Brakikki Pty Limited v Gofur

District Court of NSW|2010-11-26|Before: Mr J

Table of Contents Factual background [1] - [10] Issues [11] - [13] Evidence overview and credit [14] - [15] Summary of findings [16] Issue 1 - Whether defendant was in breach of the lease [17] - [28] Issue 2 - The timing of termination of the lease [29] - [37] Issue 3 - Quantum of plaintiff's damages [38] - [46] Issue 4 - Whether misleading representations were made [47] - [80] Issue 5 - Quantification of alleged losses on cross claim [81] - [94] Disposition [95] Costs [96] Orders [97]

Factual background 1On 23 December 2005, the plaintiff, Brakikki Pty Limited, through its director, Mr Samuel Wong, as lessor, leased retail premises within a shopping complex located at Shop 7, 124-128 Beamish Street, Campsie to the lessee, Mr Mohammad Gofur, the defendant. 2The terms of the lease provided for a 5 year tenancy to commence from 19 November 2005, at an agreed annual rental of $25,036.44 plus GST, payable in monthly instalments of $2086.37, plus GST. The lease also provided for the defendant to pay a percentage of the plaintiff's defined outgoings for the premises. Mr Gofur's intended use for the premises was for a general convenience store and to sell Indian groceries. 3The plaintiff's claim was that due to the conduct of the defendant in breaching the lease, damages for rent, GST, outgoings, and accumulated interest amounted to $98,936.27 . 4The plaintiff claimed that after a period of tenancy, the defendant left the premises owing unpaid rent and unpaid outgoings, including accrued interest that arose under the lease. In those circumstances the plaintiff claimed the defendant had repudiated the lease. This resulted in the plaintiff re-entering and taking possession of the premises. Thereafter, on the payment of some monies by the defendant, he was permitted to again use the premises. 5The parties remained in dispute on a number of issues that had evolved between them, and on a date at around the end of June 2008, the defendant left the premises, stating that he had terminated the lease. 6The defendant relied upon a cross claim against the plaintiff and alleged that the plaintiff had induced him into signing the lease by the making of representations that were either misleading or capable of deceiving or misleading, thus giving rise to a claim for economic damages, or alternatively, damages pursuant to s 52 of the Trade Practices Act 1974. 7The defendant identified the real issues in the proceedings as arising in respect of his cross claim. These concerned alleged representations, which, if accepted, it was argued, would result in a substantial assessment of damages, including for loss of profits. The defendant / cross claimant sought to quantify his claim in the order of $520,781.50 plus interest. 8It was submitted that an assessment of that order, or for any amount over and above the plaintiff's claim, would require a set-off against any entitlement of the plaintiff to damages, with the claimed result that any liability of the defendant to the plaintiff in respect of the plaintiff's action, would be cancelled out in favour of a substantial verdict and judgment for the defendant / cross claimant. 9The resolution of these matters in dispute necessarily depended upon an assessment of the credibility of conflicting testimony. 10Before moving on to outline the issues and my consideration of them, I wish to record my thanks for the skill and care with which both counsel approached the tasks required of them in these proceedings, including their helpful submissions.

Issues 11In respect of the plaintiff's claim against the defendant, the issues to be determined may be conveniently outlined as follows: Issue 1 : Whether the defendant made the payments of rent and outgoings as required by the lease, and if not, did the failure to do so constitute a breach of the lease; Issue 2 : The timing of termination of the lease; Issue 3 : Quantum of the plaintiff's damages 12In respect of the defendant's cross claim against the plaintiff, the issues to be determined may be conveniently reduced to the following formulation: Issue 4 : Whether misleading representations or representations capable of being misleading, were made by or on behalf of the plaintiff to the defendant at the time the lease was negotiated, and if so, was there a relevant reliance by the defendant on such alleged representations ; Issue 5 : The quantum of damages on the cross claim if an entitlement to such damages has been shown. 13For acceptance, each of the respective positions adopted by the parties depended upon an assessment of the credibility of the testimony of the witnesses called to give evidence in the proceedings. Where appropriate I shall identify the matters that touched upon the credibility of testimony where such matters relevantly arise for determination in the course of my reasons.

