BETWEEN : ALPINE HOLDINGS PTY LTD (ACN 009 471 907)

WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)

WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)

Trade practices - Misleading or deceptive conduct - Lease for coffee-shop tenancy in cinema complex - Whether lessee induced to enter lease by representations as to other tenancies and "spin-off" sales - Exclusive right to sell certain products

Trade practices - Causation - Whether plaintiffs induced by misrepresentations of defendants - Assessment of damages under Trade Practices Act 1974 (Cth), s 82

Trade Practices Act 1974 (Cth), s 52, s 75B, s 82

First Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi

Second Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi

Third Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi

First Defendant : Mr N W McKerracher QC & Mr R M J Lombardi

Second Defendants : Mr N W McKerracher QC & Mr R M J Lombardi

Australian Shipbuilding Industries (WA) Pty Ltd v Packer (1993) 9 WAR 375

Famel Pty Ltd v Burswood Management Ltd (1989) ATPR 40-962

Gurr v Forbes & Dakar Nominees Pty Ltd (1998) ATPR 41-491

Hedley Byrne & Co Ltd v Heller & Partners [1963] UKHL 4; [1964] AC 465

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd(1988) [1988] FCA 40; 79 ALR 83

Henville v Walker [2001] HCA 52; (2001) 206 CLR 459

IOOF Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470

March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40-490

Wheeler Grace Pierucci Pty Ltd v Wright [1989] FCA 127; (1989) ATPR 40-940

Winterton Constructions Pty Ltd v Hambros Australia Ltd [1992] FCA 582; (1992) 39 FCR 97

Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445

Amann Aviation Pty Ltd v Commonwealth [1990] FCA 55; (1990) 22 FCR 527

Consolidated Bearing Company (SA) Pty Ltd v Molnar Engineering Pty Ltd (1994) ATPR (Digest) 46­122

Edgar v Farrow Mortgage Finance Pty Ltd (In Liq) (1992) ATPR (Digest) 40­096

Esso Petroleum Co Ltd v Mardon [1976] EWCA Civ 4; [1976] 1 QB 801

Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1

Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 180; (1984) 55 ALR 25

Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre [1978] HCA 11; (1978) 140 CLR 216

Hubbards Pty Ltd v Simpson Ltd [1982] FCA 57; (1982) 41 ALR 509

James v ANZ Banking Group Ltd [1986] FCA 41; (1986) 64 ALR 347

Kaze Constructions Pty Ltd v Housing Indemnity Australia Pty Ltd (1990) ATPR 41­017

Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd [1981] FCA 15; (1981) 36 ALR 23

Morgan Corporate Ltd v GWG Leving Pty Ltd (1995) ATPR 41­414

Poseidon Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332

1 ROBERTS-SMITH J: This is a case about a small business which failed. The plaintiffs are the proprietors of that business. They say it failed because of their reliance upon misrepresentations made by the defendants who were the landlord and those acting on its behalf. The defendants on the other hand, say there were no misrepresentations and the business failed for unrelated commercial reasons for which they cannot be held responsible.

2 There is a cross-claim by the landlord against the plaintiff company as tenant of the business premises and against the second and third plaintiffs as guarantors, for unpaid rent and the balance of moneys owing under the tenancy agreement.

3 It is necessary first to explain the persons and entities involved.

4 Egon Konig is a qualified chef and business proprietor. He formerly ran two small food businesses in Perth. Shelley Konig is his wife. They are the sole shareholders of Alpine Holdings Pty Ltd ("Alpine Holdings") which is the trustee for the E & S Konig Family Trust.

5 Norman Phillip Carey is the sole beneficial shareholder and Managing Director of Westpoint Corporation Pty Ltd ("Westpoint Corporation") and is also a beneficial shareholder and director of the majority of companies which form the Westpoint Group of Companies ("the Westpoint Group").

6 Westpoint Corporation, through related or associated companies, is the owner of the shares in Warwick Entertainment Centre Pty Ltd ("WEC"). Westpoint Corporation is also the ultimate holding company of Westgem Holdings Pty Ltd ("Westgem") which traded as Westpoint Realty.

7 Brian Henry McCubbing is a licensed valuer and real estate agent. At the relevant time he was a director of Westgem. That was done to enable his real estate licence to be used by Westgem to carry out its real estate business. He was not a shareholder of Westgem. McCubbing was employed as a contractor by Westgem to conduct business on behalf of Westpoint Realty.

8 Robert Steele was approached by McCubbing to work for Westpoint Realty as an employee.

9 In the late 1980s and early 1990s, Westpoint Corporation identified the opportunity of developing a site in Warwick, a Perth suburb, to build an entertainment centre and commercial complex ("the Entertainment Centre"). The site was adjacent to the Warwick Grove Shopping Centre ("the Shopping Centre") and formed part of the Warwick Regional Shopping Precinct.

10 As a first phase of the development, Westpoint Corporation purchased the land and raised finance for construction of the Entertainment Centre.

11 According to Carey's evidence, prior to undertaking the development, Westpoint Corporation commissioned and undertook general research in relation to the prospects of its success. That research identified the "Northern Corridor" of the Perth metropolitan area as representing a highly prospective area for the development of an entertainment centre at the time. The population catchment area was highly supportive of the development and the population bases for the northern corridor and the catchment area were predicted to increase.

12 Carey considered that the proposed Entertainment Centre was also supported by the fact the Shopping Centre was an established and successful one with major tenants such as K-Mart, Coles and Woolworths as well as a number of other tenants which had resulted in a successful mixture, including general retail, newsagency, restaurants, coffee shops, boutiques and specialty stores.

13 His evidence was that the Shopping Centre attracts over 4.5 million customers a year.

14 When the Westpoint Group purchased the land to develop the Entertainment Centre, there was a general restrictive covenant registered against it. The covenant prevented the land being used purely for retail purposes. The Westpoint Group was eventually able to have the covenant modified to allow broader uses of the land, including for the purposes of restaurants, offices, video stores and a cinema complex.

15 Carey acknowledged the Entertainment Centre was developed entirely separately from the Shopping Centre. It was never proposed that the two would form one composite centre. They are physically quite separate.

16 The development site had previously been occupied by an hotel.

17 Marketing of the tenancies in the proposed new centre began in mid-1992, even before the hotel was demolished and construction of the Entertainment Centre was commenced. Construction began in approximately July 1992 and was completed in approximately August 1993. The Entertainment Centre officially opened on 11 September 1993.

18 Initial marketing in mid-1992 was done by placing full-page advertising features in local newspapers.

19 An advertisement which appeared in the "Stirling Times" on 19 May 1992 was typical.

20 That included statements such as "it will provide the only major entertainment centre in the northern suburbs" and that the development provided "an opportunity with enormous potential", that "tavern, international food hall, restaurants, commercial and entertainment tenancies [were] available", "highly visible corner location", "direct access to major roads", there was a "present shopping centre pedestrian flow of 85,000 people per week" with "projected flow for cinemas in excess of 1 million people per year".

21 Carey said all of these representations were true; indeed, in the end no issue was taken about them.

22 Shelley Konig saw the full page advertisement in the Stirling Times of 19 May 1992 and gave it to her husband. At that time Mr Konig was operating two food hall outlets in Perth. Both were located in the Carillon Arcade in the city. One was named Egon's Coffee and Patisserie and the other was Carillon Beverages. He was looking for an opportunity to move from there and open a business in the northern suburbs. Mrs Konig thought the development being advertised was just what her husband had been looking for.

23 The contact details given in the advertisement were for Brian McCubbing and gave his telephone numbers. On telephoning, Egon Konig spoke to Steele. He told Steele he was interested in procuring a coffee shop in the international food hall. Steele told him there were "heaps of applications" but invited him to the Westpoint Realty office for an interview.

24 Mr Konig went to the office and had a meeting with Steele ("the first meeting"). Steele kept an office diary. The first entry in his diary in relation to the Konigs was one of a telephone call to Egon Konig on Tuesday 28 July 1992. Steele was unable to recall the purpose or content of that call. The next relevant entry is of a telephone call from him to Egon Konig on Monday 3 August 1992, but again Steele has no recollection of that. There is a diary entry for Thursday 6 August 1992 indicating a meeting between Steele and Egon Konig at 9 am. Steele has no particular recollection of that meeting either. Subsequent diary entries relate to a telephone call by Steele to Egon Konig on Friday 21 August, a meeting he had with Mr Konig at 10 am on Tuesday 25 August (the note says "Egon Konig re Warwick coffee lounge"), two diary entries for Thursday 10 September, the first being a telephone call from Steele to Egon Konig and a meeting with Mrs Konig at approximately 3 pm that afternoon. There is another diary entry of a meeting with Mrs Konig on Tuesday 15 September at 9.30 am and an entry for the same day in respect of a meeting with Mr and Mrs Konig at 6 pm at their residence at Carine. There is then an entry of a telephone call to Mr Konig on Wednesday 7 October and the final entry is one on 12 October 1992 indicating that Steele intended to ring Mr Konig on that date.

25 Egon Konig is unable to recall the date of the telephone conversation or the first meeting but says it was sometime in May 1992.

26 His evidence was that at the meeting he was given more information about the Entertainment Centre and was shown an artist's impression of it by Steele. It is common ground that this artist's impression was in the form of exhibit D6.

27 According to his own evidence, Egon Konig stressed that he wanted to be part of the Centre. He said that Steele told him that tenants had already been procured or were in negotiations. Such tenancies included Hungry Jacks, Pancake Parlour and Bistro, Kentucky Fried Chicken ("KFC"), HBF, banks and video store. He says he told Steele that he would sell Egon's Coffee and Patisserie in order to set up the new venture.

28 Egon's Coffee and Patisserie was sold on 30 November 1992 for $385,000.

29 The Konigs sold Carillon Beverages for $262,000 and ceased operating that business on 27 October 1993 - which was after they opened the Beverley Hills Café in the Entertainment Centre.

30 Also at the initial interview, Steele showed Egon Konig plans of both the lower and upper levels of the Centre, although at that stage Konigs' interest was in respect of the lower level.

31 Again, it is common ground that the plans initially shown to the Konigs were in the form of exhibit P1 (EK7), a larger copy of which was exhibit P2. these showed tenancies 14 and 15 as being part of the complex and at the north-western corner of the cinema foyer and entrance.

32 Tenancy no 14 was earmarked for Hungry Jacks and Kentucky Fried Chicken; tenancy no 15 was earmarked for food use. Tenancy no 7 was designated "pancakes". It was adjacent to tenancy no 8 which was that ultimately proposed for the Konigs.

33 As one entered through the main entrance of the foyer, tenancy no 14 was on the right. Directly facing the foyer was tenancy no 12 earmarked for "bistro" and in the centre of which was an escalator leading to the lower level. Adjacent to that to the left was an area of offices and the ticket office for the cinema whilst to one's immediate left was tenancy no 7. Moving towards the entrance to the cinemas, one would pass tenancy no 7 on the left and then tenancy no 8 as the last tenancy before the cinemas proper. Directly opposite tenancy no 8 to the right as one moves towards the cinemas was the counter area which later became the candy bar. There was nothing on the plans initially shown to Mr Konig to indicate a candy bar.

34 At that first meeting Mr Konig was given general information about the Entertainment Centre and was asked questions about his qualifications and financial position, which were relevant to whether or not his application for a tenancy would be approved.

35 According to Egon Konig, somewhere between May and July 1992 he received a telephone call from Steele, inviting him for a further interview. At that meeting ("the second meeting") he was given a standard form containing questions about his financial position and previous experience. Steele told him that it would not matter who had the most money or experience, although those two factors were part of the selection process. WEC wanted tenants who were prepared to stay for some years and not sell the business after a short while to make a profit. That is consistent with the evidence of Carey, McCubbing and Steele.

36 Following that second meeting, Egon Konig wrote to McCubbing by letter dated 21 May 1992, forwarding a completed assets and liability statement and an outline of his previous experience.

37 There was a third meeting which Egon Konig thought was about the end of July or early August 1992 ("the third meeting"). Steele and McCubbing were both there. McCubbing told Konig that the coffee shop in the food hall in which he had been interested to that point was already leased to another tenant, but that a better position was available on the upper level. In the course of the meeting, Konig was handed a set of plans for the upper and lower levels of the centre. These were the same as the plans he had earlier been shown by Steele. I accept that the three of them sat around the plans and discussed the possibilities. McCubbing in particular, compared the rentals and associated costs of the upper and lower level tenancies. He wrote various details on the plans. On the plan of the lower level he wrote:

"8 stall holders

Costs p.a.

Approx - $50,000

Inc. . rent

. outgoings

. food court

. operating

and $65,000 contribution to establishment of food court i.e. airconditioning, tables, chairs, floorcoverings in dining area, crockery & cutlery for general crockery bank. Depreciable in hands of lessee.

PLUS

Cost of fitting out own stall."

38 He marked up the various tenancies on the lower level as "Chinese", "Timezone", "Food Court", "Tavern", and "Video". Tenancies 4 and 6 on the lower level he marked as "Business/commercial" with the notation "eg banks, Tandy Electronics, hairdresser, sports store and toy shop."

39 In the margin of the plan of the upper level, McCubbing wrote the following:

"Size : 137 m²

Net Annual Rental :

$250/m², i.e. $47,950

Outgoings :

Approx $97/m², i.e. $13,289

Hence total cost would

be $61,239 pa or

$5,103.25 pcm or

$1,177.67 pw.

For lease on a

'shell basis'. Airconditioning

etc., wall finishes, floor

covering to be done by

lessee.

Rent reviews :

Annual alternating between

CPI and market with a minimum increase of 6%

Yr. 1 Yr. 2 (5)

3 4

5 6

7 8

etc. etc"

40 On that plan, he also wrote in various tenancies:

41 It was Konigs' evidence that McCubbing told him at this meeting that if he took a tenancy on the lower level he would have to pay $65,000 in what McCubbing called "key money". He said McCubbing actually used those words. That was a further incentive for him to consider accepting a tenancy on the upper level of the Centre, because no "key money" was payable in respect of the upper level.

42 McCubbing denies the words "key money" were used. He said he did not use those words and would not have done so because he was well aware charging "key money" was illegal under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ("the Commercial Tenancy Act"). (I take this to be a reference to s 9 of that Act which stipulates that a provision in a retail shop lease under which a landlord claims key money or any consideration in respect of the goodwill of the lease is void). On the other hand, Konig says he had never heard the expression before.

43 So far as the tenancies are concerned, it was Egon Konig's evidence that McCubbing wrote on the plan those whom he said had agreed to be tenants. These were Hungry Jacks and KFC, Pancake Parlour and bistro. He says McCubbing told him the Entertainment Centre would include an Indian restaurant or bistro and negotiations were underway with Pancake Parlour. Konig says he believed that having Hungry Jacks and KFC as part of the upper floor site was a real bonus and incentive as well as a positive reason to become part of the Centre. That factor he says, convinced him to enter an agreement with the defendant to lease a tenancy on the upper level.

44 The tenancy which McCubbing said was available to the Konigs was No 8. That is the one they took for their business which they subsequently called "Beverly Hills Café". The number of the tenancy was changed in September 1993 from 8 to 15.

45 It seems to have been at the third meeting that the pleaded misrepresentations were said by Egon Konig to have been made by McCubbing and Steele.

46 Konig testified that McCubbing said that not only would the Konigs be able to attract patrons who attended the cinema, but they would also obtain "spin-off sales" from those using the parking premises at the entrance to the Entertainment Centre and availing themselves of the shopping facilities in the Shopping Centre.

47 Furthermore, he says he was told by either or both of them at this meeting that neither they, nor any other tenants could sell drinks, ice-cream, popcorn or any other food directly into the foyer "as they did not want the mess like other cinemas had experienced in their foyer".

48 This, Konig says, made him believe nobody was going to be selling food into the foyer and that anyone who wanted food or drink would have to come inside the shops. That further created the belief in his mind that the competition amongst the shop holders in the area would be similar; that is, customers would come into the area and then select which type of food they wanted and then step inside the shop and that the businesses within the various tenancies would complement each other.

49 He testified that at the meeting McCubbing repeated the statement in the advertisements that their business could receive considerable customer traffic from people using the Shopping Centre. The figures in the advertisement of 85,000 people per week attending the Shopping Centre and a projected flow of in excess of one million people per year for the cinemas, were a major factor influencing their decision to enter into a lease.

50 He says it was represented to him by McCubbing that he would receive much customer flow-through from the eight cinemas from the cinema lobby and that there would be "an enormous amount" of customer flow-through from the Shopping Centre of about 85,000 people per week.

51 This was confirmed by McCubbing's own evidence. He testified (t 697) he told Konig there would be hundreds of thousands of people per year going to the cinema complex, so because of that passing trade past the window or entrance of the tenancy it would be noticed by a "huge amount" of people, whether they be going for a movie to go and patronise any other tenancy in the complex.

52 The plan (Ex P1 EK7) does not show the Shopping Centre. It is a plan only of the Entertainment Centre development property itself. The whole Regional Shopping Precinct is bounded by Beach Road to the south, Dorchester Avenue to the west, Erindale Road to the east and Dugdale Street and Ellersdale Avenue to the north. The Entertainment Centre (including its associated car parking areas) occupies approximately one-third of the whole developed area at the south-western corner of the precinct. It is apparent from the evidence generally, and in particular from the plans and aerial photograph (ex D5), that the area of the Shopping Centre development (which was already well established in 1992) is on a higher level than the Entertainment Centre and physical access from it to the Entertainment Centre is restricted. There is a drive-way ramp from the Shopping Centre rooftop car park which leads into the northern end of the Entertainment Centre car park and there is limited pedestrian access from the north-eastern edge of the Entertainment Centre parking bays.

53 It was Egon Konig's evidence that from the photographs (ie the artist's impressions) which were hung in the office in which the meeting took place, and from what was said to him by McCubbing, he gained the distinct impression that the Shopping Centre would be on the same level as the Entertainment Centre, whereas, because of the ultimate difference in elevation, a customer of the Shopping Centre, would need to make no use whatever of the Entertainment Centre car park. He said customer flow from the Shopping Centre as well as to the Centre generally, was part of the reason he entered into the agreement and was considered very important by him to the extent that he "... may well have reconsidered the agreement if [he] had known there was to be no such customer flow".

54 A third meeting concluded on the basis that Konig would discuss the matter further with his wife.

55 The Konigs then made enquires with their accountant Mr Paul Raats, who is a Public Accountant and registered Tax Agent. They also made enquiries of a real estate agent by the name of David Gaubert, who at that time was with a real estate company "The Professionals".

56 Having received advice from their accountant and the real estate agent, Mr Konig advised Westpoint Realty they were prepared to go ahead with a tenancy at the Entertainment Centre. They later received a letter advising that Alpine Holding's tenancy application had been approved. Egon Konig says that he was then told about the "do's and don'ts" of the prospective tenancy.

57 There was a fourth meeting ("the fourth meeting"). Although not entirely clear about it, Egon Konig recalled it taking place sometime between August and 9 October 1992. Apart from him, there was Steele and Mrs Konig. McCubbing came in briefly but did not remain. The fourth meeting was the first one attended by Shelley Konig. Egon Konig says it focused on re-emphasising the layout of the tenancies. Shelley Konig could not recall clearly the exact topics of conversation at that meeting, but did remember that her husband asked Steele if other tenants had been signed up for the upper level and that Steele advised that negotiations were going very well with all tenants. She added that neither Steele nor McCubbing said there would be any change to the tenancies or the tenants from those previously advised to her husband, namely, that Hungry Jacks and KFC were confirmed tenants and would be inside the complex on the same level as the coffee shop venue. She testified this was represented to them by McCubbing who set it out in his own handwriting on the floor plan of the complex. That, I think, can only be a reference to what had been written on the plans by McCubbing at the third meeting - at which she had not been present. She did testify however, that no mention was made by Steele or McCubbing about any changes.

58 Shelley Konig had earlier said that after a meeting in July or August 1992, her husband came home and told her that after talking to McCubbing, he was considering applying for a coffee shop venue on the first floor of the complex rather than for the food hall area. She stated that her husband told her Steele and McCubbing had told him that the coffee shop venue was a far more attractive proposition "... because of its location, its sole right to sell cappuccino, and the large number of patrons that would pass through the doors" (T 240). She testified that her husband was also told that customers would be encouraged to eat in the coffee shop because they would not be permitted to take food or drinks into the actual cinemas and furthermore that no shop would be permitted to sell into the common foyer area (T 241). She stated that after that they were excited about the prospect of becoming part of the new complex.

59 Egon Konig testified there was a fifth meeting on or about 9 October 1992. Mrs Konig said it was around late September to early October. This was the occasion Steele came to their home at Carine in the evening.

60 The Konigs and Steele all agreed Steele came to their house only once. I am satisfied on the balance of probabilities this was the visit noted by Steele in his diary for 6 pm on Tuesday 15 September, but that he was late and probably arrived about 8 pm or even later.

61 There is a major conflict between them about what occurred on that occasion.

62 The Konigs say Steele had with him an agreement for lease which he pressed them to sign with "a certain sense of urgency", the reason for which Egon Konig could not recall. The Konigs say Steele did not explain the agreement for lease to them and pre-empted their request to see plans by telling them that the plans would be attached later. They say that as they did not know Steele was coming to see them that evening, they had not sought any legal or financial opinion in relation to the agreement for lease and no-one from Westpoint Realty at any time suggested to them that they should do so. They say that at the time of signing the agreement for lease on that occasion, they understood the construction and layout of the Entertainment Centre was going to be as conveyed to them in the plans and advertisements that had been provided to them previously.

63 The Konigs say that the agreement for lease document (ex P1 (EK10)) signed by them and witnessed by Steele, is the document they signed that night.

64 That exhibit is executed by them on behalf of Alpine Holdings as the lessee and signed by them individually as guarantors. The only date purporting to be an execution date, appears on the title page of the document and that is 4 February 1993.

65 The document is a photocopy. It is of 25 pages. There are no plans attached. The Konigs' personal and financial details and the other information specific to the transaction have been typed. I accept the submission made by counsel for the first and second defendants, that this could not have been the documents the Konigs signed on 15 September 1992 because the solicitor's office identification code on the last page bears the printed date "02/11/92".

66 There is a Westpoint Realty receipt dated 12 October 1992 (ex P1 (EK11)) made out to the Konigs, signed by Steele, for an amount of $5,103.25, described as a deposit on tenancy 8.

67 The procedure was that prospective tenants would complete a signed agreement to lease which Steele or McCubbing would then present to Carey, who was the only person who could decide whether or not to accept them as tenants. If he did so, the first defendant would then execute the agreement.

68 Carey testified that either McCubbing or Steele had earlier informed him of Egon Konig's interest in taking a tenancy for use as a coffee shop and commended him as a sound financial and commercial prospect. According to Carey, during the course of the negotiations with Konig, McCubbing came to see him and told him Konig had asked for the exclusive right to sell coffee. Carey's evidence was that he told McCubbing there was "no way" such an exclusive right could be granted because other tenants would also need to serve coffee as incidental to their businesses. In cross-examination he said he was sure the request put to him was about coffee, but his response would have been the same if it had been cappuccino. According to Carey, sometime after this, but prior to the first defendant entering into the agreement to lease with the plaintiffs, he met Mr Konig. One of the purposes of that meeting was to enable him to gauge whether Konig would be an appropriate tenant. Konig was very enthusiastic and keen to impress Carey. The meeting was brief. Carey's recollection was that it took only about 10 minutes. During the course of it, Konig reiterated his request for an exclusive licence to sell coffee on the first level. Carey repeated that he could not agree to that because it would be unfair to other tenants who would need to serve coffee. Carey testified that following that meeting he executed an agreement for lease, and later the lease itself. He did not meet the Konigs again until sometime after they had taken up the tenancy.

69 Exhibit P1(EK14) is a letter dated 9 October 1992 from the first defendant's solicitors, Parker & Parker to the Commercial Registrar. The exhibit itself is a copy and obviously not complete, in that documents which are referred to are not attached to it. The letter advised that the first defendant and Alpine Holdings proposed to enter into an agreement for lease of the premises shown on the plan attached. It stated that the agreement for lease had annexed to it the form of lease which the parties would execute upon completion of the construction of the Centre. It noted that the agreement for lease documents had been prepared "but not fully executed". The purpose of the letter was to apply on behalf of the first defendant pursuant to s 13(7) of the Commercial Tenancy Act for approval of the inclusion in the proposed lease of certain paragraphs, copies of which accompanied the letter. On the second page, after the signature for Parker & Parker, was the following indorsement:

"The lessee acknowledges that it has been shown a copy of the proposed lease and a copy of this letter and that it has no objection to the lessor making application referred to in this letter."

70 To that indorsement was affixed the common seal of Alpine Holdings, attested by the signatures of the Konigs.

71 The inferences to be drawn from this letter are that the parties proposed to enter into the agreement to lease and that document had been executed by the plaintiffs but not by the first defendant. The letter itself was probably signed by Parker & Parker and by the plaintiffs on or immediately after 9 October 1992. There was a suggestion that Steele had taken this letter to the Konigs' home on 9 October 1992 for them to sign urgently, but that seems to me to be unlikely. He visited them at home only once, and as I have found, that was on 15 September 1992.

72 Steele's evidence was that the Konigs had a signed agreement to lease when he called at their home. The usual practice was for he or McCubbing to give to prospective tenants three documents clipped together. They were the agreement to lease, the Tenancy Fitout Guide and the proforma lease. It accords with common-sense that those documents should be given to prospective tenants before they were asked to sign them.

73 Exhibit D1(A) is an early version of a document titled "Agreement for Lease". This is a proforma draft with blank spaces for insertion of the details required for particular tenants and tenancies. Thus, handwritten details here include the name "Alpine Holdings Pty Ltd" as lessee, the names of the Konigs as guarantors and the description "Coffee Shop Warwick Entertainment Centre". At p 20, cl 29 is headed "Special Conditions". There is a handwritten clause "subject to settlement of Egon's Coffee Shop, Carillon Arcade, Perth by 2/10/92" with the Konigs' initials. However, a line has been drawn through that. The blanks in the schedule have been completed in handwriting. On this document some of the writing is that of Steele and some is that of McCubbing. The Konigs' initials appear next to both. McCubbing was not present at the Konigs' home on 15 September 1992 (nor at any time). Even more significantly, the Konigs' signatures attest to the fixing of the common seal of Alpine Holdings and the same page has been signed by Raats and bears his office stamp. Raats' diary shows he had a meeting with the Konigs on 1 September 1992 to discuss a five year plan for the Beverley Hills Café. He would have needed the rental figures for that. The additions to the draft which are handwritten on ex D1(A) are all typed on ex P1(EK10). The draft agreement to lease, ex D1(A) was prepared sometime after 3 July 1992 (that date being printed with the solicitor's office identification) by McCubbing and Steele, necessarily on information provided by Mr Konig and almost certainly in conjunction with him. It was a document which he had with him when he sought advice on the proposed tenancy from Raats, probably around 1 September, if not earlier. That advice having been obtained, he informed Steele or McCubbing that he wished to proceed with the tenancy. The typed document ex P1(EK10) was prepared subsequently, but that could not have been before 2 November 1992.

