Fresh Express Australia Pty Ltd v Larridren Pty Limited

Credit 9 As will shortly appear the questions of liability in the case necessarily depend upon the findings of fact which I am called upon to make. Indeed, they necessarily depend upon which version of conversations I accept. 10 As already noted the evidence of Mr Gerace was critical to the case. The affidavits which he had sworn were in some respects notable less for what was said in them but rather more for what was not said. Perhaps had he lived to give evidence at the hearing that affidavit evidence might have been able to have been supplemented by additional oral evidence. But that was not to be. 11 It is obvious from the evidence that Mr Gerace was well known in the fruit and vegetable business in Sydney. I suspect that this came about not only because that industry had a large number of persons of Italian extraction working in it, but also because it was a quite closely knit industry. He had been associated with a Mr Harris who operated a number of retail fruit and vegetable outlets in Sydney and perhaps his reputation in the industry, in part, came about because of this association. Be that as it may, Mr Cerreto, although not directly in the industry, had heard of Mr Gerace at least by reputation and considered him to be a good retail operator. 12 It is also clear from the evidence that Mr Gerace was not a good manager of money. He was, to say the least, unreliable when it came to repaying money. It would seem that this was a concern of Mr Cerreto when considering Mr Gerace, or at least a company associated with him, as a prospective tenant. As will be seen Mr Gerace also owed a considerable amount of money to Fresh Express. Given the rather informal way in which Mr Musumeci approached this loan I have the impression that Fresh Express was not particularly concerned by the fact that money was owed to it by Mr Gerace. 13 Although Mr Musumeci sought at one point in the cross-examination to suggest otherwise I think that he and Mr Gerace were quite close friends. This would account for the informal attitude Mr Musumeci adopted towards the money which had been lent in the past to Mr Gerace and the additional money which Mr Musumeci agreed to advance to Mr Gerace or his company in May 1997. 14 As will become apparent the case of Fresh Express substantially depends upon two sets of conversations. The first set of conversations are those which Mr Musumeci deposes to having had with his solicitor, Mr Freeman. Mr Freeman denies these conversations. I have no hesitation in accepting Mr Freeman when he says that these conversations did not take place. Although it is true that Mr Freeman's evidence was sworn at a time when his firm was a party to the litigation, it must be said otherwise that he had no personal interest in the litigation and no reason not to tell the truth. Although Mr Musumeci is a very impressive business man and gave his evidence confidently I think that the reality is that the dispute the events of which gave rise to the present dispute was not, at the time it took place, of great importance to him. He had more important things to do in running his wholesale business. I have no doubt that he understood that Fresh Express was to get a charge over the fixtures and fittings in the shop to be leased and fitted out by Mr Gerace's company. However, notwithstanding his evidence I think that it is more probable than not that he merely assumed that as Mr Gerace was to fit out the shop he would have title to the fixtures and fittings. It may well be that what was a normal inference to be drawn in the circumstances led later to his reconstructing in his mind the conversation which he deposed occurred between Mr Freeman and himself after the dispute arose between Fresh Express and Alramon. I did not form the impression that Mr Musumeci was deliberately telling an untruth. But, whatever the explanation for the conflict of evidence between Mr Freeman and Mr Musumeci, ultimately the burden of proof lies upon Fresh Express to prove its case. As will be seen, I am of the view that it has not done so. 15 The second set of conversations involves what was said by Mr Cerreto to his solicitor, Mr Cheung. Again I would have no hesitation in accepting the evidence of Mr Cheung over the evidence of Mr Cerreto, if for no other reason than that Mr Cheung had no interest in the litigation (save as a cross respondent prior to the cross claim being settled). However, the discrepancy of evidence is in rather a different position to the discrepancy between Mr Freeman and Mr Musumeci. This is because, as will be seen, it is possible that a misunderstanding arose between Mr Cerreto and Mr Cheung during the course of the conversation which gave rise to a difference in perceptions between them. In other words, it is, I think, possible that both Mr Cerreto and Mr Cheung were telling the truth. 16 There were times during the hearing when it was apparent that Mr Cerreto was seeking by statements he made to bolster the evidence he was giving and to add weight to the case of Alramon. While this was so, I do not think that, at least on major matters, Mr Cerreto was other than telling the truth.