Evidence overview and credit 14The parties tendered voluminous folders of affidavit evidence. In addition, the plaintiff called oral evidence from the witness Mr Chabel Karam, another tenant in the building concerning access arrangements, Mr Ken Nam, the plaintiff's letting agent concerning the initial discussions and on the issue of whether relevant representations had been made, and Mr Samuel Wong, a director of the plaintiff company. Mr Gofur gave evidence in his own case. The only other witness who was called in the defendant's case was Mr John Lee, an architectural draftsman, whose evidence related to measurement issues concerning the proper basis for the calculation of outgoings under the lease. 15Substantial credit issues emerged between the evidence of Mr Wong and Mr Nam on the one hand, and the defendant on the other. On the conflicting evidence as to whether or not relevant representations were made by or on behalf of the plaintiff, I have generally preferred the evidence of the defendant. I have set out my reasons for resolving those credit issues in the context in which they arose. Whilst there were credit challenges raised in the evidence of Mr Karam, the challenge being that he had tailored his evidence to suit the case of the plaintiff, as the plaintiff was his landlord, I did not consider that to have been the case. However, I found it unnecessary to refer to the evidence of Mr Karam as the relevant issues that fell to be determined were on the polarised evidence of Mr Wong and Mr Nam, compared to that of the defendant.

Summary of findings 16I have found that the plaintiff has made out its case for unpaid rent and outgoings. This has resulted in a verdict in favour of the plaintiff in the amount of $82,640.33. I have found that the defendant has succeeded in part on his cross claim, with the result that he is entitled to an award of damages in the sum of $50,000. After set-off, this results in a verdict and judgment in the plaintiff's favour in the sum of $32,640.33. In the paragraphs that follow I have set out my findings of fact where they relate to each of the specific issues raised in the proceedings, and which call for decision.

Issue 1 - Whether defendant was in breach of the lease 17Before addressing the issue of whether or not the defendant was in breach of the terms of the lease, it is relevant to review the context in which the lease was agreed to, as well as the context of the alleged breach of that lease. 18Following negotiations, Mr Gofur took possession of the premises on 19 November 2005. At that time he was provided with a key to the premises. On 23 December 2005, the parties executed a formal deed which embodied their agreement, and that document constituted the lease between them. The entire terms of the lease were in writing and provided for a 5 year term with an option to renew for a further 5 years. In the event the option for renewal was not taken up, the lease was specified to terminate on 18 November 2005. Mr Gofur, whom I find was himself an astute businessman, negotiated the lease with the plaintiff and the plaintiff's agent, Mr Nam, with the assistance and advice of his own solicitors. The deed of lease was signed, sealed, delivered and then registered. 19The deed provided for rent under the lease to be $25,036.44 per annum or $2086.37 per month plus GST plus 10 per cent of defined outgoings, namely local council rates and charges, water, sewerage and drainage charges, land tax, insurance, repairs and maintenance expenses (excluding the costs of structural repairs), costs incurred in providing services, pest control costs, cleaning costs, security and fire prevention costs, garbage removal, cleaning and management costs. This was an obvious and not unusual commercial arrangement. Clearly, the aim of the plaintiff was to require its tenants to contribute to those expenses in order to increase the profit margin from the rent it would receive for the premises. The defendant agreed to those terms on the basis that the 10 per cent figure for outgoings was reflective of the area he thought his shop was to occupy within the overall premises. 20The lease provided for the foregoing amounts to be paid by Mr Gofur. The lease also provided for the payment of interest on unpaid rent at the rate of 20 per cent per annum. The defined use of the premises was that of " General Grocery, Indian Grocery and General Goods Store ". These were the commercial terms to which the parties had agreed before the disputes arose between them. 21I conclude that the inevitable conclusion to be drawn from the described circumstances is that Mr Gofur was bound by the terms of the lease that he had entered into with the plaintiff company. It follows that he is estopped from denying the fact and consequences of the lease, and its terms. 22The lease relevantly provided for an obligation on the tenant to pay rent, an identified share of the outgoings, interest on rent overdue for 14 days, and GST: Exhibit "E", cl 5 and cl 15. 23Clause 15 of the lease created an obligation on the tenant to pay the GST on the relevant taxable supply, namely the payment of rent. 24It is clear that a contravention of clause 5 of the lease must be regarded as a breach of an essential term of the lease as the failure to honour the obligation to pay rent is an act of repudiation inconsistent with the obligation to pay rent: Exhibit "E", Clause 12.5.1. 25The lease also provided that the tenant's obligation to pay defined outgoings was also an essential term of the lease: Exhibit "E", Clause 12.5.2. 26The evidence clearly discloses that the defendant failed to pay rent and outgoings within the time required by the lease. I therefore find that Mr Gofur was in breach of the essential terms of his lease in several respects. This is because the failure to pay rent for one month must be seen as the non-fulfilment of a relevant covenant, condition or stipulation in the lease and represented a relevant pre-condition for forfeiture of the lease following a formal demand: s 85(d) of the Conveyancing Act 1919. 27In fact Mr Gofur had failed to pay rent for more than just one month. Ultimately, he left the premises without paying the due rent and outgoings. As to the unpaid rent, in my view the plaintiff's submissions accurately reflect the extent of the rent left unpaid by the defendant. Similarly, but subject to a small adjustment that I will identify in respect of Issue 3, the same applies to unpaid outgoings. 28In the meantime, it is sufficient to record my view that it is clear that Mr Gofur's conduct in abandoning the premises, and in refusing to pay rent, as well as his refusal to pay his defined share of the outgoings or a fair proportion of them under the lease, demonstrated an unwillingness to perform the substance of the contract he had entered into with the plaintiff. As such, this amounted to a repudiation of his obligations under the lease, and therefore constituted a breach of the lease. There was no other reason for the plaintiff to re-enter the premises.

