepted that, as in Chan v Cresdon Pty Ltd, the Walls guaranteed the obligations of Wall Investment "contained in the Lease" in its character as a lease, that is, a lease at law found in a registered instrument. But what lease at law? Departing from the facts in Chan v Cresdon Pty Ltd, the lease found in the instrument as registered was not in the terms of the lease which the Walls had signed as guarantors. The lease they guaranteed was a lease not subject to FCA's mortgage as a prior encumbrance, in the sense earlier explained, and they did not guarantee the lease which came about upon registration of the altered instrument. The reasoning in Chan v Cresdon Pty Ltd in this respect applies. 102 This may not be appropriately described, as the Walls' submission described it, as discharge of the Walls' obligations as guarantors. If, as Chan v Cresdon Pty Ltd suggests, the obligations under cl 21 of the lease applied only to the lease when registered, and the lease was altered before registration, the obligations never had a subject-matter. Whether or not that be so, upon registration of the altered lease the obligations did not have a subject matter. The Walls' submission seemed to involve discharge under the principles arising from the special relationship between creditor and surety, where conduct on the part of the creditor (typically varying the principal contract) has the effect of altering the surety's rights otherwise than in an unsubstantial and non-prejudicial way: it is sufficient to refer to the discussion in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 559-561, and to observe that the positions of both Wall Investment and the Walls were prejudiced if there was only a flawed entitlement to possession of the squash centre and gymnasium. But the unilateral alteration in the present case, having effect through the provisions of the Real Property Act, to my mind attracts the different analysis by which the Walls' obligations did not have a subject-matter. 103 Clause 21 contained savings provisions on which Big Country relied. By cl 21.1.8 the guarantee was not to be "affected or abrogated by [various acts or omissions or] any other act, matter or thing which would or might, but for this provision, release the Guarantor from his obligations hereunder". Then - "21.1.11 no variation of the Lease or any transfer assignment or other dealing by the Lessee with or under this Lease or the estate hereby demised (whether with or without the consent of the Lessor) shall operate or be construed to limit or to qualify modify or otherwise affect in any way the obligations and covenants of the Guarantor hereunder; … 21.1.14 In the event of the terms of the lease not being enforceable by the Lessor against the Lessee for any reason, the Guarantor agrees to indemnify the Lessor against its loss which will include all moneys which would have been payable by or recoverable from the Lessee had the Lease been fully enforceable against the Lessee." 104 A consequence of the preferred analysis is that, whatever might have been the effect of the savings provisions if the discharge approach were taken, they do not assist Big Country. The guarantee was not affected or abrogated by an act, matter or thing releasing the Walls from their obligations as guarantor - their obligations were unaffected, they just did not have a subject-matter. There was no variation of the lease within cl 21.1.11, whether the language be read as encompassing a consensual variation or, as an unlikely construction, a unilateral dealing by the lessee. There was a unilateral alteration by the lessor having effect through the provisions of the Real Property Act. There was no dealing by the lessee with or under the lease or the estate demised. And it was not a case of the terms of the lease not being enforceable by the lessor against the lessee: either from the beginning or upon registration, the terms of the lease were enforceable by the lessor against the lessee. 105 In my view, therefore, although Wall Investment was liable to pay rent under the lease, the Walls were not liable for that rent as guarantors. (c) Liability in damages for repudiation of the lease 106 In the appeals Big Country relied for the repudiation on, and only on, non-payment of rent at the end of 1993, as breach of an essential or fundamental term of the lease. All the defendants, in the case of the Wall parties in a late joining of the bandwagon, denied that there had been a repudiation which could found Big Country's claims to damages. 107 In order to deal with this issue, it is necessary first to describe the complications flowing from the manner in which the allegation of repudiation was expressed in the summons, and to describe the course taken in the appeals. 108 In the summary of its contentions in the summons Big Country began by describing the lease to Wall Investment, and then alleged that by the deed of assignment of 22 May 1989 Wall Investment had "assigned all its right, title and interest in the lease" to the Hollingsworths; that by the deed of 24 April 1992 the Hollingsworths had "assigned all their right, title and interest in the lease" to Mr Karacominakis; and that by the deed of 13 August 1993 Mr Karacominakis had "assigned all its [sic] right title and interest in the lease" to Chadlace. Nothing was said about transfers of the lease, nor were there allegations that direct obligations to Big Country had been undertaken by the Hollingsworths, Mr Karacominakis or Chadlace under the deeds. After some other matters, Big Country alleged that Chadlace had repudiated "the lease", by ceasing to pay rent and in various other ways, and that Big Country had accepted the repudiation and re-entered the premises on 13 January 1994. 109 As earlier noted, Big Country then expressed its claim against Wall Investment as a claim "pursuant to the lease" and its claims against the Hollingsworths, Mr Karacominakis and Chadlace as claims "pursuant to the lease, each respective deed of assignment, Section 70A of the Conveyancing Act 1919 and the general law". The reference to claims pursuant to the respective deeds of assignment, a partially incorrect characterisation on any view, was but obscurely supported by the contentions, which seemed to make all claims turn on repudiation of the lease by Chadlace. 110 The first complication was that the significance of the transfers of the lease, and more important the significance of the absence of a transfer of the lease to Chadlace, were overlooked. The so-called assignments, expressed in or evidenced by the respective deeds of 22 May 1989, 24 April 1992, and 13 August 1993, were agreements to transfer the lease effective in equity as between the relevant parties, but they were not effective to transfer the lease at law. The correct position was that there were transfers to the Hollingsworths and Mr Karacominakis effective at law, but that Chadlace's interest in the lease remained equitable and arguably only as against Mr Karacominakis. Each of the Hollingsworths, Mr Karacominakis and Chadlace also undertook direct obligations to Big Country under the respective deeds, effective as a matter of contract. The manner in which Big Country framed its case distracted attention from the transfers and the separate contractual obligations. 111 The second complication, flowing from the first, was that the core allegation of repudiation was an allegation of repudiation of the lease by Chadlace. The complication had two aspects. There was no allegation of repudiation by any of Chadlace's predecessors. And in the absence of a transfer to Chadlace, Chadlace could not have repudiated the lease. It might have breached, or even repudiated, its obligations directly undertaken to Big Country under the deed of 13 August 1993, but that was a different matter. The allegation of repudiation was fundamentally flawed. 112 These complications were then compounded by Bainton J taking the view that, because the Transfer Date was not stated, the deed of 13 August 1993 had no effect. The Wall parties had not admitted Big Country's allegation of assignment by the deed of 13 August 1993; the Hollingsworths had not responded to that allegation; Mr Karacominakis had admitted it; and the Chadlace parties had admitted that Chadlace "entered into an assignment of a lease from [Mr Karacominakis], which was guaranteed by [the Johnstons]". The proceedings before his Honour appear to have been conducted on the basis that there had been an assignment of the lease from Mr Karacominakis to Chadlace, and at least on the part of Mr Karacominakis and the Chadlace parties on the basis that the deed of 13 August 1993 was effective, albeit without any thought to what was meant by the assignment. His Honour took a different view. 113 Regrettably, it seems that neither in the course of the evidence before Bainton J nor in their written submissions to his Honour did the parties give thought to whether or not the transfer to Chadlace had been registered. Nor did they appreciate the flaw in the allegation of repudiation, or the uncertainty in which the framing of Big Country's case left the separate contractual obligations under the deeds. 114 In his reasons, in which he was justifiably critical of a number of other aspects of the summons, defences, cross-claims and defences to cross-claims, his Honour said - "My realisation after these reasons had been substantially completed in draft, that the lease Y837222 had not ever been transferred to Chadlace by registration of a transfer and that no contractually binding agreement to transfer the lease to it has been proven has led me to consider whether or not I should simply dismiss the proceedings, because repudiation is a condition precedent to the entitlement to re-enter (none other is pleaded) and Chadlace is the only entity asserted to have repudiated the lease. I have determined not to do so, but instead to treat para C11 of the summons as amended so as to assert that Karacominakis, by Chadlace let into possession by him, repudiated the lease, a repudiation accepted by Big Country which re-entered on 13 January 1994. The summons so amended would not in any view have required any party to lead different or additional evidence to establish that the rights inter parties were, at the time of commencement of these proceedings, in any way different from the position as I have described it." 115 With respect, it would have been better for his Honour to have raised with the parties, even when encountering it as he prepared his reasons, whether the deed of 13 August 1993 had effect; and his Honour was in error in treating the allegation of repudiation of the lease as amended in the manner he did without notice to the parties and hearing them on the matter. The parties were denied procedural fairness in this respect. 116 We so indicated in the course of the appeals, and heard the parties on what should be done. I have already noted that the parties accepted in these appeals that the deed of 13 August 1993 had effect as if the date 18 August 1993 were stated as the Transfer Date. As well, all parties other than Mr Karacominakis were content to have the appeals determined by regard to the correct facts, that is, the transfers, agreements for sale and deeds which I have described, rather than on the basis of incorrect and legally obscure generalities of assignment. Mr Karacominakis said that he would be prejudiced if that were done, and put submissions against that course. 117 For reasons then given, we ruled that we would decide the appeals "on the true facts and the correct law", that is, "on the basis of the legal and equitable rights of the parties as they in fact exist as we think on the facts". This included whether there was repudiation of the lease, accepted by Big Country, without restriction to repudiation by Chadlace. A draft amended summons was produced, we heard submissions as to some of its aspects, and for further reasons then given we ruled that leave should be given to amend the summons in accordance with the draft save in certain respects. The reasons recorded our understanding that the amendments made the summons accord with the evidence and issues which in substance were litigated before Bainton J. 118 In the summary of contentions in the amended summons as filed Big Country again began by describing the lease to Wall Investment, but it then alleged - (i) in addition to assignment by the deed of assignment of 22 May 1989, that the Hollingsworths had covenanted by that deed to be responsible for the performance of the lessee's covenants under the lease; (ii) instead of assignment by the deed of 24 April 1992, that the Hollingsworths had agreed by that deed to indemnify Big Country in relation to failure by Mr Karacominakis to comply with the lessee's covenants under the lease and that Mr Karacominakis had covenanted by that deed to pay the rent and perform the lessee's covenants under the lease; (iii) instead of assignment by the deed of 13 August 1993, that Mr Karacominakis had agreed by that deed to indemnify Big Country in relation to failure by Chadlace to comply with the lessee's covenants under the lease and that Chadlace had covenanted by that deed to pay the rent and perform the lessee's covenants under the lease; and (iv) that there had been transfers of the lease by transfers Z138646 and E429360 and had been execution of the unregistered transfer of August 1993. 119 After referring to the guarantees by the Walls and the Johnstons in the lease and the deed of 13 August 1993 respectively, it was alleged that Chadlace had failed to pay rent under the lease and that the non-payment of rent "constituted … a repudiation by each of [Wall Investment, the Hollingsworths and Mr Karacominakis] of a term of the lease made essential by the provisions thereof". It was alleged that Big Country accepted the repudiation and re-entered the premises on 13 January 1994, and that it had suffered damage "as a consequence of the wrongful repudiation of the lease and of the respective deeds … ". The reference to repudiation of the deeds must be ignored, as the leave to amend the summons expressly excluded allegations in the draft summons of repudiation of the deeds of 22 May 1989, 24 April 1992 and 13 August 1993: the consequential revisions to the draft summons were imperfectly made. 120 The claims were now expressed as a claim that Wall Investment was liable "pursuant to the lease", claims that the Hollingsworths and Mr Karacominakis were liable "pursuant to the lease, each respective deed … and Section 51 of the Real Property Act 1900", and a claim that Chadlace was liable "for breach of its obligations under [the deed of 13 August 1993]". The Walls and the Johnstons were said to be liable "upon the proper construction of [the guarantees in the lease and the deed of 13 August 1993 respectively] and the general law". 121 The amendments meant that all claims no longer turned on repudiation of the lease by Chadlace. The claims against Wall Investment, the Hollingsworths and Mr Karacominakis involved repudiation of the lease, but by those parties as a result of Chadlace's failure to pay rent, and the claims against the Hollingsworths and Mr Karacominakis involved also their liability under the deeds to which they were parties. The claim against Chadlace was not for repudiation of the lease but for breach of the deed of 13 August 1993. A deal of the attention earlier given to repudiation in the appeals was otiose, and greater attention to the obligations under the deeds was called for. 122 It will be necessary to address the obligations under the deeds later in these reasons. For the present, I deal with liability in damages for repudiation of the lease. 123 In Shevill v Builders Licensing Board (1982) 149 CLR 620 at 624-5 Gibbs CJ identified three senses in which repudiation was used, the third being where a right to rescission arose as a result of breach of a fundamental or essential term of a contract. His Honour then said (at 627) - "It is clear that a covenant to pay rent in advance at specified times would not, without more, be a fundamental or essential term having the effect that any failure, however slight, to make payment at the specified times would entitle the lessor to terminate the lease. However, the parties to a contract may stipulate that a term will be treated as having a fundamental character although in itself it may seem of little importance, and effect must be given to any such agreement: see Wickman Tools v Schuler AG [(1974) AC 235, at p 251]. In other words, a right to forfeit a lease might arise 'in the case of any breach of covenant however trifling, if the parties had agreed that a breach of that covenant should create a forfeiture': Campbell v Payne and Fitzgerald [(1953) 53 SR (NSW) 537 at p 539]." 124 In that case it was held that the fact that the contract gave the lessor the right to re-enter if rent was unpaid for fourteen days did not mean that the covenant to pay rent became an essential term. The lease did not otherwise give the lessor exercising its right of re-entry the rights of a party who elects to terminate a contract for repudiation or fundamental breach. The lease in the present case provided much more support for repudiation by non-payment of rent. 125 By cl 3.20 of memorandum V979061 - "3.20 PAYMENT OF RENT AN ESSENTIAL CONDITION : The Lessee's covenant and obligation to pay rent throughout the term of the lease at a date not later than seven (7) days after the due date for the payment of each monthly instalment thereof shall constitute an essential and fundamental condition of this Lease. The acceptance by the Lessor of arrears or of any late payment of rent shall not constitute a waiver of the essentiality of the Lessee's obligation to pay rent in respect of those arrears or of the late payments or in respect of the Lessee's continuing obligation to pay rent during the lease term." 126 By cl 11.1 of the memorandum, if the rent reserved or any part thereof was unpaid for seven days after the due date or there was breach or default in the observance and performance of any of the obligations under the lease the lessor could re-enter, whereupon the lease would "absolutely determine". Other circumstances in which the lessor could re-enter were stated, for example, bankruptcy or liquidation of the lessee. The lease provided for variation of this clause by adding to its commencement the words, "Subject to the provisions of s 129 of the Conveyancing Act". The Hollingsworths submitted that the notice requirement in s 129 of the Conveyancing Act, although by s 129 itself not applying to failure to pay rent, thereby applied to re-entry for non-payment of rent pursuant to cl 11.1. I do not think that is correct. Clause 11.1 dealt with many occasions for re-entry other than non-payment of rent, and the variation took in the effect of s 129 so that cl 11.1 did not conflict with it. It did not extend the application of s 129. 127 Clause 11 of the memorandum then provided, so far as presently material - 11.7 LESSORS ENTITLEMENT TO DAMAGES FOR BREACH OF AN ESSENTIAL TERM : The Lessor and the Lessee covenant and agree that the covenants by the Lessee to pay the rent reserved by this Lease are essential and/or fundamental terms of this Lease the breach non-observance or non-performance of any of which covenants constitute and shall be deemed to constitute a fundamental breach non-observance or non-performance of the provisions of this Lease on the Lessee's part to be observed and performed. Should the Lessor determine this Lease following any such fundamental breach then (without prejudice to or in any way limiting any other right or remedy of the Lessor arising from such breach or otherwise under this Lease) the Lessor shall be entitled to recover from the Lessee and the Lessee hereby covenants to pay to the Lessor as and by way of liquidated damages for such breach the aggregate of the rent and other moneys which would have been payable by the Lessee for the unexpired residue of the term of this lease remaining after such determination after making allowance for any rent or other income (if any) received by the Lessor from the premises in respect of the unexpired residue of the term hereof. ... " 128 The liquidated damages provision in cl 11.7 may be put aside, as it was not invoked in the proceedings, but the agreement is clear that timely payment of rent is a fundamental or essential term of the contract, breach of which entitles the lessor to re-enter and to terminate the lease. Returning to indefeasibility, so far as these provisions stated the essential nature of payment of rent and prescribed the consequences to the lessee's term of non-payment of rent I consider that they are indistinguishable from the covenant to pay rent itself and attracted indefeasability on registration of the lease, because they characterise and attribute consequences to that which delimits or defines the lessee's interest in the land. In my view, the covenant to pay rent was made an essential term, and in the event that rent was overdue for more than seven days the lessor was entitled by acceptance of a repudiation of the lease to terminate it and, in accordance with Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17, to claim damages for loss of bargain. 129 The principal contest concerned whether Chadlace's failure to pay rent could constitute breach of a fundamental term, and repudiation of the lease, by its predecessors. 130 As earlier noted, the Wall parties did not dispute that, as the original lessee, Wall Investment remained liable to pay rent under the lease notwithstanding the transfer to the Hollingsworths. Nor did they dispute that, because Chadlace failed to pay rent, Wall Investment failed to pay rent. Accordingly, there was repudiation of the lease by Wall Investment. 131 Again as earlier noted, when the lease was transferred to them the Hollingsworths became subject to its obligations by force of s 51 of the Real Property Act at least until transfer away. But the Hollingsworths transferred the lease to Mr Karacominakis, and s 51 made Mr Karacominakis liable to pay rent as lessee. Did the Hollingsworths remain liable to pay rent as lessee? 132 On the grant of a lease there is co-existent privity of estate and privity of contract between the lessor and the lessee. At common law, on assignment of the lease the co-existence ceases. The original lessee remains liable to the lessor under the contract. The assignee of the lease becomes liable to the lessor to observe all the covenants that touch and concern the land, a covenant to pay rent being such a covenant (Parker v Webb (1693) 3 Salk 5; 91 ER 656; Auscott Ltd v Panizza (1988) NSW Conv R 55-395), and the lessor can enforce such a covenant, because of the privity of estate between them (Spencer's case (1583) 5 Co Rep 16a; 77 ER 72; Hindcastle Ltd v Barbara Attenborough Ltd (1995) QB 95), but unless a new contract is made the assignee has no privity of contract with the lessor. The assignee may enter into direct covenants with the lessor, as did the Hollingsworths and Mr Karacominakis under the deed of assignment of 22 May 1989 and the deed of 24 April 1992 respectively. In such a case there will be privity of contract as well. 133 The liability under the direct covenants may remain, depending on the construction of the relevant instrument, even after a further assignment of the lease (for example, J Lyons Co Ltd v Knowles (1943) KB 366; Estates Gazette Ltd v Benjamin Restaurants Ltd (1994) 1 WLR 1528). But the assignee is liable under the lease, that is, by virtue of the privity of estate as distinct from the direct covenants, only so long as there is privity of estate. The assignee is not liable for breaches prior to his becoming lessee (Grescot v Green (1700) 1 Salk 199; 91 ER 179; Renshaw v Maher (1907) VLR 520) or for breaches after further assignment of the lease (Paul v Nurse (1828) 8 B & C 486; 108 ER 1123). 