Findings of Fact 17 Mr Musumeci is the principal of Fresh Express. At all relevant times Fresh Express traded in the wholesale fruit and vegetable market, specialising in rockmelons, honeydew melons and tomatoes. It purchased these items either from growers or through a credit co-operative comprised primarily of wholesalers at the Flemington fruit and vegetable market in Sydney and sold them to retail fruit and vegetable shops. There seems little reason to doubt that Fresh Express was a successful wholesaler. Mr Musumuci clearly also had an extensive knowledge of the retail fruit and vegetable market. Through a company Sibmeld Pty Limited, jointly owned with Mr Harris he also had an interest in a retail fruit and vegetable business known as Ashfield Fruit World. 18 Mr Gerace had operated over a period of some thirty years a number of retail fruit and vegetable outlets either through his own companies or in partnership with others, including a shop called Erina Fresh and another called Charlestown Fresh. The latter was run together with Mr David Harris. Fresh Express, as wholesaler, had dealt with Mr Gerace or other outlets in which he was involved over a number of years. Mr Musumeci and Mr Gerace had known each other for at least ten years. 19 In early 1997 Mr Gerace responded to an advertisement which had been placed by or on behalf of Mr Cerreto concerning a shop for lease. Mr Gerace spoke to Mr Cerreto who asked about his experience in the fruit and vegetable business. It would seem that Mr Cerreto knew of Mr Gerace from the Flemington Fruit and Produce Markets, although he had not been formally introduced to him. 20 Mr Cerreto told him either then or in a later conversation that in addition to the shop which had been advertised he had a bigger and better shop at North Ryde in Cox Road. Later Mr Gerace arranged to meet Mr Cerreto. It would seem that this meeting did not take place at the shop. At the meeting Mr Cerreto told Mr Gerace (according to Mr Gerace) in relation to the Cox Road shop that he was looking for a rent of between $1,200 and $1,400 per week. According to Mr Cerreto he told Mr Gerace that he was looking for a rent of $1,800 plus outgoings, that Mr Gerace countered with an offer of $1,000 on the basis of receiving three months free rent and that Mr Cerreto said that he agreed to a rental of $1,000 per week, a rent free holiday for three months and that thereafter the rent would increase by an agreed amount per year. Although nothing turns upon this discrepancy I see no reason to disbelieve Mr Cerreto and accept his version of the conversation. 21 According to Mr Gerace he asked whether there would be a need to spend money on fitting out the shop and was told that Mr Cerreto already had all the fixtures and fittings in the shop and there would only be the need for a tenant to pay rent and outgoings. 22 Later Mr Cerreto met Mr Gerace at the Cox Road shop. Mr Gerace complained that the cash register was no good and Mr Cerreto agreed to replace it. Mr Musumeci on the other hand gave evidence that he knew that Mr Gerace had in fact purchased the cash registers and that he knew the person from whom they were purchased. Mr Gerace also told Mr Musumeci that there would be a need for electrical work to be done, some shop fitting work and there would be a need for four new counters. Mr Cerreto is said by Mr Gerace to have agreed, although it is not clear to what this agreement related. Mr Cerreto presented a different version. He said that Mr Gerace told him that he might wish to make alterations to the shop fittings. Mr Cerreto said that he agreed to that but said that the fixtures and fittings were always to remain the property of the lessor. According to the affidavit evidence of Mr Cerreto Mr Gerace agreed to this. I think that Mr Cerreto's version is rather an attempt to bolster his case and think that it is more likely than not that nothing was said then, at least, about ownership of the fittings and fixtures. 23 It seems that later a shop fitter went to the premises. Mr Cerreto was present. According to Mr Cerreto there was a discussion about the need to demolish some benches and build new ones. That such a discussion took place is likely. I accept that Mr Cerreto agreed to the work being done. However, again I think it is unlikely that thereafter Mr Cerreto said that if the work was done the new benches would become his property and that Mr Gerace acquiesced in that. But whatever may have been said about new benches I do not accept that at that meeting, Mr Cerreto said to Mr Gerace "If one day you sell the shop, any buyer can negotiate separately with me for the use of those fittings." 