Cosmopolitan Hotel (Vic) Pty Ltd & Anor v Crown Melbourne Ltd & Ors - [2012] VCAT 225 - VCAT 2012 case summary — Zoe

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Cosmopolitan Hotel (Vic) Pty Ltd & Anor v Crown Melbourne Ltd & Ors

[2012] VCAT 225

Victorian Civil and Administrative Tribunal|2012-02-24

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Victorian Civil and Administrative Tribunal

Decision date

2012-02-24

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Judgment (183 paragraphs)

[1]

This matter of the late addition to the diary entry is why I said earlier that Mr Robertson had displayed excessive partiality towards Mr Zampelis and that I had reservations about accepting his evidence.
I have no difficulty in finding, as I do, that Mr Boesley did make a threat to Mr Zampelis on 3 March 2006 that he would not be allowed to re-open the restaurants and trade unless the tenants signed and returned unaltered leases. In his internal email the previous day (see paragraph 33 above) he had expressed his determination to say that to Mr Zampelis. I also find that Mr Boesley's making of that statement prompted Mr Zampelis to hand over the leases. I am not satisfied that Mr Boesley said on that occasion that "all the leases are being aligned" although I have found that on a previous occasion, on 6 December 2005, Mr Boesley had said words to that effect. I think it likely that Mr Robertson has confused the two occasions in that regard.

[2]

I now revert to chronological order and deal in that order with other alleged statements about which Mr Zampelis gave evidence.
Mr Boesley: May 2005. On 11 May 2005 Mr Boesley had sent to Mr Zampelis documents that had included comprehensive summaries of the terms and conditions of proposed new leases. In his witness statement Mr Zampelis swore that he was "shocked" at the information that the leases would be for five years only. In paragraph 16 of his witness statement he then deposed as follows:

[11]

Mr Boesley denied having had any telephone conversation with Mr Zampelis shortly after having sent the documents to him and denied having ever said to Mr Zampelis any of the things that had been attributed to him. His evidence was that he had telephoned Mr Zampelis shortly before sending the documents, to let him know what was coming and what the terms were on which Crown was going to offer leases, and that Mr Zampelis did not say on that occasion that he was shocked only to be receiving a five-year term.
The significance of the alleged conversation is limited. The applicants did not allege in their Further Amended Points of Claim, and could not realistically have alleged, that they relied upon anything that Mr Boesley said during that conversation and were induced by it to enter into leases. For Mr Zampelis proceeded to seek out members of the Williams family for assurances about renewals of the lessee after the first five years. By doing so he demonstrated then he was not content with any statement by Mr Boesley in May 2005 but needed confirmation of it.
I am not satisfied that the conversation occurred in the manner that Mr Zampelis described. I think it is likely that he and Mr Boesley did have a conversation at some time before August 2005 about the terms and conditions that Crown had proposed but that with the passage of time Mr Zampelis has embellished it. I think it likely that Mr Zampelis did sound out Mr Boesley on the prospect of obtaining leases for more than five years. Crown's officers had expected him to do so[40] and it would have been surprising if he did not live up to their expectation. I think it is likely that Mr Boesley said something about other tenants having five year terms and Crown's desire to align tenants' leases, as part of consolatory words telling Mr Zampelis that the tenancies would not necessarily end after five years. The fact that, as I have found, he made a later statement about the desire to align leases influences my view that it is likely that he said the same thing earlier, and that the point of saying it was to console Mr Zampelis that five years would not necessarily be the end. I am not satisfied, however that on any such occasion Mr Boesley gave any assurance there would be a ten-year term.
Mr Boesley: September 2005. In paragraph 17 of his witness statement Mr Zampelis gave evidence of several conversations in September 2005, both by telephone and in person, with Mr Boesley after formal offers to lease and disclosure statements had been forwarded. His evidence was that asked Mr Boesley for an assurance that he was going to get the whole ten years, to which Mr Boesley replied, "you'll get your lease" and "you're here for the long haul". Mr Boesley denied making these statements and denied that Mr Zampelis expressly asked for ten-year leases. Again, I think that the evidence is probably embellishment of some vaguely encouraging words from Mr Boesley about the strength of the parties' relationship and Crown's willingness to see the restaurants prosper beyond the end of the five year term.
Whatever Mr Boesley said between May and September 2005, it was enough to encourage Mr Zampelis to seek out members of the Williams family in the hope that they would give him the assurances he sought about leases being renewed after five years, but it was not enough to convince him that he could sign and return the leases with confidence that the leases would be renewed, for he did not return them.
John Williams. According to Mr Zampelis, he had two meetings with John Williams at "Café Greco" in September 2005 and during the second of those meetings Mr Williams had assured him that there would be an extra five-year term after the first five years of the lease had expired. On both occasions, he said, he and Mr Williams sat in a rear corner booth at "Café Greco" and he had asked Vicki Popovic, his operations manager, to sit behind them so that she could hear their conversation. Ms Popovic gave evidence of having overheard one conversation between Mr Zampelis and Mr Williams, probably the second of those about which Mr Zampelis gave evidence.
On the first occasion, according to Mr Zampelis, he had told Mr Williams that he was unhappy about the proposed five-year term in the new leases, and that if Crown did not promise to renew the leases for an extra five-year term he would not spend the money on refurbishment that a lease would require him to spend but would refurbish at smaller expense. Mr Williams, he said, asked if he could come back to him on the question; hence the second meeting occurred.
Mr Zampelis' account of the second meeting was set out in paragraph 20 of his witness statement.

[16]