134 That is the position at common law, but the position in the present cases turns on s 51 of the Real Property Act. It provides - "51. Upon the registration of any transfer, the estate or interest of the transferor as set forth in such instrument, with all rights, powers and privileges thereto belonging or appertaining, shall pass to the transferee, and such transferee shall thereupon become subject to and liable for all and every the same requirements and liabilities to which the transferee would have been subject and liable if named in such instrument originally as mortgagee, chargee or lessee of such land, estate, or interest." 135 The effect of s 51 is that the transfer of a lease creates privity of estate and privity of contract between the lessor and the transferee of the lease: a statutory replication of the privity of estate co-existent with privity of contract between the lessor and the original lessee. Its effect is not expressly restricted to creating privity of contract only for so long as there is privity of estate, that is, for so long as the transferee is registered as proprietor of the lease. 136 In Wilson & King v Brightling (1885) NZLR 4 it was held that the equivalent provision in the Land Transfer Act 1870 (NZ) was nonetheless restricted in that way. In that case the lease to the plaintiffs was thrice transferred; when the last transferee defaulted in payment of rent, the lessor recovered the rent from the plaintiffs, the original lessee; the plaintiffs then sued the defendant, the penultimate transferee, for indemnity. At common law the defendant would not have been liable, and so would not have been liable to indemnify the plaintiffs, in respect of default after the assignment from him to the defaulting lessee. 137 The trial judge, Johnston J, said (at 5) - "It was contended on the part of the plaintiffs that the effect of this provision is not only to make the transferree of a lease liable to the lessor for breaches of covenant during his holding, but also to make each transferree liable for any breach of covenant by any other transferree, or, at all events, liable to contribute when the original lessee has been sued by the lessor for a breach during the holding of any transferree. It seems to me that it could not have been the intention of the Legislature, while simplifying the mode of transfer of property, to introduce so great a change of the law as this contention implies without using language plainly indicating such an intention. … The meaning of the section seems to be, not that the lessor is to have the same continuing cumulative remedies against the lessee and to all persons to whom the lease may be or have been assigned, but only to subject each transferree in respect of breaches of covenant arising during the continuance of his interest to the same requirements and liabilities as the original lessee." 138 On appeal, Prendergast CJ said (at 8) - "The clause, no doubt, if read literally, does involve some little difficulty, or at least a great incongruity. The result of such a construction would be this: that, quite unnecessarily, this change would be made, instead of the assignee for the time being, and the lessee, being liable to actions for rent, all persons who had been assignees of the lease would be responsible to the lessor, and liable to indemnify the lessee, as against the lessor's claim. That would involve a great alteration of the law, and quite unnecessarily so. What the legislature probably intended was that the clause should be read as if the words 'as lessee' at the end of the section had not been introduced. It is intended by the Legislature to express that the assignee is to be liable on the lessee's covenants, as if he had been mentioned in the lease; not for the purpose of extending his liability, but defining it, leaving him, as at common law, liable as holding the land, and not as in privity with the lessor." 139 Gillies J agreed, with some additional remarks. Williams J also agreed, saying (at 9) - "It would want very clear, precise and unmistakable language on the part of the Legislature to lead the Court to come to the conclusion which Mr Austin invites us to arrive at. I see nothing in section 69 which obliges us to come to such a conclusion. That section makes a transferree of a lease, on his transfer being registered, liable as if named originally in the lease as assignee. The transferree is therefore made liable in his capacity as transferree. It seems to me that when the transferree transfers the lease to someone else, the first transferree cannot any longer be in the position of transferree and, therefore, the liability imposed by the section upon him qua transferree also ceases." 140 Section 51 has in other respects been given limited scope in modification of the common law. In Measures v McFadyen (1910) 11 CLR 723 it was held that s 51 did not mean that a transferee from the lessor could sue the lessee for a breach of covenant complete prior to the transfer. At common law that could not be done because the assignment of the reversion did not vest in the assignee a right of action for a breach complete before the assignment. Griffiths CJ said (at 731) that the words of s 51 "are not sufficient to transfer the right to bring an action in respect of such a past breach", and O'Connor J (at 732-3) rejected the suggestion that ss 51 and 52 operated to vest in the assignee a cause of action accruing under the lease before the assignment. In Murphy v Harris (1924) St R Qd 187 the transferee from the lessee argued that the equivalent provision in s 61 of the Real Property Acts 1861-1877 (Qld) had relieved him of his common law obligation to indemnify the lessee against the lessee's liability to the lessor for the transferee's breach of covenant, it seems on the ground that the provision freed the lessee from all further liability. The argument was rejected. In ex parte O'Neill; re Ryan (1925) 25 SR (NSW) 416, in which the question was whether the transferee of the reversion could bring proceedings for ejectment under the Landlord and Tenant Act 1899 (NSW), it was held that s 51 had not made him the "landlord" for the purposes of that Act. Street CJ, with whom Gordon and Ferguson JJ agreed, said (at 421) that the Real Property Act - " … was passed merely to facilitate and simplify the transfer of land, and in clothing the transferee from a lessor with the rights and liabilities of his transferor it did not convert him into an original lessor." 141 In my opinion, s 51 subjects the transferee of a lease to the lessee's obligations only while the transferee is registered as the proprietor of the lease, so that following a further transfer the transferee is no longer liable under the lease to pay the rent thereafter falling due. It is not necessary for the operation of s 51 in the Torrens Title scheme to give it any wider scope, and to regard it as subjecting the transferee to the lessee's obligations for all time, creating permanent privity of contract, would significantly and unnecessarily change the common law principles. Clear language would be required for such a change. 142 The Hollingsworths were not liable under the lease to pay the rent falling due at the end of 1993, and accordingly Chadlace's failure to pay the rent did not bring repudiation of the lease by the Hollingsworths. 143 On the transfer of the lease to him, Mr Karacominakis also became subject to its obligations by force of s 51 of the Real Property Act. He is in a different position from the Hollingsworths, because there was not a further transfer of the lease. Mr Karacominakis was obliged to pay the rent to Big Country, and the rent was not paid. It does not matter that, as between Mr Karacominakis and Chadlace, Chadlace was to pay the rent. Nor does it matter that Big Country knew of and was a party to the agreement for transfer of the lease from Mr Karacominakis to Chadlace, because nothing in that agreement took away Mr Karacominakis' liability to pay the rent. Accordingly, and subject to the following paragraphs, there was repudiation of the lease (in the sense of breach of an essential term) by Mr Karacominakis. 144 Mr Karacominakis argued against this in a number of further ways. 145 One argument was that, even though the lease had not been transferred to Chadlace, upon the execution of the deed of 13 August 1993 Mr Karacominakis was no longer subject to its obligations because the lease defined "lessee" as the original lessee and its permitted assigns and Chadlace was then a permitted assign. So, it was said, once there was a later permitted assign as a matter of construction Mr Karacominakis was no longer the lessee under the lease. There are a number of answers to the argument. One is that Mr Karacominakis was the lessee by force of s 51 of the Real Property Act. Another is that the definition was inclusive, so that Mr Karacominakis became a lessee within the definition upon assignment to him and remained within the definition. A third is that Chadlace was not a permitted assign until the lease was transferred to it, in the circumstances assignment for the purposes of the definition being transfer of the lease: MacDonald v Robins (1954) 90 CLR 515 at 522. I do not think the argument should be accepted. 146 Another argument was originally put as a submission that Big Country's loss recoverable from Mr Karacominakis was limited to the unpaid rent as at 13 January 1994, that the loss could not exceed $8,000, and that because Big Country held a security deposit of $8,000 there was no basis for judgment in its favour. The conclusion depended on acceptance of another submission on the issue of mitigation of loss, as to which Mr Karacominakis argued that Big Country had failed to mitigate its loss to such an extent that it was not entitled to the damages claimed. But the argument came also to be put as an argument that, because Big Country held a security deposit for an amount greater than the unpaid rent, there had not relevantly been a failure to pay rent. 147 There are many difficulties with the argument. One is that by cl 17 of the memorandum the lessor might but was not bound to apply all or any part of the security deposit towards recouping itself for any loss suffered from the lessee's default: there was a breach of the covenant to pay rent even though the security deposit was held. Another is that the argument incorrectly took as the unpaid rent only 13/31 of the monthly rent payable on 1 January 1994, as if the rent accrued on a daily basis until Big Country re-entered on 13 January 1994. By cll 3.1 and 3.16 of the memorandum the instalment of monthly rent was payable in advance on 1 January 1994. While cl 3.1 of the memorandum had a concluding sentence, referring to rent as such as distinct from the operating expenses the subject of cl 3.16, reading "Such rent shall be deemed to accrue from day to day", this did not displace the stipulation for payment of the full month's rent on the first day of the month, or the corresponding operation of cl 11.1 of the memorandum in the event rent was unpaid for seven days after "the due date": see Ellis v Rowbotham (1900) 1 QB 740 as to the Apportionment Act 1870 (UK), cf Conveyancing Act, s 144(1). 148 Another argument was to the effect that Big Country had discharged Mr Karacominakis from any requirement to perform the lease further by preventing him from performing it. It was linked with a causation argument that Mr Karacominakis did not cause any loss to Big Country. The arguments were presented at length, and with reference to many authorities. Without intending any disrespect, I consider it sufficient to summarise them. According to the arguments, Mr Karacominakis was not told of the non-payment of rent by Chadlace before Big Country retook possession on 13 January 1994, and was not given the opportunity to pay the rent himself; he was thereafter excluded from possession, at least in that he was not invited to go into possession and take up performance of the lease; this prevention of performance by Mr Karacominakis was equivalent to performance by him (referring in particular to Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246-7 and Mahoney v Lindsay (1980) 33 ALR 601 at 603), and the cause of any loss to Big Country through not receiving rent for the balance of the term of the lease was not his failure to pay rent but Chadlace's failure to pay rent (referring inter alia to March v EH & M Stramare Pty Ltd (1991) 171 CLR 506). 149 I do not think that the prevention argument avails Mr Karacominakis. As I have said, he was obliged to pay the rent to Big Country, and it does not matter that, as between Mr Karacominakis and Chadlace, Chadlace was to pay the rent. Mr Karacominakis had no entitlement to notice of Chadlace's default, and in order to fulfil his obligations to Big Country he had to ensure that Chadlace paid the rent. He was at risk, but that was the situation in which he had placed himself. Big Country did not prevent Mr Karacominakis from paying the rent. If by Chadlace's failure to pay the rent Mr Karacominakis repudiated the lease and the repudiation was accepted, in the manner explained above, Big Country's loss of bargain was caused by Mr Karacominakis' breach of his obligations as lessee. 150 Another argument was that any essentiality in payment of rent was lost as regards Mr Karacominakis because the deed of 13 August 1993 did not expressly provide for the obligations which Chadlace undertook to be essential "in the context of the assignment". The relevant provision of the deed, cl 1, is set out later in these reasons. It did not expressly refer to essentiality, but embodied a covenant by Chadlace to pay the rent as if it had originally been a party to the lease and were named in it as lessee. This does not cut down the essentiality of Mr Karacominakis' obligation as lessee, and in any event the essentiality under the lease was imported into Chadlace's obligation. 151 Finally, another argument was that at common law, relevantly not affected by the deeds, Big Country could not treat the lease as discharged upon repudiation for non-payment of rent unless there had been formal demand for payment of rent. Mr Karacominakis referred to Woodfall's Law of Landlord and Tenant, 28th ed, vol 1, para 1-1905 and Phillips v Bridge (1873) LR 9 CP 48 at 49-50. The argument was not elaborated, and Big Country did not respond to it. Whatever may have been the common law position in this respect, it was subject to the agreement of the parties, and the lease provided that the rent was payable on the due dates without demand. 152 Any question of repudiation by Chadlace fell away with the amendment of the summons. Chadlace was not a transferee of the lease, it did not become liable to pay rent under the lease, and the claim against it was not for repudiation of the lease. 153 The Wall parties did not dispute that, if there had been a repudiation of the lease, by its re-entry and its solicitors' letter of 13 January 1994 Big Country had accepted the repudiation and thereby terminated the lease. Mr Karacominakis did dispute this. He submitted that there had relevantly not been an acceptance of the repudiation because Big Country had not communicated its re-entry and solicitors' letter to him. What had occurred, according to the argument, was that Big Country had caused the lease to be surrendered by operation of law. 154 Abandonment of premises by the lessee and acceptance of the abandonment by the lessor will be a surrender if in the circumstances an agreement between them for termination of the lease is to be found: Andrews v Hogan (1952) 86 CLR 223; Konica Business Machines Australia Pty Ltd v Tizine Pty Ltd (1992) 26 NSWLR 687. Usually the question is whether in going into possession the lessor brings about a surrender by operation of law or whether it keeps the lease alive, and the question is one of unilateral termination or consensual termination. In the present case the lease was undoubtedly terminated, and the letter of 13 January 1994 from Big Country's solicitors said so. But it was not terminated by agreement with either Mr Karacominakis or Chadlace. Mr Karacominakis did not abandon the premises, and did not know of the re-entry until after it had taken place. Chadlace did abandon the premises, but when Big Country re-entered it did so in the exercise of its right to do so and not by implicit agreement on termination. There was not a surrender by operation of law, but termination for breach of a fundamental or essential term so that, as Progressive Mailing House Pty Ltd v Tabali shows, Big Country can claim damages for loss of bargain. 155 It is not necessary that the communication of acceptance of a repudiation be in those terms, or by direct notification. Words or conduct may communicate acceptance if they are consistent only with electing to terminate the contract (Sargent v ASL Developments Pty Ltd (1974) 131 CLR 634 at 646), and it is enough to make the election manifest to the relevant party (Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 146 per McHugh JA; cf at 117 per Samuels JA, but the difference in view was as to repudiatory conduct, not communication of acceptance; Majik Markets Pty Ltd v S & M Motor Repairs Pty Ltd (No 1) (1987) 10 NSWLR 49 at 54). By late January 1994 Mr Karacominakis knew that Chadlace had defaulted under the lease, and had closed the business down and vacated the premises; he knew that Big Country was back in possession. He saw that from going to the premises, and was in part told of it via his solicitors. The evidence is referred to in a little more detail later in these reasons when considering the issue of mitigation of loss. I do not think it can reasonably be doubted that Mr Karacominakis understood, in part from Big Country and in part not directly from Big Country, that Big Country had brought the lease to an end. His own evidence was that he did not approach Mr Hesky with an offer to take a lease of the premises because he thought it was for Mr Hesky to make the offer, implicit in which was that he believed that the lease had come to an end and a new lease was available. In my view, there was acceptance of the repudiation. 156 Subject to the issue as to demand yet to be addressed, therefore, Wall Investment and Mr Karacominakis are liable in damages for repudiation of the lease. (It follows, and I do not think that this was in contest, that they are also liable for the unpaid rent.) Other than as to mitigation of loss, the damages assessed by Bainton J were not disputed in the appeals. (d) Liability under the deeds 157 I have described how in the course of the appeals Big Country came to claim that the Hollingsworths, Mr Karacominakis and Chadlace were liable pursuant to the deeds. For each of the Hollingsworths and Mr Karacominakis there was what was called in the appeals an incoming deed and an outgoing deed; for Chadlace there was only an incoming deed. 158 By cl 2 of the deed of assignment of 22 May 1989, their incoming deed, the Hollingsworths agreed with Big Country - "2. On and from the Assignment date the Assignee agrees with the Lessor to be and remain with the Assignor and the Guarantors referred to in the said Lease responsible and liable for the performance of all of the obligations and liabilities which are required to be performed observed or satisfied by the Lessee pursuant to the Lease …" 159 Payment of rent was one of the obligations and liabilities required to be performed observed or satisfied by the lessee pursuant to the lease. "Lessee" was not used as descriptive of one of the parties to the deed, and was used to refer generally to the lessee under the lease. "Lease" was used as descriptive of the lease referred to in one of the recitals, the recital beginning "By lease dated (the 'Lease') the Lessor leased to the Assignor … ". The date was not completed. Unless it could be said that the lessee's obligations and liabilities for which the Hollingsworths agreed to be responsible and liable were those pursuant to a lease not subject to FCA's mortgage as a prior encumbrance, and so did not extend to the obligations and liabilities under the lease which came about upon later registration of the altered instrument, the Hollingsworths became and remained liable for payment of rent under the lease by virtue of cl 2 of the deed of assignment of 22 May 1989 quite apart from the effect s 51 of the Real Property Act. Their contractual liability did not come to an end when they transferred the lease away: J Lyons & Co Ltd v Knowles; Estates Gazette Ltd v Benjamin Restaurants Ltd. 160 The Hollingsworths submitted that cl 2 of the deed of 22 May 1989 did not extend to payment of rent under the lease as altered and registered, taking up the argument earlier considered in relation to the Walls' guarantee. In my opinion the reasoning there explained applies also to cl 2. The Hollingsworths undertook liability for payment of rent by the lessee "pursuant to the Lease". As at 22 May 1989 "the Lease" was a lease not subject to FCA's mortgage as a prior encumbrance. The Hollingsworths are not liable for payment of rent by the lessee pursuant to the different lease which came about upon registration of the altered instrument. 161 In the deed of 24 April 1992, their outgoing deed, the Hollingsworths covenanted with Big Country - "3.1 The Lessor hereby consents to the Transfer by the Transferor to the Transferee of the Lease PROVIDED THAT and the Transferor covenants with the Lessor that such consent is expressly deemed not to release the Transferor or any Guarantor or Covenantor under the Lease from any liability under or in accordance with or by virtue of or in consequence of the Lease as if the Lease had not been transferred by the Transferor to the Transferee including but without limiting the generality thereof all liabilities past, present and future in respect of the rent reserved by the Lease and the performance and observance of the covenants, obligations and provisions contained in the Lease on the Transferor's part as Lessee therein to be observed, performed or complied with. 3.2 Further to Clause 3.1 hereof, the Transferor's liability to the Lessor under or in accordance with or by virtue of or in consequence of the Lease shall continue notwithstanding and shall not be prejudiced or affected by any future transfer of the Lease or any future assignments or any variation, waiver, rights or other concessions granted in relation to the Lease and if the Transferee (or any future transferees) shall fail to observe or perform any of the covenants and provisions contained in the Lease the Transferor shall within fourteen (14) days of a demand by the Lessor on the Transferor make good such failure and shall indemnify the Lessor from and against all claims, costs, damages, decrees, demands, expenses, judgments, losses, orders, proceedings, summons [sic], suits and writs of any nature whatsoever arising out of or in consequence of such failure." 