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[2012] NSWADT 66
respondent. Proceedings dismissed; costs reserved; directions given for any costs application.
A small espresso bar operator in the Galeries Victoria claimed the landlord had promised he could add hot foods and install an exhaust duct before he bought the business. The tribunal found the landlord never made those promises, that 'finger food' in the lease did not cover burgers or fried chicken, and that the landlord acted reasonably in refusing changes that would turn the tiny kiosk into a takeaway hot-food outlet. The operator's expert report on lost profits was ruled inadmissible because it did not explain its reasoning or prove its assumptions. All claims were dismissed.
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Mr Tarek Bousalman, through his company Eventus Group Pty Ltd, purchased the business of Mio Espresso, a 16.5-square-metre kiosk on the lower ground food court of the Galeries Victoria at 500 George Street, Sydney. The sub-lease from Ipoh Pty Ltd (the leasehold owner of the centre) permitted the retail sale of coffee, tea, cold drinks, continental cakes, filo pastries, sweet and savoury finger food, biscuits, quiche, patisserie items, muffins and open cheese melts, with additions or substitutions permitted only with the prior written approval of the sub-lessor.
No linked legislation citations have been extracted yet.
From November 2009, before taking assignment of the lease, Mr Bousalman discussed possible menu changes with the centre manager, Ms Melissa LeKluse. He later asserted that she had assured him he could sell hot foods and that an exhaust system would be installed. Ms LeKluse's contemporaneous assignee interview checklist recorded only that Mr Bousalman wished to extend the menu but understood the lessor had no obligation to approve any change. No note was made of hot food or exhaust. The assignment and a variation inserting an option to renew were completed on 16 December 2009.
Between February and August 2010 Mr Bousalman submitted successive menu proposals and requested an engineering review of exhaust capacity. On 22 March 2010 Ipoh approved a limited range of breakfast and cold items on a one-month trial but rejected hot items such as BLTs, breakfast wraps and most individual hot foods. In August 2010 the centre's consulting engineers reported that an exhaust duct extension was physically possible but would cost approximately $25,000 at the tenant's expense. Mr Bousalman indicated he wished to proceed.
By September 2010 the relationship had deteriorated. At meetings on 13 and 20 September 2010 Ms LeKluse and Ms Laura Nickson informed Mr Bousalman that the expanded menu was not approved because it fell outside the espresso/patisserie concept Ipoh wished to maintain for the tenancy, and that exhaust would not be made available because of the impending food-court redevelopment and the limited riser capacity needed for other food-court tenants. The fit-out plans were not approved. Mediation under the Retail Leases Act 1994 failed in April 2011. Eventus commenced proceedings seeking orders permitting the expanded menu (Annexure A to Mr Bousalman's affidavit), compelling installation of an exhaust facility according to the respondent's engineering specifications, declarations of unconscionable conduct under ss 62B and 72AA of the Retail Leases Act, and damages.
The three-day hearing explored the conflicting accounts of the November 2009 and later conversations, the proper construction of "savoury finger food", the reasonableness of Ipoh's exercise of discretion, and the admissibility of a forensic accounting report that projected losses exceeding $900,000 on the basis that hot-food sales would lift turnover to $1,000 per square metre per week. The tribunal dismissed the application in its entirety on 17 April 2012.
The tribunal's reasoning turned on findings of fact about what was said in the critical meetings, coupled with orthodox principles of contractual construction, good faith in discretionary powers, and the admissibility of expert evidence.
First, the representation case failed because Mr Bousalman's account was not accepted on the balance of probabilities. The tribunal preferred Ms LeKluse's evidence, which was supported by a detailed assignee checklist completed on 12 November 2009, a voicemail logbook practice, and file notes made contemporaneously. That checklist expressly recorded that Mr Bousalman understood the lessor had no obligation to approve menu extensions. No mention of hot food or exhaust appeared in the variation instrument, the June 2010 disclosure package, or the sub-lessee disclosure statement signed by Mr Bousalman on 8 June 2010. The tribunal noted at [59] that if hot food or exhaust had been raised in November 2009 it would have been noted and pursued by lawyers before settlement. Later communications, including the 22 March 2010 letter approving only limited items, were inconsistent with any ongoing representation that hot food and exhaust were assured.
Second, the tribunal construed "savoury finger food" narrowly. At [71] it adopted the respondent's solicitors' 26 August 2010 definition (small items eaten in one or two average mouthfuls, such as hors d'oeuvres and canapés) and the Australian Oxford Dictionary meaning. Items such as whole chicken and chips, burgers, burritos, rissoles, chiko rolls and hot chips could not satisfy that description. None of the other permitted-use categories covered them. Consequently the menu expansion sought was not within the existing lease.
Third, even if the items were outside the permitted use, Ipoh's refusal to approve them under the "as substituted or added to from time to time with the prior written approval of the Sub-Lessor" wording was not flawed. The tribunal accepted at [73] that such a discretionary power must be exercised reasonably and in good faith, citing Renard Constructions (ME) Pty Ltd v Minister for Public Works and Burger King Corporation v Hungry Jack's Pty Ltd. The evidence of Ms LeKluse, Ms Nickson and Mr Grant Isaacs showed that Ipoh wished to maintain a "grab-and-go" espresso and patisserie offer consistent with the centre's retail mix, customer expectations at the Town Hall Station/QVB link, and the forthcoming food-court redevelopment. Those considerations were legitimate and not arbitrary. The decisions made on 22 March 2010, 13 and 20 September 2010 and during the hearing were therefore reasonable.
Fourth, the exhaust claim collapsed with the representation claim. In addition, the prevailing approved menu did not require exhaust, and the tribunal could not formulate a sufficiently precise mandatory order under s 72(1)(c) because no final specifications or quote existed. The tribunal observed at [76] that Mr Bousalman himself had asked for "specifications regarding the works and the final quote" on 16 August 2010, confirming that none had been settled.
Fifth, the unconscionable-conduct and misleading-conduct claims under the Retail Leases Act could not succeed once the factual foundation of representations was rejected. The tribunal also noted at [66] the significance of the failure to record any representations in the sub-lessee disclosure statement, applying the Appeal Panel's observations in Armstrong Jones Management Pty Ltd v Saies-Bond Pty Ltd.
Finally, the damages claim failed on evidentiary grounds. The tribunal applied Dasreef Pty Ltd v Hawchar at [82], holding that the report of Mr Ralph Merrell did not demonstrate that its opinions on uplift in turnover, profit and goodwill were wholly or substantially based on specialised accounting knowledge. Assumptions about comparability of other Galeries food retailers were unproved, the chain of reasoning was not exposed, and the report omitted the required Expert Witness Code acknowledgment.
Prior to this decision the law was clear that a lessor's contractual discretion must be exercised reasonably and in good faith (Renard, Burger King), that lease terms are construed objectively in context, and that expert evidence must satisfy the basis rule and s 79 of the Evidence Act (Dasreef). The Retail Leases Act 1994 already required transparency through disclosure statements, and the Appeal Panel in Armstrong Jones had emphasised their role in recording inducing representations.
This judgment did not change the law. It applied those principles to a concrete retail tenancy dispute and illustrated their practical operation. It reinforced that contemporaneous file notes and disclosure statements carry substantial forensic weight. After the decision, lessees in New South Wales retail leases continued to be required to prove representations on the balance of probabilities, and lessors retained wide but not unfettered discretion over permitted-use approvals provided their decisions are not capricious. The emphasis on precision in mandatory orders under s 72 remains unchanged. The decision stands as a reminder that ambitious menu expansions in small "espresso bar" tenancies will be measured against the parties' documented bargain and the lessor's overall centre strategy.
At [59]: "I am not persuaded on the balance of probabilities that in November 2009 there was any discussion between Mr Bousalman and Ms LeKluse concerning the sale of hot food from, or the extension of an exhaust facility to, Mio Espresso as alleged by Mr Bousalman."
Plain English: The tenant's story about what the centre manager promised before he bought the business is not believed because the manager's notes, checklist and the lease paperwork tell a different story.
At [71]: "I cannot see that any of the hot food items which the Respondent deleted in the Applicant's current list, commencing with 'mini bacon and egg rolls' and ending with 'hot chips' could be said to constitute, on any reasonable construction, 'finger food'."
Plain English: Burgers, chips and fried chicken are not "finger food" no matter how you read the lease. The words mean small bites you can eat in one or two mouthfuls.
At [73]: "I would accept that the exercise of such a contractual discretionary power must be effected reasonably and in good faith."