74 In cross-examination Steele said what was signed (or given to him) on 15 September, was the handwritten version from which the formal documents were prepared. On 15 September they did not have the approval of the commercial registrar nor that of the Department of Planning and Urban Development.

75 However, Steele had no actual recollection of these events. He frankly conceded he was doing his best to reconstruct them from his examination of the documents. Nonetheless, I am satisfied he is correct on this point.

76 There is in evidence another document headed "Agreement for Lease". That is part of ex D2. It bears the handwritten date 4 February 1993. It is a photocopy of the same document as ex P1(EK10). It bears the solicitor's printing date of 2 November 1992. Exhibit D2 runs to 77 pages and has plans attached. Those plans show the fast food outlets in their stand-alone drive-through configuration and bear an architect's date of July 1993.

77 On the evidence, I think it most likely that the Konigs had been given the three standard documents under a bulldog clip, comprising the proforma agreement to lease, ex D1(A), the Tenancy Fit-out Guide and the proforma lease, which they had then discussed with Raats and Gaubert. Having decided to proceed with the Beverley Hills Café, they completed the agreement to lease document by hand and executed it. Raats also signed and stamped the document. This was the original of ex D1(A). There are no plans attached to that exhibit. I am satisfied that in the same way they also completed the draft lease document, a photocopy of which is ex D1(B). The proforma is marked "first edition" and bears a solicitor's identification number and date of 1 July 1992. It has been executed by the Konigs and witnessed (in several places, unnecessarily, by Raats). Plans are attached to that document and tenancy 8 is initialled by the Konigs. The plans show the original proposed layout, in particular with the fast food outlets shown as internal tenancies.

78 An original executed and stamped agreement to lease was eventually provided to the Konigs under cover of a letter dated 16 December 1993 from Mr Ian Scott of Westpoint Realty. Although the letter was in evidence, the original stamped agreement was not.

79 Exhibit D2 was a composite set of documents, comprising the typed and executed agreement for lease dated 4 February 1993, together with the Tenancy Fitout Guide and the proposed lease, with plans attached. But there is a conflict about whether the documents were ever in that composite form. The second and third plaintiffs say they were not. They certainly could not have been in September 1992 because that lease document was not printed until 2 November 1992.

80 The Konigs were adamant that they were not given a copy of the plans of the Entertainment Centre until they received the lease for execution in September 1993. There are no plans attached to the agreement to lease document, whether as ex P1(EK10), D1(A) or that document forming part of ex D2. As I have observed, the first version of the lease was that in ex D1(B) and that does have plans attached - however they show the fast food tenancies as internal to the building. The plans attached to the original executed and stamped lease (ex D3) show the fast food outlet as external tenancies. The dates on that document are confusing. It bears a handwritten date 21 February 1994, but there are two stamp duty office stamps, one bearing the date 4 February 1993 and the other being 23 February 1994. Whatever the position may be though, the earliest possible date of that document is February 1993.

81 I am satisfied that the Konigs were given a copy of the plans of the Entertainment Centre in ex D1(B) before September 1992, but those plans showed the fast food outlets as internal to the premises.

82 Although the Konigs were not required to pay a deposit until the agreement to lease was fully executed (cl 14.1) and WEC could not have executed it until sometime after 2 November 1992, their earlier payment of a deposit of $5,103.25 is evidenced by receipt ex P1(EK11) dated 12 October 1992.

83 The term of the lease was 15 years, with a further term of 10 years. The starting rent was $47,600 per annum ($350 per square metre). There were two-yearly rental reviews.

84 By letter dated 18 January 1993, Westpoint requested the Konigs to provide details of their tenancy fit-out by 15 February 1993.

85 Between 9 June and 6 July 1992 there was a series of letters from McCubbing on behalf of Westpoint, outlining the tenants' obligations in respect of the procedure for the fit out of their tenancies. He advised first that the tenancy would be ready for lessee's works by 8 July, but later changed that to 5 July.

86 On 22 July 1993, Scott wrote that it was anticipated the Entertainment Centre would open in the first week of August.

87 Most of the Konigs' shop fittings were prefabricated at the contractors premises. The Konigs did not have access to the Entertainment Centre site until about late August or early September 1993.

88 The lease documents in triplicate were sent to the Konigs for their execution under cover of a letter from Westpoint dated 28 September 1993. They said it was only then they realised that the plans of the upper level of the Centre were not the same as those which had been shown and explained to them by McCubbing and Steele. The Konigs complained that rent was payable by them two weeks prior to their opening, even though only two tenants out of approximately 20 had opened for business at the Centre at that time.

89 According to Mrs Konig, because the development site was fenced off and they were refused access from before construction commenced until September 1993, she and her husband were unable to see how building was progressing and that the layout was different to the plan showed to them by McCubbing in August 1992. She says they were given access about 8 September 1993 and only then realised that the layout was different.

90 She said the differences were that a candy bar for the cinema had been built in the foyer opposite Beverley Hills Café and there were two large pillars in front of, and almost obstructing the coffee shop's car park entrance. The fast food outlets were now drive-through venues and were not tenants in the first level of the complex as shown on the plans they had seen.

91 Although they were concerned about these changes, they had already spent a large amount of money for the interior design and equipment and so continued to prepare for the venue opening.

92 Mrs Konig employed some 12 staff to start work upon the opening of the coffee shop. She had uniforms especially made for them. Menus, serviettes and the like were printed and crockery and other items were purchased.

93 The Konigs say that Steele and McCubbing had told them that Westpoint would provide a grand opening for the cinema complex, but that did not eventuate. The cinema complex opened on 11 September to coincide with a Telethon event and Beverley Hills Café opened on 27 September 1993. According to the Konigs, the following weeks were very quiet. All of the shops surrounding the coffee shop were vacant and part of the complex was still incomplete.

94 In an effort to reduce expenses, Mrs Konig reduced the number of staff members at the café and did much of the work there herself.

95 When the lease documents arrived, forwarded under cover of the letter from Westpoint Realty dated 28 September 1993, the Konigs delayed signing them because the business was going badly, the complex was still not fully leased and building material was still to be seen in uncompleted sections of it.

96 In his evidence, Egon Konig identified differences between the plans they had originally been shown and what actually happened. He said the Konigs had originally been told that Hungry Jacks and KFC would be part of the Centre and located on the same floor as their tenancy. In fact the tenancies were taken by McDonalds and Chicken Treat, but instead of being located within the Entertainment Centre and on the same floor as the Konigs, they occupied drive-through restaurants which were outside the Centre proper. The Konigs had no difficulty with McDonalds and Chicken Treat instead of Hungry Jacks and KFC; their concern was that these tenancies were no longer within the Entertainment Centre itself.

97 The Konigs say that they were originally told by Steel or McCubbing or both, that their's would be the only café in the cinema foyer, yet tenancy 23 was empty until 5 May 1994 when it opened as Frederico's Café which traded in competition with them as a café/restaurant and bar. Frederico's Café later became "Bronco's" and then "Creations for Food" and most recently "Topolini's". Egon Konig said the competition from Frederico's Café added a further burden to their budget and that the decision to allow business not unlike their own in such close proximity was extremely prejudicial to them. They had understood from discussions with McCubbing and Steele that they would have the sole right to run a café. Amongst other things, Frederico's Café added cappuccinos for sale and their signage described them as a "café" as well as a restaurant.

98 The tenancy immediately adjacent to the Beverley Hills Café was "Deadly Desserts". That was split in two and a further business, "Tradefire", opened in January 1995 between Deadly Desserts and the Beverley Hills Café.

99 One of the major complaints of the Konigs in evidence was that there were two large pillars on the inside and two on the outside of their tenancy which obscured customers' views of their shop from the car park. They said that at the time of entering into the agreement for lease, they were unaware of the pillars. Egon Konig testified that had he known of the existence of the pillars and their size, he "may not have entered into the agreement for lease".

100 According to Egon Konig, two or three weeks before the Beverley Hills Café opened, a candy bar was placed in a position opposite their tenancy where the Konigs had understood, from what was told to them by Steele and McCubbing, that a ticket counter would be. He said the candy bar started trading into the foyer, which was something which they were not allowed to do and so was competing on terms quite unfavourable to them.

101 They also discovered, that upon opening, the cinema had roped off the area immediately in front of the shops, and particularly in front of Beverley Hills Café, during busy periods to help with customer flow to the candy bar and cinema. The ropes were placed there by the cinema management and although the Centre management was aware of them, nothing was done to prevent it. The flow of cinema patrons was thereby controlled in such a way as to result in customers being unaware of the existence of Beverley Hills Café.

102 The Konigs had two complaints about customer access to and from the car parks. The first was that the design and construction of the Entertainment Centre's car parking facilities effectively isolated their shop from the car parking area serving the shopping centre component of the Centre. The car park was on a lower level to the cinema centre in which their shop was located and the parking facilities serving the cinema centre was surrounded by a retaining wall. Access between the two levels of parking facilities was by stairs and a ramp which made access cumbersome for the public and so discouraged shoppers using the car park and therefore the Beverley Hills Café. Their second complaint was that customers from the cinema were often made to use exits that took them straight into the car park, rather than into the foyer. This obviously meant cinema patrons were not returning to the cinema foyer and so not passing the Beverley Hills Café.

103 On 29 September 1993, only a couple of days after their business opened, Mrs Konig wrote to Westpoint Realty, confirming an earlier conversation with Scott in which the Konigs had requested approval to put some tables and chairs on the footpath outside the café to enhance their business. They also sought permission to have a sign writer paint a "now open" sign on the lower portion of the window of the empty shop next to the Beverley Hills Café so as to advertise the café but more to hide the unsightly condition of the empty shop.

104 On 6 October 1993 Mrs Konig wrote to Westpoint Realty advising that the Konigs strongly objected to the recent account for rent received from them. They objected to being charged rent from 15 September, particularly since they had only opened for business on 27 September. Amongst other complaints she made were that to date their's was still the only shop open inside the complex, the appearance of the other shops in their various stages of completion was very unattractive and discouraging customers, the workers' vans continually in front of their shop also detracted from it and led to the impression they were still not open for business and that the takings for their first two weeks of trading would not cover wages, let along other outgoings. She also complained that when they originally signed the agreements, they had been led to believe they would have the monopoly in the coffee shop trade and it was not until they were nearly ready to open that they discovered that a business that would be in direct competition with them would be opening almost next door. Their "out of meal time" trade was almost completely cakes and coffee and that was exactly what "Deadly Desserts" would be selling. She argued that taking all of those matters into account, they should be given a rent free period until 15 October so that they could establish themselves and give the other shops time to open and make the whole venture more attractive and viable.

105 On 22 October 1993 Westpoint wrote to the Konigs approving their request to install two tables and chairs outside the tenancy on the northern side and to put limited signage on the adjoining tenancy.

106 On 6 December 1993, Mrs Konig again wrote to Westpoint. This time her first complaint was as to the state of disrepair of the front door of the café, which she said was extremely heavy and difficult for some customers to open. She expressed alarm at having recently heard that management intended to install a large sign at the top of the escalator, directing people to the food hall and tavern. She insisted that a sign of similar size be placed on the bulkhead at the bottom of the escalator directing people to the Beverley Hills Café. She then continued:

"Further, before signing our agreement with you we were informed which other businesses would be operating on the Cinema Level. Under these conditions we signed. Now we find that we are the only tenant open for the whole day Monday plus 9.30am to 3.30pm for the rest of the week. Therefore the Cinema level is generally completely empty during these hours as there is nothing to attact (sic) customers except for our Café which is tucked away and out of sight of people new to the Complex. Our trade is therefore affected to the point where our takings for the week average between $3,000.00 and $4,000.00 which gives us an operating loss of $2,000.00 per week. This sort of loss cannot be absorbed for an indefinite period."

107 On the basis of those concerns, the Konigs requested a rent review and reduced hours of trading.

108 By letter dated 14 December 1993, Scott acknowledged receipt of the Konigs' letter and advised that it had been passed to the owners for their attention. There was no other response to that letter.

109 In December 1993 the Konigs sought legal advice. That was to the effect that because they had signed an agreement to lease, they were obliged to sign the lease documents but that they could take legal action later.

110 On 23 December 1993 the Konigs' then solicitors, Murie & Edwards, wrote to Westpoint Realty referring to unspecified "difficulties" which the Konigs had faced in their business, arising out of representations made to them by the lessor and/or Westpoint Realty prior to them entering into leases (sic) in relation to the Entertainment Centre. They added that there were "various other complaints relating to unsatisfactory conditions which had had some impact on the profitability of their clients' business and appeared to have impeded its future growth", some of which had been addressed in the Konig's letter of 6 December 1993. The solicitors asked that their interest be noted and a response be made directly to them. They wrote that they wished to open "further lines of communication in the hope [the] matter [could] be resolved without litigation".

111 There was no response to that letter. I will refer later to Carey's explanation for that.

112 Mrs Konig's evidence was that she had sold her own ballet teaching business to be at home with their two sons. She had not intended working at the café. However, as it became evident that the business was going badly and they needed to cut expenses, she found herself working there and for increasingly longer hours. Their personal financial circumstances had become difficult. This was reflected in serious stress and strain on the family.

114 By August of that year the Konigs were trying to sell the business. They appointed an agent for that purpose. On 31 August 1994 they wrote to Carey detailing their complaints and concerns. These were reiterated in their evidence.

115 They observed that the projections provided to them by or on behalf of the developer indicated that the operation of a business in the cinema complex was feasible, and although they regarded them conservatively, the Konigs nonetheless relied upon them to establish their initial budget which led them to anticipate a reasonable level of profitability. They noted that to August 1994, they had outlaid in excess of $240,000 on the Beverley Hills Café business. They said that their first quarter of trading (October to December 1993) was disastrous, with a loss of some $23,000 and although the last quarter (February to May 1994) had reduced their losses to a break-even situation, the cash-flow and profitability had not allowed them to draw wages, even though they were both working in excess of 100 hours a week in an effort to reduce overheads and running costs. They asserted that their difficulties were directly attributable to the following facts.

116 First, they said they were originally told that McDonald's and Chicken Treat would be located in the main complex. The original plans however changed and that did not occur. When they signed the agreement to lease, that did not contain the plans, although they were told that plans would accompany the signed lease upon approval. They complained that no disclosure statement was ever received, even though they had been given a verbal assurance that one would be provided. They said that McCubbing told them the upper level of the complex would include an Indian Restaurant, a Pancake Parlour and a bistro, but that had not occurred. Rather, the tenants then occupying that level included a Federal Member of Parliament, Timezone and "Deadly Desserts". That last sold coffee, cakes and Devonshire teas which were lines which had been promised to the Konigs. They complained that Beverley Hills Café was hidden by two large pillars, contrary to the initial plans shown to them and although they had arrived at a solution to that problem, their proposal to install extruding signs had been refused.

117 They complained that they had been told they would have a prime location, however, when the cinemas were full, all patrons were let out through emergency exits on the lower level, which led all potential customers away from the café. They said that shops on both sides of them were still vacant and that although original artists' impressions shown to them had extensive landscaping, none of that had been carried out. Although the upper level had signs indicating the food hall and tavern, the lower level had a sign indicating the cinema only, giving no indication to potential patrons of the Konigs' facility to sell food and beverages on the upper level.

118 They reiterated their complaint that they had been told by McCubbing and Steele that they could not sell drinks, ice creams, popcorn, nor any other food into the foyer as the cinema owners "did not want the mess like other cinemas ..." Because of that, they said their café had been redesigned so that customers would have to come right inside to purchase and they would have no provision to sell into the foyer itself. However, two weeks prior to opening, they discovered that the candy bar opening directly opposite the Beverley Hills Café would be able to sell all the items forbidden to them.

119 Further complaints included that they were hindered from displaying and advertising prices "in a professional manner" although other shops were able to do so, that they had to pay rent two weeks prior to opening even though only two tenants out of 20 or so had opened for business at that time, that they had not received any response to their request of November 1993 to shorten their trading hours. They complained they had previously explored the possibility of opening their business in the Whitfords area rather than Warwick, but had relied upon "an unconditional verbal assurance" that a cinema complex would not be constructed in Whitfords whereas they had since discovered that a six-cinema complex had been approved for the Whitfords area.

120 Finally, they complained that Frederico's restaurant had commenced trading in May 1994 as a café/restaurant/bar contrary to original advice given to them that they would be the only café in the cinema foyer. They complained that the decision to allow a business not unlike their own in such close proximity had extremely prejudiced "a right which at all times has been implied as being our sole right."

121 In essence, they complained that they had been misled by misrepresentations made to them and as a result of which they had suffered significant losses. They particularly relied upon their assertion that the plans accompanying the final lease agreement were "drastically" different from those originally shown to them. They concluded that unless Carey was prepared to discuss and agree upon compensation, it would be necessary for them to sell the business and take legal action to recover their losses.

122 Shortly afterwards, the Konigs made an appointment to see Carey to discuss the issues raised in the letter. They say that was the first time that either of them had spoken to, or met, Carey. According to Mr Konig, Carey was quite frank and made it clear that he did not wish to discuss the letter. He told them their rent was not too high, but their turnover was too low and they should work to correct it. Their impression was that he was quite dismissive about their predicament and they left the meeting very disheartened.

123 As I have already observed, Carey's evidence was that he met Mr Konig briefly prior to deciding whether or not to enter into the agreement to lease. He acknowledged a further meeting with both Mr and Mrs Konig sometime after they had taken up the lease. His understanding was that they had come to see him to seek a rent rebate or reduction on the basis they were having difficulty making a profit from the tenancy. He did not have a recollection of their letter of 31 August 1994 and he would not necessarily have seen it. If he had done, there was no reason he would not have been prepared to discuss it with them. He did agree that, at what he described as the second meeting, he reviewed the Konigs' financial accounts for the coffee shop business and told them, in effect, that the problems they were experiencing were not the result of rental costs and general overheads, which were not out of line with industry averages, but lack of revenue. He testified that he suggested they needed a business plan to attract further business to generate greater revenue and may need to adapt that plan to take into account that they were in an entertainment centre and not a general shopping centre.

124 The base rent for the Beverley Hills Café as at 1996, was $416.86 per square metre. Other tenancies in the Entertainment Centre were paying more; some were paying less. The Chinese restaurant was paying the same rate. The evidence shows, and I accept, that the rent payable by the Konigs was consistent with that being paid by other tenants of the Entertainment Centre. Whether they were in line with industry averages is not something I am in a position to determine.

125 On 12 July 1995, Mr Konig again wrote to Carey. He pointed out that their business had been operating for 22 months and the trading figures were still below $5,000. He pointed out that while Frederico's restaurant was operating (it appears to have terminated in the meantime), their trading figures actually rose - which he suggested proved their "legal claim", that if there had been the variety of four restaurants as indicated on the original plans, they would be in a far better financial position. He complained that Westpoint had done very little to give the upper level of the Entertainment Centre a good appearance. The shop next to them and on the outside entrance was still vacant as it had been since their opening. The windows had never been cleaned and the inside of the shop was littered with building material and rubbish. The paving in front had gaps and Frederico's signage had been vandalised. He complained that they could not be expected to perform well when the front appearance of the building was so neglected and the whole of the upper level was totally lifeless at night except for the Beverley Hills Café.

126 Konig wrote that the main purpose of his letter was to make the point that after 22 months of struggling, they had found it was no longer possible to open on a Monday as takings for that day ranged between $135 and $300, which was barely enough to cover wages. He said that as there was no variety of restaurants to attract customers, the whole Entertainment Centre was virtually dead in the day and some of the evenings. Unless they were to receive some sort of rent reduction, they would have to consider opening evenings only. Closing during the day would not only save money but would allow him to seek employment to help cover the loss of income.

128 In cross-examination, Carey said he did not specifically recall that letter but there would not necessarily have been a reply to letters of that kind. Such matters were dealt with at the property management level and the people dealing with them had a wide discretion. The policy was to try and be proactive and solve a problem with a tenant, rather than engage in dispute by correspondence or through solicitors.

129 On 14 July 1995 the Konigs appointed Joseph Charles Learmonth Duffy as agent to sell Beverley Hills Café and on 2 February 1996 they appointed Roy Weston similarly.

130 On 9 April 1996 the Konigs wrote to Daryl Goad of Westpoint Realty, advising that Mr Konig had found it necessary to apply for daytime employment because for the past 2-1/2 years the café had not been able to take enough money during the "lunch trade" to justify remaining open. When Mr Konig was successful in obtaining employment, it would be necessary for them to close the café during the day. They said that even after 2-1/2 years of very hard work, their rent was between 25 per cent and 30 per cent of their turnover, which was an excessively high amount, and that after having the business on the market for two years, they were still unable to sell because of that. They mentioned that the only offer they had received was for "the pitiful amount" of $20,000. They requested an immediate 30 per cent decrease in their rent so that the business could run on a worthwhile basis at the present operating hours.

131 Goad replied on behalf of Westpoint Realty by letter dated 12 April 1996. He noted their comments and advised that he had referred their request to the Entertainment Centre owners, although there was insufficient information contained in it to warrant a reduction as sought. He also pointed out that the lease required them to remain open for business during the hours specified in it.

132 In their reply dated 5 May 1996, the Konigs pointed out that they had the shop listed with five different agents over the past 28 months, but each of them had been unsuccessful in securing a buyer and each of them had complained that it was because the rent and outgoings were too high. Although Mr Konig repeated this in evidence, the assertion in that form is, of course, hearsay, and I do not accept it as evidence of what was asserted, only the fact that it was.

133 In the letter the Konigs instanced April, which included a supposedly busy time of two weeks school holidays plus Easter. During that period, they had takings of $21,927 whilst the rent, outgoings and rates was $5,800 - a "rent" percentage of 26.36 per cent.

134 So far as the hours of business were concerned, they pointed out that for two years they had been surrounded by empty and closed shops, but had never been given any rent reductions, notwithstanding the obvious adverse impact that had on their business. "Deadly Desserts" was only ever open in the evenings, even though the lease for that business stipulated hours similar to the Beverley Hills Café.

135 They further pointed out that there were then three food outlets in the foyer, all of whom sold cakes and cappuccinos, even though the Konigs had signed a lease on the understanding they would be the only such venue.

136 They said that although they were initially pleased to have the Chinese restaurant as another tenant on their level, when that restaurant began to sell cappuccino, cakes, chips, pies, fruit salad, Danish pastries and other such items, they realised that it was not a Chinese restaurant but simply a duplication of their business. They said exactly the same could be said of "Broncos", which was advertising itself as a café.

137 Between August 1994 and September 1996, the Konigs had appointed five agents to sell the Beverley Hills Café.

138 About September or October 1996, Mr Konig had what he described as his second and final meeting with Carey at the latter's West Perth office. He had learned that Westpoint was considering building onto the complex to add a megascreen cinema. He proposed to Carey that it would be a cheaper option for Westpoint if they were to use the existing cinema next to the Beverley Hills Café, the space occupied by the café, together and the vacant shop next door which had been "Tradefire". That area could be used for the megascreen, rather than adding to the building. As compensation for leaving the business he asked for $50,000 plus the equipment, which he would sell. Mr Konig says that Carey told him he would consider the proposal, but although he waited for several weeks for a reply, none came. He testified that he telephoned Carey who told him that he had decided not to proceed with the megascreen, but 12 months later, one was built as an addition to the building.

139 According to Carey, this was his third meeting with Mr Konig. His testimony was that his response to Konig's proposal was that the cinema operators might wish to put in a megascreen but may not need further space and in any event he doubted the Konigs' tenancy was suitable for it. He testified that he queried whether Konig was serious about wishing to leave the Entertainment Centre, to which Konig responded that he was because he had been unable to improve the figures significantly and believed it was best for his family that they leave. According to Carey, he told Konig that if the latter undertook to keep the business running to a reasonable standard, he would work towards assisting them to effect an exit, to which Konig agreed.

140 Carey agreed that the megascreen was eventually built, but there were particular technical design requirements relating to the width and length of the auditorium based upon the focal length and size of the screen which meant it was not suitable to build it in that location in any event.

141 There was further correspondence between the Konigs and Westpoint Realty in October 1996. Not all of it is in evidence. It is not clear whether the meeting just described preceded that correspondence or was a result of it. It appears there was an undated letter from the Konigs which was received by Westpoint Realty on 9 October 1996. That is not before me. There is, however, a reply from Goad dated 18 October 1996 in which he acknowledged receipt of their cheque for $4,349.18, being part payment of rental for that month. He noted their letter did not advise when the balance of $3,000 would be paid and he requested a post-dated cheque for the outstanding amount. He wrote that Carey would be overseas on the date the Konigs had requested for a meeting and that he assumed the purpose of the proposed meeting was to discuss and seek assistance with regard to comments made by the Konigs in their letter. He said that should that be the case, there would be no benefit in discussing it without sufficient preparation and presentation of sufficient meaningful information to enable full consideration to be given to the request. He accordingly enclosed a proforma document requiring the provision of certain information and he also requested other information including the last two years profit and loss statements and balance sheets, cash flow and profit and loss projections for the current financial year, a current statement of assets and liabilities and an update of the position regarding the sale of the Konigs' house and business. The only other evidence which I take to be in relation to that was from Mr Konig who produced (as exhibit P1(EK46)) copies of financial statements which he said were submitted in an effort to obtain an abatement of rent prior to vacating the premises.

142 ABPS Real Estate and Business Brokers ran an advertisement for the sale of the business in "The West Australian" newspaper of Wednesday 24 July 1996. This advertised the business as a "fantastic opportunity superb business ..." with a long lease and in a "stunning location" in a northern entertainment centre. The net profit was said to be $70,000 per annum and the vendor was asking only $115,000 for a quick sale.

143 The Konigs' attempts to sell the business were markedly unsuccessful.

144 On 30 December 1996 they signed an agreement for the sale of it to one Peter Plank for a gross purchase price of $6,000 but settlement did not eventuate.

145 In January 1997 they signed an agreement for sale to Mr and Mrs Lilburne for $8,000. This was subject to conditions that a satisfactory assignment of the lease or a new lease would be granted by the landlord to the purchasers, that the lease be for a three year term with three options to renew, each of three years, and there be a rent reduction of 10 per cent plus a 2 per cent reduction of the minimum increase, to 4 per cent per annum.

146 The Konigs anticipated that all of this would be agreed to by Westpoint. The Lilburnes were seeking to purchase the business for their daughter, who was a chef, and who had in fact been working as an employee of the Konigs for the last two years. Mr Konig paid the first week of the January rental in advance. He then handed over the business to Ms Lilburne, who paid the three remaining weeks rent. The Konigs left the business and moved to live at Pemberton in the south of the State.

147 The Konigs' evidence was that although Goad had made it clear the final decision on whether or not to accept the Lilburnes as new tenants could only be made by Carey, they were encouraged to think that would be forthcoming because Goad had indicated he would recommend that it be approved. Nonetheless, that approval did not eventuate. On 23 January 1997, the Lilburnes wrote to the Konigs advising that settlement date had passed and the conditions had not been met. Accordingly, they no longer wished to go ahead with the purchase of the café.