When during cross-examination Mr Hopkins asked Ms Popovic to recount the conversation she said she had overheard, she said that Mr Williams had said that "it is okay, everything will be okay, I can handle it from Sydney" but did not recount anything else; she said that the conversation had given her "an impression that everything was going to be fine."
Mr Williams' evidence was that he did not make any of the statements attributed to him. He also said that leasing was not his area of responsibility at Crown at the time and that if Mr Zampelis had raised any issues with him about a lease he would have referred him to Mr Rafaniello.
On the basis of Ms Popovic's evidence I find that Mr Zampelis and Mr Williams did meet and talk at "Café Greco" on one occasion during which Mr Williams made references to having approved something and to having spoken to Sydney. I think it likely that the subject matter of the conversation included leases; as the old leases to the previous occupiers had expired and new leases had been sent to the applicants for execution, it would have been odd if the conversation was otherwise.
Ms Popovic's evidence did not, to my mind, support a case that Mr Williams at that meeting made any promise or gave any assurance that there would be a ten-year lease or a renewal of the five-year lease after it had expired. At the time there was a question in Ms Popovic's mind as to whether there were going to be leases at all. The staff's jobs would be less secure under monthly tenancies than under leases. I think that she was probably listening for reassurance that there were going to be leases, not monthly tenancies, and that what she heard reassured her of that.
I am not satisfied that John Williams made any distinct promise or gave any distinct assurance to Mr Zampelis that if his companies entered into leases for five years they would be renewed for a further term. On the other hand, I consider that whatever Mr Williams said during one or more meetings with Mr Zampelis at "Café Greco" left Mr Zampelis with the belief that if such a promise or such an assurance was given by others it would have the approval of persons higher in the Crown hierarchy.
Lloyd Williams. Mr Zampelis gave evidence of a chance meeting with Lloyd Williams on the promenade of the Crown complex in October or November 2005. He said that he told Mr Williams that he was concerned about the leases having only a five-year term and that Mr Williams said words to this effect: "don't worry, it has been fixed and that should have been conveyed to you" and "you've always done the right thing by us and will be looked after." Mr Williams did not concede that he met Mr Zampelis on the promenade and thought it unlikely that he would have been there at the time. He denied making the statements attributed to him.
The meeting probably did occur. Mr Zampelis is more likely than Mr Williams to remember such a chance meeting. I am not satisfied that it has the significance that Mr Zampelis gave it. While I think it likely that Mr Williams spoke some words that encouraged Mr Zampelis to think that Crown would continue to regard him and his restaurants favourably, I am not satisfied that the words implied any admission that Crown had agreed to renew the leases after the five-year term had expired.
Nick Williams. According to Mr Zampelis, he and Nick Williams had been friends. He had attended Mr Williams' wedding and Mr Williams had attended the christening of his (Mr Zampelis') children. (Mr Williams agreed that that had been so.)[41] Mr Zampelis said that Mr Williams had been instrumental in persuading him to open restaurants at the Crown complex in 1997 and that they had kept up a friendship since then, attending social functions and having drinks together. Mr Williams, however, gave evidence that he and Mr Zampelis were nothing more than business acquaintances.
According to Mr Zampelis, it was Nick Williams who encouraged him to speak to John Williams in 2005 about the leases once he (Mr Zampelis) had told Nick Williams that he was concerned about there being only a five-year term. Nick Williams' evidence was that he doubted that he did have any conversations with Mr Zampelis in 2005 about a lease term, but if he did have one he would have referred Mr Zampelis to John Williams, who held a position at Crown, whereas he (Nick Williams) did not.
Mr Zampelis gave evidence that on an occasion after his meeting with John Williams but before November 2005 Nick Williams telephoned him and said "Are you happy now, you've got it right from the top." It was not clear from Mr Zampelis' evidence whether that occasion was before or after he had spoken to Lloyd Williams. Nick Williams denied having made the statement.
Nick Williams' evidence was puzzling. I was left with the impression that he had had a closer and more friendly relationship with Mr Zampelis than he had been prepared to admit, and I was puzzled as to why he did not admit it. So I think it likely that from time to time he encouraged Mr Zampelis to take up with Crown's officers the matter of an eventual renewal of the five-year leases. I find that he encouraged Mr Zampelis to speak to John Williams about it. On the other hand, I am not satisfied that he had made any admission that Crown had approved the eventual renewal, let alone any promise that Crown would approve it. At all events, not being an officer of Crown, he was in no position to make such an admission or give such a promise.
Talis Sterns. Talis Sterns was the general manager (construction and development) of Crown at all material times. He oversaw the design and construction process within Crown for Mr Zampelis' refurbishments. At paragraph 23 of his witness statement Mr Zampelis stated that at a design meeting at Crown in October 2005 Mr Sterns said to him: "You have heard it from David Boesley about your lease term and he has assured you, what's the problem now?"
Mr Sterns denied having made any such statement. He swore that he had known nothing about any lease term for Mr Zampelis or any assurances from Mr Boesley, who had never discussed any lease term for Mr Zampelis with him.
Mr Pearce cross-examined Mr Sterns about a sentence in an email that Mr Sterns had sent to Ms Marmaras on 26 October 2005,[42] paragraph 9 of which had read:

[25]

What appears in the following five paragraphs is drawn from two sources: the entry in Halsbury's Laws of Australia on the law relating to collateral contracts,[43] and passages set out in the applicants' written submissions from a Federal Court authority, SVI Systems Pty Ltd v Vest & Less Pty Ltd.[44] The sources are remarkably similar in expression.
A collateral contract is a contract the consideration for which is the making of some other contract (the main contract). The entry into the main contract, if occurring after the making of the collateral contract, is the consideration for the making of the collateral contract which makes the collateral contract enforceable.
If the alleged foundation for a collateral contract is a statement of fact as distinct from a promise, there are three elements that have to be established before the collateral contract itself can be established. First, there must be an intention by the maker of the statement that it should be relied upon. Secondly, there must be reliance upon the statement by the person alleging the existence of the collateral contract. Thirdly, there must be an intention, on the part of the maker of the statement, to guarantee its truth.
If the alleged foundation for a collateral contract is a promise rather than a statement of fact, the requisite intention of the promisor will be obvious if in truth there has been a promise, but the promisee must still establish reliance upon the promise.
"The reluctance of courts to hold that collateral warranties or promises are given or made in consideration for the making of a contract is traditional.... [A] chief reason for this is that too often the collateral warranty put forward is one that you would expect to find its place naturally in the principal contract."[45]
To take effect, a collateral contract must be consistent with the main contract. It must be the case that, notwithstanding the collateral contract, the parties have and are subject to all of the respective benefits and burdens of the main contract. Otherwise the collateral contract would become the dominant contract.
To have legal effect, the collateral contract must, like all contracts, be sufficiently certain. If the law requires a contract of the kind contended for to be in writing, it must be in writing.
Of the various propositions of law referred to above, the one that is the most controversial and that creates the greatest difficulty in most cases, including the present, is the requirement of consistency with the main contract. The requirement is sometimes called the rule in Hoyt's Pty Ltd v Spencer,[46] a case in which the High Court held that a landlord's promise to a tenant not to enforce a provision in a lease unless a specified event happened did not give rise to an enforceable collateral contract because it was inconsistent with an unqualified right in the landlord under the lease to enforce that provision. The rule does not sit well with modern developments in the law relating to promissory estoppel. Under principles of equity relating to promissory estoppel, a party to a contract may be estopped from departing from a representation or promise that the party's strict contractual rights will not be enforced when the other party has so acted upon the representation or promise that it would suffer detriment if there were a departure.[47] Even before those modern developments had become evident, the rule had been criticised.[48] But Hoyt's Pty Ltd v Spencer has never been overturned, and the High Court continues to articulate the requirement of consistency with the main contract before there can be an enforceable collateral contract.[49]
Most of the cases about collateral contracts cited in the parties' respective written submissions can be readily distinguished from the present case. They were cases in which the collateral contract was flatly contradictory to the main contract,[50] or where the so-called promise was merely a statement of intention[51] or the expression of an estimate or of an opinion.[52]
A case which is not so readily distinguishable, however, is Maybury v Atlantic Union Oil Co. Ltd.[53] The appellant, a radio program producer, had entered into a contract with the respondent to prepare, supply and broadcast over radio stations various advertisements advertising the respondent's products. The contract had provided: "The date, hour or time for each broadcast shall be as determined by the company [the respondent]". The appellant alleged a collateral contract whereby the company agreed that it would not require the appellant to appoint a broadcast for any time that would mean that it competed with a broadcast conducted on another radio station by Bob Dyer. The High Court, citing Hoyt's Pty Ltd v Spencer, held that "the oral collateral agreement conflicts with the main agreement and cannot stand with it".[54] The reason seems to have been that the main contract invested the company with an absolute discretion as to the time of a broadcast, but the collateral contract purported to fetter or limit that discretion.
Apart from attacking the factual foundation for the claim, Crown raised various defences to the claim that there was an enforceable collateral contract including Crown's promise to renew the five-year leases for a further term. They were these:

[30]

I think it is clear that the crucial statement that I have found that Crown, through Mr Boesley, made was promissory in character. In part, the statement was that Mr Zampelis would be looked after when the time came for Crown to consider renewing the leases. It was not a statement of present fact, or of present intention, or of opinion. It was a statement about what Crown would do in future. It was a promise.
Much more difficult is the question of whether what Mr Boesley said was sufficiently clear and coherent to create legal obligations and to be capable of contractual force. For I have not found that he expressly stated that Crown would renew the leases, or would give notice to the applicants that Crown would renew the leases. I have found only that he said that Mr Zampelis would be looked after at renewal time.
Although the phrase "looked after", considered in isolation, is vague, it should not be considered in isolation. Its context is the whole of the crucial statement and the leases about which it was made. What matters is how the phrase would be discerned objectively, in that context, by a reasonable person in the position of the party to whom the phrase was spoken, in the surrounding circumstances known to the parties.[55] The leases to which the applicants were being asked to bind themselves specified a fixed term of five years. Mr Boesley had explained the term by saying that Crown wished to align the leases with other tenants' leases. The leases contained the "major refurbishment" clause that created a very significant obligation for the applicants if they committed themselves to the leases. The leases also contained clause 2.3, under which Crown was obliged to give a notice at the appropriate time stating whether it would renew or whether it would do something else. In my opinion, a reasonable person with knowledge of those facts and circumstances would conclude that a promise that Mr Zampelis would be looked after at renewal time meant a promise that Crown would give a notice, when the time came, that it would renew each lease. Accordingly, I consider that the crucial statement was sufficiently clear and coherent to be capable of giving rise to a legal obligation upon Crown.
Crown submitted nevertheless that the alleged collateral contract was too uncertain to be enforced because it was not possible to express with certainty what were the terms of the renewed lease that Crown was said to have promised to provide. What was to be the duration of the lease? What rent was the tenant to be required to pay? Did the lease contain a major refurbishment clause? What were the other obligations of the parties to be? The evidence, it was submitted, did not provide answers to those questions.
The applicants submitted that the collateral contract was one whereby Crown promised to renew each lease on the same terms and conditions as applied to the existing lease. In his final address Mr Pearce moved somewhat from that position by submitting that the promise was to renew the lease on the same terms and conditions, mutatis mutandis. He did so to meet the objection that a contract to renew on the basis that the tenant was to pay the same rent as under the existing lease did not make commercial sense.
In my opinion, neither submission put the matter correctly, because neither had sufficient regard to the wording of clauses 2.3 and 3.1 of the lease that each applicant was being asked to enter into. I set them out again:

[36]

For present purposes the noteworthy thing about those clauses is the freedom that Crown had to dictate the terms and conditions of the renewed lease. It was out of the tenant's power to agree to anything other than the terms and conditions that Crown specified in its notice stating that it would renew the lease. Crown would even have the right to stipulate terms and conditions which, intentionally or unintentionally, were so onerous that the tenant would be compelled not to accept them. No doubt that is an unrealistic scenario, because the stipulation of unreasonably onerous terms in notices of renewal would jeopardise Crown's tenancies generally. One would expect a notice of renewal to stipulate terms and conditions that had reasonable correspondence with terms and conditions that had appeared in the lease that Crown was proposing to renew. The point, however, is that the way in which terms and conditions of a renewed lease could be ascertained with certainty was by Crown stipulating in its notice given under clause 2.3 what they were to be. There is only one qualification to the freedom that Crown would have in stipulating them. A notice that it would "renew" a lease, as clause 2.3 empowered it to give, implied as a matter of law that the renewed lease would be for the same term (five years) as the lease being renewed.[56]
For those reasons I consider that it is wrong to say that the absence from the evidence of any agreement about terms and conditions of a renewed lease meant that a collateral contract that Crown would give a notice for renewal of the lease was too uncertain to be enforced. There would be "agreement" about those terms and conditions once Crown dictated in its notice what they were to be and once the tenant accepted them, if it did.
For the same reasons I consider that it is also wrong to say that the collateral contract was for a renewal of the lease on the same terms and conditions as in the lease, or on the same terms and conditions mutatis mutandis. A reasonable person having knowledge of the terms of the lease and having listened to the crucial statement would have no reasonable basis for putting that gloss on it. That reasonable person would have concluded that the promise (to give a notice under clause 2.3 that Crown would renew the lease) carried with it the consequence that the terms and conditions of the renewed lease would be those specified in the notice, whatever they were.
So I have concluded that a collateral contract obliging Crown to give a notice under clause 2.3 that it would renew each lease was sufficiently certain to be enforceable.