Plain English: The landlord cannot just say "no" for no reason. But if the refusal makes commercial sense for the shopping centre, the tribunal will not interfere.
At [82]: "The report is deficient in those respects and is not acceptable evidence, leaving aside the failure of the report, on its face, to include an appropriate acknowledgment of the Expert Witness Code of Conduct."
Plain English: The accountant's report on lost profits was thrown out because it did not explain how the accountant reached his numbers and did not follow the court rules for experts.
At [66]: "The statutory disclosure notice procedure is 'designed to implant firmly in the minds of the parties the importance of transparency as to all matters of significance to each party' and 'lessees should see the disclosure system regime as providing the place in which to record all material representation that induced them to enter the contract'."
Plain English: When you sign the disclosure form you are expected to write down every important promise the landlord made. If you do not, it is hard to complain later.
The decision is likely to be relevant where a retail tenant seeks to expand a permitted use by relying on alleged oral assurances given before lease assignment or renewal; where the lease contains a permitted-use clause allowing additions only with the lessor's prior written approval; where the tenant's proposed menu would change the character of the tenancy (for example from espresso bar to hot-food outlet); where the lessor refuses approval on the basis of centre-wide retail-mix or design considerations; where the tenant has failed to record the alleged representations in the sub-lessee disclosure statement; or where damages are claimed on the basis of an expert report that does not expose its assumptions or reasoning.
It is particularly apposite for small food-court kiosks where the landlord wishes to preserve a "grab-and-go" concept and where exhaust capacity is limited by building infrastructure or redevelopment plans. The emphasis on contemporaneous notes means centre managers who use checklists and file notes are better protected. Conversely, tenants who negotiate menu changes after they have signed the disclosure statement and taken assignment face an uphill evidentiary battle.
The judgment itself carefully applied the principles stated in the cited authorities rather than breaking new ground. It treated the Appeal Panel's statements in Armstrong Jones Management Pty Ltd v Saies-Bond Pty Ltd as authoritative on the purpose of disclosure statements and quoted them directly at [66]. The tribunal treated Renard Constructions and Burger King as supplying the content of the implied obligation of good faith and reasonableness in contractual discretions and applied those cases by analogy to the permitted-use approval power. Dasreef was treated as stating the current High Court test for admissibility of expert opinion; the tribunal applied the requirement that the opinion be "wholly or substantially based" on specialised knowledge and that assumptions be proved. The equitable remedies texts (Spry and Meagher, Gummow & Lehane) were treated as stating the settled rule that mandatory orders must be clear and precise.
Because the tribunal's factual findings were reached after a three-day hearing in which credit was expressly resolved in favour of the respondent's witnesses, later courts would be expected to treat those findings as turning on the particular evidence and therefore not laying down a universal rule. The decision has been treated as an illustration of the application of established doctrine to retail lease facts rather than as altering that doctrine.
The tribunal left open whether, in a future case with stronger evidence of representation, a lessor who gives positive assurances about exhaust or menu flexibility before assignment could be held to have engaged in pre-lease misrepresentation under s 10 of the Retail Leases Act even if the disclosure statement is later signed without noting the representations. It also left open the precise boundary of "finger food" in other factual contexts; the narrow construction was tied to the surrounding words of the permitted-use clause and the dictionary meaning.
The judgment observed at [77] that the respondent's stated reasons for refusing exhaust shifted between unavailability due to food-court works and lack of necessity for an espresso bar. It suggested a clearer early statement of the true reason might have avoided the dispute. That comment leaves open whether a lessor who gives inconsistent reasons risks a finding that its decision was not made in good faith.
The tribunal did not decide whether the tribunal has jurisdiction to hear a pure Competition and Consumer Act claim; the applicant's counsel reframed the case under the Retail Leases Act. That jurisdictional question therefore remains unaddressed. Finally, the precise quantum of costs that might be awarded against an applicant whose expert report is ruled inadmissible for multiple procedural and substantive defects was reserved and not determined in the published reasons.
reasons for DECISION 1Retail Leases Division: P.R. Callaghan S.C., Deputy President, B. Harrison, Non-Judicial Member (Advisory) and M. Lonie, Non-Judicial Member (Advisory).
Background 2The Galeries Victoria, also known as The Galeries ("the Galeries"), is a shopping complex comprising a ground level and two upper levels of shops fronting, and extending back from, George Street (at the north-eastern corner of Park Street) and a lower ground level between the George Street section, Town Hall Station and the Queen Victoria building. The Galeries has the address 500 George Street. There are numerous shops and a food court on the lower ground level in the Galeries and some of the shops are small in size. One of those is the "Mio Espresso Bar" ("Mio Espresso"), in Shop AO3, occupying an area of approximately 16.5 square metres. Mr Tarek Bousalman, through Eventus Group Pty Ltd ("the Applicant"), has been operating Mio Espresso since about December 2009. Ipoh Pty Ltd ("the Respondent" and "Ipoh") is the leasehold owner of the Galeries and the Applicant has a sub-lease from the Respondent of the premises which expires on 12 July 2015. Disputes in relation to that tenancy have arisen between the Applicant and the Respondent out of events between about November 2009 and about September 2010. They concern the Applicant's wish to expand the menu of food items sold from Mio Espresso, particularly in relation to hot food, and a wish, or a perceived need, of the Applicant to have a cooking exhaust facility extended to Mio Espresso. 3Mr Bousalman, on behalf of the Applicant, had relevant dealings with various personnel on behalf of the Respondent, all of whom have given evidence: Mr Grant Isaacs - Group Leasing Manager Ms Melissa LeKluse - Centre Manager Ms Laura Nickson - Senior Leasing Executive Ms Katharine Mackarell - Proprietor of Three Fishes Interior Design and design consultant to the Respondent. Ms LeKluse was principally involved on behalf of the Respondent. 4The following is a shortly expressed chronology of some relevant events: 14 September 2005 Commencement of sub-lease of Mio Espresso. 4 November 2009 Applicant incorporated. Applicant applied to Respondent for the sub-lease to be assigned to it. 12 November 2009 Meeting Mr Bousalman and Ms LeKluse. 20 November 2009 Telephone discussion Mr Bousalman and Ms LeKluse re option to renew and changes to Mio Espresso menu. 16 December 2009 Applicant settled purchase of Mio Espresso. Assignment of sub-lease and variation instrument executed, variation instrument adding option to renew to lease. 8 February 2010 Meeting Mr Bousalman and Ms LeKluse re proposals for new fit out and menu. Ms LeKluse consulted among others Ms Nickson and Mr Isaacs. Respondent's consulting engineers approached. 17 February 2010 Telephone conversation Ms LeKluse and Mr Bousalman re engineers' fees and menu changes. 2 March 2010 Mr Bousalman met Ms LeKluse and submitted proposed menu comprising four pages. 22 March 2010 Letter Respondent (Ms LeKluse) to Applicant (Mr Bousalman) approving on trial basis some items in proposed menu and not approving others. 4 May 2010 Applicant's design consultant, Integrity Design, emailed Ms LeKluse. Ms LeKluse emailed Mr Bousalman re exercise by Applicant of option to renew. 6 May 2010 Ms LeKluse telephoned and emailed Mr Bousalman re exercise of option. 7 May 2010 Respondent received note of exercise of option from Mr Bousalman dated, incorrectly, 7 April 2010. 10 May 2010 Exchange of emails between Ms LeKluse and Mr Bousalman re correct date of note of exercise of option. 1 June 2010 Respondent issued Disclosure Package to Respondent. 8 June 2010 Mr Bousalman executed sub-lessee's disclosure statement noting that the sub-lessee had not sought independent advice in respect of the commercial terms in the sub-lease and not noting any statements or representations made by the sub-lessor or its agents. 29 June 2010-20 July 2010 Email exchanges between Ms LeKluse and Mr Bousalman re consulting engineers' investigation re exhaust fan and also re grease trap connection. 2 July 2010 Letter from LSB Lawyers on behalf of Applicant to Aequitas VTS Lawyers on behalf of Respondent seeking clarification of words "savoury finger foods" in sub-lease. 4 August 2010 Ms LeKluse emailed to Mr Bousalman a report from the Respondent's consulting engineers, advising that "ultimately the report indicates that it is likely to be possible to bring exhaust to the tenancy however this would be a substantial cost (conservative estimate $25,000). Should you wish to consider bringing exhaust to the tenancy, please be advised this would be at your cost". 10 August 2010 Mr Bousalman met with Ms Mackarall, the Respondent's design consultant. Ms Mackarall emailed Mr Bousalman and his design consultant a time line and other details for submission of the Applicant's proposed fitout design. 16 August 2010 Ms LeKluse received a letter from Mr Bousalman advising that he wished to proceed "with running an exhaust to my tenancy" and that "I look forward to receiving the specifications regarding the works and the final quote". 18 August 2010 Applicant's design consultant submitted drawings and other details of proposed fitout designs. 26 August 2010 Letter from Aequitas VTS Lawyers to LSB Lawyers advising "Our client instructs us that it considers 'finger food' to be small food items whereby the entire portion can be eaten in one or two average mouthfuls. Examples of 'finger food' are hors d'oeuvres and canapés" and seeking the return of the executed sub-lease and associated documents. 31 August 2010 Letter LSB Lawyers to Aequitas VTS Lawyers advising "we are in a position to return the executed sub-lease pending your client provides us with approval of our client's proposed menu" and enclosing a menu of two pages. 13 September 2010 Meeting between Mr Bousalman, Ms LeKluse and Ms Nickson where Mr Bousalman was advised that the Respondent did not approve the Applicant's fitout design, that an exhaust facility would not be available to Mio Espresso due to the centre's food court re-development and that the proposed menu was not approved. 14 September 2010 Commencement date in new sub-lease. 16 September 2010 New sub-lease executed by Applicant received by Aequitas VTS Lawyers. Applicant's design consultant advised Respondent's design consultant that she had been instructed not to amend the submitted drawings "until the final menu discussions are completed". 20 September 2010 Meeting Mr Bousalman, Ms LeKluse and Ms Nickson where the Respondent's previously stated positions were confirmed and Mr Bousalman advised that he wanted to sort out the menu before proceeding on the fitout and Ms LeKluse advised "we agree to review any menu additions as long as you understand that Ipoh does not wish to deviate from the intent of the tenancy which is a patisserie/espresso bar". 15 April 2011 Certificate that mediation under Part 8 of the Retail Leases Act 1994 has failed to resolve the dispute between the Lessor and Lessee in respect of the subject premises. 9 May 2011 Application for Original Decision ("the Application") filed in Tribunal.