148 At trial, Carey confirmed that he had decided it was not in the best interests of the Entertainment Centre to accept the assignment of the lease. He considered Westpoint would be prejudiced by the variations requested and that the business plan the Lilburnes had been asked to provide was unconvincing. He was also concerned that they did not have any strong financial backing which would have left them in a position of having insufficient working capital to get the business running properly, but he pointed out that the Lilburnes withdrew in any event. Carey also had a concern about the legal ramifications under the Commercial Tenancy Act in that, had he accepted a new tenant, then the Konigs' obligations would have terminated and he would have effectively been exchanging the financial risk of the Konigs, for the subsequent tenant - whom he considered to be an even worse risk. In effect, his position was that it would have been preferable to have had another tenant because vacancies were undesirable, but that would only be so provided the new tenant was an equivalent or better financial risk from the point of view of the landlord.

149 When they left the Beverley Hills Café, the Konigs left behind considerable plant and equipment which they claimed had a value of $91,300, as appears from a copy of a list faxed to Goad.

150 In early February 1997 and after receiving the letter from the Lilburnes, the Konigs travelled back to Perth. With the help of some friends with a truck, they returned to the premises about midnight and removed all the chairs, tables, fridges, freezers and other removable items and took them back to Pemberton. Mr Konig's explanation for why that was done at midnight was that he was working until 5 pm and the trip to Perth took 4-1/2 hours. He said he deliberately did not give notice to the landlord of his intention to remove the equipment because when the tenant of the adjoining tenancy (Deadly Desserts) did so, he was locked out of the shop and his equipment was confiscated. Konig did not want the same thing to happen to him.

151 So far as the rent was concerned, Konig explained that he had paid the first week instalment to the Lilburnes who then paid Westpoint Realty for the full month. When the Lilburne purchase did not proceed, Westpoint Realty repaid the amount for the whole month to the Lilburnes and sought payment from the Konigs. However, nothing further was paid by them.

152 When Carey learned early next morning of what had transpired, he telephoned Mr Konig. According to Konig, Carey threatened to force him to return to the Centre and return the plant and equipment. He said Carey threatened to inform their bank and to send them bankrupt. Konig told Carey there was no way they could return. He explained to Carey that they had taken up a new business in an effort to recover their financial position and for them to go back to the Beverley Hills Café was not financially possible. Konig again refused to return the equipment.

153 Carey's account of this conversation was that his immediate concern was that removal of the fittings made it impossible for the tenancy to be immediately relet to another coffee shop operator or even for WEC to operate the coffee shop with its own staff or using contractors. He says he told Konig "in no uncertain terms" that he was in breach of his lease and should immediately return with the fit out items he had taken and fulfil his obligations under the lease. He says he also told Konig that his actions were in breach of his undertaking to work with Carey to effect a sensible exit from the business. He testified that Konig refused to return to the business or to return the items and that he had decided it was in his best interests and those of his family to vacate the premises. Carey says he then asked Konig how he was going to pay the rent, to which he says Konig responded to the effect that he was not going to be paying the rent and Carey would have to sue him. Carey testified that his response was to call on Konig to honour his obligation and his undertaking to work with Carey to effect a sensible exit. Konig said he could not help and as he thought the conversation was going nowhere, Carey terminated the call.

154 On 11 February 1997 Carey wrote to Alpine Holdings advising that WEC had terminated the lease dated 21 February 1994 and the premises had been re-entered. By notice dated 1 March 1997 to Alpine Holdings, the first defendant made a formal demand for $617,581.08 pursuant to cl 46.7(c) of the lease, comprising rent which would have been payable under the lease had it not been terminated (estimated at $938,472.73) plus the variable outgoings and rates and taxes which also would have been so payable (estimated at $260,611.54) less the rent and variable outgoings which the first defendant reasonably expected to obtain by re-letting the premises, namely $581,503.19.

155 By notice of the same date, the first defendant made the same demand of the Konigs as guarantors under the lease.

156 There is no doubt the Konigs' expectations of the Beverley Hills Café were totally disappointed. Nor that the effects upon them financially and personally were traumatic. Virtually from the very outset of the tenancy in September 1993, they found themselves under enormous pressure. They both worked hard and for long hours to operate the business. Mr Konig recounted in evidence how he found himself working in a shop in which he had invested almost $250,000 but getting little or no return. He found the repeated refusals of WEC to give him rent relief demoralising. He was further depressed when he was unable to sell the business. He says he was "totally shattered" and became very depressed after Carey told him on the telephone that he would be sued. The stress and worry have continued over the last five or so years. He has been prescribed medication for a stomach ulcer and has suffered other health problems. In evidence he said (t 103) that:

"Since first taking on the café I have had many sleepless nights where all I can think of is how I was tricked into becoming part of the Warwick cinema complex and investing so much of my life savings there ...

Since taking on the café, my financial situation has not allowed me to take my family on holidays. I have not been able to visit my family in Switzerland for ten years even though both my parents [are: sic] in their 80s and several times my father's life has been in jeopardy due to ill-health.

I am now continually concerned that I have had to force my bank overdraft up so high to cover legal expenses. I seem never to have a waking or sometimes sleeping moment when my financial situation does not [cause: sic] me concern."

157 Mrs Konig confirmed the enormous physical and emotional strain on both of them, having to work six or seven days a week all year round with no finance nor opportunity for holidays. Because of the nature of the business, weekends and school holidays were their busiest times, which meant Mrs Konig was not able to spend time with her sons. It is apparent that the experience has severely affected the family.

158 I advert to these matters in this brief way because the Konigs claim damages for distress both at common law and under s 82 of the Trade Practices Act (Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445; Gurr v Forbes & Dakar Nominees Pty Ltd (1998) ATPR 41-491; "McGregor on Damages" (15th ed) at [1737] and Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40-490).

159 The plaintiffs' claim generally is that they suffered loss as a result of reliance by them upon untrue representations made by the first defendants or its agents, Steele and McCubbing. The action is based upon s 52 of the Trade Practices Act 1974 (Cth), s 10 of the Fair Trading Act 1987 (WA) and upon common law negligence under the principle of Hedley Byrne & Co Ltd v Heller & Partners [1963] UKHL 4; [1964] AC 465. The same pleaded misrepresentations are relied upon in each instance.

160 It is convenient to deal first with the claim under the Trade Practices Act and to begin with the misrepresentations pleaded. These are set out at pars 7 and 7A of the statement of claim as follows:

" 7. During the negotiations referred to in paragraph 5 above both Steele and McCubbing represented to the Second Plaintiff and thereby to him, the First Plaintiff and the Third Plaintiff that:

(a) in addition to the business, the upper level of the Centre would also include an Indian Restaurant, or Bistro, Kentucky Fried Chicken, Hungry Jacks and a Pancake Parlour and such occupancy together with the cinema complex in the upper level would attract patrons to the Business and produce spinoff sales;

(b) the construction of the Centre including car parks, cinema and control of patrons to the Centre would be such as to place the First Plaintiff's Business in a prime location attracting patrons from those attending the cinema as well as those using the parking premises at the entrance to the Centre and availing themselves of shopping facilities in the Warwick Shopping Centre proper;

(c) there would be adequate signage on the upper and lower levels of the Centre advertising facilities including the Business;

(d) the tenants in the upper level of the Centre would not be permitted to sell coffee and cappuccino on its own, such sales being preserved for exclusive sales from the Business which was to be the only coffee shop in the foyer;

(e) no shop in the upper level of the Centre would be permitted to sell drinks, ice creams or any food direct to patrons in the foyer of the cinema complex;

(f) with the exception of the Indian Restaurant, Kentucky Fried Chicken, Hungry Jacks and the Pancake Parlour the Business would be the only shop to operate in the foyer of the cinema.

7A. During the negotiations referred to in paragraph 5 above and contrary to the representations pleaded in paragraph 7(e), both Steele and McCubbing knew but failed to disclose to, and concealed from, the Second Plaintiff and thereby to him, the First Plaintiff and the Third Plaintiff, that there would be a "Candy Bar" on the premises to be situated in and around the foyer selling food and drinks direct to patrons of the cinema."

161 Counsel for the first and second defendants submits that it is not necessary to reach any conclusion about whether the alleged representations were made, or if so, whether they were true. He submits that it is because both the agreement to enter a lease and the lease itself contained the following clauses:

"20.1 Document Constitutes Entire Agreement

This document constitutes the entire agreement between the parties with respect to the subject matter of this document and contains all the representations, warranties, covenants and agreements of the parties in relation to the subject matter of this document as at the date of this document.

Any oral statement, representation, undertaking, covenant or agreement made prior to the date of this document and not contained in this document is void."

162 It is submitted that apart from the effect of the provisions in the agreement to lease (which void the alleged misrepresentations in any event), after taking occupancy of the tenancy for over 12 months, the plaintiffs executed the lease and in so doing, waived any entitlement to challenge the circumstances under which they entered into it.

163 I do not accept these submissions. Where an agreement is obtained by a misrepresentation, a disclaimer or exclusion clause in the document itself cannot bar the claim, although it may afford some evidentiary assistance on the question of inducement: IOOF Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470 at 475, 478 - 480 and the authorities there referred to.

164 In the present case, I do not consider the exclusion clauses to assist even as evidence of inducement. The agreement to lease was executed by the plaintiffs in September 1992, well before they became aware of circumstances which they claim showed earlier representations made to them to be false. Although the lease itself was executed after they were aware of those circumstances, and indeed when they were expressing their grievances to Carey and others about them, I accept that they executed the lease in the form it was because their own legal advice was that having signed the agreement to lease, they were obliged to do so. In short, they had no choice.

165 Before turning to the particulars pleaded, I should make some brief observations about the evidence.

166 For the Konigs, their dealings with the defendants were personal and important. Mr Konig in particular was personally involved in the relevant discussions namely with Carey, McCubbing and Steele. The Konigs drew on contemporaneous correspondence as well as formal documentation.

167 At all relevant times Carey was the head of a large corporate group with a range of commercial interests. He retained to himself final decision-making authority, but otherwise left matters to his employees and those acting on his behalf. He had no notes nor any other record of his conversations with the Konigs, McCubbing or Steele. He was concerned to present himself, the conduct of his business and the Entertainment Centre development in the best possible light. He sought to portray the project as much more successful than it obviously was. He attempted to convey the impression the Centre had mostly full tenancies, when the evidence was quite to the contrary. I consider his evidence must be taken cautiously.

168 Steele's evidence was essentially based on his reconstruction of events from documents rather than any factual recollection (which he found "impossible", after 10 years). It was also largely a reconstruction of what he believes he would have done. He gave his evidence frankly and honestly, but I am not prepared to accept it as correct on some critical issues where it is in conflict with the recollection of the Konigs.

169 McCubbing's evidence came from a position similar to that of Steele. Further, according to his recollection he was personally present at only two meetings with the Konigs.

170 This alleged misrepresentation comprises two discrete assertions. The first is that the upper level tenancies would include an Indian restaurant or bistro, KFC, Hungry Jacks and a pancake parlour; the second is that they, together with the cinema complex, would attract patrons to the business and produce spin-off sales.

171 Carey saw the cinema as the anchor tenancy. He repeatedly emphasised that it was essential to recognise that an entertainment centre is different to a shopping centre. This difference had to be reflected in the mix and nature of the tenants. He said he was always of the view that the cinema complex would attract a high customer flow and that once all the tenancies were in place, the other businesses would themselves generate additional customer flow. Tenants going into the Entertainment Centre needed to have sufficient financial resources to meet their establishment and fit-out costs and have the capacity to continue in business during the start-up phase while the Centre was establishing itself. Carey says he made these views clear to Steele and McCubbing when he had meetings to brief them on the marketing and promotion of the Entertainment Centre. Although he could not recall specifically, he testified that, in effect, he told them he was, or would be, undertaking negotiations with major tenants and he wanted to attract complementary businesses including, for example, a tavern, entertainment such as Timezone, various styles of restaurants, a food court, retailers, a video store and some commercial offices.

172 Not long after marketing of the development began, Carey was negotiating with KFC and Hungry Jacks and McDonalds and Chicken Treat. Those food businesses tend to operate as a pair, respectively, to their mutual benefit. Carey was confident one or other pair would commit to the Entertainment Centre. Both wanted a drive-through facility and the negotiations turned on whether that could be accomplished within the traffic and other regulatory requirements. Carey says he told Steele and McCubbing this and kept them up to date on the developments with negotiations with other prospective tenants. The traffic and other concerns were eventually resolved and McDonalds and Chicken Treat signed agreements to lease. Carey had fresh plans drawn up indicating where the drive-in facilities would be. He says he gave copies to Steele and McCubbing and told them to use the new plans for presenting the Entertainment Centre. Carey's recollection was that these negotiations were concluded about November or December 1992, although the new plans had been prepared in approximately August of that year which Carey says was when he told Steele and McCubbing they had superseded the previous plans. Revised artists' impressions were also prepared about the same time, clearly indicating the separate drive-through facilities to be operated by McDonalds and Chicken Treat. The artists' impressions were to be an aid in presentations to prospective tenants and were mounted on the wall of Westpoint's office.

173 In cross-examination Carey conceded that tenancy no 14 (marked on ex P2 as "HJs and KFC") although subject to a lease, was empty until May 1994, when it was occupied by Frederico's. There was a substantial time leading up to May 1994 that work was being done in that tenancy fitting it out. That business failed and was subsequently replaced by "Creations for Food", which later also left, to be replaced by "Topolini's".

174 Tenancy no 7 (originally marked "pancakes") adjacent to that of Beverley Hills Café was occupied by "Deadly Desserts" in 1993. In fact, that tenancy was split in two, with "Deadly Desserts" taking almost all the frontage to the Entertainment Centre foyer. The remaining portion was vacant until December 1994 when it was taken by "Tradefire".

175 The proprietors of "Deadly Desserts" were Ian and Valerie Crossley. Their experience was that business was bad from the start. Mrs Crossley described the atmosphere at the Entertainment Centre as "awful". The customer flow was very intermittent and there was none at all from the Shopping Centre. Business became more and more difficult, even though the Crossleys were working 80 hour weeks. They made no profit at all in the first year.

176 About 18 months into their tenancy they obtained permission to sell savoury products. That put them in direct competition with Beverley Hills Café.

177 The Crossleys were forced to close "Deadly Desserts" in 1995, in breach of their lease. It was not until six months later that "Little Dragon" Chinese restaurant took the tenancy.

178 "Tradefire" later closed and that tenancy was then empty until after the Konigs left.

179 Tenancy no 8 (which later became no 15) occupied by the Konigs, opened to the outside of the building under the portico to the north-west, and at the other end, directly into the cinema foyer. The outside tenancy immediately adjacent to the Beverley Hills Café was no 9. That remained vacant for the whole period the Konigs occupied tenancy no 8.

180 It was common ground that no disclosure statement was given to the Konigs. Carey agreed when it was put to him in cross-examination, that had that been done prior to the agreement to lease, it would have revealed that the only committed tenant on the upper level at that time was the cinema proprietor, but he maintained that would not have been a true reflection of the situation because there were well advanced negotiations and even agreements. He conceded those could have been shown on a disclosure statement, but said the best legal advice generally was that it was better not to refer to situations which in the end might not come to fruition.

181 Carey agreed that removing the fast-food outlets from the foyer of the building to an outside location would make "an enormous difference" to a sole tenant in that foyer, but he insisted Mr Konig was aware that had been done.

182 Initially in cross-examination, Carey said he had shown Mr Konig the revised perspective at the WEC offices in West Perth in August or September 1993. He agreed there was no doubt that for the Konigs, the fact that the fast-food outlets were to be in close proximity to them in the foyer would be of fundamental importance to them. When pressed, he said that what he had meant was that when he had met with the Konigs, the new perspective was there and available, so his position was that Mr Konig was aware of what had happened and proceeded with, and concluded the negotiations with full awareness that the fast-food outlets had been relocated as external drive-through operations. Carey said he had not made a point of it and the meeting was very brief. He was referring here to what he said was his first meeting with Konig, prior to WEC executing the agreement to lease. Later, he reiterated that his position was that he believed the perspectives were on the office wall and Mr Konig saw them and so was aware of the change - although, again when pressed, he conceded that he could not say of his own knowledge that was so and nor did he actually say anything to Konig about it.

183 There is no doubt the businesses referred to at [7(a)] of the statement of claim were mentioned by Steele and McCubbing.

184 Steele's evidence was to the effect that he told the Konigs discussions and negotiations were on-going, but that he expected a restaurant, Hungry Jacks, KFC and pancakes to become tenants on the upper level. He said those businesses were mentioned as a proposed tenancy mix. Mr Konig's own evidence was that the tenancy for the proposed Indian restaurant or bistro had not been concluded, that he had been told there were tenants "like" Hungry Jacks and KFC coming in and that "negotiations" were being concluded with Pancake Parlour. According to McCubbing, Carey told him and Steele that he was having discussions with KFC and Hungry Jacks and was confident of getting them as tenants (t 770). He told them tenancy No 14 "was going to be a restaurant", probably an Italian restaurant, and tenancy No 7 "was definitely gong to be a Pancake Parlour" (t 771). I am satisfied McCubbing and Steele accepted and acted upon what Carey had told them, by conveying the content of it to the Konigs.

185 According to Mrs Konig, Steele told her that negotiations in relation to the tenancies were going well with all the tenants.

186 I am satisfied that although the representation did not go so far as to assert tenancies had been secured, it was one that those or similar tenancies would be. That was sufficient in the circumstances in my view to give rise to an obligation on the part of the defendants to inform the plaintiffs if that position changed. Furthermore, the representation which was made overstated the actual position to a misleading extent.

187 As to the second limb of this pleaded misrepresentation, there seemed in substance to be no dispute between the parties that the Konigs were told that the proposed mix of tenancies, together with the cinema complex in the upper level, would attract patrons to the business and produce spin-off sales. That was what they all expected to happen. The substance of the representation which I am satisfied was made, was that there would be tenants of an appropriate mix such that from them and the cinema, spin-off sales would come to the Beverley Hills Café. It was said those businesses would most likely be those mentioned, with whom negotiations were well advanced and positive. The eventual reality was that most of the tenancies were vacant from the start and for a long time and that when Frederico's and Deadly Desserts did open (the former not being until May 1994) those businesses tended to compete with, rather than complement that of the plaintiffs. Further, none of the Indian restaurant, the Pancake Parlour nor the Bistro eventuated, one tenancy was taken by a member of Parliament, another became "Timezone" and one shop alongside the Beverley Hills Café remained vacant the whole time the Konigs were there. Frederico's closed in early 1995 and Deadly Desserts went out of business later that year. In short, for much of the period, apart from the cinema, there were no other tenants at all and when they did come, the mix was not appropriate to generate spin-off sales to the plaintiffs' business and did not do so. The cinema complex was seen to be the major tenant and it did attract customers generally in the numbers which had been anticipated, but did not generate "spin-off" sales for the other tenants to any real degree.

188 I am satisfied an assertion of fact made to the Konigs from the outset was that the fast-food outlets (it does not matter whether it was Hungry Jacks and KFC or McDonalds and Chicken Treat - because it did not matter to them) were to be located inside the upper level. As Mrs Konig expressed it (t 287):

"... our main concern was that we had Hungry Jacks and KFC there, and with access to the foyer. That's what we were signing up on."

"Egon was very keen to relocate, but I think had we been honestly told that the tenancy mix was completely different to what we thought it was going to be, that the fast-food outlets were going to be completely separate as drive-throughs and would not attract any customers to our business, we would seriously have re-thought and again asked for more opinions and sat back and had another look at it."

189 That representation was relied upon by them and it was a strong inducement to them to take up the tenancy for the Beverley Hills Café. The representation was still operative when they signed the agreement to lease and although they became aware of the real situation by the time tenants were given access to the premises, even before the Entertainment Centre opened for business, and so were very much alive to it when they executed the lease, by then it was too late - they were told they were already bound.

190 The representation that the fast-food outlets would be on the same level as the plaintiff's business and inside the Centre was important to them. They were not specifically informed when the decision was made to change that and did not become aware of it until after they had committed to the lease. I am satisfied the Konigs were not given a copy of the revised plans until late September 1993. In the circumstances there was a duty of disclosure upon the defendants which they failed to discharge (see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd[1988] FCA 40; (1988) 79 ALR 83, 95 and Winterton Constructions Pty Ltd v Hambros Australia Ltd [1992] FCA 582; (1992) 39 FCR 97.

191 In my view par [7(a)] and par [12(a)] of the statement of claim are made out.

192 Mr McKerracher QC put it that the essence of this representation was that the nature of the prime location would be such as to attract patrons both from the cinema and the Shopping Centre. As he said (t 937):

"The essence is that the set-up of the Centre and the foyer would be such that the prime location would attract patrons."

193 I am satisfied there was no representation made in quite the terms pleaded, but that Steele and McCubbing did represent that the plaintiffs' business would be in a prime location within the Centre. That was because all patrons entering the foyer area from the upper level car park would go past the main door of their business and the patrons moving towards the cinemas inside the foyer from the lower level would have to go past the door to the plaintiffs' business in the foyer. A food tenancy on the upper level would be in a prime location to capture movie patrons of whom there would be many hundred thousand in a year. I accept both Steele and McCubbing pointed that out to Egon Konig.

194 Steele, for example, told the Konigs there would be hundreds of thousands per year going to the cinema complex, so because of that, passing trade past the entrance to their tenancy it would be noticed by "a huge amount" (sic) of people, whether they be going for a movie or to patronise any other tenancy in the complex.

195 There was also mention made of the proximity of the Shopping Centre. Steele's evidence was that the Entertainment Centre was commonly referred to as being adjacent to the Shopping Centre - that being mentioned as a circumstance from which the Konigs could expect increased trade.

196 Likewise, McCubbing told Konig that their's would be the only coffee shop on the upper level of the Entertainment Centre, and both he and Steele expressed the opinion they were not personally aware of any other coffee shop in Perth's suburbs which traded until late in the evening at that time. That last could not amount to an actionable representation - it was no more than an expression of personal belief or opinion.

197 What was meant by the expression "control of patrons to the centre" in [7(b)] was not immediately clear. As the evidence progressed, that seemed to relate to the Konigs' concern that at times of large crowds attending the cinemas, the cinema proprietors would set out an arrangement of ropes to channel and control the movement of patrons.

198 In particular, such a rope would be strung across the internal frontage of the Konigs' tenancy to separate those cinema patrons leaving the cinema, from those entering. The rope was approximately one metre out from the frontage of the Konigs' tenancy and parallel to it. In addition, sometime after the cinema opened, the Konigs and the Crossleys noticed that the crowds exiting the cinemas, from whom they had hoped to attract passing trade, were frequently much smaller than they had expected. They then discovered that the cinema owner had adopted a practice of opening the exit doors out of the rear of the cinema tenancy so that the departing patrons could exit directly into the car park. That meant, of course, that they did not pass the tenancies in the foyer.

199 Both practices were adopted by the cinema proprietors as safety measures for proper crowd control and were only put in place when the crowds were large. It can readily be appreciated that was precisely when traders in other tenancies would hope for increased passing trade for themselves.

200 The short answer to this pleading is that there was no evidence of any representation having been made to the Konigs that the Entertainment Centre would be controlled in such a way as to make their tenancy a prime location. Indeed, I am satisfied it was always made clear that the control of the foyer was vested in the cinema proprietor - and that was reflected in the terms of the lease agreement (cl 74). Apart from those considerations I accept Mr Dillon's submission that the use of ropes in the way described was something which occurred only after the Konigs had entered into their lease and had not been the subject of any discussion prior to that, other than that the cinema proprietor had control of the foyer area.

201 I am satisfied that Steele and McCubbing pointed out to the Konigs that their tenancy would be in a prime location so far as the Entertainment Centre car park was concerned.

202 The external frontage of the tenancy faced diagonally towards patrons approaching the entrance to the Entertainment Centre and from the photographic exhibits and the evidence generally, would have been visible from the approximate North to West quadrant of the Entertainment Centre car park, which was on the same level (although falling away towards the north). It would not have been visible from locations in the car park in the area broadly North to East, until patrons approached the actual entrance to the complex. That was because of the two large pillars which were directly in front of the north-facing frontage of the tenancy.

203 The plaintiffs plead ([12(b)] statement of claim) that the design and construction of the Entertainment Centre's car parking facilities effectively isolated the Konig's business from the car parking area serving the Shopping Centre. They were on a different level to the Entertainment Centre and the parking facilities serving the latter were surrounded by a retaining wall. Access between the two levels of parking facilities was by stairs and a ramp, which made access to the Konigs' tenancy cumbersome.

204 I am not persuaded that representations were made to the Konigs that they would be in a prime location to attract customers from the Shopping Centre car park. I have no doubt the proximity of the Shopping Centre was discussed and put forward in the sense that there would be a commercial advantage in being part of a cinema complex which was in the same precinct as the Shopping Centre, but I am not satisfied there was any representation which went beyond that.

205 The Konigs' tenancy could not be seen from the Shopping Centre car park (which in fact principally surrounded the Shopping Centre to the East of the Entertainment Centre). The general disposition is readily seen from the aerial photograph Ex D5. I accept that the Konig's tenancy was effectively isolated from the Shopping Centre car park but that was because the Entertainment Centre itself was. They are on different levels with limited physical access between. But these facts must have been readily apparent from any inspection of the area.

206 The presence of the two large pillars is pleaded as a breach of the representation at [7(b)] of the statement of claim. However the pillars were always shown on the documents, plans or displays produced to the Konigs from the outset.

207 The artist's conceptual impression in the newspaper advertisement which prompted the Konigs' interest initially (Ex P1(EK2)) shows the pillars, as does the artist's impression originally shown to them (Ex D6) and the plans (Ex P30; Ex D31). A copy of Ex D31 is Annexure "A" to these reasons. It was not just the existence and location of the pillars which concerned the Konigs, it was the size of the pillars which horrified them. But even so, their size is apparent from the drawings and plans, and in any event it is a visual aspect about which the Konigs were put on notice. I am not satisfied there was any (mis)representation about the pillars nor arising out of the fact they were there.

208 So far as the general complaint in [7(b)] is concerned, the plaintiffs' tenancy was in a prime physical location to attract passing trade, whether from the Entertainment Centre car park, patrons moving through the front entrance to the upper level of the complex and cinema patrons coming either through that main entrance or up the escalator from the lower level. All would pass by either the external or internal entrance to the plaintiffs' tenancy.

209 The plaintiffs plead a representation there would be adequate signage on the upper and lower levels of the Entertainment Centre advertising facilities including their tenancy. They further plead that contrary to such representations, the only signage on the upper level of the Entertainment Centre was a display sign directing patrons to the food hall and the tavern within the lower level. Lower level signage within the Entertainment Centre directed patrons to the cinema only. There was no signage anywhere in the Entertainment Centre directing patrons to the Konigs' tenancy.

210 Both Steele and McCubbing categorically deny such a representation was made. Their evidence was that the tenants were told they would have adequate signage on their own premises. They were referred to the right (subject to the lessor's approval) to have signage on the facia above each tenancy. That included signage external to the Centre facing the car park but that was subject to not only the lessor's approval, but also that of the City of Wanneroo - which it was said would probably be difficult to obtain.

211 Mr Konig's evidence on the alleged representation was not specific. The only evidence he gave about it was that one of the things discussed at his third meeting with Steele and which led him to go ahead with the business was "clear signage to indicate location".