Issue 2 - Timing of termination of the lease 29The manner in which the proceedings were conducted, and the content of the submissions indicates that I should find that the lease was terminated on 30 June 2008, and I so find. This is despite the plaintiff having earlier re-entered the premises on 7 July 2006 to change the locks, and then subsequently consenting to the defendant re-entering the premises on 19 July 2006, and the defendant paying some rent for a period thereafter. 30The significance of that position is that after that date, the plaintiff's entitlement to damages must be based on loss of rent and outgoings to that date. After that date the only remedy available to the plaintiff was a claim for damages of a different character from 1 July 2008 until a new tenant took a lease on the premises. 31The defendant has submitted that as the plaintiff has not pleaded a claim for alternative damages in its statement of claim, and has only sought damages for rent and outgoings as a contractual debt, and therefore any claim for damages outside the pleaded case should be disallowed. I accept that submission as there is no effective answer to it. 32The background to those circumstances was that between 18 January 2006 and 6 July 2006, the plaintiff had provided the defendant with 13 separate notices of demand for the payment of outstanding rent, as well as notices of intention to take possession of the premises. The defendant did not satisfy those notices by the payment of the monies that were due and payable to the plaintiff pursuant to the lease. Those circumstances rendered the plaintiff's entry into the premises on 7 July 2006 lawful. At that time the lease must be considered to have been at an end. The plaintiff then proceeded to lawfully lock up the premises. 33Subsequently, on 19 July 2006, the defendant re-entered the premises. with the concurrence of the landlord. At that time, the defendant was given a key to the premises, but only after he had paid the plaintiff an amount for rent and outgoings. 34After the defendant had re-entered the premises with the concurrence of the landlord, further difficulties arose between the parties over the payment of rent and outgoings. This led to the plaintiff issuing to the defendant 5 further notices of demand for such payment between 25 July 2006 and 23 August 2006. Those notices were not only for the payment of outstanding rent but also gave notice of intention to take possession of the premises. Those circumstances led to an agreement between the parties reached on 24 August 2006, to the effect that the defendant would pay outstanding rent to avoid having the premises locked up again. 35Thereafter, between 25 July 2006 and 19 May 2008, the plaintiff issued the defendant with a further 30 notices of demand for the payment of outstanding rent , as well as notices of intention to take possession of the premises. The defendant refrained from making all of the payments that were due. This led to further demands by the plaintiff that the defendant pay outstanding rent and outgoings. On 29 May 2008 a cheque from the defendant made payable to the plaintiff was dishonoured by the defendant's bank. Following these events, in mid 2008, the defendant abandoned the premises whilst still owing the plaintiff monies for rent, GST and outgoings. The plaintiff again took possession of the premises on 23 July 2008. 36I consider that these circumstances justify the submitted conclusion that the lease was terminated on 30 June 2008. 37I now turn to the matter of assessment of the monetary consequences of the breach of the lease by the defendant.