Issues 5In the Application three orders were sought. The first order was expressed: "1. An Order that the Applicant be permitted to utilise a menu referred to as Annexure "A" attached hereto." There was no Annexure "A" to the Application but there was an Annexure "A" attached to an affidavit by Mr Bousalman of 27 October 2011. That affidavit refers to Annexure "A" as a temporary menu which he submitted to the Respondent, he says, on 3 March 2010 (the correct date seems to be 2 March 2010). That annexure comprises four pages and appears to be a composite of at least two menus. The Application includes particulars to the effect that the lease permitted the sale of finger foods and operation of the shop as a patisserie and that by a letter from the Respondent's solicitors of 22 November 2010 the Respondent refused to allow the sale of finger food on the premises. 6The second order sought is: "2. An order that an exhaust fan be constructed on the premises according to the Respondent's engineering specifications." Particulars are given to the effect that by the letter from its solicitors of 22 November 2010 the Respondent refused "to allow the Applicant to install an exhaust fan facility approved by the Respondent's engineer, despite prior agreement to allow for the erection of an exhaust facility". The particulars go on to allege that "the Applicant cannot operate his business without an exhaust fan facility for preparation and cooking for pastries and finger food". 7The third of the orders sought is: "3. That the Lessor engaged in conduct that was in all of the circumstances unconscionable pursuant to Section 62B of the Retail Leases Act and Section 71A, 71AA(i)(a)(b)." I gather that the last section reference is intended to be "72AA(1)(a) and (b)". No particulars are given in the Application in respect of Order 3. 8Points of Claim were filed on behalf of the Applicant on 27 June 2011. This document recites in 21 paragraphs events from and including November 2009 to and including 20 September 2010, generally corresponding to the outline in the chronology set out above. The Points of Claim conclude with the following items: "Misleading & Deceptive conduct, Trade Practices Act The Applicant asserts that the representations made by the Respondents from paragraphs 1 to 21 were designed to mislead the applicant into entering the lease with the respondent. Unconscionable Conduct The Applicant claims the Respondent engaged in conduct that was unconscionable in light of paragraphs 1 to 21 and the Respondents conduct resulted in the Applicant being unable to operate a business that the Respondent had approved, then by virtue of its conduct, withdrew. Damages Applicant seeks damages which are being assessed by a forensic accountant resulting from its loss of gross profits arising from this claim." 9During the hearing, at my request, there was prepared and tendered on behalf of the Respondent a separate particularisation of the unconscionable conduct claim: "1.The unconscionable conduct commenced when, on the applicant's evidence, he was given to understand that an exhaust system would be installed into the premises he was considering leasing and, on that advice, did enter into a lease with the respondent for the premises being Shop A03, Ground Floor of the Galeries at 500 George Street, Sydney; 2.The unconscionable conduct extended over a period of time as the respondent continued to give the applicant the impression that what he had bargained for would be delivered and, indeed after some delay, did deliver an engineer's report that indicated that the installation of the exhaust system was possible; 3.The respondent provided the engineer's report to the applicant which further encouraged the applicant that the exhaust system could be made a reality in line with the expectations raised prior to his entering the lease; 4.The applicant, relying on a quotation for the cost of the installation provided by the respondent, agreed to pay the costs associated with the installation of the system being quoted at $25,000.00; 5.That the respondent had obtained the report and the quotation and a positive response from the applicant that he wished to proceed at his cost, indicated at this point - August 2010 - that the respondent was in a position to endorse and approve the commencement of the required work; 6.That the respondent was in such a position was indicated on 10 August 2010 when the applicant met with the Tenancy Co-ordinator who provided the applicant with a timeline leading to Ipoh final design approval of his premises on 15 September 2010; 7.On 16 August 2010 the applicant confirmed with the respondent - in response to a request from the respondent - that he wished to proceed with running an exhaust to his tenancy; 8.On 13 September 2010, contrary to all the indications the respondent had given the applicant, the respondent advised the applicant that an exhaust system was not to be available to the applicant's premises." 10No additional particulars were given of the suggested misleading and deceptive conduct claim which was included in the Points of Claim. During closing addresses, I pointed out to the Applicant's Counsel that it may be that this Tribunal did not have the jurisdiction to deal with a claim under the Commonwealth Trade Practices Act 1974 (now the Competition and Consumer Act 2010). I understood the Applicant's Counsel then to indicate that the Applicant was alleging pre-lease misrepresentation under s.10 of the Retail Leases Act 1994 ("the RLA") and misleading or deceptive conduct under s.62D of the RLA. Apparently, those claims are intended to be prosecuted in respect of the matters particularised in relation to the other claims. 11No Reply was filed on behalf of the Respondent but the Respondent obviously contests all the claims made against it by the Applicant. 12The issues that may be deduced from what was thus ultimately presented to the Tribunal might be summarised as follows: 1.Should the Tribunal order the expansion sought by the Applicant of the menu of food items permitted to be sold by the Applicant from Mio Espresso ("the menu expansion") on the following bases, or any one or more of them: first, that the Respondent had represented to the Applicant that it would permit the Applicant to have the menu expansion; secondly, that the menu expansion covers only items which are within the Permitted Use clause in the subject sub-lease (in particular being "finger food"); and thirdly, that the menu expansion should have been approved by the Respondent by way of additions under the Permitted Use clause? I will refer to this as "the menu expansion issue". 2.Should the Tribunal order that a cooking exhaust facility ("the exhaust facility") be installed in the Mio Espresso premises? I will refer to this as "the exhaust facility issue". 3.In the period from (and including) about November 2009 to (and including) 20 September 2010 did the Respondent represent to the Applicant that the Respondent would permit the Applicant to have either or both of the menu expansion and the exhaust facility, and then not fulfil that representation? I will refer to this as "the representation issue". 4.If "yes" to question 3, did the Respondent's behaviour constitute all or any of pre-lease misrepresentation, misleading or deceptive conduct, and unconscionable conduct under the RLA? 5.If "yes" to question 4, what, if any, monetary order should be made by the Tribunal by way of compensation for loss or damage or otherwise?