162 For the purposes of the deed of 24 April 1992 "the Lease" was clearly the lease as altered and registered: it was described by its registered dealing number. A submission similar to that put in relation to the deed of assignment of 22 May 1989 is not available, and was not put. 163 The drafting of cll 3.1 and 3.2 is poor, and their construction presents difficulties. It would, I think, be artificial to attribute to the draftsman, or to the parties to the deed, precise and coherent intention. The words and phrases must have been put together with a general purpose in mind, and regard may be had to it if it can be satisfactorily divined. The intention must nonetheless be found in the words and phrases used. 164 Clause 3.1 does not impose obligations on the Hollingsworths. It records Big Country's consent to the transfer of the lease to Mr Karacominakis, and then preserves their liability, whatever it was, in that Big Country's consent "is expressly deemed not to release" the Hollingsworths from liability. The lengthy description of the liability which follows is a description of what is not released, albeit with reference to liability as if the lease had not been transferred and future liability. Despite this, the only relevant operation of the clause is to preclude release by reason of the consent. 165 Clause 3.2 does impose obligations on the Hollingsworths. It includes reference to a demand, which gave rise to an issue argued separately from the rather unsatisfactory attention in submissions to liability under the deeds. The Hollingsworths and Mr Karacominakis (whose deed of 13 August 1993 contained almost identical clauses) submitted that they were not liable with respect to the outstanding rent or, if there had been a repudiation founding Big Country's claims to damages, with respect to damages, in the absence of demand prior to the commencement of the proceedings. It was common ground that no demand had been made, but Big Country said that demand was not necessary. I think it necessary to address the place of a demand as part of the present issue. 166 Clause 3.2 is expressed to be further to cl 3.1, that is, additional to it. By the words down to and including "in relation to the Lease" the Hollingsworths' liability is to continue notwithstanding certain future events, preserving their liability, whatever it was, from any effect of the future events (including transfer of the lease) rather than from any effect of Big Country's consent to the transfer of the lease to Mr Karacominakis. Then come the obligations: paraphrasing them, the Hollingsworths agree that if Mr Karacominakis or a future transferee fails to comply with the lease they will make good the failure within fourteen days of a demand made by Big Country and will indemnify Big Country against all claims etcetera occasioned by the failure. 167 A general purpose might be seen in this, although whether it was the purpose of the draftsman or the parties is perhaps speculative. It is enough that the intention found in the words and phrases used can be seen as serving an understandable purpose. The deed of assignment of 22 May 1989 recorded an agreement made in connection with the transfer of the lease. Big Country wanted to ensure that the Hollingsworths' existing liability under the deed of assignment of 22 May 1989 was preserved despite the transfer to Mr Karacominakis and any future transfers, although the drafting may not have been fully appropriate to that end. But the Hollingsworths would be out of possession, and would not necessarily know of any default by the transferee, so there was an express positive obligation to make good a transferee's default on demand. As well, there was exacted a stringent indemnity provision so that, whatever happened about the Hollingsworths making good, they were responsible to Big Country for all claims etcetera occasioned by the transferee's failure to comply with the lease. (There was an indemnity provision in cl 7 of the memorandum, but differently worded and not necessarily protecting Big Country in the event of the lessee's default.) 168 I do not think that cl 3.2 of the deed of 24 April 1992 gives Big Country a basis for its claims against the Hollingsworths. So far as it preserves the Hollingsworths' liability, it does not assist Big Country. Big Country can not rely on the positive obligation to make good a transferee's failure within fourteen days of a demand, if for no other reason because it has not made the requisite demand. That leaves the indemnity. The overwhelming import of the collocation of words is that it is an indemnity as to third party claims occasioned by the transferee's failure to comply with the lease, rather than as to money not paid by the transferee (eg rent) or money paid by Big Country in place of the transferee (eg to repair). Standing alone the words "expenses" or "losses" could encompass unpaid rent or money paid to repair, but their place amongst the other words colours their extent in cl 3.2 and in my view the indemnity is not as to unpaid rent. 169 By cl 1 of the deed of 24 April 1992, his incoming deed, Mr Karacominakis covenanted with Big Country - "1. The transferee hereby covenants with the Lessor that the Transferee will on and from the date referred to in Item 6 of the Reference Schedule pay the rent reserved by the Lease and all other moneys payable thereunder on the days and in the manner herein provided AND will be bound by and will do, perform, observe and carry out each and every of the covenants, obligations and provisions on the part of the Transferor as Lessee in the Lease as if the Transferee had originally been the party thereto and were named in the Lease as Lessee." 170 Mr Karacominakis undertook liability for payment of rent under the lease by virtue of cl 3.1 of the deed of 24 April 1992 quite apart from the effect of s 51 of the Real Property Act. His contractual liability did not come to an end when he agreed to transfer the lease away. The lease the subject of the deed of 24 April 1992 was the registered lease (it was identified by its dealing number in a recital), and there is no question of escape from liability on the argument which relieved the Hollingsworths from the burden of the deed of assignment of 22 May 1989. 171 Mr Karacominakis is liable under the deed of 24 April 1992 for the unpaid rent. 172 Is he is liable under the deed of 24 April 1992 for the damages claimed by Big Country? The question re-arises for Chadlace. The lease contained a provision (cl 11.8) whereby the lessee covenanted to pay compensation for loss suffered by repudiation of the lease. I put this aside, so that it is not necessary to consider whether, if the lease was avoided by the operation of the rule in Pigot's case, cl 11.8 was revived upon registration of the lease. Apart from that provision, I consider that Mr Karacominakis is liable for the damages. He breached the contract by failing to pay the rent. As a consequence of that failure, which in the manner earlier described entitled Big Country to terminate the lease, Big Country terminated the lease; its loss caused by the breach included its loss of bargain. Even though Big Country did not claim damages for repudiation of the deed of 24 April 1992, its damages for breach of the contract embodied in the deed by failing to pay the rent included compensation for loss of bargain, in the same amount as the damages for repudiation of the lease. 173 In the deed of 13 August 1993, his outgoing deed, Mr Karacominakis covenanted with Big Country in almost identical terms to cll 3.1 and 3.2 already set out. For the reasons earlier given, I do not think that the deed gives Big Country a basis for its claims against Mr Karacominakis. 174 By the deed of 13 August 1993, its incoming and only deed, Chadlace covenanted with Big Country in the same terms as cl 1 of the deed of 24 April 1992 already set out. Its position is materially the same as that of Mr Karacominakis. There is contractual liability for the rent, and Big Country's damages for breach of the contract include compensation for loss of bargain in the same amount as the damages for repudiation of the lease. 175 Subject to the issue as to demand, therefore, Mr Karacominakis and Chadlace are liable for the rent and damages claimed by Big Country. (e) The need for a demand 176 I have already described the submission by the Hollingsworths and Mr Karacominakis in reliance on the reference to a demand in cl 3.2 of the respective deeds of 24 April 1992 and 13 August 1993. It was said that the clauses should be read with, and qualified, the obligations the Hollingsworths or Mr Karacominakis otherwise owed to Big Country under the lease and their incoming deeds as well as under the respective outgoing deeds, and that the demand to which cl 3.2 referred was a condition precedent to any liability to Big Country. 177 A request for payment of a debt is generally unnecessary, and in an agreement to pay a present debt on demand it may be unnecessary to demand payment prior to bringing proceedings. But it depends on the construction of the agreement, and in some circumstances demand may be made a pre-condition to liability, a necessary element in the cause of action (see for example Bradford Old Bank Ltd v Sutcliffe (1918) 2 KB 833). 178 The Hollingsworths and Mr Karacominakis placed great weight on Tricontinental Corporation Ltd v HDFI Ltd (1987) 21 NSWLR 689. In that case a surety agreement stated "pre-conditions to entitlement to make demand", compliance with which was held to be necessary for liability. It was held that the statement in the agreement was not just of a promissory condition, but of a condition precedent to liability. The agreement, however, was in very different terms from the deeds of 24 April 1992 and 13 August 1993, and the context was suretyship. Although on assignment of a lease the lessee has been said to become a surety to the lessor for the assignee (Wolveridge v Steward (1833) 1 C & M 646 at 660; 149 ER 557 at 564), the lessee has primary obligations and the analogy with conventional suretyship is not convincing. I do not think Tricontinental Corporation Ltd v HDFI Ltd assists the submission. It is a question of construction of cl 3.2 of the deeds. 179 From the earlier discussion of cl 3.2, in my opinion the positive obligation to make good a transferee's default on demand was an additional obligation, standing together with the existing obligations of the transferor of the lease. The existing obligations were emphatically preserved in cl 3.1 and the preceding part of cl 3.2, and it could not seriously be said that, although emphatically preserved, they were then diluted by importation of a process of demand and a period of grace. I do not think that cl 3.2 made demand a precondition to any liability for the rent and damages to which the Hollingsworths and Mr Karacominakis were already exposed. (f) Relief from liability under principles of contribution between sureties 180 Mr Karacominakis submitted that if the lease was unenforceable by Big Country against any of Wall Investment, the Hollingsworths or Chadlace, it was also unenforceable against himself. This, he said, was because principles of contribution between sureties applied between himself and those persons and companies, so that if any of those persons and companies were not bound to Big Country by the obligations in the lease, or were freed from their obligations, he was freed from his obligations. He referred to Hancock v Williams (1942) 42 SR (NSW) 252 and Marston v Charles H Griffith & Co Pty Ltd (1985) 3 NSWLR 294. 181 The lease was enforceable by Big Country against Wall Investment and the Hollingsworths, but in the absence of a registered transfer it was not enforceable by Big Country against Chadlace. But I do not think that principles of contribution between sureties come into play, and even if they did the submission is flawed. 182 In Wolveridge v Steward it was said that the effect of an assignment is that the lessee becomes a surety to the lessor for the assignee. At common law, in the absence of contrary agreement the assignee of a lease must indemnify the lessee for any breaches of covenant during the assignee's term (see for example Burnett v Lynch (1826) 5 B & C 589; 108 ER 220; Wolveridge v Steward; Moule v Garrett (1872) LR 7 Ex 101). Mr Karacominakis argued that the assignee was equally a surety to the lessor and the lessee for a further assignee. So, the argument ran, in the event of breach of covenant by the ultimate assignee there was a collection of suretyship obligations, and Mr Karacominakis could invoke the principles in the cases earlier mentioned whereby a surety is discharged if the obligations of a co-surety are unenforceable. 183 The lessee is not a surety to the lessor for the assignee in the same sense as conventional suretyship. The lessee has direct obligations to the lessor, pre-dating the assignment, and is surety for the assignee only in the sense that the assignee's default will also constitute the lessee's default. The assignee is also not a surety to the lessor or the lessee for a further assignee in the same sense as conventional suretyship. The assignee is liable to the lessor and to indemnify the lessee only for breach of covenant during the assignee's term, and is responsible for the assignee's own default. If there are successive assignments, the indemnity will be given to the defaulting assignee's assignor, not to the lessee. The lessee and the assignee or successive assignees are not in any sense under coordinate liabilities, let alone co-suretyship obligations, but parties to a chain of indemnities: hence, as has been seen, although the lease was enforceable in the abstract against the Hollingsworths, they are not liable under the lease for Mr Karacominakis' (or Chadlace's) failure to pay rent. The principles of contribution between sureties relevant to discharge of a surety if the obligations of a co-surety are unenforceable have no application. Section 51 of the Real Property Act, with the operation earlier described, does not alter this position. 184 In any event the submission is flawed, because it was not a condition of liability or continued liability of Mr Karacominakis that Chadlace should become an assignee of the lease (as cll 3.1 and 3.2 of the deed of 13 August 1993 emphasise), and if the possibility of coordinate liabilities be assumed it was not a case of Chadlace becoming liable but then being freed of its obligations. 185 The submission was as I have stated, that the lease was unenforceable against Mr Karacominakis. There was, however, some blurring in the argument in support of the submission between enforcement of the lease and enforcement of the separate obligations under the deed of assignment of 22 May 1989 and the deeds of 24 April 1992 and 13 August 1993; so it was said at one point that Mr Karacominakis was released from "such obligations as [he] might otherwise have to 'guarantee' the performance by Chadlace of its obligations under the Lease". I have held that the Hollingsworths are not liable to Big Country under their incoming deed but that Mr Karacominakis and Chadlace are liable to Big Country under their incoming deeds. Even then, however, the deeds were relevantly not contracts of suretyship, that is, contracts by which "one person (the guarantor) agrees with another (the obligee) that he, or property of his, shall be responsible for the performance or observance by a third party (the obligor) of a primary obligation of the third party to the obligee" (Hancock v Williams at 255 per Jordan CJ). They were contracts by which the respective assignees undertook primary obligations of their own, albeit that the content of the primary obligations came from the obligations of the lessee under the lease. Nor was it a condition of the liability or continued liability of Mr Karacominakis that the Hollingsworths should be or remain liable under the deed of assignment of 22 May 1989, as is necessary for the operation of the relevant principles (see Carter v White (1883) 25 Ch D 666 at 670; Williams v Frayne (1937) 58 CLR 710 at 738; JGL Investments Pty Ltd v Maracorp Financial Services Ltd (1991) 2 VR 168 at 175-6). Principles of contribution between sureties still do not come into play. (g) Mitigation of loss 186 Mr Karacominakis, and a for a time the Chadlace parties, submitted that Big Country had failed to mitigate its loss, and had failed to such an extent that it was not entitled to the damages claimed. In short, Mr Karacominakis' submission was that Big Country should have given him the opportunity to go back into possession of the squash centre and gymnasium. The circumstances in and extent to which Mr Karacominakis had relied on mitigation of loss at the trial were debated and were far from clear, but probably it was sufficiently in issue to permit the submission on appeal: I will assume so. Also in short, the submission of the Chadlace parties was that Big Country should have accepted their offer to take a lease of the premises at a reduced rent. While it was current Mr Karacominakis adopted the submission of the Chadlace parties, although without independently speaking to it. Thereafter the Chadlace parties expressly abandoned their submission. It was unclear where this left Mr Karacominakis' adoption of the submission. 187 A plaintiff who acts unreasonably in failing to minimise his loss from the defendant's breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less. This is often misleadingly referred to as a duty to mitigate, although the plaintiff is not under a positive duty. The plaintiff does not have to show that he has fulfilled his so-called duty, and the onus is on the defendant to show that he has not and the extent to which he has not (TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130). Since the defendant is a wrongdoer, in determining whether the plaintiff has acted unreasonably a high standard of conduct will not be required, and the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did (Banco de Portugal v Waterlow and Sons Ltd (1932) AC 452; Pilkington v Wood (1953) Ch 770; Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd (1976) 1 NSWLR 5). 188 Whether the plaintiff acted unreasonably is a question of fact. It is possible that a plaintiff will be held to have acted unreasonably in failing to enter into a new contract with the defendant, following breach of contract by the defendant and termination of the contract (Bracer v Calder (1895) 2 QB 253; Houndsditch Warehouse Co Ltd v Waltex Limited (1944) KB 579). But the fact of the breach and its effect on the relationship between the parties may be material to reasonableness: for example, in Shindler v Northern Raincoat Co Ltd (1960) 1 WLR 1038 an employee's rejection of an offer to re-employ him was not unreasonable when the new employment would have involved him in being answerable to the persons with whom he had disagreed over his dismissal. 189 On 13 January 1994 Big Country's solicitors wrote to Mr Karacominakis' solicitor saying that Chadlace had "defaulted under the Lease", and that the writer of the letter "wishes to discuss certain aspects of the matter with Mr Soulos and would be pleased if Mr Soulos would telephone the writer as soon as possible". So far as appears, to this time Mr Karacominakis had no knowledge of Chadlace's difficulties with payment of rent, and was not aware that it had closed the business down and vacated the premises; nor was he aware that Big Country had taken possession of the premises. 190 Mr Karacominakis' solicitor was away, and neither responded to this letter nor passed on its news to Mr Karacominakis at the time. He told Mr Karacominakis of the letter at a time which was unclear but seems to have been at least before the end of January 1994. However, Mr Karacominakis had an equipment lease arrangement with Mr Johnston. On 10 or perhaps 13 January 1994 Mr Johnston had sent a fax to Mr Karacominakis' solicitor, informing him that the business had closed and that the equipment was no longer required. At a time which was also unclear, but was shortly after 13 January 1994, Mr Karacominakis telephoned Mr Johnston inquiring after his rent under the equipment lease, and was told of the fax and its contents. Specifically, he was told by Mr Johnston that the premises had been vacated. 191 Later in January 1994 Mr Karacominakis was asked by Mr Chiswick to give Mr Chiswick a lease of his equipment. He declined. Mr Karacominakis went to the premises in order to regain his equipment. He found Ms Morley operating the squash centre and gymnasium. Later again he agreed to sell some of his equipment to Mr Chiswick. 192 Big Country did not approach Mr Karacominakis, either before or after 13 January 1994, to invite him to go back into possession of the premises or to conduct the squash centre and gymnasium. According to Mr Hesky, he left it to Big Country's solicitors to tell "all the previous tenants … what had happened", and understood that a letter had been sent saying that "the Johnstons had moved out". He said that he did not otherwise contact Mr Karacominakis and invite him to go back into possession because nothing had been heard from Mr Karacominakis in response to the solicitors' letter of 13 January 1994. For his part, Mr Karacominakis gave evidence that he did not approach Mr Hesky with an offer to take a lease of the premises "because I thought it was up to him to make the offer". 193 Notwithstanding his reticence in 1994, Mr Karacominakis gave evidence that if Big Country had given him the opportunity to do so, he would have taken a lease of the premises. In his initial evidence in chief he said, in relation to the lease by Big Country to Nelville in September 1994, that he would have been "extremely happy to have been offered a lease of the premises" for the rent under the lease to Nelville, $30,720 per year, and "would have been prepared, given the opportunity, to pay a rental far higher than $30,720." In cross-examination he said that it would have been a viable proposition to him to go back into the premises at the rent under the original lease, then approximately $11,000 per month, asserting that the business would "certainly" have been "much better than the first time I went in". 