Issue 3 - Quantum of the plaintiff's damages 38The fact that the lease between the parties was terminated does not affect the plaintiff's accrued rights to collect arrears in rent, GST and outgoings that constituted a debt to the plaintiff: cl 5.1.1 and cl 5.1.2. 39The plaintiff's entitlement to claim damages for the defendant's breach of the lease comprises the following three elements: (a)Unpaid rent, including GST as was provided under the lease; (b)Unpaid outgoings as defined, subject to an adjustment as to the appropriate percentage that is due; (c)Interest. 40In respect of the component of unpaid rent and GST, I assess the plaintiff's entitlement to damages for the defendant's breach of the lease involving the element of unpaid rent between 17 February 2007 and 16 April 2009 at $52,808.77. The applicable GST on that amount is in the sum of $5280.87. The total amount of the claim for rent and GST is in the sum of $58,089.64. The calculations which reveal that amount have been provided by the plaintiff. These are set out in Appendix I to these reasons and I accept them as representing the appropriate quantum to be assessed for the breach of the lease. 41In coming to that view, I do not accept that the plaintiff has failed to mitigate its loss by seeking to obtain another tenant in a timely manner between 1 July 2008 and 16 April 2009. The mitigation argument raised by the defendant is flawed by several factors. First, the defendant left goods and equipment in the premises for a significant period of time. This undoubtedly had an adverse effect on the plaintiff's ability to obtain another tenant. Secondly, I consider that the plaintiff acted reasonably in seeking to mitigate its losses by placing the property in the hands of a letting agent in order to try and obtain another tenant. That action would not have been required if the defendant had not left the premises without fulfilling his obligation to pay rent, GST and outgoings. Having done that, I consider that to have been sufficient mitigation. I therefore do not accept the defendant's argument that the plaintiff had unreasonably failed to mitigate its loss on the rent claim. 42In respect of the component of unpaid outgoings under the lease, the plaintiff claims the defendant is liable for 10 per cent of those outgoings which were identified in the sum of $14,446.14. For the reasons I will outline in connection with the claimed misrepresentation allegation on the defendant's cross claim, I consider that the claim for 10 per cent of outgoings should be adjusted downwards from 10 per cent, which equated to $14,446.14 to 4.19 per cent, which equates to $6061.31. 43In respect of the component of interest on unpaid rent and outgoings, by written submissions dated 8 August 2011, the plaintiff submitted that in the claimed period 17 February 2007 and 12 August 2011, interest on unpaid rent and GST should be assessed in the amount of $24,085.28. That calculation is based on the rate of interest agreed in the lease at 20 per cent. 44That calculation seems excessive as the relevant rates are a combination of the period during which the contract rate of 20 per cent applied to an aggregating rate over time, and a litigation rate according to the Uniform Civil Procedure Rules 2005 rates. As the required calculation is labyrinthine, and as the award of interest and its rate is in part discretionary, I have used a blended rate of 7 per cent on the rent claim over 4.31 years between 17 February 2007 and 12 August 2011. Accordingly, interest on rent of $58,089.64 at 7 per cent over 4.31 years is assessed in the amount of $17,525.64. 45I propose to take a similar approach to the calculation of interest on outgoings in the sum of $6061.31. The relevant period is 2.65 years between the filing of the statement of claim on 16 December 2008 and the date of judgment on 12 August 2011. Interest of 7 per cent on outgoings of $6061.31 over 2.65 years is assessed in the amount of $963.74. 46The foregoing assessments reveal the amount of the plaintiff's entitlement to damages and interest is in the sum of $82,640.33.