Menu Expansion and Exhaust Facility Issues - Preliminary 13These two issues require to a large extent joint consideration because, first, both were on occasions referred to, or allegedly referred to, together in the communications between the Applicant and the Respondent, and in that regard they need to be considered in conjunction with the representation issue. A second reason why they have to be dealt with together is that the availability of an exhaust facility would be a factor in any menu expansion to include the cooking in Mio Espresso of hot, for example, fried, food. Nevertheless, each of the two issues has some separate features which might be detailed at the outset and I will deal with the menu expansion issue first. 14The Permitted Use specified in the current sub-lease of Mio Espresso is as follows: "Retail sale of coffee, tea and cold drinks (excluding juices), continental cakes, filo pastries, sweet and savoury finger food, biscuits, quiche, patisserie with cookies, tarts, danish pastry, biscotti, scones and brownies, muffins and open cheese melts (as substituted or added to from time to time with the prior written approval of the Sub-Lessor)." That is virtually identical to the corresponding provision in the sub-lease which it replaced. 15The first time Mr Bousalman presented a proposed written menu to the Respondent was, he says, on 3 March 2010. On the evidence before me it was 2 March 2010. He then handed to Ms LeKluse, the Galeries Centre Manager, the document which is annexure "A" to Mr Bousalman's affidavit. By letter dated 22 March 2010 Ms LeKluse conveyed to Mr Bousalman the Repondent's decision in relation to that requested menu and the letter was in the following terms (the attachments are omitted): "In reference to the meeting held 2 March 2010 between Eventus Group and Centre Management, please be advised that the Sub-Lessor has reviewed the request for amendments to the Permitted Use. The current Permitted Use is stated in the Sub-Lease as follows: Retail sale of coffee, tea and cold drinks (excluding juices), continental cakes, filo pastries, sweet and savoury finger food, biscuits, quiche, patisserie with cookies, tarts, Danish pastry, biscotti, quiche, scones and brownies, muffins and open cheese melts (as substituted or added to from time to time with the prior written approval of the Sub-Lessor) The following responses are referencing the document titles as provided by Eventus Group, copies are attached. Breakfast additions approved as follows: Toast - Raisin, Thick white and brown, wood fire, grain Bagels - Plain, Blueberry, Cheese (With choices of vegemite, selected jams, cream cheese and Ricotta & honey) Cinnamon Toast - White thick bread Croissants - Strawberry jam & Swiss cheese Muesli cups - Toasted muesli layered with Berry compote or seasonal poached fruits with low fat honey cinnamon yogurt Bircher cup - Healthy mix of oats & seeds with creamy low fat yogurt, natural nuts & strawberries Please note that the following are not approved: BLT's Mini breakfast rolls Breakfast wraps Fruit salads Open Melts on Turkish Bread All variations are approved as these are covered under the Permitted Use. Individual Cold Items As per the attached email that was provided, all cold items are approved. Individual Hot Items Baby Frittatas, quiches and feta and spinach rolls are approved All other items are not approved Assorted cakes and slices All items are approved Cocktail bites Please provide more information on this proposal. Are these meant to be catering options? Or will these be sold for individual sale? Lunch Menu Additions Up to 6 types of pre-made wraps are approved using the type of ingredients listed Up to 6 types of pre-made rolls are approved using the type of ingredients listed These variations are approved for a trial period of one month. The Sub-Lessor will then consider permanently approving these changes, subject to feedback from retailers, customers and the Sub-Lessor's agents." The approval of that list by the Respondent seems to have continued at all relevant times up to the hearing. 16On 2 July 2010 LSB Lawyers on behalf of the Applicant wrote to Aequitas VTS Lawyers on behalf of the Respondent seeking clarification of the words "savoury finger foods" in the sub-lease. The request was worded as follows: "Our clients seek to clarify the definition and scope of the words 'savoury finger foods' mentioned in Reference Schedule Item 13 of the Sub-Lease contract. The meaning and scope of those words will inevitably determine the nature and scope of the food product which our client can provide at the premises and is therefore necessary to clarify the precise meaning of those terms." Aequitas VTS Lawyers responded to LSB Lawyers by letter dated 26 August 2010 in the following terms: "Our client instructs us that it considers 'finger food' to be small food items whereby the entire portion can be eaten in one or two average mouthfuls. Examples of 'finger food' are hors d'oeuvres and canapés. 17On 31 August 2010 LSB Lawyers wrote to Aequitas VTS Lawyers. They advised: "We are in a position to return of the executed Sub-lease pending your client provides us the written approval for our client's proposed menu. Please note that enclosed menu is what our client intends to sell in addition to the existing menu. We are instructed that most of food to be small food items falls into your clients' definition of 'finger food'." The attachment to that letter comprised the second and fourth pages of the four page menu document which is Annexure "A" to Mr Bousalman's affidavit referred to above. Those pages included items such as "whole chicken and large chips", "chicken burger reg. chips and drink", "fish fillets grilled or deep fried", "beef strogonoff" and "pluto pups". 18While a suggested wide meaning or range of "finger food" did not feature significantly in the closing written submissions or oral address made on behalf of the Applicant, it appears to have been an aspect of the particulars in respect of Order 1 sought in the Application and Mr Bousalman referred to it a number of times during cross-examination and appeared to place considerable reliance on it. Mr Bousalman's comments in cross-examination included the following: "...The permitted use of the term savoury finger foods, I looked it up with my previous law firm and that - it's a very broad, wide range which would allow me to expand my menu. At that stage that's as simple as it was and was all I needed to know, so based on that information is what I've put down here, and it seems to me quite clear and to my knowledge it was understood by Melissa and it was accepted." "...being finger foods as part of the permitted usage to me was enough. The interpretation I receive as what finger foods is from the lawyers is - I'm sorry to say is a mere fabrication and so this is where we're at." "...Q. You say that whole chicken and chips is savoury food? A. Absolutely, once chopped up and eaten with foods, according to what's out there in the general public on the internet served across the board, yes, I do believe so. Q. And it refers to barramundi, roast pork and beef, it has types of burrito. You say a whole burrito is savoury finger food? A. Yes, and I have checked that out with my previous lawyer. If it's served in the right way, portioned up correctly, yes it is. Q. This menu includes burgers. They're not savoury finger food are they, Mr Bousalman? A. Yes they are, they're eaten with your hands and fingers. They are. Q. You regard a burger-- A. Absolutely. Q. -of any size as being savoury finger food? A. According to my investigations, yes. Q. And sausages, rissoles and chiko rolls? A. Absolutely." "...I mean I've got, I've got rice, of course that's not a finger food, but the general consensus and what I have been advised and what my investigation has come to conclude is that it can be anything that is used - eaten with your hands and fingers and that's it. That's as broad as an interpretation as we could possibly get." This consideration was also raised with him during questions from one of the Tribunal members: "Q. ...had you ever considered trying to define a little more, in more detail in brackets, as to what you meant by savoury finger food? A. Sir, I took that to my lawyer at the time, my Counsel, to ascertain what - because I couldn't really put my finger on as to what it actually meant. We did some investigation and came up happy with the answer we found." 