24 Some days later another discussion took place between Mr Gerace and Mr Cerreto in which there was discussion about the name of the lessee. Mr Gerace says that he nominated a company AMO Pty Ltd; Mr Cerreto says that Mr Gerace suggested that the lease be in his own name subject to advice from an accountant. This difference is immaterial, although since the initial correspondence between Mr Gerace's solicitor (Mr Muriniti) and Mr Cerreto's solicitor (Mr Cheung) referred to the proposed lease as being a lease to AMO Pty Ltd, it is more likely that at the outset Mr Gerace had nominated the company as the lessee. I accept Mr Cerreto's evidence, however, that either then or soon after he, Mr Cerreto, advised Mr Gerace that a guarantee of the lessee's obligations under the lease would be required. 25 Mr Cerreto gave permission to Mr Gerace to start work on fitting out the shop before the solicitors had prepared the lease documents. 26 Some time in March 1997, Mr Gerace approached Mr Musumeci for financial assistance to "kick-start" the fruit and vegetable business in Cox Road, North Ryde. He told Mr Musumeci that he needed approximately $50,000 by way of a loan at interest. Mr Musumeci indicated that he would need some security. Mr Gerace referred to the fact that at that time he already owed Mr Musumeci a lot of money. The amount turned out to be $85,000. The preceding advances were, it must be said, unsecured. According to Mr Gerace he said to Mr Musumeci that if Mr Musumeci helped, Mr Gerace would pay him not only the money that he already owed but also the additional money to be lent for the new business. Mr Gerace apparently offered by way of security "all the plant and equipment in the shop". The money was, so Mr Gerace's affidavit says, needed to buy cash registers and scales, to rewire the shop, make counters and to buy stock. 27 Mr Gerace's affidavit deposes that when Mr Musumeci asked about the coolroom Mr Gerace responded by saying that the landlord had given him the coolroom, the fixtures and fittings in the shop because the previous owner had left them there when he left. That significant part of the conversation, if it occurred, was not repeated by Mr Musumeci in his evidence. Nor is there anything in Mr Gerace's evidence leading up to this first conversation with Mr Musumeci which suggests that there had been any conversation prior to Mr Gerace meeting Mr Musumeci which had taken place between Mr Cerreto and Mr Gerace in which Mr Cerreto said that he would give Mr Gerace any fixtures or fittings at all. While something may well have been said about the coolroom and fixtures it is unlikely that Mr Gerace said what the affidavit narrates, if only because the real facts were that these items had been owned by Alramon and leased by that company to the previous tenant. As that tenant was obliged to do under the lease he or it certainly left the items, or at least the majority of them on the premises when possession was vacated. 28 I also doubt that Mr Gerace said to Mr Musumeci as Mr Gerace deposes that he owned the fixtures and fittings so that these items could be given as security. Again Mr Musumeci does not in his evidence suggest that Mr Gerace did say this. I think it is more likely that when Mr Musumeci asked about security Mr Gerace did say that the only security he could offer was plant and equipment but that no discussion took place then about the items that would be offered as security or for that matter the ownership of them. No doubt it was implicit in that conversation that Mr Gerace was the owner of the plant and equipment. Mr Musumeci by then was aware that Mr Gerace was purchasing some fixtures and fittings and constructing or reconstructing others. 29 The conversation concluded with Mr Musumeci saying that he would speak to his lawyers and get back to Mr Gerace. 30 Either the same day or the next day Mr Musumeci called Mr Freeman a partner in the firm Blessington Judd. Mr Musumeci told Mr Freeman that he was thinking of lending some money on the security of plant and equipment in the borrower's fruit shop. According to Mr Musumeci he told Mr Freeman that he did not want to lend Mr Gerace any more than the $85,000 already owing until the "documentation" was right. According to Mr Freeman, whose evidence I accept to the extent there is any conflict with Mr Musumeci, the latter said after noting that he planned on lending Mr Gerace a further $50,000 that he, Mr Musumeci thought that the only way Mr Gerace was likely to have any prospect of repaying the $85,000 already owned was for Mr Musumeci to lend Mr Gerace $50,000 so that he could set up and equip a fruit shop business and repay the money over time. Mr Musumeci gave Mr Freeman details of the borrower, the shop and the owner of the shop. Mr Freeman noted that his firm through another office at Chatswood also acted for Mr Cerreto. As security for the additional advance there was to be a mortgage over the lease, a charge over the company and a personal guarantee. 