Issue 4 - Cross Claim - Whether misleading representations were made 47The defendant has claimed that misleading representations were made to him by or on behalf of the plaintiff at the time the lease was negotiated. If that allegation is made out, and it can be shown that the defendant relevantly relied upon such alleged misrepresentations, a claim for damages is maintainable by the defendant: s 51A and s 52 of the Trade Practices Act 1974 . Those claims are examined in the paragraphs that follow. 48The defendant has claimed that misleading or deceptive representations, or alternatively, representations that were likely to mislead or deceive, were made to him by or on behalf of the plaintiff at the time the lease was negotiated. He has further claimed that in reliance upon such representations, he was induced into entering into the lease in question. 49The first point to be considered in relation to this aspect of the claim is whether the conduct of the plaintiff was in trade or commerce. In this regard I am satisfied that this essential pre-requisite has been satisfied in that the leasing of commercial premises by a corporate landlord to a commercial tenant must be characterised as an activity carried out in trade or commerce. 50The second point to be considered in relation to this aspect of the claim is whether, if the alleged representations had not been made, the defendant would not have entered into the lease. I shall return to this issue after examining the range and detail of the representations the defendant claims he had relied upon. 51Before doing so, I identify the fact that the parties were at issue as to whether it was Mr Wong on behalf of the plaintiff, or his agent, Mr Nam, of Campsie Real Estate, who had negotiated the lease with the defendant, or more accurately, with the defendant's then solicitor. In my view that issue should be resolved in favour of the defendant. In that regard, I prefer the evidence of Mr Gofur to that of Mr Wong and Mr Nam. I accept that for the purposes of negotiating the lease, the defendant's introductory dealings were with Mr Nam, who was the agent of the plaintiff. It follows that the plaintiff is bound by any representations that were proffered to the defendant by Mr Nam. 52My reasons for preferring the evidence of Mr Gofur to that of Mr Wong and Mr Nam on the agency issue is that I consider that the evidence of Mr Gofur is inherently more probable and likely to be correct. In that regard, I consider that as a busy landlord involved in other activities, and having appointed an agent who had the relevant documents and information, it was unlikely that Mr Wong would attend to such matters himself rather than delegate them to an agent, where he had already engaged an agent. 53On the contest of credibility of testimony between Mr Gofur and Mr Nam, I prefer the evidence of Mr Gofur as more likely to be correct, for the reasons submitted by counsel for the defendant. In brief these are that Mr Nam seemed unable to reconcile relevant conflicting events that emerged from within his own testimony. His resort to the use of an interpreter part-way through his evidence was at odds with his antecedent and demonstrated ability to communicate in English, which together with his efforts in correction of the interpreter's efforts, led me to the view he did not truly need the services of the interpreter, other than to gain some thinking time to deal with the apparently difficult questions that were confronting him in cross-examination. 54For these reasons, I preferred the evidence of Mr Gofur, where it conflicted with that of Mr Nam. I considered Mr Gofur's evidence was more likely to be accurate on those issues, where his evidence was straightforward and spontaneous. Even allowing for self-interest considerations on the part of Mr Gofur, I considered that he gave truthful evidence concerning the representation that I have accepted. 55I now turn to the alleged misrepresentations. The defendant claims that he entered into the lease in reliance on the following 5 representations from the plaintiff, through his agent Mr Nam: (a)He would be permitted to use the store as a general grocery, Indian grocery, as well as general goods and convenience store, including to sell gift items and household items; (b)The plaintiff would not grant a lease of a shop, or permit any of its tenants to operate a shop, in competition with any of the others or to sell the same types of goods as another shop in the centre; (c)The car park at the rear of the premises was for use of the tenants and their customers; (d)The entrance to the shopping centre from the rear car park would be the main entry point for the defendant's customers, and would be open between the hours of 8.00am and 10.00pm; (e)The defendant would be permitted to use the rear car park for loading and unloading goods into his shop; (f)The leased shop occupied 10 per cent of the shopping centre complex and accordingly, the defendant would be required to pay 10 per cent in outgoings under the lease. 56Before considering those matters I will set out some further background to the misrepresentation claim. 57In the lead-up to him signing the lease, the defendant had submitted a development application to the local council. Following the approval of that application, the defendant expended a significant sum of money on fitting out the shop in question, which was the subject of the lease that was later formally executed on 23 December 2005. The defendant commenced trading in his leased shop on 30 December 2005. 58In my view, that sequence of events would have been unlikely to have arisen or prevailed if there had not been some significant representations made to the defendant, on behalf of the plaintiff, to provide the defendant with reassurance that it would be commercially worthwhile for him, the defendant, to commit himself to the business risks associated with a 5 year commercial lease, with the attendant onerous obligations of having to pay rent and outgoings under that lease. 59In these circumstances I am satisfied that on behalf of the plaintiff, Mr Nam made some representations to the defendant in the lead-up to the lease being signed. I am also satisfied that such representations were made by Mr Nam as agent for the plaintiff. 60The defendant claimed that after some six months of trading at the shop, his takings had increased to about $3500 - $4000 per week, and after about one year, they had increased to between $4000 and $5000 per week. He claimed that this resulted in a profit of at least $1000 per week. The defendant also claimed that during those periods, for their own convenience, and for the benefit of his business, many of his customers parked in the car park at the rear of the premises, and gained entry to his shop via that route. He also stated that he often used the rear car park to load and unload groceries from the shop. 61The defendant claims that in October 2006, he became aware that Mr Wong, the director of the plaintiff, was in the process of fitting out another shop at the centre where it was planned that he would sell similar goods to those sold by the defendant. This resulted in the defendant complaining to Mr Wong. The defendant claims Mr Wong had ignored his complaints. The defendant claimed that at around the same time, the plaintiff had constructed steel posts within the rear car park and had padlocked a chain fence across the entrance between those steel posts so that it was no longer possible for the defendant or his customers to use the car park. 62The defendant stated that on 25 June 2008, he wrote to the plaintiff indicating that he was terminating the lease as at 30 June 2008 because of the changes the plaintiff had made to the arrangements for parking, access, and because of competition from the shop operated by Mr Wong. There was a dispute over if, when, and how, that correspondence had been sent. I accept the evidence of Mr Gofur that the letter in question had been sent as he had claimed. I do not consider that his evidence in that regard required corroboration or that it was unlikely. 