194 Bainton J did not expressly deal with this evidence. Mr Karacominakis' defence as filed had not raised mitigation of loss, and under the defence failure to give Mr Karacominakis the opportunity to go back into possession of the premises and take up the conduct of the squash centre and gymnasium arose, if at all, only in connection with a defence of estoppel in part on the ground that Big Country "effectively prevented [Mr Karacominakis] from rectifying any alleged breaches, and entering the premises and conducting the business, himself". The defence of estoppel failed at the trial for other reasons, and was not taken up on appeal. 195 His Honour did not find Mr Karacominakis a satisfactory witness, and was critical of much of his evidence. It is not easy to accept that Mr Karacominakis would have gone back into the premises in January 1994, if given the opportunity, at the rent under the original lease or anything like it. At the end of August 1992 he had written to Mr Hesky saying that his efforts to "revive the centre" had been unsuccessful, that he was running at an average loss of approximately $1,000 per week, and that the business was "not a viable proposition". At about the same time he had asked Mr Hesky to "seek another tenant to accept a transfer of the lease", and had said that he did not require a purchase price and that if the lease was not transferred in the very near future he would vacate the premises. At the end of September 1992 he had written to Mr Hesky saying that he could no longer guarantee to pay rent for the premises and asking Mr Hesky to "please make other arrangements regarding your building". There were then discussions as a result of which Big Country paid to Mr Karacominakis a so-called advertising subsidy of $2,500 per month. Even then, when Mr Karacominakis sold the business he told Mr Hesky that he needed a loan from the bank to pay the rent. 196 In the light of this, in my view, Mr Karacominakis' unsupported assertion that the business would have been much better than the first time he went in must be regarded as a flight of fancy. The only conclusion reasonably open on the evidence is that, at the rent under the original lease or anything like it, the business would have been just as unviable under Mr Karacominakis' operation in January 1994 as it had been in 1992-93, if not more unviable given the circumstances of Chadlace's departure and the dilapidated state of the premises. 197 It does not follow that Mr Karacominakis would not have been prepared to go back into the premises at a rent higher than that paid by Nelville, although the evidence was all but non-existent as to Mr Karacominakis' availability to take up the conduct of the squash centre and gymnasium, as to a possible rent, and as to the prospects of the business succeeding at a rent higher than that paid by Nelville. Bainton J found that the rent paid by Nelville, after considerable expenditure on the premises by Big Country, was a proper rent, and it might be thought unlikely that Mr Karacominakis would, once bitten, have agreed to pay more than a proper rent. However, in any event I do not think that the failure to mitigate for which Mr Karacominakis contended has been made out. Mr Karacominakis' evidence of what he would have done, if given the opportunity, is not determinative. The question is whether Big Country acted unreasonably. 198 By the letter between solicitors it told Mr Karacominakis of Chadlace's default, and received no response. It knew that Mr Karacominakis had operated the business for about ten months in 1992-93, and had been told that he had found the business unviable to the extent that he had been prepared to give it away or walk out himself. From what Mr Hesky was told about the bank loan, it knew that Mr Karacominakis had found the business unviable even with the advertising subsidy. It was reasonable for Big Country to believe that Mr Karacominakis knew that Chadlace had vacated the premises and that there could be a new lease and a new operator of the squash centre and gymnasium, as indeed he did. Mr Karacominakis was far from a prospective lessee, even if a lesser rent than that under the original lease were in contemplation, and Big Country could reasonably have expected him to indicate interest if he was interested. I do not think that Big Country acted unreasonably in the extent of its communication with him. 199 The contention of the Chadlace parties was rightly abandoned. 200 The letter of 13 January 1994 from Big Country's solicitors to the solicitors for the Chadlace parties, advising that Big Country had re-entered and the lease had been determined, said that Big Country "proposes, in an endeavour to mitigate its damages, to re-open the gym and squash centre". It asked for records of current memberships and particulars in relation to gym instructors. At least the records were provided; it is not clear whether the particulars in relation to the gym instructors were provided. 201 The solicitors for the Chadlace parties then sent two letters dated 20 January 1994 to the solicitors for Big Country. One was an open letter, foreshadowing proceedings against Mr Karacominakis for misrepresentation of the income of the business and asking Big Country to "take no action against our client which might jeopardise its ability to prosecute the proceedings against the vendor". The other was a letter expressed to be without prejudice, in which it was said (with reference to certain financial information) that the business could not support the rent under the lease and a new lease was suggested for the balance of the term of the original lease at a rent of $5,000 per month. 202 The reply to the second letter dated 9 February 1994 said that Big Country would respond upon receipt of an open letter setting out the offer of a new lease. The Chadlace parties declined to make an open offer. Nothing more occurred. 203 Bainton J said of the failure to mitigate asserted in Chadlace's defence as filed - "I reject the asserted failure to mitigate: the circumstances in which Chadlace vacated the squash centre were such that no sensible lessor would have it or Johnston or Schmitz back under any circumstances short of a cast iron guarantee (not forthcoming) that Chadlace would perform the obligations of a lessee for the whole of the balance of the term." 204 A little later in the reasons his Honour gave what he described as a fuller account of Chadlace's departure - "Chadlace ceased to trade on 23 December 1993, and it removed the equipment owned by it on 28 December 1993 so as to sell it. It had been selling three to six months 'memberships' to the fitness centre up to 20 December 1993. Chadlace left on the door a notice advising its 'fitness' members to go to Club Fitness (a gymnasium that had not long before opened in the vicinity; it did not have any squash courts), where their 'memberships' would be accepted on payment of a transfer fee of $20. Johnston had arranged for this to be done. Squash playing patrons were left to find their own alternative courts. The centre had not been well looked after during Chadlace's occupation and a considerable amount of cleaning, repairing and replacement was necessary. There was, however, no evidence as to the cost of making the premises fit for reletting as a squash centre/gymnasium." 205 With the qualifications next mentioned there was ample evidence to support these findings, particularly the finding that the squash centre had not been well looked after during Chadlace's occupation. There was also evidence that customers of the business were unhappy with the Johnstons' management and angry about the way the business had been closed, something which underlies his Honour's findings. The qualifications are that the notice left on the door by Chadlace was to advise customers that the premises would be closed from 23 December 1993 to 4 January 1994; that the notice to which his Honour referred was placed on the door by a member; and that it was only after contact by a representative of the Department of Consumer Affairs, following complaint by a member, that Mr Johnston made an arrangement with Club Fitness. Correction of these errors does not improve the account of Chadlace's departure. 206 Mr Hesky explained in his evidence why he was unwilling to have Chadlace back as lessee. His reasons included the circumstances of its departure and doubt that it would perform under a new lease, as to rent and otherwise. The doubt was not unreasonable. Chadlace had defaulted in payment of rent within a few months of taking possession. Mr Johnston had asked to be allowed to pay rent weekly instead of monthly in advance (which Mr Hesky had declined). On the financial information in the without prejudice letter of 20 January 1994 the business would have run at a loss even with rent of $5,000 per month. Implicit in what Bainton J said was acceptance of this explanation, and acceptance that Big Country did not act unreasonably in declining to take up the suggestion of a new lease, and in my view his Honour was correct. 207 It may have been part of Mr Karacominakis' submission that Big Country unreasonably delayed in re-letting the premises to Nelville: again, there was some obscurity in the profusion of submissions. If so, I do not agree. I have referred to Bainton J's finding that a considerable amount of cleaning, repairing and replacement at the squash centre and gymnasium was necessary. Mr Hesky took advice, and in accordance with it carried out some alterations to the premises and more significant refurbishment in order to make them a better letting proposition. The work took time, and in the meanwhile the business was kept alive under the operation of Ms Morley. I do not think Big Country acted unreasonably in this respect. 208 Having dealt with the issues earlier identified, the outcome of Big Country's claims against the defendants may be summarised as follows, in the case of Mr Karacominakis subject to his defensive cross-claims: 1. Wall Investment is liable for the unpaid rent under the lease and in damages for its repudiation. The judgment against it for $517,311 should stand. 2. The Walls are not liable as guarantors. The judgments against them should be set aside. 3. The Hollingsworths are not liable for the unpaid rent under the lease, in damages for its repudiation, or for the unpaid rent or the amount of the damages under the deeds to which they were parties. The judgments against them should be set aside. 4. Mr Karacominakis is liable for the unpaid rent under the lease and in damages for its repudiation, and also for the unpaid rent and the amount of the damages under the deed of 24 April 1992. The judgment against him for $517,311 should stand. 5. Chadlace is liable for the unpaid rent and the amount of the damages under the deed of 13 August 1993. The judgment in its favour should be set aside, and there should be judgment against it for $517,311 taking effect on 22 September 1997, the date on which the judgments below were ordered. 6. The Johnstons are liable as guarantors. The judgments in their favour should be set aside, and there should be judgment against them for $517,311 taking effect on 22 September 1997. The defensive cross-claims 209 Only Mr Karacominakis appealed in relation to his defensive cross-claims, and it is not necessary to describe the other such cross-claims. In fact, what I have called his cross-claims were raised as part of Mr Karacominakis' defence and not by way of cross-claim. They were treated as cross-claims by Bainton J and by the relevant parties on appeal: I will continue to call them cross-claims. Only the grounds of misleading conduct within the Fair Trading Act and injustice within the Contracts Review Act were maintained on appeal. (a) The Fair Trading Act 210 The cross-claim was founded on allegations of misleading representations. The representations and their misleading nature were - "(iv) In April 1992 prior to execution of the deed of assignment dated 24th April 1992 Peter Hesky the representative of the plaintiff represented to the sixth defendant that the rental charged was correct; that the squash centre and gymnasium was a big money earner, and that previous owners had made a fortune. (v) In April 1992 prior to the execution of the deed of assignment the said Peter Hesky represented to the sixth defendant that the shopping centre was going to be built together with the supermarket, and he asked the sixth defendant if he knew anyone who could operate the supermarket. (vi) In late April 1992 the said Peter Hesky assured the sixth defendant that the rent was the proper rent for the premises and represented that previous tenants had made a fortune and drove around in Mercs. (vii) In or about July 1992 the said Peter Hesky represented to the sixth defendant that he was negotiating with Woolworths and Coles to take on the supermarket as tenants to attract more people to the area. (viii) In or about August 1992 the said Peter Hesky represented to the sixth defendant that the rental was the right rental for the squash centre and gymnasium in the metropolitan area, and Windsor, for the purpose of assessing rental, was within the metropolitan area. PARTICULARS The representations were made in the course of telephone conversations between the sixth defendant and Peter Hesky the representative of the plaintiff. (ix) The sixth defendant says that the representations made by the representative of the plaintiff were untrue or untrue in a material respect. PARTICULARS a) The rental charged was excessive. b) The rental charged was not proper market rental for the area. c) The shopping centre was not constructed. d) The shopping centre consisted of a vacant block of land. e) The shopping centre still consists of a vacant block of land. (x) The sixth defendant says that the alleged rental of $30,720 per annum payable now to the plaintiff represents, [sic] a proper market rental for the premises." 211 The relief under the Fair Trading Act sought was not specified in the defence. From the context it was not relief by way of damages, and such relief was never suggested; presumably it was intended that in some way Mr Karacominakis should be freed from any liability to Big Country under the lease or the deed of 24 April 1992; how his liability under the deed of 13 August 1993 could have been affected is another matter, but if what I have earlier said be correct it does not matter. 212 Bainton J said as to the representations - "These assertions depend upon my accepting evidence of Karacominakis in paras 13-21 of his statement filed on 24 July 1995 which became Exhibit 6D3. Hesky denied the asserted misrepresentations in that he either denied saying what he was asserted to have said, or the gloss put on it by Karacominakis, in respect of the amount of the rent. Hesky says that what he told Karacominakis about rent was that the figure put to him by Karacominakis was correct, ie it was the rent payable under the lease Karacominakis was contemplating purchasing. Karacominakis asserts that by 'correct' Hesky was asserting it was the market value. He was not. For reasons which I will expound when I come to deal with the transactions between Karacominakis and Johnston (and ultimately with Chadlace) I do not accept anything which Karacominakis said in his evidence unless it is agreed or inherently probable and not contradicted." 213 After referring to the cross-claim his Honour said, "Having rejected the asserted misrepresentation I reject this assertion". 214 Mr Karacominakis submitted that Bainton J's preference for the evidence of Mr Hesky in relation to the representations was vitiated by what he described as denial of procedural fairness, relevantly that credit findings adverse to Mr Karacominakis resulted from, or were influenced by, factual errors and an unjustified animadversion to Mr Karacominakis, to the extent that it was said that his Honour demonstrated bias against Mr Karacominakis. In these circumstances, it was said, Mr Karacominakis' claim for relief under the Fair Trading Act had not been determined on its merits, and there had to be a new trial as to at least that claim. 215 The submission was supported by a lengthy tabulation of alleged factual errors. Big Country (and the Chadlace parties, who had an interest in upholding his Honour's credit findings adverse to Mr Karacominakis for the purposes of their cross-claim against him) responded to the alleged errors seriatim. Some of the alleged errors were errors. Some were either clearly not errors or available factual statements or conclusions. Of the errors, some were no more than obvious slips, trivial, or of no significance. I do not think that Mr Karacominakis made good his submission so far as dependant on the factual errors, and ultimately he acknowledged, with respect properly, that this Court "would not interfere with the judgment under appeal on the basis that those errors, of themselves, so affected the judgment as to constitute a denial of procedural fairness". In the circumstances, I do not propose to go through the alleged errors in these reasons. 216 As I have said, Bainton J did not find Mr Karacominakis a satisfactory witness, and was critical of much of his evidence. The passage from his Honour's reasons set out above is stark, and when dealing with the cross-claim of the Chadlace parties against Mr Karacominakis more will been seen. However, a reading of the transcript shows, so far as the printed word can do so, that there was much to be critical of in Mr Karacominakis' evidence and that he was indeed a witness whose credibility could be doubted. Bainton J had the advantage of seeing and hearing Mr Karacominakis giving his evidence, and of appreciating the ebb and flow of his evidence in a manner not open to us. I am not persuaded, or even inclined to countenance, that his Honour showed an unjustified or in any way improper animadversion to Mr Karacominakis, or that bias against him was demonstrated. His Honour's view of Mr Karacominakis' credit is not properly open to appellate question. 217 It follows that the rejection of the misleading representations on which the Fair Trading Act cross-claim was founded should not be overturned, and the cross-claim so far as on this ground was correctly dismissed. (b) The Contracts Review Act 218 The claim for relief under the Contracts Review Act, the relief sought again not being specified in the defence, was - "(i) The sixth defendant says that the covenants in relation to rent, in both the lease and deeds of assignment, are harsh and oppressive and the rental payable was excessive at the date of the contracts and thereafter. (ii) The sixth defendant says that the rental for the subject premises was assessed on an erroneous basis. PARTICULARS (a) The premises were not in a regional shopping centre. (b) The premises were not in a metropolitan area, for rental assessment. (c) The sixth defendant seeks relief under Part 2 of the Contracts Review Act 1980." 219 Bainton J said as to this - "It is plain from the difficulties encountered by each of those who acquired the lease of these premises that the rent was such as to preclude a reasonable rate of return, but s 6(2) of the Contracts Review Act 1980 plainly precludes me from granting this relief even if I were to find that the lease was harsh and oppressive and for that reason unjust. There is no doubt that, as it turned out, the rent extracted was (when coupled with all the other expenses necessarily incurred) such that the business was (contrary to what Karacominakis represented to Johnston and Schmitz) unprofitable. But that does not of itself attract the operation of the Contracts Review Act 1980. See West v AGC (Advances) Ltd (1986) 5 NSWLR 610. There is nothing unfair, as between the Hollingsworths and Karacominakis, in the assignment from them to him. That is when and how the obligation of Karacominakis to pay rent to Big Country originated." 220 Mr Karacominakis submitted that his Honour was in error in holding that s 6(2) of the Contracts Review Act precluded him from granting relief. He submitted that there was also error in regarding relief as unavailable because there was nothing unfair as between the Hollingsworths and Mr Karacominakis, saying that the relevant injustice was as between Big Country and Mr Karacominakis as parties to the deeds of 24 April 1992 and 13 August 1993. And he sought to submit, although it was outside the case in the defence, that there was injustice for the purposes of the Contracts Review Act as between Big Country and Mr Karacominakis because Mr Hesky had not disclosed to Mr Karacominakis that Big Country had been unable to attract a commercial tenant for the shopping centre and did not intend to develop it until such a tenant could be located. 221 Big Country objected to the extent of the submission. On investigation, it became plain that at the trial, notwithstanding the plural in para (i) set out above, Mr Karacominakis had not claimed relief in relation to the deed of 13 August 1993, and had not claimed relief on the basis of disclosure as to a commercial tenant for the shopping centre, nor had his notice of appeal done so. Leave was refused to claim relief in relation to the deed of 13 August 1993 and on that basis. That left the effect of s 6(2) of the Contracts Review Act, the substantive question of injustice in relation to the deed of 24 April 1992, and whether relief could be granted as between Big Country and Mr Karacominakis while otherwise leaving the deed in force. 222 The latter questions need not be considered, because in my view s 6(2) does preclude the grant of relief in relation to the deed of 24 April 1992. It relevantly provides that relief may not be granted to a person in relation to a contract "so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by him or proposed to be carried on by him". Mr Karacominakis entered into the deed of 24 April 1992 in the course of or for the purpose of his carrying on the business. It was part of getting the premises where he was or was to be conducting the business, and Ellison v Vukicevic (1986) 7 NSWLR 104 (Young J); Vukicevic v Alliance Acceptance Co Ltd (1987) 9 NSWLR 13 (CA) and Coombs v Bahama Palm Trading Pty Ltd (1991) ASC 56-097 on which Mr Karacominakis relied are not to the contrary. Whether, as these cases might suggest, entry into the deed of 13 August 1993 was not in the course of or for the purpose of his carrying on the business, because Mr Karacominakis was ceasing to carry on the business, does not arise, and I prefer to leave that matter open. 223 The cross-claim so far as on this ground was also correctly dismissed. The claims for indemnity and contribution 224 To repeat, the claims for indemnity by the Wall parties against the Hollingsworths, the Hollingsworths against Mr Karacominakis and Chadlace, and Mr Karacominakis against the Chadlace parties were all dismissed, but it was held that the Wall parties, the Hollingsworths and Mr Karacominakis were under coordinate liabilities to Big Country so there should be contribution between them. None of these defendants appealed in relation to the dismissal of its or their claim for indemnity. The only appeal in relation to contribution was that of the Wall parties, not contesting contribution but seeking to extend the contribution between the defendants to include contribution by Chadlace. In their cross-appeal the Wall parties alleged error in the holding that they were not entitled to a declaration that their liability was coordinate with that of the Hollingsworths, Mr Karacominakis and Chadlace, and claimed a declaration to that effect, and it seems to have been thought that the matter turned on whether Chadlace was liable to Big Country. 