31 Also in March 1997 Mr Cerreto contacted Mr Cheung was at the Chatswood office of Blessington Judd and instructed him to prepare a lease of Shop 8 to a company owned by Mr Gerace. The company was at some time thereafter nominated as AMO Pty Ltd. 32 According to Mr Cheung's affidavit evidence (and, as I have already noted, I accept Mr Cheung's evidence as being truthful so far as his memory permitted) during the course of a telephone conversation with Mr Cerreto to obtain instructions Mr Cerreto said to Mr Cheung words to the effect: "It is part of my deal with Gerace is [sic] that I will give him the fixtures and fittings so that he can operate the shop". Mr Cheung responded: "Why are you giving him such a good deal?" Mr Cerreto replied, so Mr Cheung says, in words to the following effect: "While Gerace has no money, he knows the fruit business. He'll be able to turn it around. Plus, I'm getting good rent." 33 This evidence is critical to the Fresh Express case. It is said to prove that Mr Cerreto, acting for Alramon had transferred, or agreed to transfer the relevant fixtures and fittings to Mr Gerace, or his company and so as to permit the company to charge them to Fresh Express as security. It is clear enough that Mr Cheung understood that this was what Mr Cerreto was instructing him. Mr Cheung rejected a suggestion that Mr Cerreto in this conversation had said that he was giving Mr Gerace the fittings and fixtures to use in connection with the fruit shop which was proposed to be leased to Mr Gerace's company. On the other hand Mr Cerreto denies that he said any words to the effect that he had given Mr Gerace the fittings and fixtures. Rather he said that his instructions were that he was giving Mr Gerace the fixtures and fittings to use in the proposed fruit shop because Mr Gerace had no money to buy fixtures. 34 Mr Cerreto did not recall Mr Cheung saying that Mr Cerreto was giving Mr Gerace a good deal, but that if he did, this would probably have been in connection with the rental holiday. Further, he denied that the rent that was to be paid was a good rent. Rather he pointed out that it was less money than he had been getting from previous tenants. It may be noted here there is no evidence one way or another whether the rent which Mr Gerace agreed to pay to Mr Cerreto, taking account of the rent free holiday, was other than a normal commercial rent. 35 Mr Cheung made no note of this conversation, although he agreed in cross-examination that it would have been incumbent upon him to have done so and to have obtained details, such as whether the transfer of fittings was by way of sale or otherwise. 36 I have had the opportunity of seeing both Mr Cheung and Mr Cerreto in the witness box. Mr Cerreto's English is, it must be said, poor. Indeed, Mr Cheung noted that he often received his instructions from Mr Cerreto's son rather than from Mr Cerreto and I would think it was likely that this came about precisely because Mr Cerreto's English was not good. In cross-examination Mr Cerreto acknowledged that he had looked at the lease document to Toutounji (a former tenant) but that there were a lot of words in it that he did not understand. He said he looked at the conditions and summary of lease particulars. I do not find it at all surprising that Mr Cerreto would not understand in detail the language used in a commercial lease, although I have no doubt that by looking at the conditions and summary he would understand whether the lease was generally in accordance with his instructions. I doubt that he would understand the difference between the lease to Toutounji which gave the right to use lessor's fixtures and the lease to Mr Gerace's company which was silent on the matter, although I accept that Mr Cerreto was aware of the fact that the lease was silent on the question of ownership of the fittings and fixtures. On the other hand I have some doubt whether Mr Cerreto contemplated that the question of ownership of fittings and fixtures would be sorted out at a later time as he said in his oral evidence. 