212 I find the only representation made to the Konigs about signage was that explained in evidence by Steele and McCubbing, which was not to the effect of that pleaded. The latter seems to have arisen from a concern of the Konigs first expressed in their letter to Westpoint Realty dated 6 December 1993 (Ex P1(EK26)). In that, they wrote of their "great alarm" at having recently heard that the Centre management was going to install a large sign at the top of the escalator, directing people to the food hall and tavern in the lower level. They insisted that a sign of similar size be placed at the entrance to the escalator on the lower level, directing people to their café.

213 What is significant about the letter in the present context is what it did not say. There was no complaint that signage of that type had been promised the plaintiffs but not provided. The complaint related not to a prior representation of the nature pleaded, but to a management issue which only arose in December 1993.

214 Paragraph [7(c)] of the statement of claim has not been made out.

215 The plaintiffs plead a representation that the tenants in the upper level of the Centre would not be permitted to sell coffee and cappuccino on its own, such sales being preserved for exclusive sales from the Konigs' café, which was to be the only coffee shop in the foyer.

216 Mr Konig's evidence in this regard was that the Beverley Hills Café would be the only coffee shop in the foyer and the only venue that would have permission to sell cappuccino on its own. Other venues, such as Frederico's, would only serve cappuccino with food.

217 I have already referred to what Carey said about that. His unequivocal evidence was that he would not have approved a request for the exclusive sale of either coffee or cappuccino, because that would impact unfairly upon other tenants in the building on the upper level, in particular those restaurants who would want to serve coffee at the end of meals.

218 Steele confirmed that the Konigs would be the only tenancy on the upper level permitted to sell and promote coffee as its predominant purpose, but said it could do so only within the tenancy and not sell directly into the foyer of the cinema. He did confirm that Mr Konig did ask on a couple of occasions for the exclusive right to sell coffee and cappuccino, but that was refused. According to Steele, the tenants on the upper lever were advised that they would not be able to sell cappuccino on its own. It was the intent that the Beverley Hills Café would be the only one where people could go in and just order a cappuccino on its own. He agreed that he did make the representation to the Konigs that they would be the only coffee shop in the foyer and the only venture to have permission to sell cappuccino on its own.

219 McCubbing confirmed that they did tell the Konigs their's would be the only coffee shop in the foyer on the upper level.

220 Mrs Crossley explained that their tenancy, "Deadly Desserts" had approval to sell plunger coffee and they had always wanted to sell cappuccino, but they were told quite categorically at the beginning, they would not be permitted to sell cappuccino coffee as Beverley Hills Café had that exclusive right. However, about a year later when Frederico's restaurant opened opposite to their business, the Crossleys saw Frederico's were serving cappuccinos and so they asked for permission to do so also. But they were again refused. Steele confirmed that he told the Crossley's "Deadly Desserts" could not sell cappuccino although they did have the right to sell coffee. Their core business was as a dessert restaurant.

221 In my view the evidence establishes that the second plaintiffs were told by Steele and McCubbing that their's would be the only business on that level which would be permitted to sell cappuccino on its own, and that their's would be the only coffee shop on the cinema foyer level. These were positive, unqualified representations which Steele and McCubbing were not in a position to give because Carey was prepared to approve menus which would put other tenants in direct competition with the Beverley Hills Café.

222 In fact, as things eventuated, Frederico's and "Little Dragon" did sell cappuccino and they and Deadly Desserts sold coffee with food such as cakes, which it was reasonable for the Konigs to have understood from what they had been told would be exclusive to them as the only coffee shop in the foyer.

223 I find par [7(a)] and par [12(d)] of the statement of claim made out.

224 The plaintiffs claim that it was represented to them that no shop in the upper level of the Centre would be permitted to sell drinks, ice creams or any food direct to patrons in the foyer of the cinema complex. They then claim that contrary to those representations, other shops in the upper level of the Centre, including the candy bar, were permitted to sell drinks and food items direct to patrons in the cinema foyer.

225 As the candy bar is the subject of a specific pleading, I will deal with that separately. Apart from that, particulars of shops permitted to sell drinks and food items contrary to this representation are Deadly Desserts and Frederico's.

226 In his evidence-in-chief, Mr Konig listed "in substance" a number of things which Steele and McCubbing told him. They included that no tenancy would be allowed to sell food or drinks in the foyer, which made him believe patrons were to purchase drinks, etc, by entering the tenancies in the foyer. He said later that he was told by either McCubbing or Steele, or both, at the third meeting that neither the Konigs nor any other tenant could sell drinks, ice-cream, popcorn and/or any other food into the foyer as "they" did not want a mess like other cinemas had experienced in their foyers. He said this made him believe that nobody was going to be selling food into the foyer and that customers who wanted food or drinks would have to come inside the shops. For this reason he believed the competition amongst the shop-holders into the foyer would be similar. Customers would have to come into the foyer area and then select which type of food they wanted and then step inside the shop itself, and that the businesses within the various tenancies would complement each other. He said that because of this, the Beverley Hills Café was redesigned so the customers would have to come right into the café to purchase goods; the Konigs had no provision to sell directly into the foyer.

227 Steele confirmed in his evidence that he did tell the Konigs that no shop in the upper level of the Centre would be permitted to sell drinks, ice-cream or food direct to patrons in the foyer of the cinema complex.

228 I am satisfied on the evidence that it was made expressly clear to the Konigs and to other prospective tenants, that no shop tenant would be entitled to sell directly into the cinema foyer.

229 Clause 24.3 of both the Konigs' lease and that of the Crossleys, designated an excluded use:

"(a) the lessee shall not sell by retail any popcorn, packaged confectionary or stick or packaged ice creams or iced confection; and

(b) if the premises are situated on the upper ground floor level of the Centre the lessee shall not sell by retail any ice-cream and iced confection in cones and similar containers."

230 There was to my mind some confusion about exactly what the pleading in [7(e)] was directed. At times it seemed the complaint was that the Konigs could not sell any products directly into the foyer, whereas other tenancies did; at other times the complaint seemed more that they were not permitted to sell those certain nominated items. Yet again, it seemed the complaint was that shops in the upper level were permitted to sell food and drink items in competition with the Beverley Hills Café. That last is more appropriately dealt with under [7(f)] and I will return to it then.

231 The nature of the restriction on the sale of certain types of food and drink is clear from cl 24.3 of the lease. That restriction did apply to all tenants on the upper level at least. The representation that there was such a restriction was undoubtedly made to the Konigs, and it was true.

232 I am satisfied the representation was made that no shop tenancy would be permitted to sell directly into the foyer. With the exception of what I shall say below about the candy bar, the Konigs' understanding of that was correct.

233 The only evidence of sales being made directly into the foyer area was that Deadly Desserts was divided into two tenancies and in the restructuring the Crossleys had their entire frontage onto the foyer. That was arranged in such a way that patrons could step straight into Deadly Desserts and up to the sales counter across the whole frontage of the tenancy, rather than having to enter through a doorway.

234 Steele was somewhat surprised at that, but observed that although the Deadly Desserts' counter may have facilitated the sale of products to patrons coming in from the foyer, the setback of the counter meant they were still being sold within the Deadly Desserts' tenancy.

235 In my view, that development did not make what had been said by Steele and McCubbing in the tenancy negotiations about sales directly into the foyer, a misrepresentation. The fact was, the prohibition did apply and was in substance enforced.

236 The permitted use for the Deadly Desserts' was "dessert restaurant with takeaway facility" for the sale of food of the type described in the approved menu. The food so described was specialist desserts. The Crossleys were permitted to sell drinks, including plunger coffee, but not cappuccino.

237 After they had opened for business, the Crossleys were most disappointed to learn that the cinema would not allow food or drink items purchased from anywhere other than the candy bar to be taken into the cinema. Nonetheless, they accepted that, because it was within the rights of the cinema proprietor to dictate.

238 I am satisfied that a representation was made in the terms pleaded at [7(e)] but that it was true. Furthermore, one aspect of it was the restriction to be contained in any lease, that items such as ice-cream and popcorn could not be sold at all because they would be sold by the cinema candy bar.

Limited food (shops operating in foyer): [7(f)]

239 At [7(f)] the plaintiffs plead a representation that with the exception of the Indian restaurant, Kentucky Fried Chicken, Hungry Jacks and the Pancake Parlour, the Beverley Hills Café would be the only shop to operate in the foyer of the cinema. The alleged breach of this representation is in turn pleaded as being that contrary to that representation the Centre management did not prevent the candy bar, Deadly Desserts and Frederico's from operating within the foyer, which indicates implied or express approval of such activity.

240 Again the substance of what this pleading is about was at first not at all clear. I have taken it to be a claim that the Konigs were told the only other businesses in the foyer area would be those adumbrated in [7(f)] ("the nominated tenants"), whereas other businesses which were similar to the Beverley Hills Café and so competing directly with it were permitted, they being the candy bar, Deadly Desserts and Frederico's.

241 The evidence certainly was that negotiations were being conducted with the nominated tenants and it was expected they would sign up. The evidence does not establish there was any representation that the tenants on the upper level would be limited to the nominated tenants, although I do accept the Konigs wee told their's would be the only coffee shop on that level.

242 Mr Konig's evidence about this was that Deadly Desserts (subsequently called Little Dragon) sold coffee, cakes and Devonshire teas, which he said were lines that were promised to Beverley Hills Café. As to Frederico's, subsequently called "Bronco's" and later again "Creations for Food", he said that their tenancy was empty until 5 May 1994 when it opened as Frederico's Café, which then traded in competition with the Konigs. He said it was trading as a café/restaurant/bar contrary to the original advice given by Steele and/or McCubbing that the Beverley Hills Café would be the only café in the cinema foyer. Konig said that the decision to allow a business not unlike their own in such close proximity, extremely prejudiced them. He also added that the Chinese restaurant was also selling cappuccino and cakes, which was a duplication of the Konigs' business.

243 He referred to his letter to Westpoint Realty dated 5 May 1996 (Ex P1(EK33)) in which he referred to being surrounded by empty and closed shops for two years and pointed out that Deadly Desserts was only ever open in the evenings even though their lease stipulated hours similar to Beverley Hills Café. In the letter he went on to point out that there were, at that stage, three food outlets in the foyer, all of whom sold cakes and cappuccinos. He pointed out they had signed a lease on the understanding they would be the only such venue. Likewise, although initially pleased to have the Chinese restaurant as another tenant, the Konigs realised that was largely a duplication of their own business when the Chinese restaurant started to sell cappuccino, cakes, chips, pies, fruit salad and Danish pastries, etc. He made the same observation in relation to Bronco's, which he said was advertising itself as a café, when the Konigs had signed the lease believing they would be the only café in the foyer area.

244 Counsel for the first and second defendants submitted first that the particular of falsity pleaded does not relate to the making of the representation, but rather to activities and management after the plaintiff took up occupancy of the tenancy. He also relied upon cl 24.7 of the lease (Ex D3). That clause states that the permitted use of the premises is not exclusive to the lessee and the lessor may permit other persons to conduct similar or competing businesses in the Entertainment Centre. That latter proposition, so stated, is correct, but it does not respond to the complaint. Furthermore, it highlights the misleading nature of the representation when made. If WEC intended to rely upon that clause to approve tenancies trading as cafes in that area, then at the very least the representation should have been clearly qualified in that way (see Wheeler Grace Pierucci Pty Ltd v Wright [1989] FCA 127; (1989) ATPR 40-940 per Lee J at 50,251 and Famel Pty Ltd v Burswood Management Ltd (1989) ATPR 40-962). I find that there was a representation the Beverley Hills Café would be the only coffee shop on the upper level and that the letting of tenancies which were permitted to sell a range of items so substantially in competition with the Konigs' business was contrary to that representation.

245 The plaintiffs plead that during the negotiations and contrary to the representation at [7(e)] that no shop in the upper level of the Centre would be permitted to sell drinks, ice creams or any food direct to patrons in the foyer of the cinema complex, both Steele and McCubbing knew, but failed to disclose to, and concealed from, the plaintiffs that there would be a candy bar on the premises situated in the foyer area, selling food and drinks direct to patrons of the cinema.

246 The particulars of the failure to disclose are said to be that during the negotiations, McCubbing failed to include the candy bar in the proposed tenant and floor plan shown to the Konigs.

247 At the hearing, senior counsel for the plaintiffs expressly disavowed any reliance on the assertion that Steele or McCubbing actively concealed the existence of the candy bar from the plaintiffs; rather, it was put that the fact of the non-disclosure had that effect. Thus the submission was that Steele and McCubbing failed to disclose to the Konigs that there would be a candy bar in the foyer selling food and drinks direct to cinema patrons. I do not accept that submission. It may well be that Egon Konig took what Steele and McCubbing told him about the restriction on tenants not being able to sell drinks, ice creams or food direct to patrons in the foyer of the cinema complex as meaning that there would be no sales of that kind to cinema patrons at all. That was certainly the sense in which I understood his evidence. But it was a misunderstanding. The reason for the restriction on shop tenants was precisely because the right to sell such items was to be reserved to the cinema candy bar. However, as Egon Konig said, what they told him "made [him] believe that nobody would be selling food into the foyer ...". He may have understood it that way, but it was not what they were talking about and the misunderstanding was most probably due to his enthusiasm to seize what he saw was a very promising business opportunity.

248 The point was made graphically clear by Mr Konig's evidence, that one or two weeks prior to the opening, the Konigs found that the candy bar had opened directly opposite their tenancy and was able to sell all the items forbidden to them. His testimony was that he and his wife had understood from what Steele and McCubbing had said, that the location in which the candy bar operated was where the cinema ticket counter was to be. Again, he expressed his complaint as being that the candy bar started trading into the foyer, which was something Beverley Hills Café was not allowed to do.

249 Mrs Konig said she was never told about the existence of the candy bar. That evidence may be accepted, but she had very limited personal dealings with Steele and McCubbing and most of her evidence about the negotiations and any representations consisted only of recounting what her husband had told her.

250 I am satisfied that Steele and McCubbing did tell Mr Konig there would be a candy bar in the foyer. The plan of the upper level (Ex D31) has the description "C/bar" in the cinema area, albeit somewhat to the west of where it was eventually located. I accept McCubbing's evidence that this diagram was shown and explained to Mr Konig. What they told him about that was reflected in cl 24.3 of the lease (Ex D3). I do not overlook the fact, as I accept it to be, that the first plan or diagram the Konigs were shown (Ex P2) did not have the candy bar marked on it.

251 The first time the issue of the candy bar was raised by the Konigs was in their letter to Westpoint Realty dated 31 August 1994, some 12 months after they took up their tenancy. The complaint was not that they had not been told there would be a candy bar, but that it would sell the items forbidden to them. However, the reason why they were forbidden to sell those items was because they were reserved to the candy bar.

252 Paragraph [7A] of the statement of claim is not made out.

253 Before turning to the plaintiffs' case in respect of each defendant, it is necessary to consider what Mr Dillon described as the very large issues of reliance and causation. The contention was that even were I to find there had been misrepresentations made, those would not have affected the decision made by the plaintiffs to enter into the lease.

254 I accept that the Konigs were excited by the opportunity of taking up a tenancy at the Entertainment Centre. Mr Konig was already looking for a business closer to their home in Carine. He, in particular, was very enthusiastic. Mrs Konig drew his attention to the advertisement in the "Stirling Times" of 19 May 1992 and he wrote to McCubbing in response to it on 21 May. I accept Konig's evidence that his first meeting with Steele was in May that year, even though the first relevant entry in Steele's diary was for 28 July 1992.

255 I find that it must have been in late August 1992 that Raats prepared the first financial projection for the Beverley Hills Café based on information related to him by Mr Konig, which he in turn had obtained from the newspaper advertisement and from Steele. The initial projections must have been done about September 1992 because it was not until Mr Konig's third meeting with Steele and McCubbing that they told him the tenancy he had first sought on the lower level was not available, but there was one on the upper level. It was at that meeting McCubbing wrote on the plans and it was at that meeting, probably in early August 1992, that the representation pleaded at [7(a)] of the statement of claim was made and the plans (Ex P2) were shown. Raats and Mr Konig had a lengthy meeting at 3 pm on 1 September 1992 to discuss the preparation of budgets, a five-year plan and other aspects of the proposal. Raats actually prepared the five-year plan on 18 and 19 September 1992.

256 The initial budgets were for a profit and loss forecast for a period commencing 1 July 1993. The first projection was for a turnover of $494,000 for the 1993 year. It was probably based on a market share of some 10 per cent of passing trade.

257 Raats subsequently revised and "fine-tuned" the budgets and forecasts even more conservatively and in December 1992 produced what he described as an "ultra-conservative" feasibility schedule. A later print-out of that, but showing only the 10 month period from December 1993 to June 1994 became Ex P11. The projected turnover for that period was $321,160, which, extended for the full year, was $385,000.

258 The revised forecast was based on an annual flow of one million patrons to the cinema, or approximately 20,000 per week. Raats used a figure of 27,000 people per week, which included spin-off trade from the Shopping Centre and from people coming from outlying areas to the other businesses in the Entertainment Centre. He allowed average sales of $3.50 per head (for perhaps a cup of coffee and a piece of cake) and taking a figure of 6 per cent of market share (of the 27,000 people per week) estimated 20 sales per hour for 12 hours a day initially, increasing to 30 sales per hour by 30 June 1994. Six per cent of 27,000 people per week represents 231 people per day, or one person every three or four minutes - accepting that to be an average figure, not an actual rate.

259 Raats and the Konigs thought both sets of budget forecasts showed the proposed venture was commercially viable. That was a reasonable conclusion, based on what I accept was an appropriately conservative approach. But it was also fundamentally based on a representation that the Beverley Hills Café would get spin-off trade from the cinemas and from the appropriate mix of other businesses on the upper level of the Entertainment Centre and that they would be the only coffee shop in the foyer. That assumption was founded on the representations made to the Konigs by Steele and McCubbing. The representations were made in part on the basis of what Carey had told them. So regarded, the advice and the decision of the Konigs to proceed with the business enterprise would satisfy the "but for" test of causation favoured by McHugh J in March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506, 533 - 534. I am satisfied it would certainly meet the "commonsense and logic" guide adopted by the majority in that case. The wrongful conduct of the defendants in the making of representations which were misleading or deceptive was one of a number of conditions which produced the damage suffered by the plaintiffs. Applying ordinary notions of language and commonsense (per Deane J, with whom Gaudron J agreed in Stramare at 524; followed by Ipp J in Australian Shipbuilding Industries (WA) Pty Ltd v Packer (1993) 9 WAR 375 at 381), the injuries suffered by the plaintiffs was caused by the representations which induced them to enter into the lease.

260 For there to be the necessary causal relationship between a contravention of s 52 of the Trade Practices Act, and loss or damage, so as to satisfy the requirements of s 82(1) of that Act, it is not essential that the misrepresentation be the sole cause of the loss or damage. It is enough if the conduct of the defendants was one of the operative causes (per Gleeson CJ in Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, 41).

261 Mr Dillon relied upon the fact that the Konigs contracted for the sale of Egon's Café and Patisserie in mid-August 1992, as indicating they had already made up their minds to take the lease for the Beverley Hills Café. I do not accept that. I am satisfied the Konigs had decided to sell Egon's Café and Patisserie in any event as part of their general intention to restructure and relocate their business activities, at a time when they had made no firm decision on exactly what form that would take. Indeed, at that early stage Mr Konig was still toying with the possibility of establishing a coffee shop at Whitford City.

262 The misrepresentations as to future matters I have found established were made without reasonable grounds for making them.

263 The making of the representations by Steele and McCubbing acting on behalf of Westgem, constituted conduct by Westgem in trade or commerce which was misleading or deceptive or which was likely to mislead or deceive contrary to the provisions of s 52 of the Trade Practices Act.

264 WEC was involved in Westgem's contraventions of the Trade Practices Act pursuant to s 75B in that at all material times Westgem had full access to the plans, management policies and information in relation to existing and proposed tenancies in the Centre. Furthermore, WEC engaged Westgem as its agent and supplied it with the information which Westgem, by Steele and McCubbing, used in making the representations. Finally, WEC knew the representations were made, or ought reasonably to have known and took no steps to correct them.

Disclosure statement and expenditure statement

265 Paragraphs 23 to 26 of the statement of claim seek damages for a failure to provide a disclosure statement in accordance with s 6 of the Commercial Tenancies Act and an order under that Act terminating the lease. In his final submissions senior counsel for the plaintiffs conceded he could advance no argument in support of those claims. The plaintiffs' reliance on the failure to provide a disclosure statement was confined to the proposition that had such a statement been given to the Konigs, it would probably have indicated that there were in fact no tenants at all committed for the upper level at the time they committed themselves to the lease.

266 Mr McKerracher QC also accepted there was no evidence to support the plaintiffs' claim of overpayment of variable outgoings by a failure of the landlord to provide an audited variable outgoings statement.

267 It was common ground that the appropriate measure of damages in this case is that analogous to damages in tort for misrepresentation or deceit. That is, that damages should put the successful plaintiffs in the position they would have been in but for the misrepresentations.

268 Even so, as Gleeson CJ explained in Henville v Walker (supra) at [18] and [19]:

"[18] Section 82 of the Act is the statutory source of the appellants' entitlement to damages. The only express guidance given as to the measure of those damages is to be found in the concept of causation in the word 'by'. The task is to select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case. The purpose of the statute, so far as presently relevant, is to establish a standard of behaviour in business by proscribing misleading and deceptive conduct, whether or not the misleading or deception is deliberate, and by providing a remedy in damages. The principles of common law, relevant to assessing damages in contract or tort, are not directly in point. But they may provide useful guidance, for the reason that they have had to respond to problems of the same nature as the problems which arise in the application of the Act. They are not controlling, but they represent an accumulation of valuable insight and experience which may well be useful in applying the Act.

[19] The assessment of damages for deceit, or for negligent misstatement, has confronted courts with issues similar to those which arise in the present case.

[20] In Clark v Urquhart [1930] AC 28 at 67-8 Lord Atkin said:

'...I find it difficult to suppose that there is any difference in the measure of damages in an action of deceit depending upon the nature of the transaction into which the plaintiff is fraudulently induced to enter. Whether he buys shares or buys sugar, whether he subscribes for shares, or agrees to enter into a partnership, or in any other way alters his position to his detriment, in principle, the measure of damages should be the same, and whether estimated by a jury or a judge. I should have thought it would be based on the actual damage directly flowing from the fraudulent inducement."

269 Gaudron J dealt with the issue in the context of the onus of proving loss or damage. At [67] her Honour said:

"[67] The question posed by the Full Court's conclusion that Mr Henville failed to prove his damages is really a question as to who bears the onus of proof, and on what issue, in a case where contravening conduct is the cause of some but not all the loss in issue. The precise question is whether, in a case where loss results from two or more acts or events, s 82(1) requires a claimant to prove only the total loss that he or she suffered leaving it to the person whose conduct is in question to prove that some aspect of that loss is referable to other acts or events or whether, on the other hand, it requires a claimant to prove that a particular component or particular components of his or her loss are referable to the contravening conduct in question.

[68] Just as the relief available under s 82(1) is not to be confined by analogy either with the actions in tort or in contract, it should not be confined by imposing an unduly strict burden of proof on the claimant. As already indicated, s 82 provides for the recovery of loss or damage that a person suffers by contravening conduct. To require a claimant to prove which component of his or her loss or damage is referable to the contravening conduct would be to impose limitations on relief which the terms of that subsection do not require.

[69] At the very least, to require that a claimant under s 82(1) of the Act prove which component of his loss or damage is referable to contravening conduct would be to confine recoverable loss to that directly resulting from that conduct, and, thus, to impose a gloss on the words of the subsection. At the other extreme, it would be to deny any remedy at all in those cases where loss results from two or more acts or events but the claimant is unable to identify the precise component or components of the loss referable to contravening conduct. That consequence is inconsistent with the concept of causation upon which s 82(1) is predicated, namely, that the contravening conduct should only have materially contributed to the loss or damage suffered.

[70] It follows that, under s 82(1) of the Act, it is for the person whose contravening conduct materially contributed to the loss or damage to establish what component of that loss or damage is referable to some act or event other than his or her contravening conduct and not for the person who suffers loss or damage to establish the precise component or components referable to that conduct."

270 McHugh J pointed out [130 et seq] that although in most cases the measure of damages in tort is the appropriate guide in determining an award of damages under s 82 of the Trade Practices Act, courts are not bound to choose between the measure of damages in deceit, or other torts, or contract. Once a causal connection is found, nothing in s 82 suggests that the recoverable amount should be limited by drawing an analogy with contract, tort or equitable remedies, although they will usually be of great assistance. His Honour concluded the general principles for assessing damages may have to give way altogether in particular cases to solutions best adapted to give the injured claimant an amount which would most fairly compensate for the wrong suffered.

271 The plaintiffs relied upon the expert evidence of Mr Russell Morgan of the accounting firm William Buck. The first and second defendants relied upon expert evidence from Mr Lindsay Stagoll of the firm Parkinson & Co.

272 Morgan's first report was dated 5 October 1999. In that, he put forward two components of the total losses of Alpine Holdings as trustee for the E & S Konig Family Trust. The first was the total trading losses sustained by the company for the period that it operated the Beverley Hills Café. The second was the projected trading profits that the business would have earned over the 15 year lease.

273 Morgan's examination of the company's financial statements showed the actual trading results for the financial periods to June of each year from 1993 to 1997 inclusive, were:

274 His examination of the financial statements and other enquiries disclosed the amount of that loss was affected by a number of items.

275 The loss of $93,945 for the period July 1996 to January 1997 included $75,116 on disposal of fixed assets. They comprised fixtures and fittings which the Konigs were unable to remove from the shop premises when they vacated. Morgan calculated the loss on disposal of those fixtures and fittings on the basis that Alpine Holdings had received no compensation for non-removal of them.

276 I note the total loss includes rent for the premises paid by Alpine Holdings up to 28 February 1997.

277 Morgan noted that the calculation of the total loss did not include any interest expense applicable to borrowed funds used for setting up the business. The financial statements show the company initially borrowed $248,192 from its directors, the Konigs, in order to finance the setting up costs and working capital of the business. Those borrowings had been reduced to $211,030 as at 28 February 1997. Morgan calculated that on the basis of the Westpac commercial rate the company would normally have incurred interest expense totalling approximately $97,780 over the three years and seven months on those borrowed funds (calculated at 10 per cent interest per annum, compounding on the average loan balance of $239,280).

278 Although I accept the correctness of Morgan's observation that normally there would be an interest expense associated with the loan account as a general proposition (and whether viewing it as an actual allowance for interest or as an opportunity cost), the fact is that the Konigs had not charged interest on their loans to the company. There was no expense item in the books for interest on the loan and there is no evidence the Konigs would have sought to recover it. They simply put the money into the business in the expectation that their return would be the profits and ultimate return on sale. In those circumstances it seems to me inappropriate to allow this component.

279 Morgan also considered allowance should be made for directors' wages.

280 The actual wages expense for directors as shown in the company's financial statements were as set out below:

281 Accepting that Mr Konig worked full-time in the business and Mrs Konig worked part-time, Morgan estimated that commercially realistic gross salaries for their efforts would be at least $30,000 per annum for Mr Konig and $6,000 per annum for Mrs Konig. Thus, if the company had paid the directors accordingly, the total loss for the period of three years seven months would have been increased by at least $125,166.