[37]

Maybury v Atlantic Union Oil Co Ltd[57] decided that when a main contract conferred upon a party an absolute discretion, but an alleged collateral contract had that party agreeing to limit its discretion, the collateral contract was inconsistent with the main contract and could not be enforced. In the present cases, the main contract (the lease) by clause 2.3 required Crown to give a notice stating one of three things, but the collateral contract for which the applicants have contended required Crown in its notice to state one of those things, not either of the other two. The question arises whether the collateral contract was an attempt to limit a right to elect between three courses of action, and whether that attempt, like an attempt to limit a discretion, created an inconsistency with the main contract.
I have concluded that the answer to the question is no, and that that answer comes from attention to what clause 2.3 actually provided. I set it out once more:
- 2.3 At least 6 months, but no more than 12 months before the Expiry Date, the Landlord must give notice to the Tenant stating whether:
  - (a) the Landlord will renew this Lease, and on what terms (this may include a requirement to refurbish the Premises or to move to different premises - see clauses 44 and 54);
  - (b) the Landlord will allow the Tenant to occupy the Premises on a monthly tenancy after the Expiry Date; or
  - (c) the Landlord will require the Tenant to vacate the Premises by the Expiry Date.
The clause imposed an obligation upon Crown to give a notice to the tenant stating what Crown would do once the five-year term had expired, and to give that notice within a specified time range. While the clause identified three possible things that Crown could state in its notice that it would do, they were the very three possible things that Crown could do, as a landlord, at the expiration of the lease. For the lease contained no covenant by the landlord to renew and no option for the tenant to renew.
The clause did not confer upon Crown a right to elect between three choices. Crown had that right in any event. The clause did not confer upon Crown a right to elect between three different notices. While clause 3.1 referred to a notice "under clause 2.3(a)", in truth any notice given in performance of the obligation imposed by clause 2.3 would be a notice given under clause 2.3, not under clause 2.3(a) or under clause 2.3(b) or under clause 2.3(c). The sub-paragraphs (a), (b) and (c) merely identified the three possible things that Crown could do, one of which Crown had to specify in the notice that it would do.
The collateral contract for which the applicants have contended did not have the effect of removing from Crown a right of election or of fettering a discretion of Crown as to the giving of a notice. The lease did not create a right of election - Crown had that right, independently of the lease - and did not confer a discretion. The lease imposed an obligation: to give a notice within the required time range. So a collateral contract whereby Crown promised to give that notice with a specification of one only of the three possible things that it could do at the expiration of the lease in any event - i.e. a specification that it would renew the lease - did not impinge upon any right created by the lease, or contradict any part of the lease.
I have concluded, therefore, that a collateral contract obliging Crown to give a notice under clause 2.3 that it would renew each lease was not inconsistent with the leases.

[41]

Two parts of that evidence were wrong. Other evidence, of Mr Robertson and of emails from Mr Boesley, established that Mr Boesley gave his ultimatum on 3 March 2006, 15 days (not "a few weeks") before the refurbishment of the restaurants was complete and the applicants resumed trading.[58] Mr Zampelis did not sign the leases "a few weeks" before that. He had signed by 3 November 2005. Ms Marmaras had said so in an email.[59] The valuers had had copies of the signed leases before giving their valuations dated 17 January 2006. But Mr Zampelis had not told Crown that he had signed the leases. He did not hand over to Crown the signed leases until 7 March 2006, four days after Mr Boesley had given his ultimatum. The references in paragraph 30 of his witness statement to signing of the leases ought to have been to the handing over of signed leases.
There are two possible interpretations of the evidence set out in paragraph 149 above. The first is this. Mr Zampelis had received assurances about a further five year term but had never been satisfied with them. He would only be satisfied with written confirmation. He decided he would not hand over signed leases until written confirmation came. It never did. Instead, he got an ultimatum that his restaurants would not be allowed to open unless he handed over signed leases. He handed over these leases, not because of the assurances he had received, but because of the ultimatum. On that view of the evidence, there was no reliance upon any promise given orally on Crown's behalf.
The other possible interpretation of the evidence is that he had sought and received assurances about a further five year term, had decided to commit Cosmopolitan and Fish & Co to the leases on the strength of those assurances, but delayed handing over signed leases for as long as he could, hoping to the end that he could get written confirmation of the further five year term. Once he got the ultimatum he realised he could not delay any longer. While the ultimatum was the reason for him handling over signed leases as late as he did, the assurances were the reason for his having handed them over at all. On that view of the evidence, it is evidence of reliance.
When regard is had to the evidence in the proceedings as a whole, I think that the second interpretation is the proper one. It is consistent with Mr Boesley's description, in his evidence, of Mr Zampelis as a master of delaying tactics.[60] It is consistent too with Mr Zampelis having commenced the refurbishment works in January 2006, after Mr Boesley's crucial statement in December 2005 that Mr Zampalis would be looked after at renewal time, Mr Zampelis then believing that members of the Williams family had said much the same thing so that Mr Boesley's promise was authoritative.
Nevertheless, Crown put forward several reasons in submissions why I should find that there had been no reliance.
The first was this. Because the tenor of Mr Zampelis evidence was that all of the statements that he alleged had been made to him about a further term had a cumulative force, once I failed to be satisfied that any one or more of those statements had been made the applicants' cases must fail. I do not think that that submission is correct as a matter of logic, let alone as a matter of law. A finding of reliance upon the crucial statement would be sufficient to satisfy the requirement of reliance in order to establish the collateral contract contended for, even though Mr Zampelis's evidence was that he had relied upon other statements as well.
The second was that the applicants had committed themselves contractually to five-year leases by taking possession on 1 September 2005 of the area formerly occupied by "La Perla", by paying rent after 1 September 2005 in the amounts that the leases required, and in beginning the refurbishment. If I understood it correctly, the submission was that there was an agreement for leases for a five year term that could have been enforced against the applicants, despite the absence of executed deeds of lease, because the applicants had partly performed the agreement. There are two answers to that submission. One is that any act of part performance making an agreement for a lease enforceable in the absence of writing must be an act of part performance by the person seeking to enforce the agreement[61] (i.e. Crown, for the purposes of the submission). Acts of part performance by the other party are irrelevant. The other is that Crown's own conduct was inconsistent with any claim that it had an enforceable agreement for leases. It was demanding the return of signed leases. It had threatened not to allow the applicants to re-open the restaurants until signed leases were returned. It could not have not made plainer its stance that it would not recognise the applicants as tenants under a fixed-term tenancy until signed leases were returned to it.
The third submission drew attention to the evidence that Mr Zampelis had signed the leases at an earlier date than the date of the promises in December 2005 on which he said he relied. The submission was that therefore the applicants did not sign the leases on the faith of any promise about renewal. There was no clear explanation in the evidence of why Mr Zampelis had signed the leases, as I have found he did, by 3 November 2005. But from the evidence of his having then sent the leases to National Bank Australia Bank I infer that he signed them in order to support his application for bank finance. The effect of his evidence was that he did not decide to commit the applicants to entry into the leases until he had got assurances (so he thought) from the Williams family about renewals and had then heard Mr Boesley's crucial statement. Only after those things had occurred did he hand over the signed leases to Crown.
The fourth and most difficult submission related to a question that I have begged so far: when and how did the applicants enter into the leases? When they handed them over to Crown on 7 March 2006? Or when Mr Zampelis signed them, on a date before 3 November 2005? Or on some date in between? Mr Hopkins submitted that the applicants entered into the leases, and became bound by them, as soon as Mr Zampelis signed them, thereby executing and delivering them for the applicants.
That submission leads one into the recondite law relating to the execution and delivery of deeds. So far, in these reasons, I have refrained from using the word "delivery" and have used instead the phrase "handing over". That is because "delivery" has a particular meaning in the law relating to deeds. Lord Denning MR explained it in Vincent v Premo Enterprises (Voucher Sales) Ltd:[62]