37 Ultimately the question for me is whether it is more probable than not that Mr Cerreto intended to convey to Mr Cheung that he had agreed to transfer (or had transferred before the lease was entered into) the fittings and fixtures left on the premises by the previous tenant and which were owned by Alramon to Larridren. Despite my acceptance of Mr Cheung's evidence I do not think that this is what Mr Cerreto intended to convey, even if, as I accept, this is what Mr Cheung believed was said to him. I reach this conclusion for a number of reasons. First there is nothing at all in Mr Gerace's evidence that suggests that Mr Cerreto ever offered or agreed to transfer title in the fixtures and fittings to Mr Gerace's company. If indeed Mr Cerreto had agreed to do so it might be expected that Mr Gerace would give evidence about exactly what Mr Cerreto had said. Secondly, it would seem to be strange to say the least that a landlord would give away fixtures which on Mr Musumeci's evidence were worth $60,000 and which, in Mr Cerreto's assessment were worth $80,000. This is particularly so when one considers that if, for some reason there was default in the lease or otherwise it came to an end the landlord would not be able to deal with a new tenant on a going concern basis, that is to say, by offering a new tenant use of a coolroom and other equipment obviously necessary for the operation of a fruit and vegetable retail business. Rather I think that in the conversation to which reference has been made Mr Cerreto, when using a word such as "give" intended to convey no more than that the fittings and fixtures would be available to the tenant for use. Given the poverty of Mr Cerreto's English it would not be surprising that he and Mr Cheung thereafter were at cross purposes when Mr Cheung pointed out that Mr Gerace had been given a good deal. 38 In or about early May Mr Freeman rang Mr Musumeci and told him that it was necessary that he provide a list of the plant, fixtures and equipment over which there was to be a charge to secure the new loan. Mr Musumeci phoned Mr Gerace and asked him for the list. Mr Gerace told Mr Musumeci that he would get his solicitor to give the list to Mr Musumeci's solicitor. By the time Mr Freeman spoke to Mr Gerace's solicitor on the matter the lessee of the business had become Larridren. 39 When Mr Freeman received the list of plant and equipment he called Mr Musumeci and told him that he would start to prepare the documentation. 40 A few days later Mr Musumeci visited Mr Gerace at the shop premises. According to Mr Musumeci's affidavit evidence while there he received a phone call from Mr Freeman. This phone call and related calls are critical to the Fresh Express case. It is the content of these calls to the extent they involved him which Mr Freeman denies. According to Mr Musumeci the conversation proceeded as follows: "Mr Freeman: Andrew, my Chatswood office has informed me that Sam Cerreto is not happy with the proposal of you taking security over the fixtures, fittings, plant and equipment. [Mr Musumeci]: What do you mean? Mr Freeman: He's advised our office that all the equipment, fixtures and fittings belong to him and not to Tony Gerace." 41 Mr Musumeci then says that the conversation was interrupted and he spoke to Mr Gerace along the following lines: "[Mr Musumeci]: Sam Cerreto is not prepared to sign the documents because he believes that the equipment, fixtures and fittings are his. Mr Gerace: Well that's not true because I have agreed with Mr Cerreto that the equipment, fixtures and fittings are mine. [Mr Musumeci ]: Well, what are we going to do? Mr Gerace: Just tell Steve to put the phone down and I'll call Cheung, and I'll explain the whole thing to him." 42 According to Mr Musumeci, Mr Musumeci then spoke to Mr Freeman and told him that Mr Gerace was going to call Mr Cheung and that Mr Cheung would explain things to Mr Freeman. 43 According to Mr Musumeci Mr Gerace then rang Mr Cheung and said: "Mr Cheung, it's Tony Gerace here, in relation to Cox Road, North Ryde. I was just advised by Mr Musumeci who was advised by his solicitor, Mr Freeman, that Sam Cerreto is not prepared to sign the documents that have been sent to him because of the security that I'm providing to Andrew in relation to the fixtures, fittings and equipment. Let me explain to you that when I originally discussed this business deal with Mr Cerreto, it was agreed that I would have the fixtures, fittings and equipment of the premises and that if I couldn't have these there was no way I could put this deal together. Could you please speak to your client and advise me as soon as possible." 44 Thereafter Mr Gerace spoke to Mr Cerreto by telephone and said (according to Mr Musumeci): "Sam, this is Tony. I've just been on a call with your solicitor in relation to this security over the plant fixtures and fittings. Have you told th em that you're objecting for Andrew to take security over them? If you haven't, could you please tell your solicitor to advise Andrew's solicitor that there's no problems." 45 Later, according to Mr Musumeci Mr Cerreto called back to say that he had spoken to his solicitor. Following that call Mr Gerace told Mr Musumeci that Mr Cerreto had spoken with Mr Cheung and told him that everything was in order and that the signing of the documents would proceed. Mr Musumeci then says that he telephoned Mr Freeman and said: "Steve, Tony has rung Cheung and told him that Cerreto agreed that the fixtures, plant and equipment were his and could be given to me as security. He then called Sam who agreed with this and Tony tells me that Sam has confirmed this with Cheung." 