282 In cross-examination Morgan agreed that business proprietors who have an equity interest often suffer the rises and falls of their profits and will not take salary but allow goodwill to build up in the business. He noted that directors wages were a salary for personal exertion which is quite different from a rate of return on investment and when valuing a business it is necessary to determine an actual rate that would reflect the directors services being put into the business. Nonetheless he did concede, as I understood his evidence, that a proprietor would often be content to take their return from a business by way of capital growth and goodwill, rather than by way of wages. There is also a good tax reason for that because the company tax rates are only 30 per cent and marginal rates are higher. That course however, tends to produce the problem of confusing the rate of return with the rate of remuneration for personal exertion.

283 I accept that for the purpose of valuing a business it is necessary to factor into the calculation a commercially realistic allowance for directors' wages. But that is not the present purpose. What is necessary here is to determine what loss was suffered by the Konigs. The fact that directors who were also the sole shareholders did not draw wages from their corporate business might well lead to a conclusion that there should be no compensation for lost wages. In this case however, it is clear that the reason the Konigs did not draw wages was because the business was going so badly and they were trying to keep their costs as low as possible. In these circumstances I consider it proper to include the lost wages component.

284 The starting point for Morgan's calculation of loss of profits was a one page forecast summary prepared by Mr Konig based on a turnover of $494,000 per annum. That produced a forecast net profit before depreciation and interest expense of $156,000. In passing I note it also included an allowance of $30,000 for directors' wages which I consider to be reasonable and even conservative. The summary forecast reflected the initial figures prepared by Raats and Mr Konig, not the December 1992 revision by Raats which anticipated an annual turnover of $385,000.

285 Morgan considered the estimates reasonable by reference to the actual trading results of Alpine Holdings' previous coffee shop Carillon Beverages and the former coffee shop and food outlet operated by the Konigs' trading as Egon's Coffee and Patisserie. He also compared the estimated rent and overhead expenses, and other trading estimates, to the actual income and expenses of the Beverley Hills Café for the period that it operated.

286 Carillon Beverages was operated by Alpine Holdings in the Carillon Centre Perth from 15 February 1991 to 27 October 1993 when it was sold.

287 Egon's Coffee and Patisserie was also located in the Carillon Centre, Perth and was operated by the Konigs for a number of years prior to the date of sale of that business on 12 October 1992.

288 The actual annual sales for Egon's Coffee and Patisserie for its last two periods of trading to 1 November 1992 was $432,272. The actual sales for Carillon Beverages for the period 15 February 1991 to 27 October 1993 were $1,097,350, representing average annual sales of $405,175.

289 Morgan recognised there were significant differences between the businesses, including the fact that the Beverley Hills Café was located in a suburban entertainment centre whereas the other two businesses were located in a city shopping arcade, but was nonetheless of the view that allowing for those factors, it would have been reasonable to forecast its sales would be $418,723 based on the previous trading history of those other two businesses.

290 In his oral evidence he thought that if all of the positive assumptions made in respect of the Beverley Hills Café were found to be true, the projected income could well be closer to Konig's estimate of $494,000, but he had taken a more conservative approach, which was to compare it to actual results for similar businesses.

291 Stagoll thought that Mr Konig's turnover expectations may have been based upon his trading results in his city stores, but in his opinion, that expectation was unrealistic. He pointed out that the Beverley Hills Café was not located in the city with a high volume of passing trade and it had an entirely different customer base. A suburban cinema has a large number of children with limited spending capacity. Also, the Warwick location, he said, is not a high socio-economic area, being surrounded by areas such as Hamersley, Warwick, Greenwood and Balga. He also compared a comparative analysis of Carillon Beverages' actual financial results and the projections for the Beverley Hills Café, from which he concluded that the Konigs were expecting to produce a greater turnover from the latter than they had achieved from Carillon Beverages, even though Carillon Beverages was longer established. He also thought that the Konigs had an unrealistic turnover expectation for Beverley Hills Café having regard to the relationship between rent and turnover. Whilst turnover for Carillon Beverages was approximately 4.25 times rent, Stagoll noted that the Konigs' projections for the Beverley Hills Café were approximately 9.3 times rent - that is, Konig was expecting to achieve more than double the turnover per dollar of rent paid. In summary he suggested that the Konigs were expecting to achieve four times the profitability from a new business than they had been able to achieve from the Carillon store and that was not realistic. His major criticisms however, were based upon a comparison with statistical information compiled by the Financial Management Research Centre ("FMRC"), University of New England, Armidale, New South Wales. I shall return to those shortly.

292 The flaw in Stagoll's comparison of Carillon Beverages and the Beverley Hills Café is that it assumes they are similar businesses, whereas in fact they were quite different.

293 Apart from the different nature of their respective locations, Beverley Hills Café was to have been the only coffee shop on the upper level of the Entertainment Centre, whereas Carillon Beverages was in competition with similar businesses located in Carillon Arcade. Further, Beverley Hills Café was to have been the only café in the northern suburbs of Perth operating with extended hours and was to belong to the only cinema complex in the northern suburbs at that time. It was to trade seven days a week, whereas Carillon Beverages was not open on Sundays. Beverley Hills Café was expected to have limited competition from similar businesses for three to four years, when the Joondalup cinemas would be built, whereas the competition for Carillon Beverages in Perth central city was extensive. In addition, Beverley Hills Café was expected to gain "spin-off sales" from some one million cinema patrons each year plus other businesses in the Centre.

294 The major thrust of Stagoll's evidence was based upon the comparison of the plaintiffs' business against the FMRC business benchmarks ("the FMRC benchmarks"). These are produced by FMRC from financial surveys of Australian industry and professional sectors. Results from individual businesses are compiled into standard questionnaires, identified by code only so confidentiality is guaranteed. The results are then processed into averages. The averages are then broken down into sale size or turnover groupings, so that a business can be compared against similar sized businesses.

295 The introduction to the FMRC benchmarks document itself notes that the statistics reported should not be considered to be representative of all of the enterprises in a particular sector; rather they are intended to provide a guide to a valuation of the performance of an individual business or practice.

296 The sample size for each sector varies according to the number of questionnaires submitted to FMRC. Statistical variance tests are applied to ensure the end results are not biased by any one extreme result in the sample. Those extreme cases are excluded.

297 Stagoll used the FMRC benchmarks as a basis of comparison with the actual performance of Beverley Hills Café for 1995 and the projections made by the Konigs and by Morgan.

298 As to the first, he concluded that although in 1995 the shop was only into its second year of operations, its gross profit was almost identical to the FMRC average. However, wages costs as a percentage to turnover was significantly higher than the FMRC benchmarks. From that, Stagoll suggested that by comparison with similar business it could be concluded that the business was over-staffed. He noted that the depreciation costs recorded in the financial statements was more than three times the FMRC average which suggested to him that the amount invested in equipment was very high compared with other similar businesses or the rate of amortisation was not in keeping with the industry norm as reflected in the benchmarks.

299 In Stagoll's opinion the Konigs' turnover and profit projections were unrealistic. He was referring there to the projected turnover of $494,000. He said that was 84 per cent greater than the actual turnover benchmark disclosed in the FMRC statistics, whereas the actual turnover achieved was almost identical to the benchmark figure. He was critical also of the gross profit projection of $374,000 which he said was 126 per cent greater than the FMRC benchmark and that the gross profit percentage to sales of 75.7 per cent was substantially higher than the FMRC benchmark of 61.38 per cent. He was also critical of the Konigs' figures for rent, wages and other expenses.

300 From his comparison, Stagoll concluded that Konig had unrealistic expectations of the turnover and profit potential of the business.

301 While he considered Morgan's projection of net profit more realistic than Mr Konig's, he still regarded the former as substantially overstated.

302 Stagoll asserted that Morgan's sales projection of $418,723 was 56 per cent higher than the FMRC benchmark, the gross profit figure was overstated in line with sales being overstated, certain other occupancy costs were apparently overlooked by Morgan and whilst the $24,000 depreciation provided for by Morgan was less than the actual cost charged in the financial statements, it was still almost 2.5 times the benchmark figure. He expressed similar criticisms of Morgan's adjusted figures for wages and net profit projection.

303 The overall conclusions arrived at by Stagoll were that Konig entered into the business with unrealistic profit and turnover expectations as a result of which he structured the business wrongly, particularly in terms of staffing and fit-out. In his view the losses incurred were a function of Konig's lack of understanding that the Warwick cinema complex was a different market to that which he had experienced in his city locations. In short, Stagoll's conclusion was that any losses incurred were as a result of poor management resulting from unrealistic sales expectations by the Konigs.

304 Morgan's evidence was that particular care must be taken to ensure that the sample of businesses from which the benchmarks were obtained is similar to the business being analysed. He said that furthermore, by definition, averages represent a combination of results that are higher and lower than the average level: thus the fact that a business does not correspond with the average result does not necessarily mean that it is poorly operated, as it may be more reflective of those businesses which had the higher results in the averages calculation.

305 More pertinently he contended that Stagoll had made two fundamental errors in his comparison.

306 The first was that Stagoll selected the incorrect category in the FMRC benchmarks report for comparison to the actual results of Beverley Hills Café.

307 The FMRC category selected by Stagoll was the "All Firms Average" which is the average results of all coffee lounges surveyed by FMRC, whereas the report dissects coffee lounge businesses into two categories, those with total annual sales of less than $250,000 (Group 1) and those with total annual sales of $250,000 or more (Group 2).

308 As the annual sales of Beverley Hills Café for the year ended 30 June 1995 were $253,601 (and in 1996 were $274,318), Beverley Hills Café fell into Group 2. However, Stagoll had selected the percentages in the "All Firms Average" column which is the average of Group 1 and Group 2, against which to compare Beverley Hills Café. That had the effect of unfairly lowering the percentages against which Beverley Hills Café's results were compared, as those "All Firm's Averages" include results from the smaller businesses in Group 1 as well as results from the larger businesses in Group 2. I appreciate the point made by Stagoll that for 1995 the Beverley Hills Café was into Group 2 only by $3,600 and was therefore closer to the "All Firms Average", but I accept Morgan's evidence that inclusion in Group 2 is nonetheless appropriate because the business dynamic changes between the Groups.

309 Morgan undertook a similar comparison himself, recasting the comparison using the FMRC percentages in Group 2. The result of that was to show that the differences between Beverley Hills Café's actual trading results and the FMRC Group 2 businesses were generally much less significant than was shown by Stagoll's comparison.

310 The second error identified by Morgan was that Stagoll had not applied the percentages taken from the FMRC benchmark figures properly in any event.

311 Morgan also addressed some of the other criticisms made by Stagoll, including those relating for example, to the depreciated calculations. He pointed out that the depreciation expense contained in the depreciation schedule appeared to be fixtures and fittings normally forming part of the premises and hence which would accrue to the landlord. He did not consider that the depreciation expense contained in the FMRC benchmarks would include depreciation of landlords' fixtures and fittings. I think that must be right.

312 Overall I found Morgan's analysis and explanation much more logical and persuasive than that advanced by Stagoll and I accept the former.

313 Konig had initially forecast gross profit from trading of $374,000, which was 75 per cent of gross sales. That equated with sale prices at an average mark-up of 300 per cent above cost price. Morgan noted that the gross profit percentage earned by the two businesses which operated at Carillon Arcade was approximately 60 per cent, representing average sales mark-up of 150 per cent above cost price. He considered Konig's forecast to be unreasonable, even allowing that the average mark-up for food and drinks sold in cinema outlets is usually higher than those for other food and drink shops (due to the captive market). He considered it would have been reasonable to use the actual gross profit margin of 60 per cent earned by the Carillon shops. Applying that to the forecast sales he thought reasonable, of $418,723, the forecast gross trading profit would have been $251,234 per annum. I consider that to be a reasonable conclusion.

314 The estimated wages for staff contained in Konig's forecast was $105,000. that was based upon achieving forecast annual sales of $494,000. Given his reduction of the latter figure to $418,723, Morgan reduced the forecast wages for staff to $65,000.

315 Morgan's calculations of forecast net profit before depreciation and interest expense was:

" Per Annum

$

Income

Sales 418,723

Deduct: Cost of sales 167,489

Gross Profit from Trading 251,234

Expenses

Rents and outgoings 53,000

Other overheads 30,000

Wages - Staff 65,000

- Directors 30,000

178,000

Forecast Net Profit Before Depreciation and Interest

Expense $73,234"

316 On the basis of those figures, Morgan calculated the forecast net profit before tax to be $25,234, that being as under:

"- Interest expense (24,000)

- Depreciation (24,000)

Forecast Net Profit before Income Tax $25,234"

317 I have already said that I would not include the interest in this regard and so I discard that.

318 Morgan's calculation of depreciation was based on a practical basis (for present purposes) which differed from the depreciation rate applied by Alpine Holdings in its financial statements. In those, a rate of 20 per cent per annum was used. That was the relevant statutory basis for income tax purposes. Morgan's calculation was based on the average estimated life of the furniture, equipment and leasehold improvements installed by Alpine Holdings in the Beverley Hills Café. That estimate was 10 years. He accordingly applied a depreciation rate of 10 per cent per annum to the total capital expenditure of approximately $240,000. I consider that realistic and appropriate. I do not accept Stagoll's criticism of it.

319 As the lease agreement was for a term of 15 years, Morgan's opinion was that it was reasonable for the first plaintiff to expect a net profit before tax of $378,510 (15 years x $25,234) recognising that figure did not take into account the effect of inflation on income and expenses, nor did it represent the present net value of the forecast net profit before tax.

320 I would not include the interest expense in favour of the Konigs. That would thereby increase the forecast annual net profit before tax for Alpine Holdings to $49,234.

321 Applying that to the 15 year term of the lease would give a figure of $738,510. There should be added to that the calculated trading loss from 23 May 1993 to 6 January 1997, of $169,786, giving a total estimated loss of the first plaintiff of $908,296. From that though must be deducted the repayment of the loan from the Konigs, for the reason I express below. The outstanding balance was $211,030. That would bring the total estimated loss for the first plaintiff to $697,266. However, the first plaintiff claims only $548,296 under this head and accordingly that is what I allow.

322 Morgan identified estimated losses incurred by Mr and Mrs Konig as the company's directors totalling $222,946. That amount was made up of $97,780 estimated interest not recovered by them from the first plaintiff between May 1993 and January 1997 and estimated salaries not recovered by them over the same period of $125, 166. For the reasons already expressed, I do not consider the first of those should be included, but the second should.

323 In a supplementary report prepared by Morgan dated 20 February 2001, he expressed the view that the selling costs of Carillon Beverages (totalling $12,113) were additional losses incurred by the first plaintiff from setting up and operating Beverley Hills Café. He did that on the assumption that Carillon Beverages was sold in October 1993 in order to obtain seed capital for Beverley Hills Café and that those costs would not have been incurred by the first plaintiff if it had not sold Carillon Beverages but had continued to trade that business.

324 I am satisfied on the evidence that the Konigs had decided to sell Carillon Beverages in any event and to apply the proceeds, or part of them, to whatever new business venture they were to embark upon.

325 In a subsequent report dated 22 November 2001, Morgan changed his view in respect of Carillon Beverages. He wrote then that since his report of February 2001, he had received revised information to the effect that the Beverley Hills Café had already been leased and was operating at the time Carillon Beverages was sold and of the proceeds of the sale, $20,000 was used to reduce the overdraft on Beverley Hills Café and the balance was invested in real estate. Given that information, Morgan concluded that Carillon Beverages was not sold as a result of the decision to set up and operate the Beverley Hills Café. That was because even if the circumstances were that the bank had demanded a reduction of the Beverley Hills Café overdraft at that time, there would have been sufficient unencumbered value in Carillon Beverages to secure a loan for $20,000 in order to make the overdraft repayment, instead of selling that business. Thus it appeared that the selling costs of $12,113 would have been incurred by Alpine Holdings regardless of the decision to set up and operate Beverley Hills Café and accordingly Morgan did not consider that the selling costs on the sale of Carillon Beverages formed part of Alpine Holdings' losses from the Beverley Hills Café. That accords with my own conclusions on the evidence.

326 In his report of February 2001, Morgan also included the selling costs of Egon's Café and Patisserie, in the sum of $15,607 as additional losses incurred by the Konigs in setting up and operating Beverley Hills Café.

327 The evidence establishes that business was sold on 30 November 1992 for $385,000, of which, after costs and expenses, the Konigs received $374,811. Morgan included the selling costs as a loss associated with the Beverley Hills Café on the basis that the reason the Konigs sold Egon's Café and Patisserie was to obtain funds to set up and operate the Beverley Hills Café. Although the evidence was not particularly specific about that, I accept it was so. The figures show that the Beverley Hills Café was operating at a loss. The Konigs themselves were working increasingly long hours and were not drawing wages. Only $20,000 of the $247,337 received by the first plaintiff from the sale of Carillon Beverages was used in connection with the Beverley Hills Café. The accounts show the Konigs loaned the first plaintiff approximately $240,000 for the Beverley Hills Café. In my view it is reasonable to conclude the selling expenses of Egon's Café and Patisserie were incurred for the purpose of establishing and operating the Beverley Hills Café.

328 However, in my view the Konigs' loan of $240,000 must also be included. They contributed that money to the Beverley Hills Café business. They did not charge, nor expect interest payments on that. I have therefore not included such payments. But they lost the balance of that money, which was outstanding. The loss of it was a direct result of the inducement of the misrepresentations. In my view, they are entitled to be compensated for that loss. I would include it as a component of the damages payable to the Konigs. It is to be expected that had the business traded profitably over the 15 years as anticipated, the first plaintiff would have repaid the loan to the Konigs. Not to allow for that now would mean double compensation. The estimate of total loss for the first plaintiff must accordingly be reduced by that amount, as I have done above.

329 The loan component was not specifically pleaded on behalf of the Konigs and nor was it addressed in submissions by counsel. That being so, I will hear counsel further in relation to that aspect but in the meantime will include it in my assessment.

330 The Konigs' claim damages for distress, inconvenience and anxiety. In Zoneff v Elcom Credit Union (supra) Hill J pointed out (at 469) that such damages are not intended to be exemplary. I respectfully agree.

331 It was certainly reasonably foreseeable that were the Konigs induced by misrepresentations to enter into and attempt to sustain a seriously failing business they would suffer inconvenience and emotional distress of the type claimed.

332 The distress suffered by the Konigs was severe and long-lasting. It continues today. At one stage it led Mr Konig to become suicidal. The disruption to their lives and to their family has been substantial. I have already made some reference earlier in these reasons to their evidence about this. I accept it. In my view there should be an award of $10,000 in respect of each of the second and third plaintiffs.

333 I am conscious that despite the seeming comfort to be derived from arithmetical calculations of profit and loss, the exercise which I am here required to undertake (and on which the expert witnesses have expressed their opinions) is, in the end, one of prognostication founded on assumptions of what might have been. I am required to do the best I can to arrive at an outcome which as much as possible would put the plaintiffs in the positions they would have been but for the misrepresentations, or perhaps more accurately, to determine what is proper compensation for the loss actually suffered by the plaintiffs as a result of the misrepresentations.

334 Taking that approach, I conclude the appropriate compensatory awards would be $548,296 for Alpine Holdings and $371,803 for the Konigs, made up as follows:

Estimated trading losses 23 May 1993 - 6 January 1997 169,786

Forecast profit foregone over 15 year lease period 738,510

Selling expenses of Egon's Coffee and Patisserie 15,607

Damages for distress, inconvenience and anxiety (2 x $10,000) 20,000

336 Given the conclusions I have reached in respect to the plaintiffs' claim under the Trade Practices Act, it is unnecessary for me to deal with the alternative claims under the Fair Trading Act or in negligence at common law.

337 In my opinion the misrepresentations were of such a nature as to require the declaration claimed by the first plaintiff that the agreement for lease and the lease between the first plaintiff and the first defendant is void ab initio and I would make that declaration.

338 As against the first defendant and the second defendant, I would also make an award of damages and interest to the first plaintiff and jointly to the second and third plaintiffs in accordance with the reasons expressed above.

339 As against the third and fourth defendants, I would award damages and interest to the first, second and third plaintiffs similarly.

340 It follows from the foregoing that the first defendant's cross-claim must be dismissed as against each of the plaintiffs in the original action.

341 I will leave it to the parties in the first instance to bring in a minute of agreed orders, including interest components, in accordance with these reasons.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53 (S)

HEARD : 4-8 & 11-14 NOVEMBER 2002, 27 MAY, 11 & 23 JUNE 2003

BETWEEN : ALPINE HOLDINGS PTY LTD (ACN 009 471 907)

WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)

WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)

Damages - Assessment - Trade practices - Loss and damage due to misleading or deceptive conduct

Practice and procedure - Costs - Indemnity costs - "Calderbank" letter of offer of compromise and offer of compromise pursuant to O 24A rejected - Plaintiffs obtaining better result by judgment - Whether indemnity costs payable on basis of rejection of "Calderbank" and O 24A offer - Principles to be applied

Practice and procedure - Judgments and orders - Power to recall reasons before judgment pronounced - Application to re-open - Discretion - Principles

Practice and procedure - Judgments and orders - Stay of execution pending appeal - Principles

First and second defendants' counterclaim dismissed

Plaintiffs' application for indemnity costs refused

Defendants to pay plaintiffs' costs on party/party basis

First and second defendants' application for stay of execution refused

Partial stay granted in respect of third and fourth defendants

First Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi

Second Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi

Third Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi

First Defendant : Mr N W McKerracher QC & Mr R M J Lombardi

Second Defendants : Mr N W McKerracher QC & Mr R M J Lombardi

Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685

Alpine Holdings & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53

Calderbank v Calderbank [1975] 3 All ER 333

Dobb v Hacket (1993) 10 WAR 532

Federal Commissioner of Taxation v Myer Emporium Ltd [1986] HCA 13; (1986) 160 CLR 220

Fortron Automotive Treatment Pty Ltd v Eurotine Holdings Pty Ltd & Ors [2001] WASCA 384

Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1

Henville v Walker [2001] HCA 52; (2001) 206 CLR 459

Hoad v Nationwide News Pty Ltd & Ors (1997) 37 IPR 407

Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 76 ALJR 1461

John S Hayes & Associates Pty Ltd v Kimberley Clark Australia Pty Ltd (1994) 52 FCR 201

Linotype-Hell Finance Ltd v Baker (Practice Note) [1992] 4 All ER 887

Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721

Malliaros v Moralis [1991] VicRp 86; [1991] 2 VR 501

Marks v GIO Australia Holdings Limited [1998] HCA 69; (1998) 196 CLR 494

McBride v Sandland (No 2) [1918] HCA 59; (1918) 25 CLR 369

Monaco v Arnedo Pty Ltd, unreported; FCt SCt of WA; Library No 940481; 6 September 1994

Monk v Bartram [1891] 1 QB 346

Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425

Pavich v Bobra Nominees Pty Ltd [1988] ATPR (Digest) 46-039

Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768

Re Middle Harbour Investments Ltd (in liq), unreported; CCA of NSW; 15 December 1976

State Bank of Victoria v Parry [1989] WAR 240

State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146

The Annot Lyle (1886) 11 PD 114

Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2), unreported; SCt of NSW; 21 August 1995

Wilson v Church (2) (1879) 12 Ch D 454

AutoDesk v Dyason (1993) 176 CLR 3000

Baillieu Knight Frank v Ted Manny Real Estate (1992) 30 NSWLR 359

Cox and Coxon Ltd v Leipsit [1998] NZCA 202; [1999] 2 NZLR 15

Duvall v Godfrey Virtue & Co, unreported; SCt of WA; Library No 970510; 24 September 1997

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397

Metwally v University of Wollongong (1985) 60 ALR 68

Norman v Norman (1992) 6 WAR 372

Pirrotta v Citibank Ltd (1998) 72 SASR 259

Sanko Steamship Co Limited & Anor v Sumitomo Australia Limited, unreported; FCA; 7 February 1996

Smith v NSW Bar Association [1992] HCA 36; (1992) 176 CLR 256

Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [2000] WASCA 102

Toteff v Antonas [1952] HCA 16; (1952) 87 CLR 647

1 ROBERTS-SMITH J: Reasons for decision were delivered in this matter on 24 March 2003 after a trial held on 4-8, 11-14 November 2002 (Alpine Holdings & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53) ("the primary reasons").

2 Having delivered my reasons I left it to the parties to bring in a minute of agreed orders, including interest components. Furthermore, I included in my assessment of damages to be awarded to the Konigs, an amount of $211,030, being the balance outstanding of a loan of $240,000 by them to Alpine Holdings. I reduced the damages payable to Alpine Holdings by the amount of the outstanding balance on the basis that it would have been repaid to the Konigs in due course. As the issue of repayment of the loan had not been specifically pleaded on behalf of the Konigs nor addressed in submissions by counsel, I gave the parties liberty to make further submissions in that regard.

3 The relevant evidentiary context and findings are set out in the primary reasons and I shall not repeat them. These reasons are to be read together with the primary reasons.

4 The plaintiffs subsequently filed further submissions dated 15 April 2003 in support of their motion for judgment. The first and second defendants (to whom where convenient henceforth I shall refer as "the Carey companies") filed an outline of submissions and minute of proposed orders on 7 May 2003. They filed a chamber summons for a stay of execution on 4 June and an amended minute of proposed orders on 10 June 2003.

5 The plaintiffs filed further submissions as to a stay of execution of judgment and costs on 16 April and amended submissions on amendment, damages, interest and cots, on 29 May 2003.

6 The parties also filed various affidavits in support of the outstanding applications and submissions.

1. A request on behalf of the Carey Companies that I recall the primary reasons to "correct" what Mr Dillon argues is an erroneous approach to damages; alternatively, that I allow the Carey Companies to re-open on the issue of expectation damages and mitigation;

2. whether the loan by the Konigs to Alpine Holdings should be treated as a head of damages for the Konigs;

3. an application by the plaintiffs to amend their pleadings to enlarge the quantum of damages claimed;

4. The terms of the orders to be made as to costs and interest;

5. An application by the Carey Companies for a stay of execution of the judgment (yet to be pronounced) pending appeal.

Recall of reasons for "correction"; leave to further cross-examine

8 It was Mr Dillon's submission that the sum of $738,510 for profit forgone by Alpine Holdings over the 15-year lease period, ought not be allowed because it would represent expectation damages which are not recoverable in the circumstances.

9 The argument, put very shortly, was that the primary reasons acknowledge (at [267] - [270]) it was common ground the appropriate measure of damages in this case is that analogous to damages in tort for misrepresentation or deceit and referred to passages from the judgments of the members of the High Court in Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, yet then failed to take into account the findings of the majority in that case to the effect that expectation damages cannot be awarded under s 82 of the TPA. It was submitted that a party is not entitled to damages on the basis that the misrepresentation would be fulfilled, unless it be possible to apply the contractual measure of damages by finding the misrepresentation amounted to a collateral contract, which is not the case here.

10 These submissions do not accurately reflect my reasoning. It was not that damages for future profits should be awarded to Alpine Holdings because that was what had been promised, but because Alpine Holdings had lost that profit as a result of the misrepresentations. That conclusion was based on the likelihood those profits would otherwise have been made had it not been for the misrepresentations and involved an acceptance of the plaintiffs' expert evidence in that respect. The point sought to be made by reference to Henville v Walker was that the measure of damages in tort is no more than a useful guide when determining damages under s 82 TPA. At [270] of the primary reasons I specifically referred to what McHugh J had said about that in Henville v Walker.