225 Mr Karacominakis' submission as to relief from liability under principles of contribution between sureties, and the consideration of coordinate liability to which it led, caused the Court to question whether Bainton J's conclusions on indemnity and contribution were correct quite apart from whether Chadlace was liable to Big Country. The relevant parties indicated concurrence in the Court giving effect, despite the limited claims and appeals as to indemnity and contribution, to the correct outcome. This included that if the Court considered it appropriate the declaration made by his Honour as to coordinate liabilities should be set aside and replaced with declarations or orders providing for indemnities. 226 The Wall parties' claim against the Hollingsworths was in the alternative pursuant to the indemnity in the agreement for sale of the business of 5 May 1989 and the indemnity in the deed of assignment of 22 May 1989, and Bainton J also referred to what he described as "the asserted but not explained common law right to such indemnity". As to the indemnity under the agreement for sale of business of 5 May 1989, his Honour said that the liability of the Wall parties was not as a result of any default or action of the Hollingsworths, but rather was due to default by Chadlace in complying with its promise to Mr Karacominakis to pay the rent. After referring to the Hollingsworths' reliance as against the Wall parties on cl 3.2 of the deed of 24 April 1992, both the reliance and what his Honour then said about it being, with respect, not easy to understand, Bainton J noted that in his written submissions counsel for Wall Investment relied for the cross-claim only on the provision in the agreement for sale of business of 5 May 1989. It may be that his Honour did not go further into the indemnity under the deed of assignment of 22 May 1989 because the indemnity was also confined to loss or damage by reason of the Hollingsworths' default. Going to the common law right to indemnity, his Honour said only (with reference to Wolveridge v Steward) that "an assignee of a lease is not liable to the assignor to him for rent which that assignor has been compelled to pay to the lessor after his assignee has himself assigned over". 227 His Honour noted that Wall Investment's written submissions did not seek to support its claim for indemnity from Mr Karacominakis and Chadlace. 228 The Hollingsworths' cross-claim repeated by incorporation Big Country's allegations and, without elucidation, asserted that they were entitled to indemnity from Mr Karacominakis and Chadlace. Bainton J noted that the summons simply sought indemnity and said that the claim for indemnity failed. No further explanation was given. 229 Mr Karacominakis alleged an implied agreement that the Chadlace parties would indemnify him in respect of any liability to Big Country. Bainton J said that Mr Karacominakis' contract with Chadlace (erroneously referred to as the deed of 24 April 1992 but in fact the deed of 13 August 1993) "attempted but failed to confer any indemnity", and his Honour went on to say, apparently on the assumption that the deed was effective despite the absence of the Transfer Date, that he could not imply "an agreement to the effect of that which they probably intended to make but failed so to do". 230 Although they had not claimed it, Bainton J observed that Wall Investment was entitled to contribution from the Hollingsworths for the reasons to be found when he came to deal with contribution claims. At that time he first dealt with Wall Investment's claims for contribution from Mr Karacominakis and Chadlace, saying - "Contribution is another principle which evolved during Ld Coke's tenure of office. See Herberts Case (1584) 3 Co Rep 11b. The principle evolved differently at law than in equity. At law that entity who paid could recover only an aliquot part from the others, depending on the whole number of sureties. If one became insolvent his shares could not be recovered from the others. Cowell v Edwards (1800) 2 Box - p 268, Dering v Earl of Winchelsea (1787) 1 Cox Eq Cas 318. But in equity (the principle which now prevails in this court) he who pays can make the other solvent sureties contribute rateably to the entire obligation, Peter v Rich 1629 I Rep Ch 19, Lowe v Dixon (1885) 16 QBD 455, an obligation which equity will enforce against the estate of a deceased co-surety Primrose v Bromley (1739) I Atk 89. Whether or not two liabilities are co-ordinate in this sense is determined by whether or not payment of one would discharge the other. Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 346 per Barwick CJ, McTiernan and Menzies JJ. However, and probably of considerable significance in this case considering the magnitude of Big Country's quantification of its claim, the right to contribution arises only when 'one of several persons has paid more than his proper share towards discharging a common obligation'. Davies v Humphreys (1848) 6 M & S W 153 at 168-9 (151 ER 361 at 367-8). Until that happens, if it does, this Court can do no more than declare that upon payment of more than the proper aliquot share the surplus is recoverable rateably from any others under a coordinate liability. See the judgment of Wright J in Wolmershausen v Gullick (1893) 2 Ch 514 at 529 which reviews the development of the entitlement to contribution from Justinian's statement of it, through its application by the custom of the City of London in the time of Queen Elizabeth to the time of his judgment. I have held that each of Wall Investment, Mr & Mrs Wall, Mr & Mrs Hollingsworth and Karacominakis are each liable to Big Country in the same amount, $21221 and the difference between the two income streams to which I have referred (and called $X) (as at 30 June 1997). That burden is to be spread among those six defendants. How it will fall will depend on the ability of each to meet it. I cannot decide that now; all I can do is to make a declaration to that effect. I have determined that Chadlace is not liable at all to Big Country, so that the claim against it for contribution fails." 231 When later dealing with the Hollingsworths' claims against Mr Karacominakis and Chadlace, his Honour said that if the Hollingsworths were compelled to pay Big Country they were entitled to contribution from Mr Karacominakis but not from Chadlace. 232 Contribution and indemnity must be considered afresh in this appeal. The position to this point is that Wall Investment, Mr Karacominakis, Chadlace and the Johnstons are all liable to Big Country for the unpaid rent and damages, although on different bases. Wall Investment is liable by privity of contract under the lease. Mr Karacominakis is liable as lessee by force of s 51 of the Real Property Act, and also by privity of contract under the deed of 24 April 1992. Chadlace is liable by privity of contract under the deed of 13 August 1993. The Johnstons are liable by privity of contract under the deed of 13 August 1993, but as guarantors of Chadlace's obligations. No question of indemnity or contribution in favour of the Hollingsworths or the Walls arises. 233 If the Johnstons pay Big Country they will be entitled, as sureties for Chadlace, to be indemnified by Chadlace. This was not in question, and was not part of the proceedings. There could not be indemnity or contribution from the Johnstons in favour of Chadlace. The possible questions are as to indemnity or contribution - (i) in favour of Wall Investment, from any or all of the Hollingsworths, Mr Karacominakis, Chadlace and the Johnstons; (ii) in favour of Mr Karacominakis, from any or all of Wall Investment, the Hollingsworths, Chadlace and the Johnstons; (iii) in favour of Chadlace, from any or all of Wall Investment, the Hollingsworths and Mr Karacominakis; and (iv) in favour of the Johnstons, from any or all of Wall Investment, the Hollingsworths and Mr Karacominakis. (i) In favour of Wall Investment 234 Under the general law, in the absence of contrary agreement the assignee of a lease must indemnify the lessee for any breaches of covenant during the assignee's term: see earlier in these reasons, especially Moule v Garrett. Chadlace was not a legal assignee of the lease, and Mr Karacominakis was the last legal assignee of the lease. The breach of covenant occurred while he was assignee, and he must indemnify Wall Investment. The breach of covenant did not occur while the Hollingsworths were assignee, and they are not liable under the general law to indemnify Wall Investment. 235 The indemnity by the Hollingsworths in favour of Wall Investment and the Walls in the agreement for sale of business of 5 May 1989 was against any action Big Country might take to enforce the covenants in the lease against them "as a result of default or any action of the Purchasers which could give rise to any such action". The indemnity must be read as referring to any default of the Hollingsworths or other action of the Hollingsworths by which the Wall parties were liable to Big Country. There was no such default or other action, and Bainton J was correct in this respect. 236 The indemnity by the Hollingsworths in favour of Wall Investment and the Walls in the deed of assignment of 22 May 1989 was in the terms - " … AND the Assignee hereby agrees to indemnify and keep indemnified the Assignor and the Guarantors against any loss or damage arising to the Assignor or the Guarantors by reason of the Assignees [sic] failure to perform observe or satisfy such obligations or liabilities." 237 The "such obligations or liabilities" referred to "all the obligations or liabilities which are required to be performed observed or satisfied by the Lessee pursuant to the Lease". The non-payment of rent was not a failure by the Hollingsworths within the indemnity, because they were not obliged to pay the rent. 238 That leaves as to indemnity the positions of Chadlace and the Johnstons. There was no contract between them and Wall Investment. But the basis on which, under the general law, Mr Karacominakis as legal assignee must indemnify Wall Investment extends in my view to make Chadlace also liable to indemnify Wall Investment. 239 The basis is described in Mason and Carter, Restitution Law In Australia, 1995 at 208 as recoupment, derived together with contribution from considerations of natural justice (as to contribution see Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350-2 per Kitto J). The authors say - "Rights of contribution and recoupment derive from a single source, namely the injustice of the defendant having had its burden relieved by the plaintiff. But a right of recoupment differs in its application from contribution because there is no 'equality': rather the respective positions of P and D are such that it is just that P should throw the whole burden of P's liability to X upon D's shoulders. If it were otherwise, D would be seen to have received an unjust benefit (that is, the effective release of the burden to X) at the expense of P who bore it.[Cf Pavey v Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 256-7 per Deane J.] Thus, in the standard guarantee situation a guarantor (P), who is forced to meet the creditor's (X's) claim, is entitled as against the principal debtor (D) to recoupment in full for the outlay. This is one example of a broader principle, as Lord Wright MR demonstrated in Brook's Wharf and Bull Wharf Ltd v Goodman Bros: [[1937] 1 KB 534 at 544, cited with approval by Walsh JA in Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 at 47. See also The Pindaros [1983] 2 Lloyd's Rep 635.] 'The essence of the rule is that there is a liability for the same debt resting on the plaintiff and the defendant, and the plaintiff has been legally compelled to pay, but the defendant gets the benefit of the payment, because his debt is discharged either entirely or pro tanto, whereas the defendant is primarily liable to pay as between himself and the plaintiff.'" 240 In Moule v Garrett itself the assignee's obligation to indemnify the original lessee was founded by Cockburn CJ (at 104) on - " … the general proposition … that where one person is compelled to pay damages by the legal default of another, he is entitled to recover from the person by whose default the damage was occasioned the sum so paid. This doctrine, as applicable to cases like the present, is well stated by Mr Leake in his work on Contracts, p 41: 'Where the plaintiff has been compelled by law to pay, or, being compellable by law, has paid money which the defendant was ultimately liable to pay, so that the latter obtains the benefit of the payment by the discharge of his liability; under such circumstances the defendant is held indebted to the plaintiff in the amount'." Willes J had referred in argument (at 103) to - "the general principle, that where two persons are under an obligation to the same performance, though by different instruments, if both share the benefit which forms the consideration they must divide the burden; if only one gets the benefit he must bear the whole", and agreed with Cockburn CJ (at 104) - " … on the ground that where a party is liable at law by immediate privity of contract which contract also confers a benefit, and the obligation of the contract is common to him and to the defendant, but the whole benefit of the contract is taken by the defendant; the former is entitled to be indemnified by the latter in respect of the performance of the obligation." 241 In the present case, albeit only an equitable assignee Chadlace undertook direct liability to Big Country under the deed of 13 August 1993; as between itself and Wall Investment it had the full benefit of the lease, and was as a matter of fact responsible for payment of the rent; and in my view Wall Investment is entitled to recoupment from it if Wall Investment pays Big Country. 242 Is Wall Investment also entitled to recoupment from the Johnstons? In Becton Dickinson UK Ltd v Zwebner (1989) 1 QB 208 it was held that a lessee who had assigned the lease but been obliged to pay the lessor was entitled to indemnity from a guarantor to the lessor of the assignee's obligations. The reasoning, with reference inter alia to Moule v Garrett, was that the guarantor's obligation to the lessor was "prior to" that of the lessee, so that as between them the guarantor's was the primary and the lessee's was the secondary liability: as between them, therefore, the lessee was entitled to indemnity from the guarantor. The correspondence with the well accepted entitlement of a surety to indemnity from the debtor is close - the party with the primary liability must indemnify the party with the secondary liability, and in my view it is correct to view the guarantor's liability as liability primary to the lessee's secondary liability because it goes together with the undoubtedly primary liability of the assignee. In my opinion, Wall Investment is also entitled to recoupment from the Johnstons. 243 There is no room, in these circumstances, for contribution in favour of Wall Investment. (ii) In favour of Mr Karacominakis 244 No indemnity was given by Chadlace in favour of Mr Karacominakis in either the agreement for sale of 6 July 1993 or the deed of 13 August 1993, and a contractual indemnity can not be implied. Since Mr Karacominakis must indemnify Wall Investment, he is not entitled to indemnity or contribution from Wall Investment. There is no ground for indemnity or contribution from the Hollingsworths. Without repeating it, however, on the reasoning whereby Wall Investment is entitled to recoupment from Chadlace and the Johnstons in my view Mr Karacominakis is also entitled to recoupment from Chadlace and the Johnstons. There is no occasion for contribution from them. (iii) In favour of Chadlace 245 Since Chadlace must indemnify Wall Investment and Mr Karacominakis, it is not entitled to indemnity or contribution from either of them. There is no ground for indemnity or contribution from the Hollingsworths. (iv) In favour of the Johnstons 246 The Johnstons are relevantly in the same position as Chadlace. 247 In the result Wall Investment and Mr Karacominakis are entitled to declarations of their entitlement to recoupment from Chadlace and the Johnstons in the event that either pays the unpaid rent and damages to Big Country. The false representation claims by the Chadlace parties against Big Country and Mr Hesky 248 The false representation claims were made on the grounds of misleading conduct within the Trade Practices Act and the Fair Trading Act. It was said that Big Country, by Mr Hesky, had by making false representations engaged in misleading conduct, that Mr Hesky was knowingly concerned in that misleading conduct, and that the Chadlace parties had suffered loss or damage by that conduct in that they relied on the representations in purchasing the business and entering into the deed of 13 August 1993. The false representations alleged were - (a) that the business had generated when conducted by the Hollingsworths, and was generating when conducted by Mr Karacominakis, "sufficient income to pay the rent payable to [Big Country] under the lease of the premises and the other expenses of carrying on the business"; and (b) that none of Wall Investment, the Hollingsworths or Mr Karacominakis "had been late with payment of rent due to [Big Country]". 249 According to Mr Johnston, at the end of March 1993 he telephoned Mr Hesky, told Mr Hesky that he was considering the purchase of the business, and asked Mr Hesky to confirm "the amount of rent being paid to you". Mr Hesky named an amount, which Mr Johnston did not recall but which was consistent with his understanding of the rent then payable under the lease. Still according to Mr Johnston, the conversation continued - "I said: 'How long have you owned the premises?' He said: 'About twelve years.' I said: 'What sort of tenant has Nick Karacominakis been?' He said: 'He's been good.' I said: 'Has he ever been late with rent payments?' He said: 'What does that matter?' I said: 'It would show if the business was making sufficient money to cover the rent and other expenses.' He said: 'Nick has not been late with any payments.' I said: 'What about the previous tenants, have they ever been late with rent?' He said: 'No. All payments of rent have either been on time or early.'" 250 Mr Hesky agreed that he had a telephone conversation with Mr Johnston, which he placed in early March 1993, in which Mr Johnston asked, "What type of tenant is Nick?" and Mr Hesky said, "He pays the rent on time". Mr Hesky said that he did not recall being told by Mr Johnston that the reason for the inquiry about payment of rent by Mr Karacominakis was to determine whether the income of the business exceeded its expenses, and that he did not recall being asked about the timing of rent payments by the previous tenants. He did not deny these elements of the conversation. 251 Bainton J did not specifically find that the conversation was as recounted by Mr Johnston, but must have so found. At one point in his reasons he said that "Hesky told [Mr Johnston] that Karacominakis had not been late with payments of rent, nor had previous tenants". The passages from his reasons next set out include that Mr Hesky said "Previous tenants were not late in their payments" and that Mr Hesky asserted to Mr Johnston "that the business was generating sufficient income to pay the rent". The claims were nonetheless dismissed because, in his Honour's view, what Mr Hesky said was not shown to be misleading and in any event it was not relied on in the purchase of the business. 252 The first passage in His Honour's reasons from which this appears, Mr Hesky being the person referred to, was - "He said previous tenants were not late in their payments. His accounts are in evidence - they record receipts from time to time of a few or several days after they should have been made, but the reasons were not explained. The entries were probably extracted from bank deposit books - there could be a variety of reasons for a few days delay in banking cheques." 253 The second passage was - "I am more inclined to the view that Johnston, who did the negotiations, relied on Karacominakis rather than that he relied on Hesky but if he did rely to some extent on Hesky what he was told was literally true, or at least not shown to be untrue. There is no evidence to establish that in any monthly period, let alone annual period, the rent exceeded the income. 'Income' is different from profit. There could be no doubt whatever that Johnston understood the difference between income and profit. Para 17(d) refers to the 'advertising subsidy'. While I regard it as equivalent to a rent reduction, it was actually paid by Big Country to Karacominakis, who paid the full contractual rent to Big Country. It had the same effect on Karacominakis' bottom line, but it does not establish that Hesky's assertion to Johnston that the business was generating sufficient income to pay the rent was misleading or deceptive. I add that Chadlace's purchase contract was not signed until a little over three months after this conversation between Hesky and Johnston (and the assertion in which reliance is placed was not propounded until 21 April 1995, which is a little after two years after it was made and a little over four months after the proceedings were instituted). I do not think that Chadlace was induced to purchase by anything that Hesky said to Johnston. It was induced by what Karacominakis told him. It is possible that Hesky's statement may have assisted Johnston in accepting what Karacominakis told him, but, if it did, that, in my view was its only impact on the decision to purchase. The onus of establishing that Chadlace (and Johnston and Schmitz) were induced by what Hesky said to them about rental payments, and that it was a misrepresentation, is on Chadlace, that is to say effectively on Johnston: he has not discharged it to my satisfaction." 