[48]

Section 127(1)(c) of the Corporations Act 2001 (Commonwealth) provides that a proprietary company may execute a document without using a common seal if the document is signed by a person who is the sole director and sole company secretary. Section 127(3) provides that a company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with sub-section (1). There was no evidence that Mr Zampelis was the sole director and sole company secretary of Cosmopolitan and of Fish & Co, but by signing the two leases and ultimately handing them over to Crown he held himself out as being so, and I infer that he was. So each lease was properly executed as a deed.
The leases were "delivered" to Crown at the time when the applicants, by their acts or words, demonstrated that they intended to be bound by them.[65]
There have been English cases[66] which have held that a party to a deed of lease had effected delivery, and so was bound by the deed, even though there had been no exchange of parts of the lease and even though no lease executed by that party had come into the possession of the other party. In those cases the executing party had put the executed lease into the possession of its solicitor only. The decisions in those cases depended, at least in part, on the deed having been executed by having a company's common seal affixed to it and attested so that the English equivalent of section 74(1) of the Property Law Act 1958 (Victoria) had effect. Neither Cosmopolitan nor Fish & Co executed its lease by having its common seal affixed and attested. Moreover, Australian authority[67] holds that execution of a deed by a corporation does not involve delivery if the requisite intention of the corporation to be bound is absent.
The only evidence that might have pointed towards an intention to be bound earlier than the date of the handing over of the leases to Crown is the evidence of the applicants having sent the leases to National Australia Bank soon after Mr Zampelis had signed them. They did that for the purpose of supporting an application for finance. In my view the act of sending them for that purpose does not demonstrate that the applicants intended to be bound by them. The act is consistent with an intention merely to inform the bank of the liabilities that the applicants were going to incur once the leases were entered into. I add that it is not clear from the evidence whether what the applicants sent to the bank were the original executed instruments or merely copies of them. If the applicants had sent copies to the bank but had retained the originals, any argument that the applicants had thereby evinced an intention to be bound would be so much the weaker.
In my opinion the proper conclusion from the evidence is that the applicants evinced an intention to be bound by the leases when, but only when, the executed leases were handed over to Crown on 7 March 2006. Delivery occurred on that date. There is no room for the operation of the rebuttable presumption because more evidence is available about the applicants' relevant acts than simply evidence of the circumstances of execution of the leases.
I find that the applicants entered the leases, by delivering them to Crown on 7 March 2006, in reliance upon the collateral promise that I have found that Crown made.

[52]

Mr Hopkins submitted that by virtue of that section the applicants could not succeed in these proceedings because the alleged collateral contract was not in writing signed by anybody on behalf of Crown.
I reject that submission. The collateral contract contended for was not a contract for the disposition of an interest in land. It was a contract under which Crown was obliged to send a notice specifying that it would renew a lease. Under clause 3.1 of the lease the tenant would then have the right to give a notice to Crown agreeing to renew the lease and accepting Crown's terms of lease as identified in Crown's notice. Only once the tenant gave its notice would any contract for disposition of an interest in land - a new leasehold interest - be created. Crown's notice would have constituted its offer to make the disposition and the tenant's notice would be the acceptance of the offer, concluding the formation of the contract. The legal position would be the same as when a tenant exercises an option to renew a lease. The option "constitutes an offer to grant a further term which the lessor is contractually precluded from withdrawing so long as the option remains exercisable".[68] Once the lessee exercises the option, while being entitled to do so, an agreement for a new lease is created.[69] If, when Crown gave its notice, the tenant did not give its notice agreeing to renew the lease, no new disposition of a leasehold interest would have occurred.
Should that conclusion be wrong, and should section 126(1) of the Instruments Act be applicable, I would accept the applicants' alternative submission that Crown is estopped in equity from denying the existence of the collateral contract. The applicants have proved the matters which, in accordance with Brennan J's well-known formulation in Waltons Stores (Interstate) Ltd v Maher,[70] must be proved before a promissory estoppel arises. The applicants expected that there would be an offer of a renewed lease, at renewal time, that they would be free to accept. Crown's collateral promise induced them to expect that. In reliance upon the expectation created by the promise, the applicants entered into five-year leases with the "Major Refurbishment" clause. Crown intended that they should so rely, because Mr Boesley made the crucial statement in the course of urging Mr Zampelis to return signed leases to Crown. The applicants suffered detriment when the expectation was not fulfilled, because they were required to vacate the leased premises and the value of the refurbishment was minimised. Crown failed to act to avoid that detriment. Instead it required the applicants to vacate.

[58]