11 As the High Court pointed out in Marks v GIO Australia Holdings Limited [1998] HCA 69; (1998) 196 CLR 494, once causation is established, neither the amount recoverable under s 82(1) nor the orders that might be made under s 87 TPA are limited by analogy with breach of contract, tort or equitable remedies.

12 The same point had been made by McHugh, Hayne and Callinan JJ in Marks at [41]:

"This is not to say that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52. Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention. Leaving aside the questions of remoteness of damages in assessing damages for deceit (a question that was left unresolved in Gould v Vaggelas, the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation. But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act." (Footnote omitted.)

13 To accept that the appropriate measure of damages is analogous to those in tort for misrepresentation or deceit is not to say they must be exactly the same. The analogy is no more than that; it is not a confining constraint.

14 I accept that even after reasons for decision have been published a Judge is permitted to change his or her mind and has the discretion to allow a party to re-open to persuade the Judge to do so (per Anderson J in Hoad v Nationwide News Pty Ltd & Ors (1997) 37 IPR 407 at 409 and the authorities there cited). Leave to re-open for this purpose will not lightly be given where the matter sought to be re-opened was fairly before the court on the first occasion (per Anderson J, ibid). In effect, counsel for the Carey companies has already had that opportunity. He has argued that I should recall my reasons and change my finding that Alpine Holdings should be awarded $738,510 as damages for profit foregone. I decline to do so. I do not consider that award would constitute "expectation damages" in the sense used by the High Court (see e.g. the joint judgment of Mason, Wilson and Dawson JJ in Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 11 - 12 and Gaudron J in Marks, supra, at 502 - 503).

15 Mr Dillon conceded (t 1002; 1005) the expert evidence of Morgan and Stagoll had dealt at some length with the plaintiff's claim for loss of profit and that the claim had been included in the plaintiff's particulars, but he nonetheless argued that he had not regarded it as a live issue because in his view it was a claim for expectation damages, which could not be awarded.

16 That item was clearly raised by the expert evidence called on behalf of the plaintiffs. Morgan spent considerable time on it. Stagoll, the defendants' expert, also spent considerable time on it. Counsel for the defendants had every opportunity to deal with the issue at trial.

17 Counsel submitted this case is similar to Monaco v Arnedo Pty Ltd, unreported; FCt SCt of WA; Library No 940481; 6 September 1994; BC 9402083 in that the way in which the plaintiffs' case was presented gives rise to a necessity to allow the defendants to re-open to deal with the damages issue and to call further evidence. Monaco, however, is distinguishable in that the learned Commissioner whose judgment had been set aside on appeal had decided the case on the basis of a legal proposition which no party had advanced and in respect of which he had not given anybody the opportunity to make submissions. That is simply not the position here, where the plaintiffs' case had been conducted on the basis such damages were sought and should be awarded. Nor was objection taken to Morgan's evidence in this regard. To my mind, the present case is similar to that of Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768, and see Hayne J at [32] - [34] and Callinan J at [84].

18 I come to Mr Dillon's alternative application that the Carey companies should be permitted to re-open the evidence and further cross-examine Mr Konig. Such cross-examination would be confined to the issue of mitigation of damages.

19 There are two obstacles in the way of this. The first is that the primacy of the causation principle in s 82 TPA excludes reliance upon concepts such as mitigation or contributory negligence (I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 76 ALJR 1461 - and see in particular the reference by McHugh J to the dicta of French J in Pavich v Bobra Nominees Pty Ltd [1988] ATPR (Digest) 46-039).

20 The second is that the defendants had the opportunity at trial to cross-examine Mr Konig on the issue of the quantification of loss of future profit. I refuse leave for the Carey companies to re-open to further cross-examine Mr Konig with respect to mitigation of damages.

21 The first and second defendants oppose the inclusion of any component in respect of the loan balance outstanding. They contend that the finding that the balance of that loan from the Konigs to Alpine Holdings should not be included in Alpine Holding's damages (primary reasons, [321]), should stand, but that the amount should not be included in the damages awarded to the Konigs (primary reasons, [328]). The first and second defendants say that is because the sum was not pleaded as a component of the Konigs' alleged loss and that the $211,030 ought not to be awarded without an amendment to the statement of claim and that at this late stage in the proceedings, the first and second defendants would be substantially prejudiced if such an amendment were to be made. There is a further submission that there would be double compensation were the Konigs able to recover the loan balance of $211,030 as part of their loss.

22 The first submission of the plaintiffs in respect of the loan balance is that the consequence of the treatment of it in the primary reasons is neutral to the defendants. That is because the loan balance of $211,030 was deducted from the losses claimed by the first plaintiff but added to the losses awarded to the second and third plaintiffs. The net effect is that they offset each other and there is no effect on the overall damages awarded to the plaintiffs generally.

23 The plaintiffs submit the damages were at large in the pleaded case and that expert evidence afforded the parties and the court the opportunity to evaluate the extent of loss and damage sustained if the underlying facts were established. The submission is that the facts were established and the ultimate computation is a matter for the court. Finally they submit that if an amendment of the plaintiffs' pleadings or particulars is thought to be necessary to accommodate the actual losses found, then such amendment should be permitted (State of Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146) because there is no prejudice to the defendants.

24 It is necessary first for me to deal with a collateral submission made on behalf of the Carey companies. The submission is that because in the primary reasons I have limited the first plaintiff's recovery to the claimed loss of $548,296, that restriction would in any event have precluded recovery of the $211,030 by the first plaintiff - that is, even if the loan balance was not deducted from the first plaintiff's damages, it would still only recover $548,296.

25 I think the short answer to this is that the loan balance was deducted from the first plaintiff's claim because it was not, on my reasoning, a loss suffered by the first plaintiff. The fact that if it had been a loss suffered by the first plaintiff, the damages awarded could still not have exceeded the amount claimed, is simply not to the point.

26 The first and second defendants submit the amount should not be allowed and an amendment should not be permitted because they conducted their case on the basis that the Konigs did not seek recovery of the balance of the loan as part of their damages and so to allow them to recover an amount equivalent to it as damages, raises a different case to that pleaded and contested. It is said that if the amount is now incorporated into the damages awarded to the Konigs, the first and second defendants would have been denied the opportunity to cross-examine the plaintiff's expert (Morgan) or obtain evidence from the first and second defendants' expert (Stagoll), as to the relationship between Alpine's balance sheet, the loss suffered on the abandonment of the fixed assets and the loan itself.

27 They argue that there was no opportunity to test the expectation that Alpine Holdings would have repaid the loan to the Konigs because such repayment was not included in the calculations of the plaintiffs' losses.

28 However, as counsel points out, the treatment given to the issue by the Konigs was to allow a 10 per cent "interest expense" in respect of the loan.

29 That is so. I note that interest expenses of $97,780 were claimed on the borrowed funds (answer 8.1 and 9.1(iii) of the Answer to Request for Further and Better Particulars of the Plaintiffs' Further Re-amended Statement of Claim).

30 Thus, while the first and second defendants are strictly correct, it is nonetheless true that the issue was raised in substance. Indeed it was the first and second defendants' position at trial that the loan to the E & S Konig Family Trust only existed because of the structures used by the plaintiffs. That much can be accepted. Beyond that, it was the first and the second defendants' case that had the Konigs' business operated as a partnership, no such loan would have existed - it would have been "partners' capital" and that in fact, the $240,000 was capital invested in the business with an expectation of profit, not funds lent with an expectation of interest return. This position was summarised in the notes to exhibit D27 tendered by the defendants. I accept the analysis. On that basis the loss was realistically that of the Konigs, and it was the loss of the return of the outstanding balance of the loan. I am of the view that the loss is properly compensable to the Konigs and that in the circumstances the issue was sufficiently raised and live at trial. I do not consider amendment of the pleadings or particulars is necessary, but if it were, I would allow it.

31 I turn to the submission that the award of the loan balance would involve double compensation.

32 The first and second defendants submit that the original loan of $240,000 made by the Konigs to Alpine Holdings was to finance the setting up of the business including the acquisition of plant, equipment and fit-out. They then point out that the amount of $169,786 claimed by Alpine Holdings as losses incurred in operating the business incorporates a loss of $75,116 on disposal of fixed assets. However, the plant and equipment which were subsequently abandoned and which resulted in the loss of the $75,116 was purchased (given the loan was to assist in establishment costs) through the money advanced by way of the loan. If that proposition be accepted, then it is submitted the plaintiffs will be doubly compensated by the repayment of both the loss on the disposal of the fixed plant and equipment and the repayment of the outstanding loan which was used, at least in part, to acquire the fixed plant and equipment.

33 I do not accept this submission. That is because Alpine Holdings would have to have repaid the loan in due course in any event, but would have had the assets, upon which it has however suffered a loss on disposal due to the defendants' conduct.

34 I note in passing that in the plaintiffs' interest calculations, the trading losses of $169,786 have been eliminated because they are fully off-set by the loan balance of $211,030 deducted from the losses of Alpine Holdings. I consider that treatment to be correct.

35 Next it is submitted repayment of the loan would have reduced the profit earned by Alpine Holdings (and the Konigs). Thus it is said the Konigs would be doubly compensated if they (through Alpine Holdings) receive both the profit without deduction for repayment of the loan and repayment of the loan itself.

36 This submission ignores the fact that the loan repayment has been deducted from Alpine Holdings' trading loss (primary reasons, [321]).

37 There is a related submission. It is that the value of the remaining unsold plant and equipment taken by the Konigs from the Beverley Hills Café should be deducted from the loan repayment. According to Morgan the value of the unsold plant and equipment removed was $42,594. I accept this submission. There would be an element of double compensation were the Konigs to recover both the balance of the loan and have the benefit of that plant and equipment. The $211,030 should be reduced to $168,436.

38 In my primary reasons I concluded (at [321]) that the total estimated trading loss for Alpine Holdings was $697,266 but as the claim was only for $548,296 that is all that should be allowed. Mr McKerracher QC submits that judgment should be given for the full amount rather than that claimed. He submitted that damages were at large in the pleaded case and that the expert evidence afforded the parties and the Court the opportunity to evaluate the extent of loss and damage if the underlying facts were established. If any amendment of the plaintiff's pleadings or particulars is necessary to accommodate the actual loss as found, it should be permitted in order to do justice (Queensland v J L Holdings Pty Ltd (supra).

39 No minute of proposed amendment was put forward.

40 The application to amend is strongly opposed by the defendants. They say not only was that not the case pleaded, but that they would be prejudiced by it particularly in respect of the plaintiffs' application for indemnity costs. It would be unfairly prejudicial for the plaintiffs to be allowed to argue on the one hand that the defendants should have accepted an offer to compromise on the basis of the quantum pleaded and at the same time be permitted to enlarge that quantum after trial.

41 In my view, in light of the plaintiffs' pleaded case and the way in which Alpine Holdings' loss was quantified by its expert at trial, the motion to amend (or, more accurately, for judgment in the full amount found rather than that claimed) should be refused.

42 In relation to the forecast profit foregone over 15 years of the lease, I accept the plaintiff's submission that having held that the interest expense on the Konigs' loan is not claimable (because it was not actually incurred), it is consistent to exclude the interest expense on this loan which was taken into account in the calculation of the forecast profit over the 15 year period of the lease. Accordingly, the increase in Alpine Holdings' losses over the 15 years by $360,000 (from the $378,510 claimed, to $738,510) compensates for the interest expense claimed by the Konigs of $97,780 that was disallowed. Again, that is consistent with the approach taken in the primary reasons.

43 The first plaintiff claims interest of $146,201.20 on forecast profits of $738,510 foregone over the 15 years for the Beverley Hills Café lease. Whilst I have included the amount of $738,510 in the calculation of loss, I limited the total loss to the amount claimed, namely $548,296. In that circumstance, interest should be payable only on the amount of $548,296 actually awarded. I consider the appropriate way to approach that is to allow interest then for profit of $541,574 foregone over 11 years as calculated in the plaintiffs' outline (a total of $120,825.60) plus interest on the balance of $6,722 at the applicable rate from 30 June 1999.

44 I allowed an amount of $15,607 for the actual selling expenses of Egon's Café and Patisserie. The second and third plaintiffs claim interest on that amount. It should be allowed.

45 The second and third plaintiffs also claim interest on the $125,166.00 they characterise as estimated directors' salaries not recovered by them from Alpine Holdings during the period 23 May 1993 to 6 January 1997. That amount I allowed as wages. I would award interest on the amount claimed.

46 The second and third plaintiffs also claim interest of $74,166.92 on the loan balance of $211,030 as at 28 February 1997. I accept the first and second defendants' submissions in that regard. It was never contemplated by the first and second plaintiff that interest would be paid. I would not allow it.

47 In their written submissions dated 15 April 2003 the plaintiffs sought indemnity costs solely on the basis of a "Calderbank offer" (Calderbank v Calderbank [1975] 3 All ER 333).

48 The making of the Calderbank offer was proved by the affidavit of Charmaine Tsang sworn 16 April 2003. Facsimile letters were sent by the plaintiffs' solicitors to the first and second defendants' solicitors and to the third and fourth defendants personally, on 10 October 2002. The plaintiffs' offer was to compromise the proceedings on the basis of consent orders that the defendants pay the sum of $350,000 and that the plaintiffs' action and the first defendant's counterclaim be dismissed. In the event, the outcome for the plaintiffs was better than the compromise so offered.

49 Order 24A of the Rules of the Supreme Court ("the WA Rules") contains provisions relating to offers of compromise. Order 24A r 10(4) states:

"Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim from the date on which the order was made, taxed on an indemnity basis in addition to his costs incurred before that date, taxed on a party and party basis."

50 However, in the present case, O 24A does not apply to the offers of October 2002. That is because an offer to compromise made pursuant to it is required by O 24A r 1(2) to be in writing and bear a statement to the effect that the offer is made under that order. The October offer contained no such statement; they were expressed to be offers "... pursuant to the principles of Calderbank v Calderbank and Cutts v Head" (Cutts v Head [1984] Ch 290).

51 Nonetheless, offers of compromise which are not made under O 24A may still affect the Court's discretion as to costs. That has been said to be due to the need for the courts to preserve in the minds of litigants the conscious consideration that their behaviour may have placed them at risk as to costs if they refuse reasonable offers of settlement: Dobb v Hacket (1993) 10 WAR 532 at 541.

52 As the learned author of "Seaman: Civil Procedure in Western Australia" (Supreme Court) notes at 6206:

"It is the obvious intention of the sub-rule to oblige a defendant who receives an offer of compromise to give serious thought to the risk of losing the proceedings and then being ordered to pay costs subsequent to an offer on an indemnity basis and if the result is no less favourable than the plaintiff's rejected offer then ordinarily that order should be made: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724."

53 Equally, the author points out, the defendant must have an informed opportunity, based on material disclosed in the proceedings, to assess the chances of either side doing better than the plaintiff's offer, and if that is not so, there is good reason to refuse an order for indemnity costs. Here the offer was certainly made at a sufficiently late stage in the proceedings to enable the first and second defendant to make that assessment.

54 It may be accepted that the policy of both the common law in relation to Calderbank offers and that underlying O 24A is to encourage a party to whom a fair and reasonable offer of compromise has been made to accept it and bring the proceedings to an end, so freeing the court from the time and resources taken by proceedings which are prolonged unnecessarily: Malliaros v Moralis [1991] VicRp 86; [1991] 2 VR 501 at 505. Both seek to encourage the saving of public and private costs and the avoidance of the inherent risks of delays of litigation by promoting early and realistic offers of compromise: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721.

55 The plaintiffs submit that they should have costs from or about the date of the offer on an indemnity basis as the consequence of the defendants' rejection of it (Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 per Rolfe J at 451 and see Fortron Automotive Treatment Pty Ltd v Eurotine Holdings Pty Ltd & Ors [2001] WASCA 384).

56 The first and second defendants pointed out that the plaintiffs were seeking an order for indemnity costs solely on the basis that the defendants did not accept the Calderbank offer, but say that is only one matter which is to be taken into account by the court in the exercise of its discretion as to costs. The defendants submit that the common thread through the authorities is that the court will award indemnity costs only where the defendant can be seen to have acted unreasonably and the mere fact that the plaintiffs' Calderbank offer was significantly (even beyond the case contested for by the plaintiffs) more favourable to the defendants than the final judgment, does not establish the latter acted unreasonably in not accepting it.

57 Particular considerations advanced in support of the proposition that the defendants were entirely justified in rejecting the offer include that the case turned effectively on the disputed oral evidence of the Konigs, Steele and McCubbing; that the first and second defendants were represented separately to Steele and McCubbing and presented separate cases; that if the evidence of Steele and McCubbing had been accepted the plaintiffs' action would have failed; that the plaintiffs in opening, effectively conceded that if their action failed the first defendant would be entitled to judgment on the counterclaim (that being for an amount in excess of $600,000) and that although the court ultimately favoured the evidence of the Konigs over that of Steele and McCubbing, the evidence of the latter was found to have been given honestly and to the best of their ability but was simply not as accurate a recollection of the events as the Konigs.

58 Shortly put, it was contended that based on the likely evidence of Steele and McCubbing as foreshadowed through their pleadings and witness statements, the first and second defendants were likely to be successful and the only way the evidentiary dispute between them and the plaintiffs would be resolved was by being tested in the trial process. The first and second defendants relied particularly in that regard on the decision of Hill J in John S Hayes & Associates Pty Ltd v Kimberley Clark Australia Pty Ltd (1994) 52 FCR 201 at 206.

59 Put shortly, the defendants' submission is that notwithstanding the rejection of the Calderbank offer, they have not acted unreasonably in proceeding to trial and there is accordingly no occasion for an order for indemnity costs.

60 Care must be taken in drawing statements of principle from the authorities. That is because many of them turn on particular statutory provisions.

61 Many of the authorities were most helpfully examined by Rolfe J in Multicon Engineering, supra. The application for indemnity costs in that case was made pursuant to s 76(1) of the Supreme Court Act 1970 (NSW) and Pt 52 r 28A of the Supreme Court Rules (NSW) ("the NSW Rules"). That rule was in similar terms to O 24A r 10 of the WA Rules. As his Honour pointed out (433), the justification for an entitlement to indemnity costs under the NSW Rules was nothing more than the making of a successful offer pursuant to the Rules "... unless the court otherwise orders". The obligation was therefore on the party against whom the order was sought to satisfy the court that such an order should not be made, the presumption being that the making of the successful order prima facie entitled the party to indemnity costs.

62 Rolfe J further noted that the effect of the New South Wales rule was to displace certain accepted principles in relation to the award of costs. In the absence of such circumstances, the general principle is that the successful party is entitled to an order that the unsuccessful party pay its costs on a party and party basis. His Honour went on to say that on the other hand, in the absence of an offer of compromise, a court would generally order indemnity costs only where there was some "misconduct" in the bringing or prosecuting of the proceedings. Ordinarily the presumption is that costs will be paid on a party and party basis unless the party seeking costs on the more favourable basis can satisfy the court it is entitled to such an order.

63 In Maitland Hospital v Fisher (No 2), supra, the New South Wales Court of Appeal said (at 724):

"The obvious purpose of providing Pt 52, r 17 is to facilitate the proper compromise of litigation. This has been attempted by the twin measures of a 'carrot' and 'stick'. Relevantly, the 'carrot' is the promise of indemnity costs to a plaintiff in the event that the defendant is found unreasonably to have refused an offer of compromise. The 'stick' is the threat of the penalty of the imposition of an indemnity costs order against a defendant in such circumstances. It is the obvious intention of the rule to oblige a defendant, which has received an offer of compromise, to give serious thought to the risk which it may run of losing the proceedings and then being ordered to pay costs on an indemnity basis.

The objects of the rule include:

(1) to encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its 'bottom line' will be revealed to the court;

(2) to save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and

(3) to indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation."

64 In Multicon, having referred to the foregoing passage from Maitland Hospital, Rolfe J quoted the following passage from the judgment of Young in Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2), unreported; SCt of NSW; 21 August 1995:

"... there is a general policy to encourage settlement and that general policy is far better served if the general message gets through to litigants and the profession that it is more likely than not that where there has been a Calderbank letter, and where there is a falling short by more than a minimal degree of the offer that is made in the Calderbank letter, that litigants should expect that after time has expired for complying with the Calderbank letter the costs will be on an indemnity basis. If some sort of general policy like that does not underlie this type of litigation then settlements will be discouraged and there will be more and more hearings and all sorts of orders would have to be made which again takes up more time and costs everybody more money."

65 Rolfe J seemed reluctant to accept there is such a general policy but preferred to regard it as more correct to say that normally a Calderbank letter would be given effect according to its terms and thus fulfil the functions of an offer of compromise. However, his Honour went on to say that all the authorities supported the view that when an offer of compromise is made, in whichever form, in circumstances in which there can be no doubt that if the offeree does not accept it, then if the offer is not bettered and provided the offer reflects a compromise, a court would commence its consideration of an application for indemnity costs from the position that such an order should be made unless the offeree can persuade the court that it should not be - recognising that the ultimate decision will always depend on a consideration of the facts and circumstances of the particular case. With respect, that approach seems to me to accord with authority, principle and the objectives of the proper administration of justice.

66 I respectfully agree with the conclusion of Rolfe J in Multicon that the emphasis in the New South Wales decisions to which he there referred in which indemnity costs orders had been made, is that where an offer of compromise has been made there is a disposition, at least, to order indemnity costs. Further, that those decisions do not show a requirement that in addition to the result not matching the offer of compromise, there must be some misconduct of the party against whom the order is sought. But I reiterate that those decisions, as that in Multicon itself, concern the application of a statutory rule in similar terms to O 24A of the WA Rules. The position at common law is arguably not necessarily the same.

67 In Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 the New South Wales Court of Appeal was dealing with a case in which an application for indemnity costs had been made in circumstances where shortly before an appeal was called on for hearing, the appellant notified the respondent that it would not be proceeding with the appeal. The respondent then sought costs on an indemnity basis. The majority of the Court of Appeal held that indemnity costs should not be awarded, amongst other reasons, because there had been a failure to warn the appellant that its prospects of success were bleak and that if the appeal was pursued costs would be sought on that basis.

68 In agreeing with that conclusion, Mahoney JA said [250] - [251]:

"Until recent times, costs would not, I think, have been ordered on an indemnity basis in circumstances such as the present. Costs upon an indemnity basis were ordered only in restricted circumstances: see generally Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354; EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 at 64. However, there has been, in my opinion, a change in the practice of this and, I believe, other courts in this regard. Costs on an indemnity basis are becoming more frequently available; ...

It is, I believe, right that such a change be made. The costs customarily awarded did not achieve what, I think are the main purposes for which costs are in principle given.

...

For a long time, the costs ordered to be paid by one party to litigation to another have been less than the costs which the successful party ordinarily was required to pay to its own solicitors. In more recent times, at least in commercial litigation, the gap between the costs payable by one party to the other and the costs payable by a party to its own solicitor has, in ordinary cases, increased. The court is, I think, entitled to know that this gap, ordinarily or at least often, is substantial. This, I believe, is one of the factors which has led this court to reconsider the circumstances in which indemnity costs should be awarded.

This court is aware also that the gap between costs ordinarily awarded and the costs payable by a party to its own solicitor has been used as a factor in bargaining for commercial advantage. In referring to this, I do not confine what I say to the illegitimate use of legal proceedings, steps taken in them, or the gap between costs recovered and paid. I am concerned with the use which may legitimately be made of such matters in the commercial bargaining processes which take place between parties who are or may potentially become parties to commercial litigation. It is, I think, undesirable that such a gap be available to be so used."

69 The first and second defendants expressly relied upon the decision of Hill J in Hayes. That case concerned particularly O 62 of the Federal Court Rules 1979 which contains detailed provisions which make it clear that, unless otherwise ordered, costs will be on a party/party basis. However, as Hill J pointed out, the Federal Court Rules are not exclusive and cases arise in which the circumstances have been held to justify an order for full indemnity costs. That, it seems to me, really reflects the general position and it is the converse of a rule dictating that in certain circumstances indemnity costs are to be awarded unless the court otherwise orders.

70 The decision in Hayes and other Federal Court authorities was discussed by Rolfe J in Multicon(at 445 - 451). His Honour noted that the reasoning which led Hill J to the conclusion that the mere making of a Calderbank offer and its rejection, without more, would not ground an order for indemnity costs and that it was necessary for the party claiming to show some misconduct by the other party, was consistent with the principle applicable if indemnity costs were being considered in the absence of an offer of compromise (447). Rolf J took the view rather, that the fact of such an offer must itself be a factor to be taken into account.

71 Rolfe J went on to explain that an examination of the case by a party and the party's legal advisers must, and can only, be undertaken in light of all the circumstances of which they are aware. The outcome of litigation will rarely be certain, but that does not remove the purpose and effect of offers of compromise, whether pursuant to rules or by means of a Calderbank letter. At 447 - 448 his Honour said:

"If a party is entitled to refuse an Offer of Compromise because the adjudication process will involve the resolution of difficult questions of fact and/or law there is no obligation on the party in very many cases to accept an Offer of Compromise prior to judgment and, conversely, a party making the Offer is not advantaged if ultimately its prognostication of the litigation proves to be correct. In my opinion this cannot be so. If it is it takes away from the utility of making an offer and, accordingly, the general philosophy of a Court, seeking where possible and once again acting judicially to promote settlement, is defeated. All of this has to be looked at in the context of the present approach to legal proceedings where procedures are being taken such as early neutral evaluation of cases and alternative dispute resolution to seek to bring about a compromise prior to the hearing. This is the climate in which the courts are now operating: Pt 7B of the Supreme Court Act 1970. Further, judges frequently suggest to parties, (and I do not suggest this is a recent occurrence), that serious consideration should be given to settlement. This is often couched in terms that ultimate factual findings will depend upon the view taken of the witnesses and their evidence and, in some cases, that the law is uncertain. It is frequently pointed out by the court that settlement will achieve certainty of result. However, it seems to me that there is little point in the court making such remarks to the parties if a party, which has adopted a procedure to try and bring about a settlement and thereby eradicate those doubts and difficulties, derives no benefit from making a sensible commercial offer, which if accepted would have concluded the litigation, because the court denies it that benefit.

The question, so it seems to me, when one is considering a case where an Offer of Compromise has been made and the party rejecting the offer has not achieved a better result than that provided for by it, is not whether it was reasonable for the party rejecting the offer to fight on notwithstanding that the offer had been made, but whether it was reasonable for the party rejecting the offer to do so and, in that regard, I would suggest that the onus must be on the party rejecting the offer to establish in some way the reasonableness of the course it took. In my opinion that cannot be done by saying that litigation is uncertain and it was entitled, rather than accept the offer, to have the uncertainties, whether legal or factual, resolved by judicial decision. That, of course, is an entitlement any litigant has; but what must be understood is that if the litigant has received an offer, which it does not ultimately better, its desire for a judicial determination should, generally speaking, be made subject to its paying the other party's costs on an indemnity basis from the date the offer is made. It is the very uncertainly of the legal and factual issues propounded for decision, which makes settlement an appropriate course, a matter much stressed in suggesting that settlement be considered. If there is no uncertainty, if that can ever be so, there is no reason to settle. It also seems to me that the more difficult and complicated the legal and factual issues the greater must be the uncertainty and, accordingly, the greater must be the incentive to settle on a commercial basis. The greater the uncertainty the more that is being risked and the more the prospect of further litigation by way of appeals."