63The defendant also stated that since the dispute between the parties had arisen, he had discovered that the area of the leased premises occupied an area of less than 10 per cent of the total area of the entire complex, namely, just 4.19 per cent of the total lettable area of the centre. 64I now turn to examine the alleged misrepresentations raised by the defendant as outlined above. 65As to claimed representation (a), to the effect that the defendant would be permitted to use the store as a general grocery store, convenience store, and also sell gift items and household items, I accept that representation was made. That said, I do not accept that this representation was in any material way misleading or that it was likely to mislead. 66As to representation (b), to the effect that the plaintiff would not grant a lease to a shop or permit any tenant to compete with the defendant, I do not accept that a representation was made in those precise terms, However, I accept the evidence of the defendant to the effect that Mr Nam intimated to the defendant that the plaintiff had a policy of non-competition for certain goods amongst the businesses within the shopping complex. 67I consider that the evidence of that intimated policy did not extend to the full extent that was asserted by the defendant. However, I also consider that it was reasonable that Mr Gofur could have assumed the construction he has contended as a result of Mr Nam's discussions with him. In that sense, I consider that the representation made by Mr Nam was capable of misleading the defendant. 68I have reached this conclusion because in general I prefer the evidence of the defendant to the evidence of Mr Nam, because in his evidence, Mr Nam did not give me the impression of being clear and precise in his communications, and I consider that this could have been a ready source of confusion. 69In this regard, I consider the defendant had, perhaps due to communication difficulties of expression and comprehension as between himself and Mr Nam, misinterpreted the true extent of Mr Nam's representation. I also accept that the nature and manner of the communication in question had the capacity to mislead, and that is what in fact occurred. I do not accept that there was a representation that there would be absolutely no competition with the defendant's business. Whilst I accept that the defendant would have hoped for such an attitude on the part of the landlord for similar businesses to be excluded, there was a difference. However, I also consider that Mr Gofur relied upon his assumed interpretation and I accept that such an interpretation was reasonably open to him. 70As to representation (c), to the effect that there was a failure of the plaintiff to allow the defendant and his customers reasonable use of the rear car park and entry to the premises via the door facing the rear car park, I accept the evidence of Mr Wong that the plaintiff had made a key available to the defendant which enabled him to use the car park once the posts and chain had been fitted in the car park area. I do not accept that a relevant misrepresentation as to the use of the car park by customers arose at the time the lease was negotiated. Nor do I accept that Mr Wong's subsequent actions gave rise to any legitimate complaints on the part of the defendant. 71It was always open to the plaintiff to restrict the use of the car park to tenants, as in fact occurred. In relation to the alleged misrepresentation that customers would be allowed use of the car park, I consider it unlikely that this was ever intimated to the plaintiff as the car park was relatively small compared to the number of businesses in the shopping complex and I consider that it was improbable that it could have been said that it would be open to use by a range of customers patronising a relatively small grocery business located amongst other businesses in the building. I consider that to be a matter, which was known to the defendant, from an inspection of the premises, and at the time he entered into the lease. I find that the car park representation is not made out by the defendant as he has claimed. 72As to representation (d) to the effect that the entrance to the shopping centre was the rear car park, I consider that claimed representation is simply not sustainable as it was the choice of the customers of the defendant as to from where access to the defendant's shop would be obtained. I consider that the asserted opening hours of the car park between 8.00am and 10.00pm is also not sustainable as an available means of access by customers to the defendant's business. I take this view because of the relatively small size of that car park compared to the number of shops and units within the premises. There is no evidence that the defendant was to be given special consideration for his customers concerning the use of the car park. 73As to representation (e), I find that there was no relevant prohibition on the defendant using the car park for the purpose of loading and unloading goods for his business if the limited space within the car park was not being used for any other purpose at the time the defendant wanted it for loading or unloading. The defendant had a key to enable him to use the car park for loading and unloading. Whilst I accept that access to the car park by means of a key to unlock the chain was inconvenient, I consider that no relevant misrepresentation arose. 74As to representation (f) on the basis of the evidence of the floor plan measurement and analysis by Mr Lee, which I accept, it necessarily follows that I accept the defendant's submission that the portion of the premises which he had leased from the plaintiff did not occupy 10 per cent of the area of the centre but in fact occupied just 4.19 per cent of the lettable area. In this regard I accept that the defendant's liability for outgoings should be limited to only 4.19 per cent of the outgoings and not the 10 per cent that has been claimed. 75However, despite having reached that conclusion, I am not satisfied that for the purposes of assessing his likely overheads when making plans to set up his business at the premises, the defendant in fact relied upon a representation that the area of the shop that he was leasing, occupied 10 per cent of the lettable area. 76To the extent that there was a misrepresentation as to the actual area involved, I do not regard that to have been material to the defendant's considerations, nor misleading or likely to mislead. This is because I consider that the defendant would have entered into the lease of the shop in any event, and the latter ascertained misdescription of the area at 10 per cent instead of 4.19 per cent, was an opportunistic discovery that was not relied upon by the defendant in deciding to take the lease of the premises. In any event, I consider the misrepresentation, if that is how it must be characterised, was an innocent one, and most probably arose due to a difference in views as to how the area was to be measured and compared within the entire premises, having regard to the floor space occupied by fit-outs and the like, and was probably a rounded off figure. As such, I consider that the defendant did not rely upon that representation of area as being 10 per cent. 77Nevertheless, the interests of justice between the parties requires that the defendant is entitled to an adjustment for the percentage variation I have accepted on this issue, namely an adjustment of outgoings from 10 per cent down to 4.19 per cent. 78I otherwise accept that the generic outgoings claimed by the plaintiff were reasonably referable to the overall running of the centre and comprised justifiable expenses which the plaintiff could reasonably pass on to tenants. The plaintiff was entitled to spread this as a commercial cost incurred in respect of the operation of the entire centre and divide it between its tenants. 79To reflect my findings on this point I have already accommodated this percentage variation in my finding of a reduction in the amount of outgoings for which the defendant is liable to the plaintiff: paragraph [42] of these reasons. 80I now turn to assess the quantum of the defendant's entitlement to damages against the plaintiff on the cross claim.