Mr Boesley left Crown's employment in July 2006, to take up a managerial position in Kuwait, where he now lives.
Keith Nichols became Crown's general manager (retail) in November 2006. In early 2008 he began preparing written Requests for Proposals for sending to tenants at Crown complex whose leases were due to expire in 2010. He sent a Request for Proposal to Cosmopolitan and to Fish & Co on 3 October 2008.[71] As the name of the document implied, it sought from each tenant a proposal for a new lease, if it wished to make one.
Having received the Request for Proposal, Mr Zampelis sent a two-page letter to Crown for the attention of Mr Nichols.[72] The letter was not dated but it was common ground that Crown received it on 27 October 2008. In that letter Mr Zampelis alleged that Mr Boesley had made a number of representations to him to encourage him to carry out refurbishment works even though the term of the lease was five years. The alleged statements included "we told you that we would look after you when the initial lease expired and we have" and "If you expend the money there is no way why we wouldn't extend next time". The letter stated that he (Mr Zampelis) had had discussions with Mr Rafaniello as well as with Mr Boesley. It went on to express Mr Zampelis' shock at receiving the "letter" of 3 October 2008 (presumably the Request for Proposal). It concluded with what was, in effect, a demand that Crown renew the leases.
Mr Nichols proceeded to discuss the letter with Mr Rafaniello and to review Crown's file. He gave evidence that he also sent an email to Mr Boesley, who did not reply. He made no further attempt to get Mr Boesley's version of events. By a letter dated 11 December 2008 Mr Nichols denied Mr Zampelis' allegations.[73]
Mr Zampelis gave some rather confusing evidence about having contacted Mr Rafaniello by telephone while Mr Rafaniello was in Canada, asking him to intervene to fulfil Mr Boesley's promise. In the end Mr Zampelis was unclear about whether he had done that in early 2008 or in early 2009. Mr Rafaniello gave evidence that Mr Zampelis did contact him by telephone in Canada in the first half of 2009 on more than one occasion, and that he had simply referred him to Mr Nichols and had told him that his recollection of events did not correspond with his own.
On 19 March 2009 Mr Zampelis submitted tenders for leases not only for "Café Greco" and for "Waterfront" but also for other restaurants at the Crown complex.[74] Mr Nichols sought more information about the tenders, and Mr Zampelis supplied it.
A meeting of Crown's executive, of which Mr Nichols was a member, on 20 and 21 May 2009 determined that Mr Zampelis' tenders would not be accepted.[75]
By an email dated 28 May 2009 Mr Nichols told Mr Zampelis that no decision had been made about the restaurants at the premises occupied by the applicants.[76] In cross-examination he sought to justify that email by saying that no decision had been made about a successful tenderer and that if Mr Zampelis had proceeded to submit a better tender it would have been considered. That was not a satisfactory explanation, in my opinion. The truth was that Crown had made a decision adverse to Mr Zampelis. It was wrong to imply otherwise in that email.
By a letter to Cosmopolitan dated 14 December 2009, signed by Mr Nichols, Crown gave notice "[p]ursuant to clause 2.3(c) of the Lease ... that it will not renew the Lease" and that it required Cosmopolitan to vacate the leased premises by midnight on 31 August 2010.[77] Although no letter to Fish & Co was put into evidence, it was common ground that on the same date Crown had given a notice in the same terms to Fish & Co.
The notices given on 14 December 2009 and Crown's requiring of the applicants to vacate by 31 December 2010, constituted a breach of the collateral contract that had obliged Crown to give notices in different terms, stating that it would renew the relevant lease. The breach exposed Crown to a claim for damages.

[70]

Ms Wright was instructed to assume that the refurbishment undertaken by the applicants in 2006 had been a partial refurbishment only, and that if they had been given new leases in 2010 Crown would have required a complete refurbishment of the leased premises. In her reports Ms Wright stated that although she had been given no instructions as to the cost of the refurbishment that had occurred in 2006 she had noted entries in the June 2007 balance sheets of each company for the value of plant, equipment, fixtures and fittings before accumulated depreciation ($2.2 million for Cosmopolitan, and $2.1 million for Fish & Co) and had compared them with the sums that paragraph 8 of the Further Amended Points of Claim in each proceeding had alleged as having been spent on refurbishment ($2.2 million for Cosmopolitan and $3.3 million for Fish & Co). From that comparison she had assumed that the cost of a full refurbishment of "Café Greco" for Cosmopolitan in 2010 would have been approximately $2 million and of "Waterfront" for Fish & Co would have been approximately $3 million. She proceeded to factor those estimated refurbishment costs into her calculations of future revenue and future expenses.
Mr Meredith was given no instructions about refurbishment or the cost of refurbishment, except in relation to the separate matter of the cost of enclosure of terraces, to which I shall refer below. So he did not factor any other refurbishment costs into his calculations. His reports reflect an assumption that the applicants would not have been required to incur any refurbishment costs in 2010 or at all, except for the cost of enclosure of the terraces.
The evidence established that the instructions given to Ms Wright about the extent of refurbishment in 2006 were incorrect. It was not a partial refurbishment. It was a total refurbishment, in fulfilment of the "Major Refurbishment" obligation in each lease. During cross-examination Mr Boesley agreed that that had been the case.[78]
The instruction to Ms Wright that Crown would have required a complete refurbishment of the premises in 2010 was consistent with evidence that Mr Nichols gave to that effect in his witness statement. During cross-examination, however, Mr Nichols acknowledged that his evidence to that effect was based upon his belief that the 2006 refurbishment of each restaurant had been partial only. He agreed that if, as Mr Boesley had sworn, the refurbishment in 2006 had been total, Crown would not have required major refurbishment of each restaurant again in 2011 but would have required "some level of refurbishment".[79]
Mr Pearce sought to justify Mr Meredith's assumption, that there would be no refurbishment costs at all for either applicant under a renewed lease except for the cost of enclosure of the terraces, by submitting that a renewed lease could not have included the "Major Refurbishment" clause. That obligation in the 2005 leases, he submitted, had been discharged, and so there could be no occasion for repeating it in renewed leases on the same terms and conditions, mutatis mutandis. I do not accept that submission. I have found above that when Crown gave notices under clause 2.3 of the 2005 leases that it would renew those leases, as it had promised it would do, those notices could specify whatever terms and conditions Crown wished to specify. It could specify another refurbishment provision if it wished. To my mind, it was inherently improbable that after a total refurbishment in 2005 Crown would want to specify a total refurbishment again in 2010, and Mr Nichols's evidence given during cross-examination established that Crown probably would not have specified a "Major Refurbishment" clause in 2010 leases but probably would have specified a provision like clause 44 for minor refurbishment.
For those reasons I consider that, because instructions given to Ms Wright were incorrect and because there was an omission from instructions given to Mr Meredith, the assumptions that each of them made about refurbishment costs were incorrect. The assumptions ought to have been that each applicant would have incurred, under a renewed lease, an obligation to undertake the expense of a partial or minor refurbishment, but nothing like the expense of the major refurbishment performed in 2006.
Mr Pearce submitted that there was no evidence of when a minor refurbishment might have been required or how much it might have cost. There was, however, evidence from which one might make a reasonable assumption about the likely cost, just as Ms Wright did when making an assumption about the likely cost of a major refurbishment. In his supplementary witness statement Mr Zampelis gave evidence, which Crown did not challenge or dispute, that when the restaurants commenced operation (in 1997) the building was new and each tenant spent about $550,000.00 each on a fit-out at the commencement of the tenancy. Doing the best I can to translate a 1997 figure into a 2010 equivalent, I would postulate a figure of $750,000.00.
My conclusion is that it is reasonable to assume that if Crown had given notice to each applicant that Crown would renew the lease, and each applicant had accepted the renewal, the renewed lease would have contained an obligation for the tenant to undertake a less-than-total refurbishment and that the cost of complying with that obligation would have been $750,000.00: a total of $1,500,000.00 for both applicants. While there was no evidence of when Crown might have enforced that obligation, the likelihood that such an obligation would have been imposed at all suggests a likelihood that Crown would have enforced it sooner rather than later. Accordingly I conclude that it would be reasonable to assume that each applicant would have been required to expend $750,000.00 in refurbishment during the first year of the period of renewal.