"In my opinion the proper approach to take to an Offer of Compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness ... is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have preferred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged." (Emphasis added).

73 Although what his Honour there said must necessarily have been obiter insofar as it relates to a Calderbank letter, I respectfully agree with it. The logic that there should be a prima facie presumption that indemnity costs should be awarded unless the opposing party can show otherwise, for the reasons given by his Honour, is compelling. The conclusion retains the essential discretion of the court to make a different order depending upon the circumstances of the particular case. The approach is consistent with, and does not detract from, the discretion given by s 37 of the Supreme Court Act 1935 (WA) and O 66 of the WA Rules. It also gives effect to the requirements of the proper administration of justice.

74 In my view the approach adopted by Rolfe J in the passage quoted at [72] above appropriately encapsulates the principles which should be applied to an offer of compromise made by way of a Calderbank letter.

75 But following a brief procedural hearing on 27 May 2003, there was a further development. On 29 May 2003 the plaintiffs filed an amended submission on (inter alia) the issue of costs. Attached to that was a further affidavit of Charmaine Tsang sworn 29 May 2003, in which she deposed to having recently become aware of offers of compromise made to the defendants pursuant to O 24A. Copies of the relevant correspondence were annexed to her affidavit. The offer was made to the first and second defendants' solicitors by letter dated 2 March 2000, to the third defendant's then solicitors by letter dated 15 May 2000 and to the fourth defendant's then solicitors by letter dated 16 May 2000. Each was expressly said to be made pursuant to O 24A and as a Calderbank offer. The offer was that all claims between the parties would be compromised on the defendants paying to the plaintiffs a sum of $310,000 plus costs to be taxed.

76 Applying the approach articulated by Rolfe J in Multicon, to the present case, and dealing with it both as a Calderbank offer and one made under O 24A, I have come to the conclusion that the considerations advanced on behalf of the first and second defendants were legitimate and proper considerations. I would have been minded to order indemnity costs were it not that I am persuaded the position taken by the first and second defendants was reasonable, notwithstanding the actual outcome. I consider that in the circumstances the rejection of the offer has been shown to have been based on a realistic - albeit ultimately wrong - assessment of the case. For that reason I conclude the first and second defendants have demonstrated why costs should not be ordered on an indemnity basis. Although their positions are forensically different, it seems to me essentially the same considerations apply in respect of the third and fourth defendants and I would accordingly not order them to pay indemnity costs. I am particularly mindful that some of the plaintiffs' factual assertions upon which the offer of compromise was founded were assertions which failed at trial. The order will be that the plaintiffs have their costs on a party/party basis.

77 I conclude with an observation of the New South Wales Court of Appeal in Maitland (at 725), which I consider apposite to the present case:

"The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances, the litigant or its advisers mis-judge the prospects of success or mis-calculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a mis-calculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case. It has added a new duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public interest in the prompt and economical disposal of litigation. It is the duty of courts, allowing for exceptions in particular cases, to give effect to the purpose of the rule" (Emphasis added).

78 The Carey companies seek a stay of execution of judgment in relation to the entire judgment given on the primary reasons or alternatively, in relation to that part which relates to the award of $738,510.00 for loss of profit referred to at [334] of the primary reasons. The application is supported by the third and fourth defendants. Although they have not filed a formal application for a stay, they are unrepresented and I am therefore prepared to take them as having made a similar application by way of motion.

79 The grounds upon which it is said on behalf of the Carey companies there should be a stay are twofold. The first is that the prospects of a successful appeal are so strong that the judgment should not be executed until the appeal is determined. The second is that the plaintiffs, insofar as disclosed by the evidence at trial, are not parties of such substance that if any substantial judgment sum (being one of approximately $1 million) were to be paid to and then expended by them, they would have the capacity to repay the sum following a successful appeal.

80 There is, of course, no appeal presently on foot. There could not be, because judgment has not yet been given. But the defendants foreshadow that there will be an appeal.

81 This raises the question of jurisdiction. There are several possibilities, to which different considerations apply.

82 A stay of execution of judgment may be granted under O 47 r 13 of the WA Rules. Relevantly to this case, that would require the defendants to show that by reason of special circumstances it is inexpedient to enforce the judgment.

83 Order 63 r 15 gives the court power to order a stay pending appeal. That pertinently provides:

"(1) Except so far as the Full Court or a Judge may direct -

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;"

84 In addition, the court has an inherent jurisdiction to stay execution on a judgment or order. As to that, Malcolm CJ said in State Bank of Victoria v Parry [1989] WAR 240, 244:

"In the exercise of the inherent jurisdiction the discretion must be exercised on grounds relevant to a stay of the enforcement proceedings, rather than on grounds which may bear upon the validity or correctness of the judgment: T C Trustees Ltd v J S Darwen (Successors) Ltd [1969] 2 QB 295 at 302, per Lord Denning MR. It follows that the 'special circumstances' referred to in [O 47 r 13] must likewise be relevant to a stay of the enforcement proceedings."

85 I will approach the application first as an exercise of the jurisdiction given by O 47 r 13 and in the inherent jurisdiction of the court.

86 The rule itself requires the defendants to show "special circumstances". That reflects the principle the successful party is entitled to the "fruits of victory" (The Annot Lyle (1886) 11 PD 114; Monk v Bartram [1891] 1 QB 346; Federal Commissioner of Taxation v Myer Emporium Ltd [1986] HCA 13; (1986) 160 CLR 220 per Dawson J at 222-223).

87 It is suggested in Seaman: Civil Procedure, Western Australia, vol 1, [47.13.1] that in determining whether there are special circumstances which render it inexpedient to enforce a judgment because of a pending appeal, a court will be guided by the principles applied by the Full Court before granting a stay pending an appeal. However on the principles applicable to the latter it may be easier to satisfy the court a stay should be granted. In Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 the Victorian Court of Appeal held that under the Victorian equivalent of O 63 r 15 of the WA Rules a stay may be granted where the applicant demonstrates a reason or an appropriate case to warrant the exercise of the discretion in that party's favour; it is not necessary that special or exceptional circumstances should be made out (cf Dawson J, in FCT v Myer Emporium supra). The court cited with approval the following passage from the judgment of Mahoney JA in Re Middle Harbour Investments Ltd (in liq), unreported; CCA of NSW; 15 December 1976:

"Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party."

88 The "obvious error" in the primary reasons which is said to give rise to such a strong prospect of success on appeal is the award of damages for loss of profit - that which the defendants characterise as "expectation" damages. I have already addressed this argument above. It follows from what I have said there that I would not see this point as constituting relevant "special circumstances" nor does it go to a stay of the enforcement proceedings rather than the validity or correctness of the judgment.

89 The further ground as to the plaintiffs' financial capacity is more apposite. A realistic prospect that an appeal may be nugatory where, because of the financial circumstances of the respondent, there is no reasonable prospect of recovering monies paid to the respondent pursuant to the judgment, may constitute special circumstances (Wilson v Church (2) (1879) 12 Ch D 454, 458).

90 Counsel for the Carey companies conceded his submission that the plaintiffs' financial circumstances are such that it is unlikely they would have the capacity to raise the amount necessary to refund the judgment monies following a successful appeal by the defendant, would be rebutted if the plaintiffs put on evidence establishing such financial capacity.

91 The defendants rely upon the following evidence given at trial by Mrs Konig (at T252-253) on 6 November 2002:

"We received a letter dated 11 February 1997 from Warwick Entertainment Centre and signed by Norm Carey which terminated our lease. In a letter dated 1 March 1997 Warwick Entertainment Centre demanded the sum of $617,581.08. Since receiving this letter in March 1997 we have been in a continual legal wrangle with Westpoint and other defendants.

Our legal expenses have been an enormous strain both physically and emotionally. Egon and I work 6 or 7 days a week all year round, with no finance or opportunity for holidays. Because of the nature of our business weekends and school holidays are our busiest times. This means I have not been in a position to spend time with my sons. My eldest son has moved to Perth for his education - Sorry.

McKERRACHER, MR: There's no rush, Mrs Konig. Take your time?

---For the past 3 years I have had to impose upon my 80-year-old parents to allow him to live with them because we cannot afford other accommodation.

The concern about our escalating bank overdraft is an ever-present worry. There have been many times in the past 6 years that we would have liked to expand and improve upon our present business to increase our income but we have been financially restricted because of the need to pay legal expenses.

We have had designs for tourist accommodation to be built on our property but have not been able to afford to build. We continue to live in a 120-year-old home that needs urgent repairs and maintenance but cannot afford to do so.

We have found the last 6 years since leaving the café very draining. Even though our present business is the only financial option we have at this stage it has meant leaving close friends and immediate family so we can live in Pemberton. Also, due to the hours I need to work to pay our expenses I cannot afford to leave the business to visit my son or family in Perth other than on overnight visits and a 4-hour drive back to start work.

Towards the end of 1999 the strain of constantly having to deal with our legal action started to affect Egon's health. He was very moody and every time communication arrived from our solicitors he became very agitated. He complained of strong stomach pains and I arranged for him to see a local doctor who prescribed ulcer medication.

Until then Egon had assumed most of the responsibility of our legal action but at that time I decided to assume much more responsibility to protect his health. I took over the communications with our solicitor on a day-to-day basis and involved Egon only when necessary." (Mrs Konig, T252-253, 6 November 2002)

92 They rely also on that given by Mr Konig at T103 on 4 November 2002:

"Since taking on the café, my financial situation has not allowed me to take my family on holidays. I have not been able to visit my family in Switzerland for 10 years even though both my parents are in their eighties and several times my father's life has been in jeopardy due to ill health.

I am now continually concerned that I have had to force my bank overdraft up so high to cover legal expenses. I seem never to have a waking or sometimes sleeping moment when my financial situation does not me concern."

93 An affidavit was filed on behalf of the Carey companies on 19 June 2003. That was of David Ross Kilpatrick, a solicitor employed by Williams and Hughes. He deposed to having conducted the searches for property in the names of the plaintiffs. The only property discovered was land at Pemberton in the name of Alpine Holdings and subject to a mortgage to the National Australia Bank ("NAB"). The mortgage is stamped to secure up to $95,000. The land is 57.302 ha.

94 Also on 19 June 2003 the plaintiffs filed an affidavit of Owen Wei-Keong Chua, a solicitor in the employ of Feinauer and associates, to which he annexed a copy of a letter from the Konigs in which they set out details of their main assets and liabilities. The assets are described as:

Two bedroom apartment at Sorrento Quay Resort, Hillarys

Pemberton 43 acres with Trout Farm, Hatchery, Processing Unit, 40 seat Restaurant with fishing lake, 3 bedroom house

95 They show a liability of $590,000 to the NAB, legal fees totalling $46,679.50 since March 2003 and interest on overdraft from 24 March to 23 June 2003 of $9,724.00. Total liabilities are therefore shown as $646,403.50 against total minimum estimated assets of $1,645,000.00

96 Mr Dillon submitted on 23 June 2003 that "short of an amazing turnaround in the financial position of the Konigs", this information appeared to contradict what they had said at trial. He pointed out that as the searches conducted on behalf of the Carey companies had failed to identify any property held in the name of the plaintiffs other than one at Pemberton, presumably the other Pemberton property and the apartment at Hillarys are not held by them. If that were so, they would not be susceptible to execution by the defendants and so should not be taken into account.

97 The Kilpatrick affidavit, although sworn and filed on 19 June 2003, was not seen by senior counsel for the plaintiffs until the morning of the hearing on 23 June. At the conclusion of submissions he sought leave to file and serve a further affidavit as to the properties referred to. There being no objection I gave leave.

98 On 30 June the plaintiffs filed an affidavit of Mr Konig sworn 27 June 2003.

99 According to that affidavit the Hillary's unit ("the unit") is Crown land in respect of which has been granted a 99-year lease. The lease was initially taken by Mr Konig and his brother Rolf in April 1997 as an investment. The purchase price was $225,000. There is a lease-back agreement to Hillarys Harbour Resort, giving a quarterly rental income of $2,812.50. The finance for the unit was obtained under a mortgage by the Konig brothers to the NAB. They opened a joint bank account in respect of the unit with the NAB. About May 2000 Rolf Konig decided to sell his half share in the unit to the second and third plaintiffs. That was done. The joint account was closed. The mortgage and home loan account were paid out by Alpine Holdings. The joint account was closed. Rolf Konig was paid $40,000 for his equity in the unit.

100 Mr Konig deposes that he has not attended to registration of the transfer of the unit from him and his brother to him and his wife due to what he describes as the "cost in transfer fees", which are approximately $6,000.

101 With regard to the Pemberton property, it is that described in Certificate of Title volume 2212, folio 763 in the Shire of Manjimup. Mr Konig says he has for some time been in the process of subdividing the property into one lot of 43 Acres and one of 100 acres. A letter from a licensed surveyor dated 20 June 2003 advised the Plan of Survey was then being drafted and should be ready for registration by the end of the month. According to Mr Konig, the two properties referred to in the affidavit of Wei-Keong Chua sworn 19 June 2003 are the same property as that referred to in the Kilpatrick affidavit also sworn 19 June 2003.

102 In my view the defendants have not demonstrated that the plaintiffs lack the financial capacity to repay the judgment monies should they be required to do so following a successful appeal.

103 It was not contended that the Carey companies would be financially embarrassed by having to pay on the judgment, to such an extent they would be unable to fund their foreshadowed appeal.

104 That brings me to a consideration of the application under O 63 r 15 of the WA Rules.

105 It is true the discretion to stay execution pending appeal is unfettered, but it is nonetheless a judicial discretion and must be exercised according to principle and the merits of the particular case. I adopt the approach articulated in the passage from the judgment of Mahoney JA quoted in Alexander v Cambridge Credit referred to at [87] above.

106 The applicant bears the onus of showing not only that there is an arguable case for appeal but that the circumstances are appropriate for a stay to be granted. That will involve consideration of fairness to the parties, the rights of the parties and the balance of convenience.

107 I am not persuaded the circumstances are such that a stay should be granted in favour of the Carey companies. An appeal is as yet only foreshadowed. At this point only one proposed ground of appeal has been identified. Even assuming it is arguable, I do not consider it to be so strong as by itself to justify a stay. No other circumstance of any weight has been advanced on behalf of the Carey companies. Their application for a stay will be refused.

108 The position of the third and fourth defendants is entirely different. They have been unrepresented throughout the trial. The evidence shows they are in financially difficult circumstances. They could not hope to meet the whole or even a substantial part of the amount payable under the judgment. McCubbing said that execution against him would force him into bankruptcy. He could not then proceed with his appeal. Steele would clearly be in a similar position. Without a stay of execution they will be ruined financially. The ground of appeal foreshadowed is at least arguable.

109 I am satisfied that the third and fourth defendants have demonstrated special circumstances why it is expedient that a stay be granted in respect of them (Linotype-Hell Finance Ltd v Baker (Practice Note) [1992] 4 All ER 887, 888; McBride v Sandland (No 2) [1918] HCA 59; (1918) 25 CLR 369, 375).

110 I would grant a partial stay of execution of judgment with respect to the third and fourth defendants during the time limited for appeal and, if an appeal is instituted by them, pending determination of the appeal.

1. The agreement for lease between the first plaintiff and the first defendant dated 4 February 1993 is and is hereby declared to have been void ab initio.

2. The lease between the first plaintiff and the first defendant dated 21 February 1994 is and is hereby declared to have been void ab initio.

3. Judgment be entered for the first, second and third plaintiffs on the following terms:

3.1 the first, second, third and fourth defendants jointly and severally pay to the first plaintiff the sum of $548,296.00 together with interest thereon pursuant to s 32 of the Supreme Court Act from 12 September 1997.

3.2 the first, second, third and fourth defendants jointly and severally pay to the second and third plaintiffs the sum of $309,209.00 together with interest on $140,773.00 of that amount pursuant to s 32 of the Supreme Court Act from 12 September 1997.

3.3 the first, second, third and fourth defendants jointly and severally pay to the second plaintiff the sum of $10,000.00;

3.4 the first, second, third and fourth defendants jointly and severally pay to the third plaintiff the sum of $10,000.00.

4. The counterclaim be dismissed as against each of the first and second plaintiffs.

5. The first, second, third and fourth defendants do jointly and severally pay the plaintiffs' costs on a party and party basis including any reserved costs of Federal Court action no WAG 122 of 1995.

6. The plaintiffs be granted certificates for two counsel and for transcript.

7. Execution on order 3 of these orders be stayed with respect to the third and fourth defendants during the time limited for appeal and, if an appeal is instituted by them, pending determination of the appeal.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53 (S2)

BETWEEN : ALPINE HOLDINGS PTY LTD (ACN 009 471 907)

WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)

Costs - Extension of time to apply for removal of costs limit - Delay - Factors - Whether prejudice to other parties

Costs - Removal of limit for getting up - Order 66 r 12(1) Rules of the Supreme Court - Unusual complexity - Other good or sufficient reason - Whether amount of work involved constitutes a good or sufficient reason

Legal Practice Act 2003 (WA), s 215

Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53

Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S)

Jewel Walk Pty Ltd & Anor v Kondinin Group Inc [2001] WASC 197

McLean v Kerville, unreported; SCt of WA; Library No 6455; 1 October 1986

Schmidt v Gilmour [1988] WAR 219

Snowtop Mushrooms v Powley, unreported; FCt SCt of WA; Library No 4501; 14 May 1982

Verdell Pty Ltd v F & G Nominees Pty Ltd & Anor [2002] WASC 58(S2)

Wayella Nominees Pty Ltd as Trustee for the D J Gordon Family Trust v Cowden Ltd [2003] WASC 210(S)

Collins v Westralian Sands Ltd (1993) 9 WAR 56

Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400

Geneva Finance Ltd v Resource & Industry Ltd [2002] WASC 121(S)

Re City of Joondalup; Ex parte Mullaloo Progress Association Inc [2003] WASCA 293(S)

1 ROBERTS-SMITH J: The trial of this action was heard before me over nine hearing days from the 4 to 8 and 11 to 14 November 2002. My primary reasons allowing the plaintiffs' claim and dismissing the first defendant's counterclaims were handed down on 24 March 2003: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53. A supplementary judgment was delivered on 14 July 2003: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S).

2 In the latter I gave judgment for the plaintiffs and assessed damages. I dismissed counterclaims by the first and second defendants. I refused an application by the plaintiffs for indemnity costs, ordered the defendants to pay the plaintiffs' costs on a party-party basis and dismissed an application by the first and second defendants for a stay of execution pending appeal, but granted a partial stay in respect of the third and fourth defendants.

3 The supplementary judgment followed the hearing of further submissions by the parties on 27 May and 23 June 2003, relating to those issues. By chamber summons filed on 24 March 2004, the plaintiffs seek leave to make this application out of time - that is, they seek an extension of time to apply and they seek, inter alia, an order pursuant to O 66 r 12(1) of the Rules of the Supreme Court ("RSC"), that the taxing officer be at liberty to tax the plaintiffs' bill of costs on the basis that the limit in item 13 of the Supreme Court scale of costs be removed.

4 The application is supported by the affidavit of Oliver Dirk Feinauer, sworn 22 March 2004. The first and second defendants oppose the application and in support of that opposition there has been filed an affidavit of David Ross Kilpatrick, sworn on 25 May 2004. It is convenient to begin with a general outline of what has been put before me in the affidavits, before I deal with the submissions made by the parties. I note that neither the third nor the fourth defendant appears before me nor is represented today.

5 Turning to Mr Feinauer's affidavit, he begins by setting out the background to the litigation and representation of the plaintiffs. I do not need to canvass that now. As far as the trial itself was concerned, Mr Feinauer deposes that a total of 190 documents were filed and attaches a list of those documents. As Mr Dillon points out in his submissions, a number of those documents are effectively pro forma documents but, of course, others are not.

6 Mr Feinauer deposes that a total of 13 witnesses were examined by counsel during the trial. He refers to the occasions on which submissions were made to me and to the course of events leading to the judgments. I note, as Mr Feinauer points out, that an amended minute of proposed orders which was filed on 29 May last year, sought removal of the costs limit, but in the event nothing was said of that by anybody at any hearing and no submission was advanced in relation to it. As a consequence, of course, that did not feature in any way in any decision made by me.

7 Really, the gravamen of Mr Feinauer's affidavit begins at [19] where he refers to the appearance before me on the delivery of my supplementary decision in July 2003. Mr Feinauer deposes as to that, that due to the pressure of practice a practitioner of less than one year's post admission experience was required to attend to take the judgment and that any failure to move for special orders as to costs on that occasion can be ascribed to inadvertence and inexperience on the behalf of counsel.

8 Then he turns to the situation as it evolved subsequent to the delivery of that judgment, and he says as to that, that due to the size of the file and substantial documentation involved it was envisaged that the process of taxation would be costly and protracted, and he considered it to be in the best interests of his clients to brief practitioners who act predominantly in the area of costs.

9 To that end, on 13 August 2003, a representative of his office telephoned Mr David Garnsworthy of Garnsworthy Cost Consultancy to retain him to act for the plaintiffs. In the course of that contact it was ascertained that Mr Garnsworthy had already received instructions from Messrs Williams & Hughes, who were the solicitors for the corporate defendants at trial, with respect to costs and other undisclosed matters relating to the file.

10 He also observes that Ms Maria-Luisa Coulson was a prior employee of the firm in about 1997, who had worked on the file and as she was associated with Garnsworthy Chambers the issue of conflict was perceived and that was raised in a facsimile to Williams & Hughes on 13 August 2003, following the conversation to which I have referred. As a result, Mr Garnsworthy advised that the Cost Consultancy was unable to act for the plaintiffs' solicitors by reason of the conflict of interest.

11 Other inquiries were made to obtain specialist assistance in that area. I do not need to detail precisely what they were. The situation is, however, that it was not until instructions were given to Mr Sheavyn of Messrs Talbot & Olivier on 23 October 2003, that the solicitors were able to obtain a practitioner to assist them in drafting a bill of costs for taxation and making an application for special orders as to costs.

12 So far as the work done on the matter is concerned and specifically that involved in the getting up, which is all the application before me now relates to, it is deposed by Mr Feinauer that the complexity of the claim and the rigorous pursuit of the defendants' position afforded little opportunity to limit the scope of the litigation. The opposing parties, it is said, were unable to agree in relation to elements of the claim, or as to aspects of damages in light of the blanket denial of the defendants that any misrepresentations were made, that the plaintiffs relied on any representations made to them, or that any of the losses claimed were causally linked to conduct on behalf of the defendants.

13 As a consequence, Mr Feinauer says, all aspects of the matter had to be exhaustively prepared for trial and that led to an increase in the work necessarily done. It is also contended that the matter raised not only complex factual issues, but also complex matters of law including, but not limited to, the quantum of claims. As to the item "getting up", Mr Feinauer deposes that a preliminary review of the file by Mr Sheavyn has indicated, on a conservative approximation, that the work involved in getting the case up for trial took something in excess of 410 hours. A number of those are itemised in terms of the work done, such as attendances on clients and witnesses, attendance on counsel, research and the like. Again, I do not propose to specify those particular amounts - that is, the times - nor the items in respect of which they are attributed.

14 The affidavit of Mr Kilpatrick is quite short. He deposes that he has had the conduct of the action almost since its commencement, the file having initially been transferred to Williams & Hughes from the then firm Parker & Parker. He deposes that since at least early 2000 - which was more than two years prior to trial - most of the correspondence and communications he had with Feinauers and generally with the plaintiffs' solicitors, were with certain identified practitioners about whom he has made inquiries with the Legal Practice Board and by reference to the Law Almanac of Western Australia and believes they are relatively junior practitioners. In his affidavit he gives the details of those inquiries.

15 The conclusion, however, which he advances in his affidavit is essentially as to his belief that during the periods in which he dealt with those nominated practitioners, they were either in their articles, were restricted practitioners or were, at best, in their post restricted practice year and that from the observations he made in relation to the conduct of the matter, it appeared to him that those junior practitioners were significantly involved in the preparation of the action for trial on behalf of the plaintiffs.

16 It is submitted in part, on behalf of the first and second defendants - to whom I shall simply refer as "the defendants" - that much more was needed to be produced to me in support of this application than has been, and in particular, that there ought to have been at least a draft bill of costs.

17 I do not accept the submission that the plaintiffs should have brought in a draft bill of costs and that, in the absence of such a draft bill, the application should fail. The nature and extent of the evidentiary material required to support an application to vary or remove a costs limit under O 66 r 12(1) will depend upon the circumstances of the particular case. One of the most important of those will be whether or not the Judge before whom the application is made was the trial Judge. In this case I was the trial Judge.

18 In McLean v Kerville, unreported; SCt of WA; Library No 6455; 1 October 1986, the then Chief Justice Sir Francis Burt said:

"... if the trial Judge is of the opinion that for reasons falling within O 66 r 12(1) the allowance in that scale should be increased then before making any order it would be a good rule of practice if he were to require the person seeking such an order to bring in a draft bill so enabling the trial Judge to tailor his order to the then known facts".

19 As to that, in Verdell Pty Ltd v F & G Nominees Pty Ltd & Anor [2002] WASC 58(S2), Wheeler J observed that it is to be noted that the Chief Justice apparently thought it was open to the trial Judge to form an opinion that the allowance should be increased before seeing any draft bill and that nothing in his Honour's observation required a bill of the detail which had in fact been set out in the affidavit before her Honour in that case. As her Honour pointed out, when one considers the material which the Full Court actually had before it in that case, the Court was able to review the exercise of the trial Judge's discretion without reference to any such bill.

20 I am indebted to her Honour for the very helpful discussion of the authorities at [5] to [15] of her Honour's judgment in Verdell. I respectfully agree with her Honour's observations and conclusions as to the proper approach to be adopted on an application of this kind. I made reference to them and to some of the other authorities in Wayella Nominees Pty Ltd as Trustee for the D J Gordon Family Trust v Cowden Ltd [2003] WASC 210(S).

21 I will not repeat all I said there. It will be sufficient if I quote what I said at [11] and [12]:

"11 The nature of the exercise to be conducted and the evidentiary material required for it were explained, particularly in Collins and in Verdell. Those and other authorities make it clear a Judge considering such an application is not engaging in a taxation. It is neither necessary nor appropriate for the Judge to examine items in a draft bill, line by line. What is necessary rather is for the trial Judge drawing, inter alia, on his or her knowledge of the trial to make a preliminary and provisional judgment whether on the face of it the amount of work done appears to have been reasonably done so as to constitute good and sufficient reason for making the order or, alternatively, as it is put in that way in this case, the case is of unusual complexity, such as to justify an order of that kind.