Issue 5 - Quantification of alleged losses on cross claim 81As I have found that there was a relevant representation that was capable of misleading or deceiving the defendant at the time the lease was negotiated between the parties, and that representation was relied upon by the defendant in committing himself to the lease, the issue of quantification of the defendant's cross claim against the plaintiff arises to be addressed. 82In my view, it is difficult to discern the extent to which Mr Gofur may have suffered damage. The extent of any loss is not readily assessable on the evidence adduced in the proceedings. 83As to the defendant's claim for loss of profits, despite the able efforts of his counsel, I consider the absence of satisfactory business or accounting records in relation to Mr Gofur's business represents a substantial obstacle to any rational attempt to assess damages in favour of Mr Gofur on his cross claim. 84There were aspects of Mr Gofur's evidence that caused me to doubt the factual foundations of his claim. I find that in the absence of cogent business records, I cannot rely upon the evidence of Mr Gofur's estimate of the profitability of his business to make out his entitlement to a damages assessment on the cross claim for the amount he has claimed. The matters that raised such doubts are outlined in the paragraphs that follow. 85First, I do not accept that Mr Gofur lost his business records when he was locked out of the leased premises. In my view, as an astute businessman, it was unlikely that he would have left his business records in the premises and out of his reach and control without attempting to retrieve them. Further he vacillated as to whether his records were a notebook, a diary, lever arch folders, or accounts. I considered he was evasive with such evidence. 86Secondly, Mr Gofur varied his evidence in which he listed his stock levels and I therefore consider this to be an unreliable basis upon which to make an assessment of damages. 87The third matter that caused me to doubt the accuracy of Mr Gofur's evidence on the profit potential of his business was the matter of an apparent and unexplained incongruity that during the period when his business at the premises was closed, Mr Gofur was still purchasing stock during the non-trading period. In this time he was trying to sell the business. That evidence is somewhat confounding, as it is difficult to understand why a business that was closed, and therefore not operating, and was at the same time for sale, would still be purchasing stock when it had no customers. 88For completeness, I should deal with a claimed credibility issue. The parties placed differing constructions on the fact that Mr Gofur was not prepared to answer questions concerning the accuracy of his financial records. The plaintiff submitted this was a discrediting factor. I do not accept that submission. Mr Gofur was fully entitled to take the position of refusing to answer questions that might tend to incriminate him. That position was identified to him during evidence and he exercised his right to adopt that position. No adverse credit conclusion should be drawn from those circumstances and I do not do so. 89In my view, the factors I have identified make the task of attempting an assessment of damages somewhat speculative and difficult. These considerations have persuaded me that I should not undertake the task of attempting to assess damages on a detailed mathematical approach for estimating likely foregone profits. This is because the foundation detail for such an approach is absent, and the result of such an approach would be necessarily flawed and unreliable. 90Instead, I propose to make a global award of damages that reflects an entitlement of the plaintiff to damages for his reliance on the representation that I have accepted, and that by its nature, had misled him. However, that award must be constrained within the bounds of reasonableness to reflect the fact that the evidence does not disclose a sound basis for projecting a large claim for loss of profits over the term of the lease as has been claimed. Another relevant factor is the many uncertainties as to the success or otherwise of the business in question. 91Those uncertainties would in part be dependent of the business acumen of the defendant. On that topic, a question over the defendant's business acumen has been identified, namely his regime of purchasing stock in a period he was not trading, which on one view, seems an unwise course. That seems to me to be a discounting factor on any assessment of loss of business profits. On the other hand, for reasons I will outline, the defendant did appear to have some business success spanning many years in the taxi industry. 92In considering any damages assessment, it is clear that Mr Gofur had the obligation of taking reasonable steps to mitigate his claimed losses. 93The plaintiff argued that Mr Gofur had failed to mitigate his losses. In that regard, I consider that Mr Gofur has failed to take reasonable mitigatory steps to counter the effects of such claimed losses. In that regard, he stored his perishable goods in a way that meant they were unlikely to be saleable. He allowed his stock and some of his business equipment to be soiled and affected by mouse droppings as is evident in the Tender Bundle photographs between p 490 - p 492. I therefore find that it has been shown that he failed to take reasonable steps to mitigate his loss. I consider that instead, he took an early and pragmatic view of the failure of this particular business and largely turned his back on it, choosing to rely on his other economic endeavours, which included operating his taxi business, which he had operated over some 13 years, involving some 7 taxis and employing around 24 - 25 people, including casual drivers. 94Given that the evidence does not permit anything other than a global award, I consider that the appropriate approach is to award the defendant / cross claimant the global sum of $50,000 on the cross claim. Whilst not separately identified, that sum incorporates a modest discount of the order of 30 per cent on account of a failure to mitigate and pre-judgment interest, the total being rounded off at $50,000.