19During cross-examination Mr Bousalman made comments to the effect that he was happy to talk and negotiate about his submitted menu. During re-examination he accepted a suggestion which I made, that Annexure "A" comprised an ambit claim. That led to there being prepared overnight after the first hearing day, a list of what the Applicant actually wanted for the purposes of Order 1. It also became apparent during Ms LeKluse's oral evidence on the second hearing day that following completion of the food court refurbishment in about May 2011, there would still be some capacity within the Galeries exhaust system for an exhaust facility for Mio Espresso, were that required. The Tribunal was informed during closing addresses that the Respondent had responded by way of agreement on 29 February 2012 to much of that list but with some deletions and amendments. Given in particular the continuing relationship between the parties the menu as then altered by and agreed to by the Respondent should be set in full: Mio Espresso Menu BREAKFAST/MORNING TEA/LUNCH/AFTERNOON TEA Toast - Raisin, Thick white and brown, wood fire, grain Bagels - Plain, Blueberry, Cheese (with choices of vegemite, selected jams, cream cheese and ricotta & honey). Cinnamon Toast Croissants - assortment of filled croissants (Almond & custard, chocolate & Custard, Cream cheese & smoked salmon, ham, cheese & tomato, Cheese & tomato). Selection of cakes and slices May include - caramel slice, mud cake, carrot & walnut cake, mini cheese cakes & tartlets (lemon meringue caramel & pecan), petite cupcakes, healthy muffins (gluten free and low fat), banana bread, pear & raspberry bread, mango & coconut scones. Open Melts on Turkish bread made to order (variety of options) -Avacado & tomato -Cheese & tomato -Vegemite & cheese -Avocado, mushroom & boccocini -Ham, cheese & Spanish onion -Bacon, boiled egg & tasty cheese -Salami, olive paste & cheese -Mushroom, caramelized onion & cheese -Salmon, cream cheese, capers & Spinach Assorted Pre-made Wraps and Rolls will vary from day to day depending on seasonal availability- with fillings to include such things as (bacon, baby spinach, tomato, avocado, poached/scrambled or curried egg, ham, smoked salmon, tuna, rare roast beef, chicken, salami, eggplant, zucchini, artichokes, basil, tabouli, Turkey, cheese, haloumi cheese & lettuce, cranberry jam, hollandaise, pesto, sundried tomatoes, Dijon mustard, chutney, Sauce and homemade garlic mayo). Hot selection Mini bacon & egg rolls Mini bacon, lettuce, tomato & mayo rolls Dim Sims, spring rolls, chiko rolls, chicken & corn rolls, Pluto pups Chicken nuggets & chips Chicken drumettes & wings & chips Marinated chicken skewers with satay sauce Marinated lamb skewers with minted yogurt Gourmet sausages. chipolata & chips Beef rissoles & chips Crumbed chicken tenderloins Gourmet sausages rolls, meat pies and spinach pastries Potato scallops Hot chips Beverages Cappucino, flat white, long black, latte, chai latte, espresso, mocha, hot chocolate, macchiato, herbal tea, earl grey tea, English breakfast tea. Iced coffee/iced chocolate/frappuccino Milkshakes (vanilla, chocolate, caramel, strawberry) Frappes with seasonal fruits Refrigerated bottled Cold drinks (excluding juices) It is apparent that nothing on that menu (as altered and agreed) requires the installation of an exhaust facility in Mio Espresso. 20The particulars in the Application refer to a letter dated 22 November 2010 from the Respondent's solicitors whereby "the Respondent refuses to allow the sale of finger foods on the premises". So far as I can discern, that letter was not referred to during the hearing and is not in evidence. However, at meetings on 13 and 20 September 2010 between Mr Bousalman, Ms LeKluse and Ms Nickson, the Respondent's non-approval of any menu expansion beyond, apparently, that given by the letter of 22 March 2010 which I have detailed above, was confirmed, at least implicitly. Those discussions will be covered further in the following section of this decision, dealing with the representation issue. 21I will now deal with some of the evidence dealing with the exhaust facility. An important aspect of this issue is when, and in what terms, the exhaust facility was raised between the Applicant and the Respondent. Mr Bousalman says that it was discussed between him and Ms LeKluse in November 2009 but Ms LeKluse denies that and claims that the first time Mr Bousalman raised it with her was on 8 February 2010. 22Mr Bousalman and Ms LeKluse met on 8 February 2010. Mr Bousalman says in his affidavit: "On 8 February 2010 I met with the Respondent's employee, Melissa LeKluse, and asked her whether she had an answer in regards to the exhaust ducting system and she replied 'no not yet, I should have an answer for you very soon'.'" Ms LeKluse says in her affidavit that on 8 February 2010 Mr Bousalman raised the issue of exhaust with her for the first time. She details the discussion thus in the affidavit: Mr Bousalman said to me words to the effect: 'I am just making enough to pay my bills. Lunch trade is non-existent on the Premises but the sale of coffee is good and I hope to retain it. I want to introduce a deep fryer or hot plate to the Premises and start to sell hot food'. I replied to Mr Bousalman words to the effect: 'The introduction of a kitchen will need a service review. We need to send your request to the services department and make sure there is enough capacity to service the kitchen. Also, all menu changes are subject to Ipoh's approval.' Mr Bousalman then said to me words to the effect: 'I also want to remove all seatings and bring the counter to the edge of the lease line. I want to install wheels on the counter so as to enable entry.' I then replied to Mr Bousalman in words to the effect: 'Any fitout on the Premises would require a design review. As the period for you to exercise your option to renew the Sub-lease is between March 2010 and June 2010, you need to exercise your option before I appoint the fitout coordinator. There will be costs associated with your proposed fitout and you will need to bear the costs of the appointment of a fitout coordinator.' Mr Bousalman said to me words to the effect: 'I don't know what is behind the bulkhead, and whether there are services back there.' I then replied to Mr Bousalman words to the effect: 'I don't know what is behind the bulkhead, I will need to look into it.' Mr Bousalman then said to me words to the effect: 'I would like a floor plan.'" 23After the meeting with Mr Bousalman on 8 February 2010, Ms LeKluse emailed to Ms Laura Nickson (Leasing Executive) and Mr Grant Isaacs (Group Leasing Manager) information concerning reconfiguration proposed by Mr Bousalman of the food menu for, and the layout of, Mio Espresso. Communications among those Ipoh personnel and also involving Mr Andrew Gardoni, the Tenancy Co-ordinator, led to the Respondent approaching Kuttner Collins & Partners (NSW) Pty Ltd, Consulting Engineers of North Sydney. Those engineers advised the Respondent that it would charge a fee of $860.00 to carry out an appropriate services review involving retrieval from their archives of existing service layouts, site investigation to ascertain ceiling space restraints and a report of the availability of existing exhaust ventilation services and capacity for additional exhaust. 24Mr LeKluse says in her affidavit that on 17 February 2010 she had a telephone conversation with Mr Bousalman: "I said to Mr Bousalman words to the effect: 'The cost for reviewing the possibility of whether an exhaust can be brought to the Premises is possibly $860.00 plus GST, and you will have to pay for it.' Mr Bousalman replied to me words to the effect: 'I will review my menu options to determine whether I definitely want to pursue a kitchen. I will get back to you and let you know whether to engage a consultant. Can I get another consultant to review the Premises and see if I can get a cheaper quote?' I then replied to Mr Bousalman words to the effect: 'No, you are required to use our consultants.' I then said to Mr Bousalman words to the effect: 'Our Leasing department is happy to consider changes to the Permitted Use but they would need to determine whether it is appropriate given other competitors in the Centre. You need to submit a menu for Ipoh to review. You need to understand that an exhaust may not be a possibility as it is subject to our final approval. As such, you need to consider menu options that don't require a full kitchen.'" Mr Bousalman does not, I discern, deal with such a conversation in his evidence. 25On 29 June 2010 Ms LeKluse emailed Mr Bousalman: "I have been following up with our facilities department and it appears that the request to investigate whether exhaust can be brought to your tenancy has been overlooked. The cost to undertake this review is $860 + GST. Could you please confirm that you still require this investigation to be undertaken?' Mr Bousalman asked for that investigation to go ahead. By way of a report dated 30 July 2010 Knox Advanced Engineering, of North Sydney, advised Mr Gardoni: "A site inspection and document search was undertaken on Friday, 23 July 2010 revealing that kitchen exhaust duct with sufficient spare capacity to serve this tenancy is located on the other side of the pedestrian mall, approximately 16 metres away. While this area is very busy and significant disruption will be unavoidable, it would be possible to extend the kitchen exhaust system to serve this tenancy. ... To extend the kitchen exhaust system to the rear of the A3 tenancy would be in the order of $10,000 not including the exhaust hood. Our feeling is that the associated builders work and electrical cost associated with relocation of signage, if required, would be in the order of $15,000. We need to emphasise that estimation of the cost of builder's work is beyond our area of expertise and, as such, the latter figure should be regarded as indicative, for budget purposes only." The report attached a proposed layout plan for the location of a possible extended exhaust duct to Mio Espresso. Ms LeKluse attached a copy of the report to an email which she sent to Mr Bousalman on 4 August 2010, advising in part: "In regards to kitchen exhaust, the report has been received from our mechanical consultant, please find attached. Ultimately the report indicates that it is likely to be possible to bring exhaust to the tenancy however this would be a substantial cost (conservative estimate $25,000). Should you wish to consider bringing exhaust to the tenancy, please be advised that this would be at your cost." Mr Bousalman responded by a note dated 16 August 2010: "I Tony Bousalman of Eventus Group pty ltd trading as Mio Espresso wish to proceed with running an exhaust to my tenancy. I look forward to receiving the specifications regarding the works & the final quote."