46 A week or so later Mr Freeman called Mr Musumeci and asked him to come into the city to execute the deed of charge, guarantee, mortgage of lease and deed of consent. 47 As already noted Mr Freeman denied that any of these conversations, so far as they were said to involve him, occurred. So far as Mr Freeman's evidence is concerned it would seem that he was never told by Mr Musumeci or anyone else about the arrangement which was said to exist between Mr Cerreto and Mr Gerace regarding the fittings and fixtures. Indeed, had he been made aware of it one might think that he would had felt the need to document the transaction in some way so as to ensure that the charge over fixtures was validly over fixtures which Larridren had power to charge to secure the Fresh Express debt. The fact that he did not do so rather suggests that he was unaware of any arrangements that might exist between Mr Cerreto, Mr Gerace and Fresh Expess. 48 Mr Gerace's evidence, on the other hand, is somewhat corroborative of the evidence of Mr Musumeci. He says that Mr Cerreto called him when he learned that Mr Musumeci was to take a charge over the plant and fittings and complained that the equipment had been given to Mr Gerace not to pass on to someone else. The conversation is denied by Mr Cerreto. Mr Cerreto is said by Mr Gerace to have said that he understood that Mr Musumeci was taking a charge over the plant, fixtures and fittings of the shop. According to Mr Gerace he said to Mr Cerreto: "The fittings are mine, what the hell has that got to do with you?" Mr Cerreto is then said to have replied: "I gave you the equipment, not to pass it on to someone else." Mr Gerace then says that he said: "The only way I can borrow any money is to offer someone security and the only security I have is fixtures and fittings." Mr Cerreto is then said to have said: "Ok. That's fine." 49 Mr Gerace's affidavit then continues by referring to the visit by Mr Musumeci to the shop and the phone call from Mr Freeman. According to Mr Gerace the following conversation then occurred: "Musumeci: Tony, I have Stephen Freeman on the phone. He's telling me that his Chatswood office has told him that the Landlord isn't happy with your proposal that I have security over the fixtures, fittings, plant and equipment. [Mr Gerace]: That's not true because I've had this conversation with Sam (Cerreto) a few days ago and he said it was alright. Musumeci: Stephen is telling me that Sam's [sic] not in ageement with you about the security." [Mr Gerace]: That's not true. Musumeci: Well, Sam is not prepared to sign any documents. [Mr Gerace]: That's not true at all. Musumeci: Well, what are we going to do about this? [Mr Gerace]: Can you tell your solicitor to wait for a few minutes, I'll call Sam's lawyer and explain the whole thing to him. Musumeci: Alright [sic]" 50 According to Mr Gerace he then rang Mr Cheung complaining that Mr Cerreto was not prepared to sign over the fixtures, fittings, plant and equipment so that they could be security for the loan to Mr Musumeci. Mr Cheung is said by Mr Gerace to have said that this was correct. Thereupon Mr Gerace claims to have said to Mr Cheung: "When I originally met Sam we agreed that the only way I would be in a position to take Cox Road was for him to give me the fixtures, fittings, plant and equipment in the shop. A few days ago I had a call from Sam in relation to the security that Andrew is taking and as far as I understand we had an agreement, because without that agreement I can't take this shop. Could you kindly speak to Sam and call me back so that we can fix this problem straight away." According to Mr Gerace Mr Cheung then agreed that he would seek instructions. 51 Mr Gerace then says that he spoke to Mr Cerreto and told him that he had spoken to Mr Cheung. He says that he told Mr Cerreto that he had told Mr Cheung that Mr Cerreto had agreed for Mr Musumeci to take security over the fixtures, fittings, plant and equipment and asked Mr Cerreto to ring Mr Cheung straight away. Mr Cerreto is said to have agreed. Later Mr Musumeci told Mr Gerace that he had spoken to Mr Freeman and that everything was all right. 52 However, it is important to note that Mr Cheung denied that any conversation along these lines to which he was a party had taken place. 53 As I have already noted there is no account in Mr Gerace's evidence of conversations that would necessarily have had to take place between Mr Gerace and Mr Cerreto to lead to title in the fittings and fixtures passing to Larridren. To be fair to Mr Gerace, however, his affidavit suggests that in discussing with Mr Musumeci the possibility of Fresh Express advancing further money he did say that the landlord had given him the coolroom, the fixtures and fittings in the shop because the previous owner had left them there when he left, thereby at least suggesting that something must have taken place. There is a problem of course about this because it would seem that the fixtures, or at least most of them were landlord's fixtures in the previous lease, that is to say they had not just been left on the premises by the tenant, they were required to be left on the premises by the lease itself. 