[71]

A decision by Crown to proceed with works to enclose the terrace area, during the currency of a renewed lease, and to require the tenant to pay for the cost of the works in accordance with a clause corresponding to clause 53.7 of the lease that had ended on 31 August 2010, would affect each applicant's capital costs and might increase its revenue. Measuring the impact of such a decision upon each applicant's potential profits over a further five year term involves answering the following questions. Would Crown have made such a decision at all? If so, what would have been enclosed? What additional seating capacity would have been created? When would the works have been done? What would have been the cost to each applicant?
The assumptions upon which the two expert witnesses proceeded when addressing these questions, and the conclusions which they reached, should be viewed in the light of what has happened since the applicants vacated their leased premises. A restaurant named "Atlantic" now operates in the areas that had been "Café Greco" and "Waterfront". In January 2011 Crown obtained planning permission for enclosure of the riverfront terrace of that restaurant.[80] The enclosure has occurred. Glass panels enclose most of what had been the riverfront terrace.[81] The planning permit, stamped on plans for the works, contained a condition that the works should leave unenclosed "a viable alfresco dining area...that seats approximately 20%-30% of the overall venue capacity."[82] After the enclosure there has remained an alfresco dining area situated on the right hand side of "Atlantic" as one looks at it from the riverside promenade.[83] There are two entrances to "Atlantic" from the promenade.[84]
Would Crown have sought enclosure? Mr Meredith was instructed to assume that Crown would have required the construction of an enclosed terrace during the term of renewed lease. In his final address Mr Pearce submitted that Crown had taken the stance that it would not have made that requirement. I do not think that that was a fair description of Crown's stance. Ms Wright was instructed to assume that the applicants were not required to construct an enclosed terrace unless Crown required them to do so.[85] That instruction was essentially correct and in line with clause 53.7 of the lease, although really that clause envisaged that Crown itself would engage contractors to do the construction and that the tenant would pay the cost. In accordance with the essentially correct instruction, Ms Wright proceeded to make alternative calculations, first on the footing that Crown did not effect the enclosure and secondly on the alternative footing that it did.
I think it is clear that Crown would have sought the enclosure of the riverfront terraces of "Café Greco" and of "Waterfront" during the currency of renewed leases. The request for proposal that Mr Nichols sent to the applicants in October 2008 included sketches depicting proposed enclosure of terraces.[86] Mr Nichols during cross-examination confirmed that Crown was intending to proceed with enclosure during any incoming tenant's term of lease.[87] And Crown did proceed, for "Atlantic".
I find that for the purposes of assessment of loss of profits one should assume that Crown would have effected an enclosure of riverfront terraces of "Café Greco" and "Waterfront" had there been renewed leases.
What would have been enclosed? The finding I expressed in the previous paragraph was about "riverfront terraces" only, not the part of each terrace that was on the wing or side of a restaurant. The following eleven paragraphs explain why I limit the finding in that way.
Mr Meredith was instructed to make the following assumptions about seating at the restaurants:

[82]