Representation Issue - Preliminary 26The Applicant's case in relation to the representation issue is put, I understand, on the basis that the alleged representations and the Applicant's reliance on them continued throughout the period from (and including) November 2009 until (and including) September 2010. Accordingly, all relevant events during that period need to be considered and the prominent among them, and there are many of those, should be detailed. 27From November 2009 and until September 2010, most of Mr Bousalman's direct dealings with the Respondent were with Ms LeKluse, the Galeries Centre Manager. There are, in the Galeries, approximately 125 tenants for whom Ms LeKluse is responsible as Centre Manager and she has held the position since June 2006. She is also the Respondent's Centre Manager for the Chifley Plaza and she reports to the Group General Manager. She explained her duties and work practices thus in her affidavit: "As the Centre Manager, my duties include meeting and liaising with prospective tenants of the Centre in relation to their leasing applications as well as financial and physical management of the Centre and providing input to the Leasing and Marketing Departments. It has been and is my practice, as the Centre Manager, to ask prospective tenants questions from a standardised checklist and to keep short notes during meetings with prospective tenants if necessary and to make detailed file notes shortly after the meetings. It has also been and is my practice to keep a voicemail logbook for every voicemail message left for me. In the voicemail logbook, I keep details of the caller, checkboxes indicating my replies, and short notes if necessary. I make this Affidavit after consulting my notes, and any relevant records of the Respondent." 28Mr Bousalman completed an Accounting Advanced Certificate at Bankstown TAFE in 1990. Between 1990 and 1996 he worked in various positions in food retail and spent the last three years of that period managing a family café business at Miranda. Thereafter until 2006 he worked principally in the building industry. He owned and operated a 250 seat restaurant in Bankstown from about 2006 to 2008. In about November 2009 through some business brokers he became aware that the Mio Espresso business was for sale and he established contact with Ms LeKluse. 29In his affidavit Mr Bousalman says: "In November 2009, I was informed by the Respondent's employee, being Melissa LeKluse that 'you can sell hot foods from the premises'. I said to the Respondent's employee, 'I am going to need an exhaust system connected to the premise I intend on purchasing, can you arrange for this for me?' The Respondent's employee said 'yes I can, I will arrange this for you'. I said 'ok then, provided you get the exhaust connected to the premises, I will buy the shop and enter into a lease'. 30Ms LeKluse says in her affidavit that she met with Mr Bousalman on 12 November 2009 and in discussions with him worked through, and completed, a form of Assignee Interview Checklist, which is attached to her affidavit. On that checklist was a question: "Does the proposed Assignee understand the parameters set by the permitted use?" Ms LeKluse indicated in the affirmative in answer to that question and entered the following comment: "Would like to extend the menu but understands that the Lessor has no obligation to approve." In her affidavit Ms LeKluse set out in detail the process she engaged, including the conversation which she and Mr Bousalman had at the time, which is consistent with the notes she made in the form. The affidavit then states: "Mr Bousalman did not express to me his intention to sell any hot food items when he mentioned his intention to change the Permitted Use as referred to above. I also do not have a record of him mentioning it. I believe Mr Bousalman did not mention his intention to sell any hot foot at that stage as it was my practice to note down anything outside the Permitted Use on the Assignee Interview Checklist." Later in her affidavit she refers to the exhaust facility: "...Mr Bousalman and I did not discuss the exhaust system during November 2009. Even if the issue of exhaust was raised at that time, I would not have said 'Yes I can, I will arrange this for you' or words to this effect as I was not authorised to organise the installation of an exhaust system without engaging a consultant's review." 31The differences between Mr Bousalman and Ms LeKluse concerning this initial meeting were emphasised during cross-examination, although neither was directly confronted with the other's affidavit account of that meeting. An example is in Mr Bousalman's cross-examination: "Q. And you knew that once you signed on the dotted line that you probably wouldn't be able to change any of the terms in the lease? A. No, because it clearly states that it's negotiable with the approval of the landlord whenever it suits them, so no. There's a clause there that states there is flexibility. That's what I was relying upon, sorry, because of the initial conversation between Melissa and myself that yes, I can have hot food and yes, I can have the exhaust. Q. So you knew that once you signed the lease you'd have to ask for a change and the landlord was not obliged to agree, could say yes, could say no? A. A slight possibility, but I was relying on her notion that it was going to happen." The following is taken from Ms LeKluse's cross-examination: "Q. Do you disagree or agree that Mr Bousalman was given the impression, if I can just put it at that level, that he was given the impression that it was possible for him to have exhaust system put into his premises? A. No I don't agree that that was the impression when he first met with me. Q. What do you tell the Tribunal? A. I met with Mr Bousalman to discuss his application to take an assignment of lease. As part of my process I review whether the incoming purchaser understands what the permitted use is. We discussed the permitted use and at that time Mr Bousalman did reference that he might want to expand the menu but didn't provide me with any details at that time. I made it clear that the permitted use is what is in the lease which is essentially what he was purchasing the right to sell but that (we still) may consider any variations at a later date as they were submitted." 32In the Checklist, Ms LeKluse noted that "Lease term to be varied to include option for further term of 5 years". There were some ongoing communications between Mr Bousalman and Ms LeKluse concerning the processing of the Respondent's approval of the assignment of the lease. On 19 November 2009, Ms LeKluse and the Group General Manager signed off on an Approval Form for the assignment of the lease and the form included a note that: "The proposed assignee understands that inserting a further option for five (5) years is contingent upon a full fit out of the tenancy being completed which will mean a complete gutting of the existing fit out." 33Mr Bousalman left a message for Ms LeKluse on 19 November 2009 seeking confirmation about that option and Ms LeKluse rang him back on 20 November 2009 to give that. She says she also then discussed with him his wish to add items to the menu of Mio Espresso to the effect of a file note which she made at the time: "spoke to Tony 10.40am
Representation Issue - Conclusions 59I have related in the preceding section of this decision the conflict between the evidence of Mr Bousalman and Ms LeKluse concerning their meeting on 12 November 2009 (see paragraphs 29 to 32 above). At that meeting, Ms LeKluse was engaged in what was for her an ordered and comprehensive exercise, of a type she was familiar with, working through with Mr Bousalman, the Respondent's Assignee Interview Checklist. She noted matters in the Checklist progressively as they went through the items listed there. The only relevant note she made in the Checklist concerning menu expansion was of a wish by Mr Bousalman "to extend the menu", in relation to which she also noted Mr Bousalman's understanding "that the Lessor has no obligation to approve". She has given a comparatively detailed account of the occasion including production of the form she completed. Mr Bousalman's evidence of the discussion is short, and asserts little more than allegedly explicit assurances by Ms LeKluse concerning development of Mio Espresso from its then presentation to the sale from it of hot food and extension to it of an exhaust facility. I was impressed by the content and presentation of Ms LeKluse's evidence as to this and other occasions, and I found her evidence on this and other occasions to be persuasive. It is, I think, likely that if Mr Bousalman had expressed any wishes concerning the sale of hot food from, and the extension of an exhaust facility to, Mio Espresso, Ms LeKluse would have included some note concerning those matters in the Checklist and also such matters would have been given attention by Mr Bousalman's lawyers in the period leading up to settlement of the Applicant's purchase of Mio Espresso. Mr Bousalman's account is unsupported by any contemporaraneous material. I am not persuaded on the balance of probabilities that in November 2008 there was in November 2009 any discussion between Mr Bousalman and Ms LeKluse concerning the sale of hot food from, or the extension of an exhaust facility to, Mio Espresso as alleged by Mr Bousalman. I am not satisfied that the Respondent then made the representations alleged by the Applicant. 60I accept Ms LeKluse's evidence that on 19 November 2009 Mr Bousalman told her by telephone that he wanted to take his time working out what items he wanted to add to the menu and that she told him this could be discussed at a later date but would be subject to Lessor approval (paragraph 33). This discussion, to my mind, reinforces the conclusions which I have expressed in the immediately preceding and succeeding paragraphs. 