254 It appears that his Honour found that the previous tenants had not been late with rent payments, regarding a few days discrepancy in Big Country's accounts as explicable for other reasons. However, there was direct evidence that the Hollingsworths had been late with rent payments, so that so far as Mr Hesky was referring to them what he said was untrue and was misleading in this respect. Mr Hesky wrote to the Hollingsworths on 12 September 1990 complaining that the rent had not reached Big Country's bank "until later than the due date" in the previous five months; the dates of receipt he recorded were from three to ten days later than the due date. He wrote to them on 17 April 1991 noting that the rent due on 1 April 1991 had been paid on 12 April 1991 and was short paid by $3,771.63, and that it had been agreed that this amount would be paid over a four month period. He wrote to them on 24 July 1991 saying that $1,771.92 was outstanding and that the four-monthly payment had not been received. This letter included, "We feel we have been very patient over the past months, accepting payment of the rent, due on the 1st of each month, late by up to 15 days, and this usually after we have telephoned to request payment", and insisted on payment on the first of the month in future. He wrote to them on 12 February 1992 with a similar complaint, saying "We have noticed recently that the tendency on your part to deposit the rent up to two weeks later than the due date, is becoming a habit". He wrote to them on 18 March 1992 saying that the rent due on 1 March 1992 had not been received. He wrote to them on 8 April 1992 asking that the current month's rent be paid that day. All this was in the face of requests by the Hollingsworths for rent relief on the ground that the business could not afford the rent - one letter from the Hollingsworths included that the business "can not survive for much longer with the stifling burden of the present rent". 255 His Honour appears to have considered that what Mr Hesky said conveyed only that the income exceeded the rent, and that that was true: he did not think that it had been represented that the income exceeded the rent and other expenses. With respect, in my opinion, there was misleading conduct in this connection. Mr Johnston had made known that he was asking about payment of rent because, in his view, late payment of rent would suggest that the business was not making sufficient money to cover the rent and other expenses. The distinction between income and profit made by his Honour was in this context unjustified, because the income had to meet the expenses other than rent. The untrue statement that payments of rent had been on time or early conveyed, in the context of the conversation as a whole, that Mr Hesky had no reason to think that the business was not making sufficient money to cover the rent and other expenses. This was misleading, both as to the Hollingsworths and as to Mr Karacominakis. 256 Mr Hesky had been told by the Hollingsworths on a number of occasions that the rent was too high and the business was not profitable, and had been asked to reduce the rent. Mrs Hollingsworth's letters to Mr Hesky were eloquent of this. A letter in February 1991 asked rhetorically why she was struggling to pay her bills and spoke of "the slow rot this business is undergoing"; she said "At present I see no point in continuing to run the business". A letter apparently of August 1991 included, "If I was also paying market rate for the lease then I would not be paying last months bills with next months income nor delaying paying what you are due", and said that the business was "slowly sinking" and that it "can not survive for much longer with the stifling burden of the present rent". Mr Hesky knew that the late payments of rent were because the Hollingsworths were not making enough money from the business to pay it on time. He kept this from Mr Johnston by an answer to Mr Johnston's inquiries which was not only literally untrue but misleading in what he did not say: there may be misleading conduct without a positive representation where silence is an element in all the circumstances making it so (see for example Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84 at 88; Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 at 618-9; Winterton Constructions Pty Ltd v Hambros Austalia Ltd (1992) 111 ALR 649 at 665-7, especially the reference to the half-truth case). 257 There was not the same evidence of late payment of rent by Mr Karacominakis, at least on a literal view of payment of rent (see as to the "advertising subsidy" shortly described). However, within months of taking over the business Mr Karacominakis told Mr Hesky that the business was unprofitable. In a letter to Mr Hesky dated 31 August 1992 he said: "My efforts to revive this centre have been unsuccessful. At present I am running at an average loss of aproximately [sic] $1000PW. This business is not a viable proposition. I therefore request you to seek another tenant to accept a transfer of the lease. I do not require a purchase price. My equipment will be removed & the stock will be available, to purchase if required. I'm not prepared to continue here much longer. If a transfer of the lease is not performed in the very near future, I will vacate the premises." Mr Hesky replied saying that he appreciated "the difficulties you are having", but insisting that the obligations under the lease be performed. In Mr Karacominakis' letter of 29 September 1992, enclosing the rent for October 1992, Mr Karacominakis said succinctly, "I can no longer guarantee to pay rent for the above premises. Would you please make other arrangement regarding your building." 258 This led to a deal under which Big Country gave Mr Karacominakis a so-called "advertising subsidy" of $2,500 per month for the first six months of 1993. The letter outlining the deal said that it was not to be viewed as a reduction in rent, and in fact Mr Karacominakis paid the full rent to Big Country and Big Country paid $2,500 to Mr Karacominakis. As Bainton J said, however, the advertising subsidy was equivalent to a rent reduction. The $2,500 per month was only partially used for advertising, and Big Country took no steps to confine its use in that way. A letter from Mr Hesky to Mr Karacominakis dated 2 June 1993 referred to it as a "rebate", recognising its true character. 259 In these circumstances, in relation to Mr Karacominakis also Mr Hesky's answer to the inquiry made by Mr Johnston was misleading. The business was not making sufficient money to cover the rent and other expenses, and Mr Karacominakis remained in business because of an undisclosed de facto reduction in rent (cf the undisclosed rent holiday in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563). The representation alleged and the evidence were concerned with "sufficient money to cover the rent and other expenses", and went beyond income as distinct from profit. 260 In my view, therefore, the Chadlace parties did discharge the onus of establishing misleading conduct on the part of Big Country in which Mr Hesky was knowingly concerned. This would not avail the Chadlace parties, however, unless (in the words of s 82 of the Trade Practices Act and the corresponding words in the Fair Trading Act) they suffered loss or damage by that misleading conduct: that is, on the facts of this case, that they relied on what Mr Hesky said in purchasing the business. 261 Bainton J's finding as to this, in the second passage set out above, is , with respect, somewhat equivocal, and in part founded on a mistake of fact. 262 His Honour's statement that he did not think that Chadlace was induced to purchase by anything that Mr Hesky said to Mr Johnston, but was induced by what Mr Karacominakis told Mr Johnston, and his opinion that the Chadlace parties had not discharged their burden of proof to his satisfaction, must be read with the earlier acceptance that Mr Johnston may have relied to some extent on Mr Hesky. It must also be read with the qualifying sentence, "It is possible that Hesky's statement may have assisted Johnston in accepting what Karacominakis told him, but, if it did, that, in my view, was its only impact on the decision to purchase". I do not read his Honour's reasons as excluding contribution to the decision to purchase the business, and contribution to the decision is enough. 263 That the contribution was thought to be limited seems to have been in part because the Chadlace parties did not "propound" the misleading conduct until a time in 1995. If a person does not complain of misleading conduct when complaint would be expected, it may be proper to infer that the misleading conduct did not affect that person's conduct. But there was unchallenged evidence that Mr Johnston did not know of the late payments of rent, or of the advertising subsidy, until some time in 1995. The Johnstons had found the business unprofitable, but that was not the same as knowing that what Mr Hesky had said to them about payments of rent was untrue and false in what he did not say. Mr Johnston said that it had not occurred to him until 1995 that what Mr Hesky had said to him was wrong, and he was not cross-examined on this: indeed, it was not put to him that the delay showed that he had not relied on what Mr Hesky had said to him. In the circumstances, I do not think an inference of the kind mentioned above was properly open. 264 That the contribution was thought to be limited seems also to have been in part because the contract to purchase the business was not signed until a little over three months after the conversation between Mr Hesky and Mr Johnston. Implicit in this must have been that the Johnstons decided to purchase the business for other reasons influencing their conduct during the three months' period. But Mr Johnston's evidence, which was not challenged, was that the decision to purchase the business was made soon after the conversation with Mr Hesky, and in effect that there was then delay in implementing the decision. 265 I do not think that, so far as Bainton J found that the Chadlace parties did not rely on what Mr Hesky said in purchasing the business, his finding was soundly based. What finding, if a finding can be made, should be made on appeal? 266 If a material representation is made which is calculated to induce the representee to enter into a contract, and that person in fact enters into the contract, there arises a fair inference of fact that he was induced to do so by the representation: Gould v Vaggelas (1985) 157 CLR 215 at 236 per Wilson J. Given Mr Johnston's stated reason for his enquiry to Mr Hesky, the response was material to the purchase of the business and objectively calculated to induce Mr Johnston to purchase it. It could be inferred that it was subjectively calculated to do so, in order that Mr Hesky could be rid of a lessee who was saying he could not make a go of the business and could gain a lessee who might do better, but this does not seem to have been suggested and I put it aside. There is a fair inference that the Chadlace parties, via Mr Johnston, were thereby induced to purchase the business. 267 Apart from the fair inference, Mr Johnston gave evidence of reliance, albeit rather in passing. In the manner shortly described, he gave evidence in chief of reliance on what Mr Karacominakis told him about the turnover and profitability of the businesses. When being cross-examined on behalf of Mr Karacominakis to suggest that his reliance was on some figures provided to him by the Hollingsworths, he said that he relied on "comments from the landlord and other investigations I made as well". He said that "the emphasis was on the figure work that was given by Mr Karacominakis". 268 Any fair inference, and the weight to be given to this evidence, will of course be affected by any alternative inducement to purchase the business, and, as I have said, Mr Johnston gave evidence of reliance on what Mr Karacominakis told him. In his affidavit sworn on 6 April 1995 Mr Johnston gave evidence first of the conversation with Mr Hesky and then of the advertisement of the business by Mr Karacominakis and what Mr Karacominakis told him about it. The concluding paragraph of the affidavit, to which I will return when dealing with the false representation claims against Mr Karacominakis, read - "20. When I arranged for Chadlace Pty Limited to enter into the contract to purchase the business and at the time that I entered into the guarantee of the company's obligations under its lease, I did so believing that the turnover of the business was approximately $260,000.00 per annum, as stated in the advertisement I had first seen, and believing that a profit of about $1,000 per week was realised from the business's trading. I further believe [sic] that the income, expenditure and profits for the previous years had been as set out in the handwritten statements given by [Mr Karacominakis]. If I had known that the turnover was less than $260,000 per annum or the profits were less than $1,000 per week or as stated in the figures for past trading, I would not have arranged for the company to enter into the contract to purchase the business and I would not have guaranteed its obligations." 269 It is not clear whether Mr Johnston knew of the late payments of rent or the advertising subsidy as at 6 April 1995. However, neither in his subsequent affidavit nor in his oral evidence in chief did Mr Johnston assert reliance on what Mr Hesky told him, and as I have said the evidence of such reliance in cross-examination was rather in passing. But I see no reason to reject the oral evidence of reliance. Bainton J expressed no doubts about Mr Johnston's credibility and reliability. He must have accepted Mr Johnston's account of the conversation with Mr Hesky. He explicitly accepted Mr Johnston's evidence in preference to that of Mr Karacominakis, and said, apparently with general application, that - " … had I any doubts as to whether or not I should accept Johnston's evidence as reliable, those doubts would have been dispelled by the 148 pages of cross-examination of him on behalf of Karacominakis. He impressed me as doing his best to answer accurately all that was asked of him." 270 Reliance on representations by Mr Karacominakis does not exclude reliance on the misleading conduct of Big Country, whether as an inference or by acceptance of the evidence of Mr Johnston. To return to Gould v Vaggelas, the representation need not be the sole inducement, and it is sufficient so long as it plays some part, even if only a minor part, in contributing to the formation of the contract (at 636; see also Kabwand v National Australia Bank Ltd (1989) ATPR 40-950 at 50,378; Leda Holdings Pty Ltd v Oraka Pty Ltd (1998) ATPR 46-601 at 40, 515-6). If what Mr Hesky said to Mr Johnston assisted him in accepting what Mr Karacominakis told him, then unless its impact was so insignificant that as a matter of common sense it did not contribute to the decision to purchase the business the requirements of s 82 of the Trade Practices Act and its State equivalent are satisfied. 271 It is understandable that Mr Johnston would have paid regard to the results of all the enquiries he made when deciding whether or not to purchase the business, and he had a particular purpose in his enquiries of Mr Hesky separate from his enquiries of Mr Karacominakis into trading figures. The enquiries into trading figures were not entirely satisfactory, and the practical test of whether the previous lessees had paid the rent on time is likely to have contributed to the decision. In my view Bainton J's conclusion was deflected by giving undue significance to when the contract to purchase the business was signed and when complaint of Mr Hesky's conduct was first propounded, and was undermined by incomplete recognition that the representation complained of need not be the sole inducement. I consider that it is open to be found in this Court, and should be found, that Mr Johnston, and via him the other Chadlace parties, relied on what Mr Hesky told him in purchasing the business, and that the Chadlace parties are entitled to recover from Big Country and Mr Hesky the loss or damage suffered by the misleading conduct of Big Country. 272 The only relief relevantly claimed in the Chadlace parties' notice of cross-appeal was by way of damages. At the hearing of the appeals they said that they sought orders under s 87 of the Trade Practices Act "bearing upon the deed of assignment so that it embodied no liability on us after we vacated the premises on 29 December 1993, so that we had no liability for rent or other liabilities after that time". Leave was needed to seek orders of that nature and, for reasons given at the time, leave was refused. I will come to the amount of damages later in these reasons. The false representation claims by the Chadlace parties against Mr Karacominakis 273 The false representation claims were made on the ground that the purchase of the business by Chadlace and the giving of the guarantees by the Johnstons had been brought about by misleading conduct by Mr Karacominakis in contravention of the Fair Trading Act. As earlier noted, the Chadlace parties succeeded in the claims and obtained damages. Mr Karacominakis appealed. The Chadlace parties did not cross-appeal to seek relief other than damages, but at the hearing of the appeals they said that they sought orders affecting the deed of 13 August 1993. As with seeking orders against Big Country and Mr Hesky under s 87 of the Trade Practices Act, leave was needed and, for reasons then given, leave was refused. The issue in the appeals was whether the award of damages should stand. 274 The misleading conduct was founded on a number of false representations alleged against Mr Karacominakis, namely - (a) A representation made on 13 March 1993, that the turnover of the business was approximately $260,000 per annum, its expenses were approximately $200,000 per annum, and the profits were approximately $60,000 per annum; (b) A representation made in April 1993, that the income and trading profit for the business for the financial years ended 30 June 1990 to 30 June 1992 and the period 1 July 1992 to 19 March 1993 were in particular amounts, summarised as follows - 1990 1991 1992 to 19.3.93 Income $253,318.00 $254,371.00 $261,557.00 $204,150.00 Trading Profit $33,889.12 $30,857.00 $57,825.00 $49,460.00 (c) A representation made on 15 May 1993, that the business produced a trading profit of at least $1,000 per week. 275 It was alleged that the turnover was significantly less than $260,000 per annum, that the expenses exceeded $200,000 per annum, that the income and trading profit were significantly less than as represented, and that the trading profit of the business, if any, was much less than $1,000 per week. 276 There were conflicts of fact between Mr Karacominakis on the one hand and the Johnstons on the other hand. Bainton J preferred the evidence of the Johnstons, saying that he was unable to accept Mr Karacominakis on any matter on which Mr Karacominakis' evidence differed from that of the Johnstons and that he had no doubt that Mr Karacominakis' evidence "was driven by his misperception of what might exculpate him, regardless of its truth". This was challenged in the appeals, but for reasons to which I will come I consider that his Honour's essential findings adverse to Mr Karacominakis should not be disturbed. 277 As to representation (a) above, on 27 February 1989 Mr Karacominakis advertised the business for sale as a business with "$260.000 T/O pa". The Johnstons saw the advertisement and responded to it. They were shown over the premises, and on 13 March 1993 Mr Johnston returned to the premises and expressed interest to Mr Karacominakis. He told Mr Karacominakis that his accountant and his bank needed profit and loss statements for the previous years so that they could see how the business had been performing, and Mr Karacominakis said that he did not have any available because they were with his accountant but that he ought to be able to get something to the Johnstons in the next week. Mr Karacominakis said on this occasion that the business was turning over about $260,000 per year, that expenses were $200,000 per year, and that the net profit before tax was $60,000. Representation (a) above was made. 278 Pursuant to the request for profit and loss statements, in late March 1993 Mr Karacominakis sent to the Johnstons four pages setting out in manuscript what were described as profit and loss statements for the years ended 30 June 1990, 30 June 1991 and 30 June 1992 and the 37 weeks to 19 March 1993. Each showed income for the twelve months or 37 weeks and expenses in different categories, with the mathematical trading surplus. The figures were those in representation (b) above, and that representation was made. 279 On 15 May 1993 Mr Johnston again went to the premises, and there made an offer to Mr Karacominakis to purchase the business. After some negotiation they agreed upon a price of $50,000. Mr Johnston gave evidence that on 13 March 1993 Mr Karacominakis had said that he was taking "over $1000 a week as income", which from the other figures had to be trading profit, and that on 15 May 1993 Mr Karacominakis said that the business "produces about $1000 profit in cash for me each week as regular as clockwork". Representation (c) was made. 280 The Johnstons knew that Mr Karacominakis had been conducting the business for only part of the period covered by the profit and loss statements - he told them eighteen months, although in March 1993 the correct period was eleven months. They must have appreciated that he had got the figures for the earlier period from the Hollingsworths, or purported to have done so, and Mr Johnston contacted Mr Hollingsworth about their conduct of the business. Bainton J found that Mr Karacominakis prepared the profit and loss statements "for the purpose of inducing Johnston to believe that they correctly revealed the income and expenditure of the squash centre for the periods covered by each", and that he gave them to Mr Johnston "to assist in inducing him and his wife and ultimately Chadlace to purchase the lease and equipment from him". He rejected Mr Karacominakis' evidence that he told Mr Johnston that the figures were only an opinion and should be verified, and found that Mr Karacominakis represented the figures as a record of actual receipts and expenditure. 281 When first adverting to these claims Bainton J said that it would appear that he found "those breaches proved", referring to the representation in the advertisement for the sale of the business and representations "orally in discussions with Johnston as to the income from and the trading profits of the business for and after the year of income ending 30 June 1990 and as to his forecast income from 1 July 1993 to 30 June 1994". The falsity of representation (c) seems to have been regarded as following from the falsity of representation (b) so far as concerned with trading profit: $1000 per week equals $52,000 per year. 282 His Honour did not thereafter detail findings that the respective representations were misleading. He referred to "the gap between what Karacominakis told Johnston he was taking and what was in fact its true figure". He said that at the end of October or early in November 1993 Mr Johnston found time to "get himself up to date with the paperwork" and discovered that "the income was significantly less than Karacominakis had represented it as being", a position which continued on Mr Johnston checking the income "for the next couple of weeks". His Honour had earlier gone through Mr Karacominakis' complaints to Mr Hesky about the profitability of the business, including Mr Karacominakis' statements to Mr Hesky that the business was bringing in about $1,000 per week less than Mr Karacominakis was spending to operate it and that during his tenancy Mr Karacominakis was increasing his bank overdraft in order to meet the outgoings of the business. His Honour must have found that both the turnover and the profitability of the business were not as represented, but it has to be said that his reasons are rather deficient in detail in this respect. 