54 I should note that the applicant sought to rely on the differences between Mr Cerreto's lease with his former tenant, Mr Toutounji, and the lease with Larridren to suggest that the fixtures and fittings in the shop had, in fact, been given to Mr Gerace by Mr Cerreto. The two leases that Mr Cerreto agreed with Mr Toutonji contained the following clause: "7.19 The Lessor warrants that the items in the demised premises and listed in Annexure 'A' are the unencumbered property of the Lessor, and apart from the small coolroom [sic] listed on page 2 of the list which must be returned to the Lessor within 48 hours of the Lessor's demand, the rest are for the Lessee's exclusive use during the currency of the lease. The Lessee acknowledges that they are all in good and proper working condition, in a clean and well-maintained state and undamaged as at the date of the commencement of this lease. The Lessee shall be responsible, at the cost of the Lessee, to keep and maintain the said fixtures, fittings, plant machinery and equipment in a clean, well maintained [sic] state and in a good and proper working condition and on expiration or sooner determination of the lease, to return them to the Lessor in the state that they were at the time of commencement of the lease, fair ware and tear excepted." This clause was missing from the Larridren lease. It was also noted that the Disclosure Statement in the Larridren lease said that no fixtures and fittings were provided by the Lessor under the lease. The applicant submitted that differences between the two leases should be taken as evidence that Mr Cerreto intended that the agreements between the parties would be different as he had given title over the fixtures and fittings to Mr Gerace. For the reasons set out in paragraph 36 above I do not think that the difference between the two lease can be said to evince a change in Mr Cerreto's understanding of the ownership of the fixtures and fittings in the shop. It is more likely that the difference between the two leases is merely an expression of Mr Cheung's misapprehension as to the arrangement intended to be reached between his client and Larridren. 55 There is a real difficulty about accepting the evidence (particularly when it is denied by Mr Cerreto) that suggests that Mr Cerreto would give away the fittings and fixtures. One might ask, not unreasonably, why would Mr Cerreto do that? Despite a submission by senior counsel for Fresh Express there is nothing in the evidence to suggest that the rent which Mr Gerace's company was to pay was so specially high that a landlord would make such an extraordinary gift to a tenant. Nor is it suggested that at this time, at least, Mr Musumeci was to provide a guarantee of the lease. The only name suggested as a guarantor at that time was Mr Gerace's girlfriend or fiancée, Laura Scullion. While I can understand that Mr Cerreto might well have agreed to facilitate a borrowing by Mr Gerace to enable fit out work to be undertaken where that might work to the benefit of the freehold in an amount worth at least that of the fixtures over which security was to be given, that does not seem to be the case here. Indeed, it seems here that the fittings and fixtures to be made available to Fresh Express as security (or at least as the Fresh Express case would have it based on the estimation of Mr Musumeci) were worth between $60,000 and $80,000, whereas the money to be advanced by Fresh Express under the additional loan was no more than $50,000. 56 Further, I think that it is more probable than not that Mr Musumeci understood that Mr Gerace was doing fit out work involving new counters etc and that any reference to a mortgage or charge over fittings and fixtures in conversations between them, was really a reference to the fittings and fixtures which Mr Gerace was having built and not fixtures or fittings that belonged to Alramon. 57 On 13 May or thereabouts, Mr Musumeci spoke by phone with Mr Freeman. As a result Mr Freeman acting for Fresh Express wrote to his partner Mr Cheung acting for Mr Cerreto. Mr Freeman advised that Fresh Express had agreed to advance certain moneys to Larridren and that as security for the money it required a mortgage over the lease that was to be granted by Alramon to Larridren. Enclosed with that letter was a draft agreement to grant a mortgage over the lease. No reference at all is made in the letter to any mortgage or charge over fittings and fixtures which were owned by Alramon and which were to be transferred to Larridren. This merely reinforces the view I take that at least to that stage there had been no suggestion that there was to be a transfer of ownership by Alramon of the fittings and fixtures which it owned and which were physically on the premises of the Cox Road shop. 58 On the same day Mr Freeman wrote to Mr Gerace's solicitor, Mr Muriniti. The letter encloses a draft deed of charge of fixtures as well as the draft mortgage. Mr Freeman requested Mr Muriniti to insert in the deed of charge a schedule of the assets to be charged with appropriate serial numbers. The letter says that Mr Freeman had advised Mr Musumeci not to proceed with the making of any part of the advance until both the deed of charge and mortgage were registered. 