61I am satisfied that the first time that Mr Bousalman spoke to Ms LeKluse concerning the sale of hot food from, or the extension of an exhaust facility to, Mio Espresso, was on 8 February 2010 (paragraphs 21 to 23). An aspect of this conclusion is that I am not persuaded to accept Mr Bousalman's assertion, which is denied by Ms LeKluse, that on 20 January 2010 and on 8 February 2010 he met with Ms LeKluse and enquired of her concerning any progress in relation to an exhaust system. Ms LeKluse followed the discussion of 8 February 2010 from Mr Bousalman through within Ipoh, to the extent that a consulting engineers' quote to assess the possibility of an exhaust facility was obtained (paragraph 23). That exercise by the Respondent is, I think, sufficiently explained by the context that there was, in any event, to be a complete refit of Mio Espresso carried out by the Applicant prior to the commencement of the new sub-lease in September 2010. It does not in these circumstances suggest to me any intimation by the Respondent of favourable consideration of, let alone agreement by, the Respondent to an exhaust facility for Mio Espresso. 62On 17 February 2010 Mr Bousalman in a telephone conversation with Ms LeKluse declined (at least for the time being) payment for the Respondent's consulting engineers' fees for an assessment of the possibility of an exhaust facility being extended to Mio Espresso and told her he was reviewing his menu options to determine whether he wanted to pursue a kitchen (paragraph 23). This led to a deferment of any further consideration of any exhaust facility for the shop. 63Mr Bousalman then, on 2 March 2010, submitted a proposed written menu to the Respondent, via Ms LeKluse, for the first time (paragraph 15). The Respondent, on 22 March 2010, again via Ms LeKluse, gave its answer to Mr Bousalman with a comprehensive list of what the Respondent approved. As I have previously said the approval of that list by the Respondent (while it was expressed to be for a trial period of one month) seems to have continued at all relevant times up to the hearing. I accept Ms LeKluse's denial of a conversation on 22 March 2010 with Mr Bousalman, alleged by Mr Bousalman wherein, he says, there was suggestion of a hot food bar and exhaust system as, in effect, forthcoming features of Mio Espresso (paragraph 39); other considerations apart, such a conversation would not be compatible with the tenor of the letter of that date. 64On 16 April 2010, I accept, Mr Bousalman enquired of Ms LeKluse as to the possibility of a bain-marie in Mio Espresso (paragraph 40). It was left to Mr Bousalman to develop that proposal by way of a further submission to the Respondent, which appears not to have been forthcoming. This is another indication that Mr Bousalman's ideas for what he wanted to do about development of Mio Espresso were not concluded. 65In May 2010, with prompting from Ms LeKluse, Mr Bousalman exercised the option to renew on behalf of the Respondent (paragraphs 41 and 42). The Respondent's designer embarked on preparation of a design for the fitout of Mio Espresso and this involved communications among Ms LeKluse, Mr Bousalman, and the Applicant's and Respondent's designers (paragraphs 45 to 48). Those communications included Ms LeKluse reminding Mr Bousalman on 29 June 2010 about the possibility of an engineers' investigation concerning the availability of an exhaust facility for Mio Espresso (paragraph 25). That reminder seems to me to be only an aspect of the consideration then being generally given to the refit design and I do not see in it any implicit suggestion of acceptability to the Respondent of such a facility. 66The failure in June 2010 by or on behalf of the Applicant for any assertion of representations by the Respondent in relation to the menu expansion and exhaust facility issues to be included in the Sub-Lessee's disclosure statement (paragraph 43) is significant. The statutory disclosure notice procedure is "...designed to implant firmly in the minds of the parties the importance of transparency as to all matters of significance to each party" and "...lessees should see the disclosure system regime as providing the place in which to record all material representation that induced them to enter the contract" (Armstrong Jones Management Pty Ltd v Saies-Bond Pty Ltd (RLD) [2007] NSWADTAP 47 at [118] and [119]). 67On 4 August 2010 Ms LeKluse forwarded to Mr Bousalman a copy of the engineers' report as to the result of their investigations (paragraph 25). In doing so she used language such as "it is likely to be possible to bring exhaust to the tenancy" and "should you wish to consider bringing exhaust to the tenancy". Again, this seems to me to be only an aspect of the consideration then being generally given to the Applicant's refit design and I do not see in it any implicit suggestion of acceptability to the Respondent of such a facility. 68The negotiations concerning the fitout including the menu expansion and exhaust facility issues come to a halt with the meetings of 13 September 2010 and 20 September 2010 (paragraphs 49 to 58). The evidence concerning those meetings is such that I am well satisfied on the balance of probabilities that the accounts of Ms LeKluse and Ms Nickson concerning those meetings should be accepted and that Mr Bousalman's evidence should not be accepted to the extent that it is inconsistent with the evidence of Ms LeKluse and Ms Nickson. 69Thus, I find myself well satisfied on the balance of probabilities that the Respondent did not at any stage from (and including) about November 2009 to (and including) 30 September 2010 represent to the Applicant that it would permit the Applicant to have either the menu expansion or the exhaust facility. I therefore find in favour of the Respondent on the representation issue and no question of pre-lease misrepresentation, misleading or deceptive conduct or unconscionable conduct on the part of the Respondent arises.
Menu Expansion and Exhaust Facility Issues - Conclusions 70It follows from the above conclusions that to the extent that the Applicant's case for the orders sought in respect of the menu expansion and the exhaust facility issues, is based on representations by the Respondent concerning them, the case fails. There are, however, other matters to be considered. 71In the Menu Expansion and Exhaust Facility Issues - Preliminary section of this decision, I have canvassed material relating to suggestions made, and perhaps pressed, on behalf of the Applicant that the description "finger food" in the Permitted Use provision in the subject sub-lease should be given a wide meaning (paragraphs 16 to 18) such that it would cover items of hot food such as, for example, the items deleted in the menu which the Respondent agreed to during closing addresses (paragraph 19). Construing the phrase "finger food" both on its own and in the context of the surrounding descriptions in the Permitted Use provision, I think that what was suggested by the Respondent's lawyers when they wrote on 26 August 2010 responding to the query raised by the Applicant's lawyers, that the Respondent considered "finger food" to be small food items such that "the entire portion can be eaten in one or two average mouthfuls", was appropriate (paragraph 16). The Australian Oxford Dictionary, 2nd edition, gives, in similar vein, meanings for "finger food" as "food served in such a form and style that it can be conveniently eaten with the fingers" and "savouries". I cannot see that any of the hot food items which the Respondent deleted in the Applicant's current list, commencing with "mini bacon and egg rolls" and ending with "hot chips" ("the contentious items") could be said to constitute, on any reasonable construction, "finger food". I do not understand the Respondent to suggest that any of the other descriptions in the Permitted Use clause would encompass the contentious items. I find that none of the contentious items falls within the Permitted Use clause. 72Among the relief that the Applicant seeks in its submissions are orders, pursuant to s72(1)(c)(i) of the RLA, that the Applicant be permitted to use the menu tendered on behalf of the Applicant on 16 February 2012 as Exhibit A7 (paragraph 19). Section 72(1)(c)(i) empowers the Tribunal (in its discretion) to make and order for a party to: "do any specified work or perform any specified service or any obligation under this Act on the terms of a lease." The relief sought may not strictly come within that provision but it would in any event come within the more general words of s72(1)(c)(iv): "do or perform, or refrain from doing or performing, any specified act, matter or thing. 73Absent (as is the case) any entitlement in the Applicant to the menu expansion based on misrepresentation by the Respondent as alleged by the Applicant or based on proper construction of the items specified in the Permitted Use clause, entitlement to any such relief would require proof by the Applicant that the failure, or refusal, by the Respondent to grant the menu expansion by exercising the discretion given to it under the Permitted Use Clause (paragraph 14) by the words in parenthesis "as substituted or added to from time to time with the prior written approval of the Sub-Lessor", was relevantly flawed. In the written submissions on behalf of the Applicant, in the context of the unconscionable misconduct claim it is contended that the Respondent's behaviour was "not just unfair or unjust but worthy of censure and blame". I would accept that the exercise of such a contractual discretionary power must be effected reasonably and in good faith. I think that relevant guidance is to be found, by way of example, in Renard Constructions (ME) Pty Ltd v Minister for Public Works [1992] 26 NSWLR 234 dealing with a different type of contractual provision, namely, a principal's power to determine a building contract, but because of the discretionary nature of the power, a relevantly similar one; Priestley JA at 255B to 263F and Handley JA at 279B to 280G, held that such power had to be exercised reasonably, and Priestley JA at 263G to 268G (also Handley at 279B to 281C) was of the view that it should also be exercised in good faith. Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558, particularly at [163] and [164], is later authority that in a commercial contract there will ordinarily be implied, as a matter of law, terms of good faith and reasonableness. 74I have detailed above in this decision the factual details of the parties' consideration of the menu expansion from November 2009 to September 2010 at paragraphs 14 to 18 and 29 to 58. I have expressed conclusions relevant to the menu expansion issue at paragraphs 59, 60, 63 and 71 in particular. I am well satisfied on the balance of probabilities that in the circumstances which I have canvassed there, the Respondent's decisions on the menu expansion issue throughout (and particular occasions were 22 March 2010 - paragraph 15; 13 and 20 September 2010 - paragraphs 49 to 57; and 29 February 2012 - paragraph 19) were made reasonably and in good faith and in no way were unfair or unjust or worthy of censure and blame. There was no flaw that I can find in those decisions, let alone one warranting attention by the Tribunal. 