For several reasons, it seems to me that the assumption that Crown's enclosure of terrace would include an enclosure of the two wings - an assumption that the applicants asked Mr Meredith to make - is open to serious question.
First, the assumption pays no regard at all to the planning requirement that there be an area remaining open for alfresco dining: an area for each of the two restaurants. From the various plans it seems to me that the area required would approximate to the area of each wing. I am not saying that the alfresco area would necessarily be on the wing. I am saying only that an area approximating the area of each wing would need to remain unenclosed.
Secondly, it stands to reason that seating on a wing terrace, enclosed or unenclosed, would be less attractive to restaurant patrons than seating on a riverfront terrace, enclosed or unenclosed. The experience of which Mr Zampelis gave evidence - of not having used the "Waterfront" wing for seating at all, and of having the "Cafe Greco" being patronised only 10% of the time - seems to reinforce that view of the matter. The incentive for Crown (and for the applicants) to proceed with enclosure of the wings is likely to have been less than the incentive to proceed with enclosure of the riverfront terrace. The thought that Mr Zampelis' plan correctly displayed 48 seats available on each wing after enclosure seems to me to have been wishful thinking rather than realism.
Thirdly, although there have been no measurements put in evidence, there is a possibility that the wings are not wide enough to accommodate seating in the way that Mr Zampelis' plan had displayed.
Finally, clause 53.7 of the leases that expired on 31 August 2010 referred only to approval and works "to extend and/or enclose the external river facing raised terrace area". The clause did not mention terrace wings. There seems to be no reason to assume that a renewed lease would describe the terrace area in any different fashion. I acknowledge that nobody on Crown's behalf drew attention during the hearing to the fact that clause 53.7 did not specify any area other than the "river facing raised terrace area", and that Crown's other plans appeared to contemplate enclosure of the "Cafe Greco" terrace wing. But there would be contractual scope for Crown to say that it would not enclose the terrace wings and for the applicants to say that they were not obliged to contribute to the cost of enclosing the terrace wings.
I find that for the purposes of assessment of loss of profits one should assume that Crown would have effected an enclosure only of riverfront terraces of Cafe Greco" and "Waterfront", not of the terrace wings.
What additional seating capacity? Mr Pearce correctly conceded that Mr Meredith's instructions ought to have allowed for the removal of seats from the riverfront terraces to accommodate entry points to each restaurant from the promenade. He submitted that there need be an allowance for only one entry point to each. I agree. "Atlantic" has two entry points only,[91] for the width of what was "Cafe Greco and "Waterfront" combined. Mr Zampelis' plan would have to be amended so that one four-seated table in each of the two rows of tables displayed on the riverfront terrace for each of "Cafe Greco" and "Waterfront" was removed.
The outcome would be that the enclosed terrace for "Cafe Greco" would have two rows of 11 four-seated tables (88 seats) and the enclosed terrace for "Waterfront" would have two rows of 15 four-seated tables (120 seats). I see no reason not to accept in other respects Mr Zampelis' plan of seating for the riverfront terraces. Mr Nichols during cross-examination confirmed that there was room for two rows of four-seated tables on the riverside terraces[92]. Crown's own (second) plan, for post-enclosure seating, provided for two rows of four-seated tables, except in one corner of "Cafe Greco".[93]
Crown anticipated that enclosure of terraces would create all-year, all-weather dining.[94] The sketches in the Request for Proposal[95] which Mr Nichols sent in October 2008 depicted folding glass panels that would permit alfresco dining in good weather and full use of the enclosed terrace in poor weather.
Mr Zampelis gave evidence that on an average of two days per week the open terrace seating could not be used because the weather was rainy, or too hot, or too cold. Crown challenged that estimate. At first sight it did seem surprisingly high. But I think that there was other evidence that justified it. A print-out of records from the Bureau of Meteorology[96] showed rainfall for the years 2005-2010 of 1 millimetre or more for 1.57 days per week on average. With an allowance for unusually hot or cold days I think that the estimate of 2 days per week turns out to be reasonable and I accept it.
I find that, following an enclosure of the riverfront terrace, 88 seats at "Cafe Greco" would have been available for two additional days per week and 120 seats at "Waterfront" would have been available for two additional days per week.
In view of my exclusion of seating on the terrace wings from calculation there is no need for me to decide whether or not Mr Zampelis' evidence that the seating on the wing of "Cafe Greco" was used only 10% of the time, and the corresponding instruction to Mr Meredith, were correct.
When would the enclosure have occurred? Mr Meredith's report expressed his assumption that the construction of the enclosure would have occurred in the first year of the term of each renewed lease: the Relevant Year commencing on 1 September 2010 and ending on 31 August 2011. ("RY 11")[97]. Ms Wright made various alternative assumptions, and alternative calculations accordingly; first, that there would have been no enclosure at all; secondly, an enclosure in RY 11; thirdly, in RY 12; fourthly, in RY 13; fifthly, in RY 14.
I consider that the assumption that the enclosure would have occurred in RY 11 is correct. It has been borne out by the fact that the enclosure of the "Atlantic" terrace has been achieved. Mr Pearce pointed out that Mr Sterns, Crown's construction manager, had agreed that the enclosure process could have been achieved within 15 to 19 months of commencement.[98] In their two documents headed "Items upon which the Experts Agree" Mr Meredith and Ms Wright agreed that an assumption that the construction of the enclosure of the terrace would have occurred in RY 11 "may be reasonable in some circumstances" but also agreed that "whether or not this is the most reasonable assumption to adopt is a matter for the Tribunal".
I find that the purpose of assessment of loss of profits it is reasonable to assume that enclosure of the riverfront terrace would have occurred in RY 11: the year commencing on 1 September 2010 and ending on 31 August 2011.
What would enclosure have cost the applicants? Mr Meredith was instructed to assume that each applicant would have been required to pay $600,000.00 towards the cost of enclosure of the terraces. Clause 53.7 of the leases had stated that the tenant's obligation was to pay costs which were "anticipated to be in the order of magnitude of $600,000.00 (plus GST)", that is to say, approximately $660,000.00.
Ms Wright was instructed that the cost of enclosure was estimated in September 2005 to be $600,000.00. She acted upon that instruction but in estimating a cost of construction during the currency of renewed leases she adjusted that figure to $712,000.00 so as to take account of increases in the Consumer Price Index in the meantime.
In his verified witness statement Mr Sterns gave evidence that the cost of construction of the terrace enclosures would have exceeded $1,410,000.00. On that estimate, each applicant may have been asked to pay in excess of $705,000.00.
Mr Pearce submitted that I should find that the cost to each applicant would have been no more than "the amount stipulated in the leases", by which I infer that he meant $660,000.00. There are several difficulties with this submission. First, under the collateral contract that I had found was made, Crown was not obliged to specify terms and conditions of a renewed lease that repeated in clause 53.7 a figure of "$600,000.00 plus GST". It would have been entitled to stipulate a different figure. Secondly, whatever figure was stipulated in a new clause 53.7, it would probably be expressed as approximate only, as the previous clause 53.7 expressed it, so that the figure was not the limit of the tenant's liability. Thirdly, in view of Mr Stern's evidence, I think it likely that Crown would have stipulated a figure higher than the one stipulated in the previous clause 53.7.
My conclusion is that Ms Wright's arrived-at figure of $712,000.00 is reasonable. I find that for the purpose of assessment of loss of profits it is reasonable to assume that enclosure of the riverfront terraces would have cost each applicant $712,000.00.

[102]

Mr Meredith's reasoning seemed to be this.[112] He found no applicable material in the Biz Exchange Index report. In his experience of valuing restaurants of the nature and size of "Café Greco" and "Waterfront" a proper capitalisation multiple would be between 2.5 and 4.0. He selected 3.5 because of his view of profit margins and because of instructions about consumer demand. The percentage calculation was 28.5%. He adjusted it to 32.3%. That should be the risk-adjusted discount rate.
Ms Wright's reasoning seemed to be a little different.[113] She found an applicable range of figures in the Biz Exchange Index report. It was a range of 2.69 to 4.40. The most common multiple, she said, for restaurant businesses like those in question was 2.37. She took a more negative view of the restaurants' profitability than did Mr Meredith. She thought the multiple should be 2.0 to 3.0. The percentage calculations were 50% to 33% respectively. She adjusted them to 54.35% to 37.20%. The risk adjusted discount rate should be within that range.
So far as I have understood the reasoning, I prefer Ms Wright's. The instructions on which Mr Meredith's opinion was based gave the supposed benefits of enclosed terraces a greater emphasis than I have thought was warranted. It was also based to some degree on anecdotal, and so to my mind doubtfully reliable, evidence about how greatly the restaurants were patronised and whether there were queues of waiting customers. Apart from the general risks and uncertainties that should be reflected in the discount rate, there was also the risk that the terms and conditions that Crown specified in a notice of intention to renew, given in fulfilment of the collateral contract, would be so unpalatable to the applicants that they preferred not to renew at all.
I adopt Ms Wright's range of 2.0 to 3.0 for the multiple and take the mid-point, 2.5. Divided into 1 the percentage becomes 40%. I do not make any further adjustments to the figure because I have not been able to understand why or how a further adjustment should be made.
I find that for the purpose of assessing loss of profits the risk-adjusted discount rate that should be applied in the calculation is 40%.

Cosmopolitan Hotel (Vic) Pty Ltd & Anor v Crown Melbourne Ltd & Ors

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Judgment (183 paragraphs)

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