Disposition 95The plaintiff has made out its entitlement to a verdict on the amount of $82,640.33. The defendant has made out his cross claim to the extent of a damages award of $50,000. After applying a set-off in respect of these two assessments, the result must be a judgment for the plaintiff in the sum of $32,640.33.

Costs 96As the plaintiff has succeeded in its claim against the defendant and the defendant has partly succeeded on the cross claim, this raises a number of potential cost consequences. I will hear the parties before making any orders as to costs.

Orders 97I make the following orders: (1)Verdict for the plaintiff in its claim against the defendant in the amount of $82,640.33; (2)Verdict for the cross claimant / defendant on the cross claim against the plaintiff in the sum of $50,000; (3)After set-off of the respective verdicts on the plaintiff's claim and the defendant's cross claim against the plaintiff, judgment for the plaintiff against the defendant in the amount of $32,640.33; (4)I will hear the parties as to the appropriate order for costs; (5)The exhibits may be returned; (6)Liberty to apply on 7 days notice if further orders are required.

Schedule of unpaid rent and GST (1) 17 February 2007 to 16 March 2007 $649.52 (2) 17 March 2007 to 16 April 2007 $2,086.37 (3) 17 April 2007 to 16 May 2007 $2,086.37 (4) 17 May 2007 to 16 June 2007 $2,086.37 (5) 17 June 2007 to 16 July 2007 $2,086.37 (6) 17 July 2007 to 16 August 2007 $2,086.37 (7) 17 August 2007 to 16 September 2007 $2,086.37 (8) 17 September 2007 to 16 October 2007 $2,086.37 (9) 17 October 2007 to 16 November 2007 $2,086.37 (10) 17 November 2007 to 16 December 2007 $2,086.37 (11) 17 December 2007 to 16 January 2008 $2,086.37 (12) 17 January 2008 to 16 February 2008 $2,086.37 (13) 17 February 2008 to 16 March 2008 $2,086.37 (14) 17 March 2008 to 16 April 2008 $2,086.37 (15) 17 April 2008 to 16 May 2008 $2,086.37 (16) 17 May2008 to 16 June 2008 $2,086.37 (17) 17 June 2008 to 16 July 2008 $2,086.37 (18) 17 July 2008 to 16 August 2008 $2,086.37 (19) 17 August 2008 to 16 September 2008 $2,086.37 (20) 17 September 2008 to 16 October 2008 $2,086.37 (21) 17 October 2008 to 16 November 2008 $2,086.37 (22) 17 November 2008 to 16 December 2008 $2,086.37 (23) 17 December 2008 to 16 January 2009 $2,086.37 (24) 17 January 2009 to 16 February 2009 $2,086.37 (25) 17 February 2009 to 16 March 2009 $2,086.37 (26) 17 March 2009 to 16 April 2009 $2,086.37 Subtotal $52,808.77 Plus GST (10%) $5,280.87 Rent total $58,089.64

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 August 2011

At a glance

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Before

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Judgment (15 paragraphs)

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