75I would add three further comments. First, the protracted consideration of the menu expansion is to be regretted but it has to be remembered that this was occurring in the context of development of the scheduled refit of Mio Espresso. Secondly, it is also to be regretted that Mr Bousalman and his advisers permitted themselves, as I think was the case, to be distracted by what I might term "the finger food issue" (paragraphs 16 to 18 and 71) and that they apparently did not recognise that there were significant opportunities for the advancement of such position as they may have wished to contend for, on the menu expansion issue (and for that matter, the exhaust facility issue) at the time the Applicant's purchase of Mio Espresso was negotiated and completed in November-December 2009 (paragraphs 29 to 34) and at the time of completion of the Sub-Lessee's aspects of the Disclosure Package in June 2010 (paragraphs 43 and 66). Thirdly, that views as to the menu issue contrary to those of Mr Bousalman, expressed on behalf of the Respondent by Ms LeKluse (for example, concerning "the espresso usage that the Lessor wants from this tenancy" - paragraph 52), Ms Nickson (for example, that Mio Espresso "has only ever been known as a tenancy that sells ... great coffee, pastries, just small, quick grab and go food ... I certainly was surprised to get the menu (Mr Bousalman) put forward" - paragraph 50) and Mr Isaacs (for example, "The 'espresso bar' concept is good coffee, fresh pastries, small cakes, toast, fast, fresh and convenient" - paragraph 53), were appropriate considerations on the part of the (leasehold) owner of the shopping complex and consistent with a proper exercise of the sub-lessor's discretion under the Permitted Use clause in the sub-lease. 76The representation issue was central to the Applicant's case on the exhaust facility issue and as I have pointed out, the latter case must fail on account of the failure of the former case. Further, there is no need for any exhaust facility on account of the prevailing Mio Espresso menu (paragraphs 15 and 19) and, as with the Respondent's decisions on the menu expansion issue, I find no flaw in the Respondent's decision that there not be an exhaust facility for Mio Espresso. There is another reason why the exhaust facility case would fail in any event. Any claim for mandatory relief, such as an order under s72(1)(c)(i) or s72(1)(c)(iv), must be "expressed in as clear and unambiguous language as the circumstances reasonably admit" and "as definite, clear and precise in its terms as possible" (Spry, Equitable Remedies, 7th edition, 2007, at 374; also Meagher Gummow & Lehane's Equity Doctrines & Remedies, 4th edition, 2002, at [21-505]). On the facts here, such an order could not be formulated. The Application in these proceedings seeks an order for the installation of "an exhaust fan on the premises according to the Respondent's engineering specifications" and the Applicant's written submissions use similar language. There were only ever detailed on behalf of the Respondent the availability with the Galeries as at July 2010 of physical conditions which would accommodate the extension of an exhaust facility to Mio Espresso and a tentative cost estimate (paragraph 25). Those details were taken no further. Constructions details and a definite cost figure for an exhaust facility were not prepared and Mr Bousalman recognised that they would be necessary, when he said in his note of 16 August 2010: "I look forward to receiving the specifications regarding the works and the final quote." There were thus no "Respondent's engineering specifications" for an exhaust facility which were capable of being the subject of an order by this Tribunal, had the Applicant otherwise made out a case for such a facility. 77There is a final comment I wish to make on the exhaust facility issue. There is some inconsistency as to the Respondent's stated reason for permission not being granted to the Applicant for the exhaust facility. According to Ms LeKluse "exhaust is not available due to food court works and the incoming sushi train" (paragraph 52) but Mr Isaacs said in his affidavit "I was of the view that the installation of an exhaust should not be approved as it is not necessary for an espresso bar tenancy, considered the appropriate use" (paragraph 53). There is evidence that the food court refurbishment was undertaken in about May 2011 and that there would still be some capacity within the Galeries exhaust system, were it required, for an exhaust facility for Mio Espresso (paragraphs 19 and 51). I have an impression that the Respondent should have given a straightforward account, along the lines of Mr Isaacs' opinion, in September 2010, to Mr Bousalman as the reason for not approving an exhaust facility and had that been done, Mr Bousalman's persistence in his stance and the stagnation which has continued since then, of the new, and now overdue, fitout of Mio Espresso may not have occurred. 78My ultimate conclusion on these issues therefore is that the Applicant has not made out any case for the Tribunal to order that either the menu expansion or exhaust facility sought by the Applicant, be implemented.
Monetary Order 79In my opinion, therefore, no case for any relief has been made out by the Applicant. Nevertheless, evidence was taken in relation to the Applicant's claim for a monetary order and it would be as well if, for the sake of completeness, I deal with that. 80The Applicant relies on a report by Mr Ralph Merrell, the principal of Merrell Associates Pty Ltd, public and forensic accountants ("the report"). In the report, being the original report of 12 December 2011 supplemented by a further report of 21 November 2011, opinions are expressed that the Applicant has suffered losses as follows: actual loss from 13 October 2010 to 30 September 2011 - $146,450.00; loss of future trade in profits - $421,776.00; and loss in value of goodwill - $394,000.00. 81The reasoning in the report might be summarised, very shortly, as follows: (a)Cash register tapes from Mio Espresso for 2 weeks from 4 July 2011 to 16 July 2011 showed among other things weekly sales of 1,823 coffees and 476 food items. Therefore, 26% of coffee purchasers also bought a food item. (b)Hot food items which Mr Bousalman wished to add to a range of items sold from Mio Espresso, listed in an attachment to the report and ranging in prices from whole chicken and large chips at $15.00 through to items such as chicken burgers, regular chips and drink at $10.95, and down to regular chips at $2.50, would increase the average price of food items sold. (c)Assuming 26% of coffee purchasers would buy food items including such hot food items, the weekly sales from Mio Espresso would increase in amount. (d)On the basis of sales figures given to Mr Merrell in respect of food retailers in the Galeries, the addition to hot food items to the Mio Espresso would increase the weekly number of sales from Mio Espresso, such as to achieve sales of $1,000 per square metre per week. (e)Under such a sales regime there would be an additional weekly net profit for Mio Espresso of $2,929.00, yielding a total for the 50 weeks from 13 October 2010 to 30 September 2011 of $146,450.00. (f)Applying the same figures to the 144 week period from 10 October 2011 to 12 July 2015, a future loss of $421,776 is calculated. (g)Applying the same figures, an additional annual turnover of $152,308.00 is calculated and valuing additional goodwill on a capitalisation of future maintainable earnings basis over 3 years a figure of $456,924 is obtained and discounting that at 5% per annum "for the time value of money", the result is (say) $394,000. 82Mr Merrell's expertise does not extend beyond accountancy. He said in evidence that he currently has no takeaway food outlet as a client. His report involves a series of deductions from facts, which he has assumed on the basis of instructions, such as the levels of sales of food retailers in the Galeries and the relevant comparability of those businesses to Mio Espresso. There is no evidence proffered by the Applicant by way of substantiation of those assumed facts. There is no statement of reasoning proffered in Mr Merrell's report showing how his expertise as an accountant when applied to the assumed facts could produce the essential results which are deduced, principally those summarised in sub-paragraphs (c) and (d) in the preceding paragraph of this decision; in other words, and using the language of s79 of the Evidence Act 1995, it has not been demonstrated in the report that the opinions expressed are "wholly or substantially based on" "specialised knowledge based on the person's training, study or experience". Proof of assumed facts and such an explanation of reasoning are essential requirements for the acceptability of expert opinion evidence (Dasreef Pty Ltd v Hawchar [2011] HCA 21 at [30]-[43], [90] and [93]). The report is deficient in those respects and is not acceptable evidence, leaving aside the failure of the report, on its face, to include an appropriate acknowledgment of the Expert Witness Code of Conduct (Uniform Civil Procedure Rules 2005 31.23 and Schedule 7). 83Had the Applicant, contrary to my decision, succeeded in any relevant aspect of its claim, the report would have constituted no basis for any monetary order to be made in the Applicant's favour.
Orders 84In the result, the Tribunal ORDERS that: 1.The proceedings are dismissed. 2.The issue of costs is reserved. The Tribunal DIRECTS that: 3.Any application by the Respondent for costs is to be filed and served, with supporting submissions, within 14 days of the publication of this decision and any response by the Applicant is to be filed and served, with supporting submissions, within 14 days thereafter. 4.Any such application for costs, in the absence of any application suggesting the contrary, may be adequately determined by the Tribunal on that material and without holding a hearing.
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: 21 April 2012
Eventus Group Pty Ltd
Ipoh Pty Ltd
(2001) 69 NSWLR 558
Proceedings dismissed; costs reserved; directions given for any costs application.