283 The detail could be of importance, because the representations alleged themselves varied. The representations as to turnover encompassed approximately $260,000 for an unspecified year, presumably a year proximate to March 1993 but perhaps an average of two or more years, and figures from $253,318 to $261,557 over the 1990 to 1992 financial years; they also encompassed $204,150 for the 37 weeks to 19 March 1993, being a higher turnover. Of more significance, the figures for profits encompassed approximately $60,000 per year and figures from $30,857 to $57,825 for the 1989 to 1992 financial years, plus a figure of $49,460 for the 37 weeks. A finding of misleading conduct would normally be founded on actual turnover and profits materially less than these figures, but which of the figures? And what were the findings as to actual turnover and profits? 284 There was clear evidence to the effect that the Johnstons could not make a go of the business, and that the turnover and profits while they conducted it were much less than as represented whichever represented figures be adopted. The takings of a business after acquisition by a purchaser may provide evidence of the takings prior to the purchase, warranting a finding of misrepresentation as to the takings prior to the purchase (Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 at 291, citing R v Lock (1926) 26 SR (NSW) 272 at 273-4; Selman v Minogue (1937) 37 SR (NSW) 280 at 282; McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) 42 SR (NSW) 187 at 193-4). But it will depend on the facts. The purchaser's conduct of the business, or even the customers' reaction to the change in ownership, may bring a reduction in takings. 285 In this case there was more evidence, supportive of misrepresentation. 286 First, there were Mr Karacominakis' complaints to Mr Hesky that he, Mr Karacominakis, could not make a go of the business and was losing $1,000 per week. Bainton J noted that cross-examination of Mr Karacominakis elicited that his statement to Mr Hesky that he could no longer guarantee to pay the rent was "a deliberately false statement made with the intention of inducing Hesky to reduce the rent", and it produced the advertising subsidy, but even allowing for this it is plain enough that his Honour concluded that Mr Karacominakis was trading at a loss. Mr Karacominakis sought in his evidence to attribute the weekly loss to the purchase of additional equipment, recarpeting, advertising, and the cost of outside signs. As recorded by his Honour, Mr Karacominakis' own records indicated that this expenditure, or the major part of it, had been incurred prior to 30 June 1992. Mr Karacominakis then asserted that thereafter his expenditure was largely in cash. When faced with his income tax return for the year ended 30 June 1993, notable for absence of the claimed expenditure, Mr Karacominakis at first blamed his accountant, and then said that he and his accountant worked out a reasonable amount of tax and his accountant prepared a return which would lead to that amount of tax. It is no wonder that his Honour did not find this acceptable. 287 Mr Karacominakis put forward figures for actual receipts and expenditure during his conduct of the business, first in an annexure to a witness statement ("the annexure figures") and then in his oral evidence ("the oral evidence figures"). 288 The annexure figures were said to have been compiled from bank statements, from invoices for goods for which cash had been paid, and as to other cash payments to gym instructors from "records kept"; they also included estimated personal and petty cash expenditure. They were for the period 24 April 1992 to 31 March 1993, and recorded mostly bank deposits and cash payments to result in turnover. The turnover for the period was $261,706. Bainton J felt unable to reconcile the apparently good turnover with the complaints to Mr Hesky. He also considered that the figures could not be reconciled with figures extrapolated from the profit and loss statements provided to the Johnstons, which for the period 1 May 1992 to 30 March 1993 showed income of $250,000. 289 As well as the annexure figures, the bundle of documents admitted en globo included a similarly constructed table for the period 1 July 1992 to 30 June 1993. The turnover for the period was $271,411. Almost no attention was paid to this in the course of the hearing. Mr Karacominakis was cross-examined extensively as to the annexure figures, including in relation to their divergence from figures in his tax return for the year ended 30 June 1993. This produced the explanation of how the tax return figures were, in effect, made up. 290 The emergence of the oral evidence figures was described by his Honour - "On the afternoon of Thursday 17 August Counsel for Karacominakis sought and was granted an early adjournment (the next sitting day was Monday 21 August) to 'check' documents and figures. On the following Monday morning she elicited from Karacominakis that he had been able to arrive at some final figures. He produced seven books of cheque stubs for the period 12 May 1992 to 27 June 1993. An examination of the stubs indicates that some may well relate to the squash centre, but that cannot be said even of the majority of them. There were also produced six wages books. One was a Zions System book for the period, week ending 27 April 1992 to the week ending 18 October 1992. The second was a small notebook and covered the period 19 October 1992 to the week commencing 9 August 1993. Both had a remarkably pristine appearance. Though I admitted them at that late stage in the hearing I am not prepared to hold even on a bare balance of probabilities that either is genuine. Then Karacominakis produced another six page document (the first two pages purport to summarise the others). Page 1 of this new document is headed 'Expenses Summary to 1 July 1992 to 19 March 1993'. It shows total expenses of $175,416.86 (plus $3,284 'Equipment Purchase'). Ignoring the equipment purchase that expenditure is at an average of $4,741 per week. Page 2 is headed 'Expenses Summary 24 April 1992 to 31 March 1993. It shows total expenses to be $230,919.02. That is an average of $5,370 per week. That means that the expenditure for the additional ten weeks is $55,503, an average of $5,550 per week. The figures given to Johnston on p 4 of the profit and loss statement handed to him by Karacominakis show expenditure of $154,484 for the 37 week covered, ie a weekly average of $4,175 per week. That demonstrates that the profitability of the squash centre was misrepresented to Johnston if those figures are correct. I doubt that they are, but do not infer that those late produced figures were understated." 291 The oral evidence figures purported to support expenses as distinct from turnover, including some of the cash expenses which went to make up turnover in the annexure figures. On any view, if the figures were correct the profit for the period 24 April 1992 to 31 March 1993 was about $31,000, of which $15,000 was the advertising subsidy, to be compared with the represented figure for the period from 1 July 1992 to 19 March 1993 of $49,460; and, as Bainton J noted, the profit was misrepresented. The obvious lack of confidence in Mr Karacominakis' figures was well justified, and his Honour was not prepared to regard the oral evidence figures as acceptable. 292 Secondly, there were the Hollingsworths' complaints to Mr Hesky that they could not make a go of the business. Mr Karacominakis gave evidence that he derived the figures for their conduct of the business in the profit and loss statements from a "statement" Mrs Hollingsworth gave him, which he did not keep. Bainton J said - "He was then confronted with a copy of the Hollingsworths profit and loss statements for the period ended 30 April 1992. It showed a loss for that period of $16,715 after taking to account a profit of $5,576 in a sale of some plant." The unstated comparison seems to have been with a trading surplus for the year to 30 June 1992 in the profit and loss statement provided by Mr Karacominakis to the Johnstons. There was nothing to establish that, contrary to their complaints to Mr Hesky, the Hollingsworths conducted the business with the income and expenses stated in the lastmentioned profit and loss statement, rather the reverse, and Mr Karacominakis' evidence directed to doing so was considered to have been unacceptable. 293 Although without detailed findings, I think it clear enough that Bainton J reasoned that the Hollingsworths had conducted the business at a loss, Mr Karacominakis had conducted the business at a loss, and the Johnstons conducted the business at a loss, and that whichever of the represented figures be taken for turnover and profitability the representations had been shown to be false. In my opinion the reasoning was open to his Honour in the circumstances of this case, although in one respect it requires further consideration. 294 Mr Karacominakis submitted that there was no evidence establishing that Mr Karacominakis did not have a turnover of approximately $260,000 at the time of the sale to Chadlace. The asserted turnover figures in the annexure were not falsified simply by regard to the complaints to Mr Hesky, because the complaints were as to profitability - the income could have been as represented, but exceeded by expenditure. Unprofitability when the business was conducted by the Hollingsworths and Mr Karacominakis reflected the difference between income and expenditure, and did not of itself point to any particular level of income. In any event, it was said, that his Honour declined to accept the annexure figures for turnover did not establish the falsity of the representation, nor did his Honour's declining to accept the oral evidence figures; it was still for the Chadlace parties to prove the falsity of the representations. 295 Up to a point, the submission is correct. On the other hand, Chadlace found income significantly less than as represented by Mr Karacominakis and, for that reason, unprofitability. Although not expressly referred to by his Honour, the evidence included a profit and loss statement for Chadlace's conduct of the business showing trading income of $54,888 and expenditure of $88,995. The expenditure was of the same order as that asserted by Mr Karacominakis, and the deficiency was in the income. A Hollingsworth profit and loss statement for the year ended 30 June 1991 showed trading income of $238,199 (and a profit of $8,140), less than the turnover figure of $254,371 for that year represented by Mr Karacominakis. The Hollingsworths' profit and loss statement for the period ended 30 April 1992 showed trading income of $189,792, equivalent to $227,000 per year, and the loss of $16,715 to which Bainton J referred: although higher turnover than Chadlace encountered, this was materially less than any of the turnover figures as represented by Mr Karacominakis and much less than the figure of $261,557 for the year ended 30 June 1992 in the profit and loss statements provided by Mr Karacominakis to the Johnstons. (Mr Karacominakis submitted that the Hollingsworths' profit and loss statement had not been proved, but it was in evidence and could be taken for what it appeared to be.) It may well have been open to find that the represented turnover figures were false notwithstanding the matters put by Mr Karacominakis. 296 However, there were also the representations as to profitability. Quite apart from their complaints to Mr Hesky, it was shown that the Hollingsworths had conducted the business at a much less profit than represented and then at a loss, see their profit and loss statements earlier mentioned. His Honour did not accept Mr Karacominakis' oral evidence directed to showing profitability while he conducted the business, evidence at odds with Mr Karacominakis' own complaints to Mr Hesky. Chadlace found the business unprofitable. In my view it was well open to his Honour, on the reasoning I have described, to find misrepresentation as to profitability, and that is sufficient to sustain misleading conduct on the part of Mr Karacominakis. 297 Mr Karacominakis argued that, because Mr Johnston agreed that the expenses of the business were of the same order as Mr Karacominakis had represented, misrepresentation as to profitability had not been established. It was said that if the expenses were consistent the falsity had to lie in income, and if falsity of the represented turnover figures had not been established then falsity as to profitability had not been established. I do not find this persuasive. Falsity as to profitability may be found by regard to matters beyond Chadlace's trading experience. The argument rather supports a finding of the falsity of the represented turnover figures as the reason for the falsity of the represented profitability. 298 The Chadlace parties relied on Mr Karacominakis' tax return for the year ended 30 June 1993 to establish the falsity of the representations. It attached a profit and loss account showing income of $200,419 and profit of $23,364, the profit figure including $15,000 for the rent subsidy. Mr Karacominakis' evidence that he and his accountant worked out a reasonable amount of tax and prepared the return accordingly will be recalled. If indeed the business was not profitable, it is curious that Mr Karacominakis returned a profit. Speculation is possible, but impermissible. I do not think reliance can properly be placed on the tax return, either in favour of the Chadlace parties to assist in establishing the falsity of the representations or in favour of Mr Karacominakis to suggest that his protests of unprofitability to Mr Hesky were overstatements in an endeavour to obtain rent relief. Mr Karacominakis rejected the latter proposition in cross-examination, although he sought to explain that the unprofitability was because he was "putting money in" for "abnormal expenses". He was obliged to agree, however, that most of the abnormal expenses were prior to 30 June 1992. Bainton J seems not to have found this evidence acceptable, and took the protests of unprofitability as genuine. There is insufficient reason to do otherwise in the appeals. 299 I return to the challenge to Bainton J's essential findings adverse to Mr Karacominakis. Mr Karacominakis submitted that his Honour had erred in declining to accept Mr Karacominakis' evidence of the annexure figures, the figures in the bundle of documents, and the oral evidence figures. If that evidence were accepted, he said, then it could not be found that the representations as to turnover were misleading, at least in respect of the period of Mr Karacominakis' conduct of the business: the figures were sufficiently close to or greater than the represented turnover figures with which the evidence dealt. It was said that most of the primary records underpinning the figures were in evidence, and that his Honour's unfavourable view of the oral evidence figures (see the passage from his reasons earlier set out) was unwarranted because their source records had been produced from the possession of Chadlace and must have been received by it on the sale of the business, and because the "cheque stubs" said not to relate to the squash centre were not identified. Mr Karacominakis proffered a schedule prepared for the purposes of the appeals by his legal representatives, based in part on the primary records in evidence, which it was said showed income for the year ended 30 June 1993 of not less than $271,675 or not less than $256,675 if the advertising subsidy were deducted. 300 There would remain the turnover for the years prior to the 1993 year, and the question of profitability. It does not matter, because a major difficulty with the submission is that, as was properly acknowledged, it depended on acceptance of Mr Karacominakis' credibility. One component of all the assessments of turnover was bank deposits, for which there were records. The other components were cash payments said by Mr Karacominakis to have been made from cash received. One of the other components, goods paid for in cash, had primary records in that there were invoices, but it was necessary to accept that Mr Karacominakis paid in cash. The second of the other components, wages and fees for instructors, took as the primary records the wages books which Bainton J was not prepared to accept as genuine, and that the wages books had been received by Chadlace on the sale of the business did not mean they were genuine. There must have been wages and fees for instructors, and comparison with such wages and fees paid by the Hollingsworths and Chadlace suggested that the amounts would have been more than was shown in the profit and loss statement accompanying Mr Karacominakis' taxation return, but acceptance of this component was still compromised. The third of the other components, estimated personal and petty cash payments, was entirely dependent on acceptance of Mr Karacominakis' credibility. 301 Much earlier in these reasons I referred to the submission that Bainton J's preference for the evidence of Mr Hesky in relation to the representations was vitiated by what was described as denial of procedural fairness. I concluded that his Honour's view of Mr Karacominakis' credit was not properly open to appellate question. As was then apparent, his Honour's adverse view of Mr Karacominakis' credit was comprehensive, and it has now been seen that it extended to Mr Karacominakis' credibility concerning the turnover and profitability of the business. In this area also I consider that his Honour's view can not successfully be challenged on appeal. His Honour was not prepared to find that the turnover was as put forward by Mr Karacominakis, and despite the detailed and careful submissions on Mr Karacominakis' behalf in the appeals I do not think he has been shown to have erred in this respect. 302 The Chadlace parties bore the burden of establishing that the representations as to turnover and profitability were untrue, and it was not for Mr Karacominakis to establish that they were true. In my opinion Bainton J found, and was entitled to find, that the Chadlace parties had discharged their burden. 303 Mr Karacominakis then submitted that, even if there had been misleading conduct, the Chadlace parties had not acted in reliance on that conduct. He said that the Johnstons had satisfied themselves, from their own observations and other enquiries, as to the turnover of the business. The observations were many visits to the premises to see the business in operation. The other enquiries were the enquiry of Mr Hesky and enquiries of Mr Hollingsworth, in the latter case resulting in the provision of at least the profit and loss statement for the year ended 30 June 1991 showing a turnover of $238,199. (It seems that the profit and loss statement for the year ended 30 June 1992 was obtained at a later time, after the proceedings had been commenced.) Particularly given the profit and loss statement, it was said, the Johnstons can not have decided to purchase the business in the belief that the turnover was approximately $260,000 per annum. When there was added to this that they understood that the business was to a significant extent a cash business, that they thought that Mr Karacominakis' financial records were unreliable, that they knew that the business was one the success of which depended very much on the personality of the people conducting it, and that the agreement for sale of 6 July 1993 (entered into when represented by a solicitor) contained their acknowledgment that they had not relied on any representation by the vendor "in respect of the subject-matter of this agreement", it was said, the conclusion that they had relied on Mr Karacominakis' representations was erroneous. 304 A feature of this submission was that it concentrated on turnover, in line with the concentration on turnover in relation to misleading conduct. Counsel for Mr Karacominakis submitted that Mr Johnston gave evidence to the effect that the turnover of the business was of prime interest to him. However, on reference to the evidence Mr Johnston by no means excluded profitability - he described turnover as "a starting point" and "part of it" - and I consider the concentration on turnover in Mr Karacominakis' submission was not warranted. Elsewhere in his evidence Mr Johnston clearly regarded profitability as important to the decision to purchase the business, as is to be expected. Nor did the passage from Mr Johnston's evidence said by Mr Karacominakis to be an acknowledgment by Mr Johnston that he had satisfied himself from his own observations and other enquiries support that submission - in fact, in that passage Mr Johnston said that he formed a belief as to the turnover from "the figure work from Mr Karacominakis", with the figure from the Hollingsworths having "a resemblance" to it. 305 I have set out Mr Johnston's evidence of reliance in para 20 of his affidavit sworn on 6 April 1995. It included profitability. Bainton J said that he took it to mean "that if he'd known that the turnover and profits were as they turned out to be of that order Chadlace would not have purchased and he would not have guaranteed (nor of course would his wife)", and that he accepted that evidence. Mr Johnston's oral evidence does not establish either restriction of his reliance to turnover, or putting Mr Karacominakis' representations aside and deciding to purchase the business because of observations and other enquiries. 306 The Johnstons did see the business in operation. However, that would not tell them about trading figures, and Mr Karacominakis refused to give them a trial period. The cash register was broken. At best, the Johnstons could have gained an impression that the business was busy. 307 There is no doubt that Mr Johnston enquired from Mr Hesky, but the enquiry did not address the particular trading results represented by Mr Karacominakis: it was concerned with payment of rent and the light that threw upon broad profitability. He also enquired from Mr Hollingsworth, but so far as the evidence showed it was a brief enquiry in which Mr Hollingsworth said that his wife was the one who knew about the business. Mr Johnston must have obtained the profit and loss statement for the year ended 30 June 1992, but he could not remember any more. The figures provided by Mr Karacominakis were different from the turnover and profit figures in the profit and loss statement (about $18,000 less turnover, about $22,000 less profit), and it might have been expected that that would cause the Johnstons to pause for thought. Inexplicably, this was not raised with Mr Johnston in cross-examination, but from his reference to "a resemblance" it seems that he recognised a difference but considered that it could be satisfactorily accounted for. In the absence of a proper challenge in cross-examination, I do not think the difference was so great that Mr Johnston could not have regarded the corresponding figures as consistent in a cash business. 