12 One point which does emerge from the authorities is that it is not sufficient for the applicant to show merely that work was done. The applicant must show why it was done or the necessity for it must otherwise be apparent to the trial Judge from his or her knowledge of the proceedings: that is to enable the Judge to make that preliminary and provisional determination, whether the work was reasonable and necessary. The point was, with respect, well made by Wheeler J in Verdell at [14] and [15], where her Honour said:

'14 Leaving aside the observations of Owen J in McDonnell at p 9 which may have been prompted by the circumstances of that case, and which I would respectfully suggest should not be seen as stating a general rule, it would appear that the following general propositions emerge in relation to the task of the Judge who determines whether or not a special costs order should be made. If the Judge has been the trial Judge, he or she will be able to draw on experience of the trial, which will be of great assistance in understanding the issues involved, and in appreciating the extent to which, for example, detailed preparation for cross-examination appears to have been necessary, or work appears to have been necessary beyond normal court sitting times to respond to matters arising suddenly during the course of the trial. Whether or not the Judge has been the trial Judge, a perusal of the pleadings, the transcript, and the submissions, together with the materials which may relate to interlocutory applications, will be of great assistance in understanding whether it was necessary for additional work to be done.

15 Whether or not the Judge has been the trial Judge, there may be work done of which the Judge is not aware. For example, there may have been unusually voluminous discovery, which is not reflected in the actual number of documents tendered at trial, or there may have been consultation with potential expert witnesses or research of issues of law which were not in the end reflected in the trial. Such work may not have been unnecessary in the light of what was known at the time, but may have resulted in agreement between the parties or a decision by one or another party to abandon an issue which at first appeared to arise. In those cases, it will be necessary for affidavit material to be placed before the Judge explaining in general terms what work was done and why it was done, and giving some indication of the time occupied by such work. It will, of course, be necessary to establish that, prima facie, costs appear to have been incurred which exceed those allowable under the scale. Whether this material is produced in the form of a computer printout, or a draft bill, or a summary prepared by the practitioner having carriage of the file, does not appear to me to matter. If the step is taken of producing a detailed schedule or a computer printout or the like, the Judge will not examine the material line by line, looking for possible duplication or overlap, or enquiring about the way in which every 10 minutes was spent.'"

22 As the plaintiffs' submissions make clear, the application is made pursuant to O 66 r 12(1) RSC. That rule provides that where the Court is of the opinion that a special order as to costs should be made, by reason of unusual complexity or importance of the case or for any other good or sufficient reason, the Court may order that particular allowances in any relevant scale be raised or a limit removed and, in giving any such direction, the Court may fix a limit within which the taxing officer may allow such costs.

23 As I pointed out in Jewel Walk Pty Ltd & Anor v Kondinin Group Inc [2001] WASC 197, at [15]:

"There are therefore three separate bases upon which a special costs order may be made. They are by reason of: (a) the unusual complexity of the case; or (b) the importance of the case; or (c) any other good or sufficient reason".

24 I note in passing that the plaintiff also adverts to s 215 of the Legal Practice Act 2003 (WA), which relevantly provides in subsection (2) that if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter, the Court or officer may do all or any of the following:

(a) order the payment of costs above those fixed by the determination;

(b) fix higher limits of costs than those fixed in the determination;

(c) remove limits of costs fixed in the determination;

(d) make any order or give any direction for the purposes of enabling costs above those in the determination to be ordered or taxed.

25 I shall return to that and to O 66 r 12 shortly. First it is necessary for me to deal with the application for extension of time and the question of delay.

26 It is clear that there has been not insignificant delay in the making of this application.

27 As Mr Dillon for the first and second defendants has pointed out, the work the subject of this application - namely, getting up - is work which was or ought to have been completed by the commencement of the trial, which was on 4 November 2002. The trial was completed by 14 November 2002 and, as I have mentioned, my primary reasons were delivered in March 2003. That is some 12 months before the present application was filed.

28 I accept the correctness of Mr Dillon's submission that there were occasions in the course of the hearing, both then and subsequently, in which the issue of costs was specifically raised; that is particularly so in relation to the submissions filed prior to the handing down of my supplementary reasons in July 2003, some eight months following the trial.

29 On that occasion matters relating to costs, including indemnity costs and a certificate for two counsel, were expressly before the court. Mr Dillon's submission, as I apprehend it, is in part that the present application should have been raised and dealt with on that occasion and, indeed, it had been foreshadowed in the minute of proposed orders, as I have indicated.

30 His contention is that it ought to have been pursued on that occasion; that there was sufficient information available as to the getting up to the plaintiffs to enable the submission, or the application to be made, and that it ought to have been done then. There is considerable force in that submission.

31 Even so, the plaintiffs had an opportunity for another 30 days following the delivery of that decision to make application for removal or lifting of the costs limit. The rule allowing that 30 days does so, in my view, on the basis that it is not unusual for such a question to escape attention even in circumstances of the delivery of a final judgment, including one with respect to costs.

32 His further contention is that - and I express it briefly and without attempting to give it the full scope with which he presented it in submissions - not only was the application not made within the time open to it to be made, but no explanation has been given in particular for the fact that the application was not made until now, following the expiration of 30 days from delivery of the supplementary reasons.

33 The explanation which I think is being advanced by the plaintiffs, or on their behalf, is that it took their solicitors that long to determine whether or not a special costs order could be substantiated and to make adequate preparation for it, by reliance upon practitioners with expertise in that area. I must say I do have some difficulty with that as a general proposition and the force of Mr Dillon's submission in relation to it cannot, I think, be denied. That, however, in my view is not the end of the matter. It is certainly a consideration which militates against the granting of the application for an extension of time. But it is appropriate, in my view, to consider those circumstances in the context of the matter as a whole, and that includes other considerations.

34 First of all, a guiding principle must be the public interest and that of the parties in the finality of litigation, a matter to which I referred at [21] of my reasons for decision in Jewel Walk, referring to Esther Investments, where his Honour the Chief Justice refused an application made because although due to inadvertence, it was not made until nearly three and a half years after judgment, and the interests of finality of litigation militated against it. In the instant case the time elapsed is some nine months which is certainly well beyond the 30 days but not of the order of the delay in Esther Investments.

35 Secondly, the question of a special costs order had been raised, although not pursued, in the minute of proposed orders filed by the plaintiffs on 29 May 2003. As I say, although not dealt with then, that was because it was not at that stage pursued before me and no party raised it. Nonetheless, I accept - as deposed to by Mr Feinauer - that the plaintiff certainly from the delivery of judgment was actively preparing to crystallise and press the application.

36 Thirdly, there is the question whether if the order had actively been sought in May 2003, or within 30 days of that judgment, it would probably then have been granted. I shall advert to this again later.

37 Fourth, the litigation is not yet finalised because there is an appeal pending which has not yet been heard. I note Mr Dillon's submission that one of the defendants, Mr Steele, has not filed an appeal and accordingly he would be, it is submitted, prejudiced were the application by the plaintiffs to be granted.

38 On this issue I think the practical answer to that contention is that the plaintiffs' costs have not yet been agreed nor taxed and presumably, given this application, they have not been quantified to the defendants at all.

39 Nor do I think that the case management principles now embodied in the Rules of the Supreme Court militate against the grant of the plaintiffs' application in the circumstances.

40 Finally, counsel for the defendants identified what he said was prejudice to them should the application be granted.

41 There were three as I apprehend it. The first is that final orders have been made and the defendants are entitled to know where they stand and that includes his reference to the fact that Mr Steele has not filed an appeal; secondly, that the appeal has in fact already been instituted, but if this application were to be granted, that would involve further consideration of the defendants' position and, in particular, whether or not the grounds of appeal should be amended, or there should be a further appeal instituted against any order which might be made today; and thirdly, there is - he says - the prejudice of the defendants having to appear by counsel today.

42 The third, it seems to me, is not something which can go to the question whether or not the extension of time should be granted, nor indeed whether or not the plaintiffs' application should itself be granted nor, in my view, does the second. So far as the first is concerned it is true that final orders have been made, but as I have observed, they are subject now to the pending appeal and the position of Mr Steele, I think, is dealt with in the way I have just indicated.

43 There is a general power to extend time notwithstanding the application to extend is itself made outside the time limit - O 5 r 1 and 2 RSC: Snowtop Mushrooms v Powley, unreported; FCt SCt of WA; Library No 4501; 14 May 1982. In addition to those to which I have referred, one factor to which it is relevant to have regard on the question of extension of time, is whether the application for raising or removal of the limit should be granted.

44 And so, in that context, I return to my consideration of that question. I mentioned the plaintiffs' reliance on s 215 of the Legal Practice Act 2003. In my view s 215 does not apply here. As Mr Dillon points out that Act did not come into operation until 1 January 2004. In any event, it would not affect any substantive change to the law in this area. I say that because it seems to me that if a case were of such unusual difficulty as to justify an increase in or removal of a cost limit, then it would inevitably also be a good or sufficient reason for doing so.

45 Section 215 in its terms is more narrow in effect than O 66 r 12(1) because the section allows an increase in costs only in three circumstances: namely, unusual difficulty, unusual complexity or unusual importance. The order, on the other hand, recognises unusually complex or unusually important matters, but the words "any other good or sufficient reason" are susceptible of encompassing not only unusual difficulty but any other relevant circumstance. That includes, in my view, the amount of work involved in preparation itself constituting a good and sufficient reason to increase the allowance provided under the scale: see Schmidt v Gilmour [1988] WAR 219.

46 It is neither necessary nor appropriate that I go through line by line the material setting out the claim for time spent or costs incurred and analyse what has been claimed; although I think that is effectively what Mr Dillon sought to have me do. I accept I need to be satisfied not only that work was done to the extent claimed, but also that it was prima facie necessarily done, but that needs to be shown only in a general and global way and against the background of my knowledge of the trial itself. I am so satisfied.

47 On the face of it, the amount of time deposed by Mr Feinauer as having been spent on getting up, suggests the case was of a degree of complexity and/or difficulty which extended well beyond that which would be regarded as ordinary. My own impressions of the conduct of the trial, the evidence, the pleadings and the submissions made by the parties, confirm that.

48 I accept it is at least probable that the case was one of unusual complexity and difficulty in the sense I have mentioned. Considerations going to that conclusion include that the case was hard fought on every point, two of the defendants were unrepresented and conducted their own cases, and the issues of causation and assessment of damages were complex.

49 I am satisfied the plaintiffs have shown it is probable there was greater work which was needed to be done in preparation than the scale amount contemplates as a maximum for the ordinary case. That is, in itself, a good and sufficient reason for removing the limit within the meaning of those words in O 66 r 12(1).

50 Thus, had the application for removal of the costs limit been made within time, it would have been granted. That is a further reason for extending time notwithstanding the long delay.

51 A point urged upon me on behalf of the first and second defendants that the work was or may have been done by junior practitioners and the scale limit would therefore not be inadequate, again has some force. However, I consider there is nonetheless prima facie justification for removing the limit.

52 Even if some substantial part of the claimed approximate total which is in excess of 400 hours was done by junior practitioners, the money claimed would still significantly exceed the amount in the scale which has been calculated on the basis of 100 hours of a senior practitioner's time. Whether or not costs should actually be allowed for junior or senior practitioners and, if so, for what work, will be a matter for the taxing officer.

53 As to the contention that the plaintiffs failed on a number of points, Mr Sheavyn submits that that should not bear on this application because there has been no apportionment of costs. The order already made is that the defendants must pay the plaintiffs' costs of the action. That submission must be accepted.

54 I would grant the application to extend time and allow the application for removal of the limit pursuant to O 66 r 12(1).

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53 (S3)

HEARD : 4-8 & 11-14 NOVEMBER 2002, 27 & 31 MAY 2004

BETWEEN : ALPINE HOLDINGS PTY LTD (ACN 009 471 907)

WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)

Costs - Application for removal of costs limit pursuant to O 66 r 12(1) of the Rules of the Supreme Court - No appearance by third and fourth defendants - Order made - Application not served on third and fourth defendants - Order not perfected - Denial of natural justice - Order recalled

1 ROBERTS-SMITH J: On 27 May this year, having heard submissions from counsel for the plaintiffs and from Mr Dillon, counsel for the first and second defendants, I made orders that the plaintiffs have leave to make their application for removal of the cost limit in item 13 of the Supreme Court scale to be removed pursuant to O 66 r 12(1) of the Rules of the Supreme Court.

2 I granted the application for removal of the limit and I made an order that the plaintiffs pay the first and second defendants' costs of the application in any event. There was no appearance on that occasion by the third and fourth defendants, Messrs Steele and McCubbing.

3 On Friday afternoon, 28 May, my Associate was telephoned by the plaintiffs' solicitors to advise that they had ascertained that the applications and material in support had not been served on the third and fourth defendants and that was the reason for their non-appearance. That telephone advice was subsequently confirmed in faxed correspondence.

4 By letter dated 28 May, Feinauers, the plaintiffs' solicitors, advised that upon a review of the files following the hearing before me the day before, they had become aware that due to an oversight, the third and fourth defendants had not been served with the relevant papers and accordingly had no notice of the hearing. They apologised for the error and indicated a willingness to do all things necessary to rectify it.

5 They advised that they were sending the papers under correspondence explaining the matter to both the third and fourth defendants that day. They noted that although they would be able to courier the documents to Messrs Wilson and Atkinson as representatives for the fourth defendant, the third defendant was presently resident in Halls Head and has not to date responded to any correspondence sent to him in the course of this matter.

6 They indicated that unless I was willing to deal with the matter having heard only the submissions of the plaintiffs and the first and second defendants on the basis that no further submissions made on behalf of the third or fourth defendants could or would have altered the decision reached the day before, the matter would unfortunately have to be listed again before me to allow the third and fourth defendants the opportunity to make submissions in opposition to the application if they wished.

7 On 31 May the plaintiffs' solicitors, again by facsimile letter, forwarded copies of the correspondence from them to the third defendant and the solicitors for the fourth defendant. In that correspondence they made various suggestions as to possible courses of action, noting that I will be in Albany on circuit from tomorrow, Tuesday, 1 June, for possibly some five weeks.

8 It was suggested that there were potentially three ways the matter may be dealt with. First it was pointed out that having filed written submissions and making extensive oral submissions at the hearing, counsel for the first and second defendants had not only raised the potential prejudice to the first and second defendants but also that prejudice he felt might befall the third and fourth defendants as litigants in person.

9 It was pointed out that my decision was made having regard to those submissions and that if the view were to be taken that no further submissions could or would have altered the decision, then it may be allowed to stand.

10 Secondly it was suggested that if the third and fourth defendants so wished, the matter might be dealt with by the filing of written submissions on behalf of them or by them, as the case may be. I could then consider the submissions and return a supplementary judgment taking them into account.

11 The third option suggested was that the matter be brought on for hearing before me to allow the third and fourth defendants to make oral submissions. Also on 31 May (that is to say today) I received through my Associate a copy of a letter from Messrs Wilson and Atkinson to Feinauers. They recited the circumstances briefly as known to them and indicated that having been spoken to by Mr Feinauer they had taken urgent instructions from their client on the understanding that I had indicated I wished to hear from the parties at 2.15 pm today prior to my departure for Albany.

12 Messrs Wilson and Atkinson indicated that they wished to make it clear that they were not acting for Mr McCubbing at the trial of the primary action and that he was representing himself. They went on to say:

"Mr McCubbing is extremely unhappy at the fact that he was not served with or even made aware of this application before it was heard. He is being placed under pressure in being forced to make an instant decision on this issue today. In the circumstances Mr McCubbing believes he has no choice but to acquiesce to the application and on that basis will not be attending court at 2.15 today."

13 As I indicated to Mr Feinauer in the course of his submissions this afternoon, I would not regard that as any appropriate indication of consent to the orders being made.

14 The orders I made on Thursday have not been settled nor extracted. Under the circumstances it seems to me that I have inherent power to recall orders which have not been perfected where there is a substantial reason for so doing.

15 The situation which exists here seems to me to be one in which that is appropriate. An order which has been made without one or more of the parties having been given an opportunity to be heard in respect of it, when it is an order made against that party or those parties and an order of some substance, is clearly a denial of natural justice. I do not understand anyone in this matter to be taking any view different to that.

16 In my view, as I say, there has been a fundamental breach of the right to be heard and that has given rise in the circumstances to orders which have not been perfected and which ought to be recalled and set aside. I say that because despite the fact that Mr Feinauer's application is for the orders to be held as against the first and second defendants on the basis that the third and fourth defendants be given an opportunity to appear and make submissions with respect to their positions, I think there are very real problems with that.

17 There is clearly potentially the prospect that having heard from the third and fourth defendants I might be disposed to make some different orders than those made last week. If that be so, there would then be some considerable difficulty with what might be inconsistent orders as against the first and second defendants by comparison with those against the third and fourth defendants.

18 There are significant difficulties in that situation and I do not think it is one which I should willingly allow to occur, even potentially.

19 Secondly, in terms of prejudice, it seems to me there is no prejudice to the plaintiffs were I to proceed on the basis of setting aside the orders made last week and giving the third and fourth defendants an opportunity to make submissions in respect of the application and the first and second defendants a limited opportunity to deal with any matters affecting them which might arise out of the submissions made by the third and fourth defendants.

20 I am told by Mr Feinauer that the process of taxation is going to take a very long time in any event and although clearly there would be some inconvenience in proceeding with the work in respect of the item "getting up" on one basis rather than another, that is to say, on the basis the cost limit has been lifted or not, nonetheless to the extent that might be seen as prejudice to the plaintiffs, it is in any event prejudice which has arisen as a result of the way in which the matter has been conducted by their own solicitors.

21 On that basis it seems to me it would be unjust to let the order stand and I propose to recall it. I will recall the orders made on Thursday and set them aside, except for the order made then that the plaintiffs pay the first and second defendants' costs of the application in any event, which order shall stand.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53 (S4)

HEARD : 4-8 & 11-14 NOVEMBER 2002, 14 JULY 2003, 27 & 31 MAY 2004

BETWEEN : ALPINE HOLDINGS PTY LTD (ACN 009 471 907)

WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)

Costs - Whether O 66 r 12(1) of the Rules of the Supreme Court or s 215 of the Legal Practice Act 2003 (WA) applies - Judgment delivered before Legal Practice Act came into operation - Plaintiffs had vested right to costs - Order 66 r 12(1) applied

Legal Practice Act 2003 (WA), s 215

Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53

Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S)

Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S2)

CIBC Wood Gundy Australia Ltd & Anor v ICL Australia Pty Ltd [1999] WASC 93

SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2004] WASC 26(S2)

1 ROBERTS-SMITH J: This matter has become unfortunately protracted.

2 This is the fourth occasion on which I have had to deliver a supplementary judgment in it.

3 The trial of this action was held in November 2002. My primary reasons allowing the plaintiff's claim and dismissing the first defendant's counterclaims were delivered on 24 March 2003: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53.

4 On 14 July 2003 I delivered a supplementary judgment in which I gave judgment for the plaintiff and assessed damages. I dismissed counterclaims by the first and second defendants, refused an application by the plaintiff for indemnity costs, ordered the defendants to pay the plaintiff's costs on a party/party basis and dismissed an application by the first and second defendants for a stay of execution pending appeal, but granted a partial stay in respect of the third and fourth defendants: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S).

5 On 27 May 2004 I made orders that the plaintiffs have leave to apply out of time for removal of the costs limit in item 13 of the costs scale pursuant to O 66 r 12(1) of the Rules of the Supreme Court ("RSC"). I granted the application for removal of the limit: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S2).

6 It was subsequently learned that the plaintiff's applications and material in support had not been served on the third and fourth defendants and that is why they had not appeared at the hearing on 27 May. I called the matter on before me again and having heard from counsel for the plaintiffs and the first and second defendants I recalled the orders made the previous Thursday and set them aside, except for an order that the plaintiffs pay the first and second defendant's costs of the application in any event: Alpine Holdings Pty Ltd & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53(S3).

7 On 31 May 2004 I further ordered that unless the third and fourth defendants, by no later than 4.00 pm Wednesday 7 July 2004, filed and served upon the plaintiffs any affidavits or submissions in opposition, or wrote to the Court to the effect that they wished to be heard in the matter, the plaintiffs would be granted leave to make the application out of time and pursuant to O 66 r 12(1) RSC the taxing officer tax the plaintiffs' bill of costs on the basis the limit in item 13 of the Supreme Court scale of costs had been removed.

8 I indicated at the hearing on 31 May that if either of the third or fourth defendant wished to be heard, the matter would be re-listed and that in any event, if the third or fourth defendant did make either written or oral submissions, the first and second defendants and the plaintiffs would also have the opportunity to address any new matters so raised.

9 No affidavit nor submission has been filed or served by the third defendant.

10 On 5 July 2004 the fourth defendant filed a submission in opposition to the plaintiff's application for a special costs order.

11 In his written submission the fourth defendant adopted the submissions previously made by the first and second defendants. He then set out the terms of O 66 r 12(1) RSC and s 215(2) of the Legal Practice Act 2003, which he described as "effective at the time of the plaintiff's application". The balance of his submission was as follows:

"4. Sub-section 215(2) of the Legal Practice Act (which by virtue of being legislation, takes precedence over the Rules of the Supreme Court) therefore:

4.1 adds 'unusual difficulty' as a basis for making a special order as to costs; and

4.2 removes 'any other good or sufficient reason' as a basis for making a special order as to costs.

5. In drafting sub-section 215(2) of the Legal Practice Act 2003, a deliberate decision was made by Parliament to depart from the wording of Order 66 rule 12(1) as it was seen as providing too broad a discretion for the making of special orders as to costs.

6. In the premises, the Court's orders granting leave to the plaintiff to bring an application out of time and removing the limit imposed on recovery by the plaintiffs of their costs of trial by the Supreme Court Scale of Costs on Item 13, should not have been made. The application should have been dismissed."

12 On 8 July 2004 Feinauers, solicitors for the plaintiffs, wrote to my Associate referring to the submission of the fourth defendant and noting no submission was filed by the third defendant and no intention to oppose the plaintiff's application had been indicated by him. The plaintiff's solicitors submitted that the submission of the fourth defendant raised no ground which had not already been substantively addressed before me on 27 May and that although if I was minded to hear oral submissions for the fourth defendant they would attend, the matter could be dealt with in terms of the "springing orders" made by me on 31 May.

13 I had my Associate inform Feinauers that I intended to deal with the matter on the papers and requested them to advise the other parties of that. They did so by letter dated 8 July 2004, a copy of which was forwarded to my Associate.

14 By facsimile letter to my Associate dated 9 July 2004, Williams & Hughes, solicitors for the first and second defendant, acknowledged that advice and wrote that on the plaintiff's application for a special costs order the Court had not been made aware of the inconsistency between the Legal Practice Act and the RSC. They said the issue had not come to their attention prior to the hearing, and submitted that the Court might be assisted by hearing further submissions on that discrete issue. On the basis that I wished to deal with the matter on the papers they advance the following:

"1. The primary difference between the position under Order 66 rule 12(1) and the Legal Practice Act 2003 is that the words 'or for any other good or sufficient reason' have been removed by the Act. It is clear, that the authorities decided in the previous rules or similar rules support the fact that, if the amount of work done appears to have been reasonable and to exceed the Scale that does constitute a good or sufficient reason for the making of an order: see Esther Investments Pty Ltd-v-Markalinga Pty Ltd (1992) 8 WA 400 (sic) @ 404 and Seaman on Civil Procedure para 66.12.1A.

2. It is quite clear that Parliament has considered it appropriate to restrict the discretion of the Court in awarding costs above the Scale, and has restricted the Court's ability to lift the Scale into circumstances where the legal costs determination is inadequate because of either (sic):

2.1 unusual difficulty;

2.2 unusual complexity; or

2.3 unusual importance of the matter.

3. We simply adopt the submissions previously made on behalf of the first and second defendants in relation to this action not being a matter of unusual difficulty, complexity or importance.

4. It is submitted that it is clear Parliament's intention was to impose a restriction on the cases in which an order lifting the Scale was made. The mere fact that work which performed which appears to have been reasonable exceeded the Scale is insufficient."

15 On 12 July 2004 Feinauers wrote to my Associate pointing out the assertion by Williams & Hughes that the s 215 issue had not been raised at the hearing on 27 May was not correct and referring to the plaintiff's outline of written submissions in support of the application pursuant to O 66 r 12(1). Paragraphs 11 - 13 of that outline specifically dealt with the issue of s 215. Feinauers accordingly submitted the scope of the orders made previously did not allow for any further submissions being entertained touching on that particular point in light of the previous opportunity afforded to the first and second defendants to be heard on the issue.

16 By facsimile message dated 12 July 2004 Williams & Hughes acknowledged that Feinauers were correct and withdrew the comments made in their facsimile of 9 July.

17 Quite coincidentally, the conflict between O 66 r 12(1) RSC and s 215 of the Legal Practice Act and the question of the applicability of those provisions to certain proceedings, had already arisen and were the subject of submissions in an unrelated matter before me. My decision on that application has been handed down today: SDS Corporation Ltd v Pasdonnay Pty Ltd & Anor [2004] WASC 26(S2) and I do not need to repeat here what I have said there about this issue.

18 Unlike the situation in SDS v Pasdonnay (supra), where judgment was not delivered until after the Legal Practice Act came into operation on 1 January 2004, in this case judgment was delivered on 24 March 2003 and a supplementary judgment in which I ordered the defendants to pay the plaintiffs' costs was handed down on 14 July 2003. The plaintiffs' right to costs became a vested right on 14 July 2003 at the latest. Section 215 is not to be given a retrospective operation which would affect that right (CIBC Wood Gundy Australia Ltd & Anor v ICL Australia Pty Ltd [1999] WASC 93; SDS v Pasdonnay).

19 That is the view I took in my reasons for judgment of 27 May 2004 (at [44]). I also said that I did not think s 215 had effected any substantial change to the law in this area. I was there referring to the situation where a matter was of such unusual difficulty as to justify an increase in or removal of a costs limit. A case which would fall within that category, it seemed to me, would also be one which would fall within the category of there being "a good or sufficient reason" for increasing or removing a costs limit.

20 I went on to point out (at [45]) that s 215 is narrower in effect than O 66 r 12(1) because it does not include "any other good or sufficient reason" (and the words "unusual difficulty" are obviously much more limited in scope). I did refer to s 215 as allowing an increase in costs in only three circumstances, namely unusual difficulty, unusual complexity or unusual importance, but that observation was obiter and for the reasons given in SDS v Pasdonnay (at [106]) I have on reflection come to the view that the adjective "unusual" applies only to "difficulty". The word "or" is disjunctive, so that what must be shown is unusual difficulty, or complexity or importance.

21 The further submissions now made by the fourth defendant go only to the issue of the application of s 215 of the Legal Practice Act. For the reasons I have given above and in SDS v Pasdonnay I have come to the conclusion that s 215 does not apply to the plaintiff's application here.

22 In my reasons for decision of 27 May 2004 (at [45] - [49]) I allowed the plaintiff's application because I was satisfied the work necessarily and reasonably done in preparation was greater than that contemplated by the scale, by reason of the degree of complexity and/or difficulty which extended well beyond that which would be regarded as ordinary. Those conclusions are sufficient to warrant an order removing the costs limit pursuant either to O 66 r 12(1) or s 215 of the Legal Practice Act.

23 In the circumstances there is no reason judgment cannot be entered in accordance with these reasons and those delivered on 27 May 2004.