308 Mr Johnston specifically asked Mr Karacominakis for trading figures. He was provided with the four handwritten pages, which the Johnstons provided to their bank in support of an application for finance. They also provided the Hollingsworth profit and loss statement for the year ended 30 June 1991 to their bank, with re-worked profit and loss statements and forecast profit and loss statements which Mr Johnston or his accountant prepared for the 1990 to 1994 years. The reworked profit and loss statements were described as "generated by information received from current owner". The application for finance included, "It is our belief that the average yearly turnover is around $260,000 as indicated to us by both the current and previous owners". This contemporaneous material strongly supports reliance on the financial information provided by Mr Karacominakis. 309 Even if they placed some reliance on what they had been told by Mr Hesky or the Hollingsworths, or on their own observations, it was both inherently probable and well open on the evidence to find that the representations by Mr Karacominakis, the person with most recent knowledge of the business, contributed to the decision to purchase the business. The representations by Mr Karacominakis were of varying figures, but overall of turnover in the order of $260,000 per annum and profitability in excess of $1,000 per week, and when Mr Johnston asked for financial statements so that his accountant and bank could see the profitability of the business I see no justification for concluding that he put aside what Mr Karacominakis told him in favour of an impression from observations, or discounted what Mr Karacominakis told him to nil for the reasons suggested on his behalf in the appeals. 310 That the Chadlace parties are entitled to damages on the basis that they relied on misleading conduct by Mr Karacominakis in the purchase of the business has not been shown to be erroneous; in my view Bainton J came to the correct conclusion. Damages in the false representation claims 311 Big Country and Mr Hesky accepted that the damages of the Chadlace parties in the false representation claims against them would be the same as the damages in the false representation claims against Mr Karacominakis. Mr Karacominakis' appeal included an appeal in relation to the amount of damages. Big Country did not put any separate submissions as to the amount of damages. 312 The elements in the damages awarded to Chadlace were the purchase price of the business, the costs and stamp duty incurred in relation to the business, and the trading loss for the period of Chadlace's conduct of the business. The elements in the damages awarded to the Johnstons were "wages and superannuation contributions foregone covering the period from 13 August 1993 to 7 March 1994" and "interest and bank charges incurred after 22 December 1993 and up until 3 July 1995". Bainton J adopted, with adjustment for one error, the assessments of loss in the report of Mr David Gurney, a chartered accountant, tendered on behalf of the Chadlace parties. Mr Gurney was cross-examined to some extent, but there were no competing accountants' reports or other assessments of loss. 313 Mr Karacominakis did not challenge on appeal the detail of Mr Gurney's assessment. He submitted that Bainton J made three errors of principle. 314 The first submission was that the primary measure of damages was the difference between the price Chadlace paid for the business and its true value, together in appropriate cases with damages for consequential loss such as trading losses (see for example Toteff v Antonas (1952) 87 CLR 647 at 650-1; Gould v Vaggelas at 220; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12). It was said that Bainton J had awarded to Chadlace the full purchase price, without considering the true value of the business, and had thereby erred. 315 Bainton J did not in terms advert to the primary measure of damages, or find that the business had no value at the time it was purchased by Chadlace. However, it seems to me that the finding is implicit in his Honour's reasons, and that if it is not it is a finding which can and should now be made. 316 His Honour would have been alive to the history of the business. There was evidence that Wall Investment had made a trading profit of $17,020.00 for the period April 1988 to March 1989. Accordingly to the profit and loss statements, the Hollingsworths made a trading profit of $8,140 for the year ended 30 June 1991 and a trading loss of $16,715 after taking to account a profit on sale of plant for the year ended 30 June 1992. Without any reliable figures, his Honour clearly considered that the business had not been profitable when conducted by Mr Karacominakis, and he had Mr Karacominakis' own protestations to Mr Hesky including that, without rent relief, Mr Karacominakis did not require a purchase price from any other tenant found by Mr Hesky to take a transfer of the lease and that Mr Karacominakis would vacate the premises if the lease was not transferred in the very near future. Chadlace then traded at a considerable loss over the four months for which it conducted the business. The picture was of a business in constant and marked decline. Although the Hollingsworths had sold it to Mr Karacominakis, Mr Karacominakis said that he did not buy it in reliance on past trading figures but because he had conducted small businesses before and thought that he could make a go of it: he had been proved wrong. The sale to Chadlace was vitiated, as any evidence of the value of the business, by the false representations. Mr Chiswick did take up the conduct of the business, for which in the circumstances he did not pay, and in due course Nelville took a lease of the premises, but that was only after Big Country spent a lot of money on the premises - the amount was not entirely clear, but seems to have been at least $200,000. 317 In the absence of evidence more specifically directed to the value of the business, and there was none, in these circumstances I consider that the proper finding is that the business had no value when purchased by Chadlace. Possibly Bainton J effectively made that finding when he said, in a discussion of the evidence of valuers leading to his conclusion that Nelville paid a proper rent - "I am left with the impression that Mr Harrison thought he was being asked to value the lease of an established ongoing enterprise, rather than a reletting after the vacation by the previous tenant in a manner bound to be off putting to customers. The reality of the situation was that Big Country was left with a non-income producing asset: it was the entity which had to 'pay' whatever was necessary to overcome that problem. The price it would have to pay was to forego or at least abate rent until the recipient of that price had rebuilt the turnover to a figure in which Big Country could participate by its rental charge." 318 As part of the submission it was said that it was difficult to see how the business could have no value when "a substantial amount of equipment … was conveyed with the contract". The agreement for sale of 6 July 1993 contained an inventory of equipment to which a value of $72,635.00 was attributed. It is not easy to give any weight to this when the purchase price of the business was $50,000, and after Chadlace gave up the business some of its equipment was sold to Mr Chiswick for $2,500 and other of its equipment was sold to various police boys clubs for $3,000-$4,000. The true value of the equipment can not have been great. In any event, the equipment was only part of the package comprising the business. That an unprofitable business, carrying with it heavy obligations under a lease, would be purchased in order to acquire the equipment is to my mind not realistic. 319 The second submission was that Bainton J should not have awarded Chadlace its trading losses for the period after mid November 1993, because by that time Chadlace must have been aware that the turnover was less than represented, and had asked Mr Hesky for rent relief without success. Instead of complaining to Mr Karacominakis or giving him notice of their difficulties, it was said, the Chadlace parties abandoned the business at the end of the year, and their losses from mid November 1993 should be regarded as caused by the Johnstons' decisions to keep trading for a period and then to abandon the business, rather than by the misleading conduct of Mr Karacominakis. 320 The Chadlace parties were in a difficult position. They had been misled into the purchase of the business. After a few months they began to realise that they had been misled, and to find out the true position. They then had to take a hard decision, and they decided to cut their losses by abandoning the business and vacating the premises. They were not required to complain to Mr Karacominakis, or to tell him what they proposed to do. The business they abandoned was not worth anything, and they were not obliged to keep incurring losses. Bainton J found that they "had no further resources to fund losses". I do not think it was unreasonable to act as the Chadlace parties did, in the circumstances in which they were placed by the misleading conduct, and the trading losses (and other losses so far as properly recoverable) did not, in my view, cease to be recoverable from mid November 1993. 321 The importance of this, at least in the eyes of Mr Karacominakis in the litigation, seems to have been that Bainton J noted that Chadlace claimed as damages in its false representation claims any rent or damages which might be payable by it to Big Country if Big Country succeeded against it in these proceedings. It would be the same for the Johnstons, and the same as to any rent or damages which might be payable by Chadlace or the Johnstons to Wall Investment or Mr Karacominakis by way of recoupment (see above as to indemnity and contribution). Because his Honour dismissed the claims by Big Country against the Chadlace parties, the damages did not include any unpaid rent or damages. As I understand it, it was accepted in the appeals that in principle they would do so, and the submission last considered was in part directed to escaping the increased damages which would follow from upholding Big Country's claims against the Chadlace parties. Two further submissions were made by Mr Karacominakis to the same end, and it is convenient to diverge to them. 322 Mr Karacominakis submitted that rent or damages payable to Big Country could not form part of the damages in the false misrepresentation claims, because the abandonment of the premises by the Chadlace parties and the re-entry by Big Country were each acts which broke the chain of causation and meant that Mr Karacominakis' misleading conduct was not the cause of the liabilities to Big Country. I do not think that this has any substance. Acceptance of liability under the lease was an integral part of the purchase of the business, and potential liability to Big Country was undertaken as a direct result of the misleading conduct; actual liability then flowed from reasonable and foreseeable conduct on the part of Chadlace and Big Country in the event that, contrary to Mr Karacominakis' representations, the business was unprofitable. I do not think that there was any break in the causal chain. 323 Mr Karacominakis also submitted, under the rather inappropriate rubric of apportionment between himself and Big Country, that he and Big Country were not equally responsible for the loss or damage suffered by the Chadlace parties referable to the period from mid-November 1993 onwards. The submission was not that there should be apportionment by Big Country paying to Mr Karacominakis a proportion of the money he had to pay to the Chadlace parties. It was that there should be apportionment in that, while Mr Karacominakis could be liable (equally with Big Country) for the loss or damage suffered "at the time Chadlace entered into possession of the premises on 18 August 1993", Big Country alone should be liable for the later loss or damage. The argument came down to the same matters of causation as have already been considered, with the added plea that equality of responsibility "ceased to be just as the continuing dealings between Big Country and Chadlace unfolded". There is no more substance in this submission. Both episodes of misleading conduct contributed to the purchase of the business and its all but inevitable consequences, including the liability for the unpaid rent and damages. 324 Mr Karacominakis thirdly submitted that, having allowed the trading losses, Bainton J "erroneously also allowed compensation for Mr Johnston and Ms Schmitz as the shareholders and directors of Chadlace, wages, superannuation and interest". He referred to Yorke v Ross Lucas Pty Ltd (1982) 45 ALR 299 at 321, where Fisher J declined to allow claimed lost wages and interest on the finance for the purchase of a business. 325 The wages and superannuation contributions foregone related only to Mr Johnston. There was evidence that he had been employed until 13 August 1993, had left his employment to conduct the business, and had commenced new employment on 7 March 1994. He took no drawings from the business. The wages and superannuation contributions foregone were calculated by regard to the salary in his employment until 13 August 1993. The damages awarded were not awarded to Mr Johnston as a shareholder or director of Chadlace, but because he had suffered loss or damage by Mr Karacominakis' misleading conduct in that he had not received the salary and superannuation contributions which he would have received if he had not acted in reliance on the misleading conduct. The present case is very different from Yorke v Ross Lucas Pty Ltd, where Yorke did not leave employment in order to conduct the business and took drawings from the business: so Fisher J thought the loss was only of an opportunity to earn wages which had not satisfactorily been quantified. 326 The Johnstons lent the purchase price to Chadlace, from finance obtained from their bank. Again the damages were not awarded to them as shareholders or directors of Chadlace, but because the incurring of the interest and bank charges was a loss to them in consequence of acting in reliance on Mr Karacominakis' misleading conduct. In Yorke v Ross Lucas Pty Ltd the financing cost was regarded as the result of Yorke's "decision, albeit obligatory in the circumstances … to finance his purchase in this way", and as "not a direct consequence of the purchase but of Yorke's lack of ready money" (at 321). On the other hand, in Sanrod Pty Ltd v Dainford Pty Ltd (1984) 54 ALR 179 at 191 Fitzgerald J saw no difficulty in accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes "not only the money paid but also the cost of borrowing that money or the loss from its investment, as the case may be". This is well established in the tort of deceit, see for example Gould v Vaggelas at 224-5, 228. 327 Notions of damages appropriate to actions in contract or tort must give way to the provisions of the Trade Practices Act or Fair Trading Act in these situations (Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 503-4, 509-10, 528-9, 541). The use of finance for the purchase of a business is by no means unusual, even if the purchaser otherwise has funds; the part played by impecuniosity in the assessment of damages in tort and contract is in truth not one of causation but of foreseeability or remoteness, and there may be causation in fact. The decision in Leisbosch Dredger v SS Edison (1933) AC 449 was described as "much criticised" by Gibbs CJ in Burns v MAN Automotive Pty Ltd (1986) 61 ALJR 81 at 82, and was there so treated, see at 82, 87, 89; see also Dodd Properties Ltd v Canterbury City Council (1980) 1 WLR 433. For the recovery of damages pursuant to the Trade Practices Act or the Fair Trading Act it comes down to whether the incurring of interest and bank charges was loss or damage suffered "by" the misleading conduct. There is no reason to think that the Johnstons would have borrowed the money from their bank if they had not, through Chadlace, purchased the business, or that they were otherwise in funds and did not need to borrow it; indeed, as I have already noted Bainton J found that by the end of 1993 the Johnstons had reached the limit of their finances. In my opinion the financing cost was part of their loss or damage suffered by the misleading conduct, and it was open to Bainton J to include the interest and bank charges in their damages. 328 In the result, the damages in the false representation claims against Mr Karacominakis awarded by Bainton J stand, and are potentially increased by $517,311 to $636,574 in favour of Chadlace and $582,398 in favour of the Johnstons, and the damages in the false representation claims against Big Country and Mr Hesky are potentially $636,574, in all cases taking effect on 22 September 1997. There remains no occasion separately to deal with Mr Karacominakis' claim for relief to do with fitness equipment. 329 I have referred to potential damages. Chadlace and the Johnstons will not necessarily have to pay the unpaid rent and damages to Big Country - Big Country may choose to exact the rent and damages from Wall Investment or Mr Karacominakis. In that event it is likely that Wall Investment or Mr Karacominakis would enforce recoupment from Chadlace or the Johnstons, so in the end there would be loss to Chadlace or the Johnstons which they were entitled to recover from Big Country. It is therefore inappropriate to give judgment for the full amounts stated above. A combination of judgment sums and declarations of right must be framed in order to give effect to these reasons. Orders 330 Bainton J made declarations and orders on 22 September 1997. They left the amount of Big Country's damages for later determination, and after the damages had been assessed orders were made on 5 December 1997 for judgments pursuant to some of the declarations. Making declarations and orders to give effect to these reasons is complicated by the separate appeals, and by the reopening in the manner I have described of questions of contribution and indemnity. In my view it is preferable to address the declarations and orders made below, which I will refer to simply as orders, without attributing the declarations and orders I now propose to the particular appeals. I will refer to the parties in the manner to which they have been referred in the reasons. 331 The following is not intended to preclude further orders in relation to the costs of the proceedings before Bainton J, which will be the subject of further consideration as hereafter indicated. To the extent to which the appeals and cross-appeals are dismissed, that does not include dismissal as to any consequential variation to Bainton J's order's as to costs. I propose the orders - (1) Set aside order 2(iv) made on 22 September 1997; (2) Set aside the judgment ordered on 5 December 1997 for Big Country against the Walls for $517,311 and substitute judgments in favour of the Walls; (3) Set aside order 3 made on 22 September 1997 and the judgment ordered on 5 December 1997 for $517,311 against the Hollingsworths, and substitute judgments in favour of the Hollingsworths; (4) Vary order 4(i) made on 22 September 1997 by deleting the words "and on the Hollingsworth"; (5) Set aside order 5 made on 22 September 1997 and substitute (i) a declaration that Chadlace was bound by the deed of 13 August 1993 to Big Country to pay the rent and perform the other covenants in lease Y837222 and (ii) judgment for Big Country against Chadlace for $517,311 with effect from 22 September 1997; (6) Set aside order 6 made on 22 September 1997 and substitute (i) a declaration that the Johnstons are bound by the deed of 13 August 1993 to Big Country to pay the rent and perform the other covenants in lease Y837222 and (ii) judgment for Big Country against the Johnstons for $517,311 with effect from 22 September 1997; (7) Set aside order 7 made on 22 September 1997 and substitute (i) a declaration that Wall Investment is entitled to be recouped by Mr Karacominakis, Chadlace and the Johnstons in respect of any moneys paid by it pursuant to the judgment for $517,311 ordered against it in favour of Big Country on 5 December 1997 and (ii) an order that the cross-claim by the Wall parties against the Hollingsworths be dismissed; (8) Liberty to apply to the Commercial Division for consequential relief pursuant to order (7). (9) Set aside order 9(ii) made on 22 September 1997 and substitute an order that the cross-claim by the Hollingsworths against Mr Karacominakis and Chadlace be dismissed; (10) Set aside order 10(i) made on 22 September 1997 and substitute a declaration that Mr Karacominakis is entitled to be recouped by Chadlace and the Johnstons in respect of any money paid by him pursuant to the judgment for $517,311 entered against him in favour of Big Country on 5 December 1997; (11) Liberty to apply to the Commercial Division for consequential relief pursuant to order (10); (12) Add to order 11 made on 22 September 1997 as order 11(ii) a declaration that in the event and to the extent that Chadlace or the Johnstons pay to Big Country, Wall Investment or Mr Karacominakis any moneys pursuant to the judgments for $517,311 ordered on 5 December 1997 or in these orders or the entitlement to be recouped declared in these orders then Chadlace or the Johnstons are entitled to an order that Mr Karacominakis pay to it or them the amount so paid; (13) Liberty to apply to the Commercial Division for consequential relief pursuant to order (12); (14) Set aside order 12 made on 22 September 1997 and substitute judgments for Chadlace against Big Country and Mr Hesky for $119,263 with effect from 22 September 1997 and for the Johnstons against Big Country and Mr Hesky for $65,087 with effect from 22 September 1997; (15) Declare that in the event that and to the extent that Chadlace or the Johnstons pays to Big Country, Wall Investment or Mr Karacominakis any moneys pursuant to the judgments for $517,311 ordered on 5 December 1997 or in these orders or the entitlement to be recouped declared in these orders then Chadlace or the Johnstons are entitled to an order that Big Country and Mr Hesky pay to it or them the amount so paid; (16) Liberty to apply to the Commercial Division for consequential relief pursuant to order (15); (17) Appeals and cross-appeals otherwise dismissed. 332 No doubt costs, of the appeals and cross-appeals and of the proceedings before Bainton J, will be of some moment to the parties. I propose orders that - (a) each party deliver written submissions to the Court and to the other parties by 4pm on 24 November 2000, the submissions not to exceed five pages; (b) Written submissions in reply be delivered by 4pm on11 December 2000, the submissions not to exceed five pages; (c) Orders as to costs be made on the basis of the written submissions unless the Court informs the parties otherwise. ______________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.