59 In fact it would seem that Mr Musumeci ignored the advice, or alternatively had already advanced monies before receiving Mr Freeman's advice. Notwithstanding that Mr Musumeci gave oral evidence that he would not have made the advance of $50,000 which he had otherwise agreed to make to Mr Gerace unless there was in place a mortgage over the fittings and fixtures of the Cox Road shop formerly owned by Alramon and transferred to Larridren this evidence was clearly not true. There was tendered in evidence bank records which showed that on 13 May there was cleared through the bank account of Fresh Express with Westpac a cheque for $15,000 which it is now admitted was a part of the additional advance of $50,000 which Mr Musumeci had agreed to make and which was made out in favour of Larridren. In other words before the security said to be a prerequisite to the making of any additional advance to Larridren had been signed and registered Fresh Express had already advanced more than one quarter of the additional amount it had agreed to advance. Indeed, it would seem that the $15,000 advance was made before Mr Musumeci even knew precisely what the fittings and fixtures were over which he was to get security. 60 While on the subject of the dates on which cheques were drawn in favour of Larridren for the additional $50,000 advance it may be said that the evidence was quite unsatisfactory. The company's ledger showed advances to Larridren as having been made on 16 May, although it is conceded this was not correct. It seems that cheque butts may not have been dated. Certainly the only cheque butt available, that for the cheque of $15,000 had no date on it. Of it, all that could be said is that it was drawn no later than 13 May 1997. Since it was an ordinary cheque it is quite likely that the cheque was dated earlier than the date on which it was cleared through the company's bank account. But whether it was the case that all cheque butts were undated, Fresh Express was unable to produce any cheque butts or bank statements indicating either when cheques were drawn or cleared through the company's bank. They apparently could not be located. And despite Mr Musumeci deposing in his affidavit to the effect that one cheque for $50,000 had been drawn in favour of Larridren after the security had been put in place it is clear that there was more than one cheque drawn and quite unclear when any subsequent cheque was drawn. 61 Another unsatisfactory part of this evidence is that the initial statement of claim asserted that the original loan to Mr Gerace was $80,000, whereas later in evidence the amount was said to be $85,000. The ledger which shows the loan suggests that there was one loan amount of $84,850.76. However, the suggestion that there was only one advance is clearly incorrect. The evidence now suggests that the amount, whatever it was, was advanced over a period of some 18 months in some at least of which time Mr Gerace was employed by Sibmeld which, it will be recalled, was a company in which Mr Gerace was personally interested. The bookkeeper for Fresh Express, Carmen Attard, gave evidence that the loan was made in 3 parts either to Mr Gerace directly through a company (affiliated with Fresh Express) called Nature Knows Best or to a company called Suprem which was a Melbourne business owned by Mr Gerace. 62 On 13 May 1997 Mr Muriniti faxed to Mr Freeman a list of the fixtures. The list reads as follows: "(1) 3 Registers and Tec Scales Computerised. (2) 1 Automatic SL 5700 Scale (3) 4 Clock Scales (4) 1 Pallet Jack (5) 1 Net Machine (6) 1 Forklift (7) 1 Coolroom (8) 30 Trolleys (9) All counters and shelves in the shop (10) Racks in the storeroom (11) All stock from time to time." The list is similar to the schedule of fittings and fixtures which was contained in the lease from Alramon to Toutounji, the previous tenant who had operated the Cox Road fruit shop and who had vacated the premises around March 1997, giving rise to the arrangement being negotiated of a lease of those premises from Alramon to Larridren. However the number and nature of some items is different. 63 Mr Cheung had prepared a draft of the proposed lease in March 1997 which he had forwarded both to Mr Muriniti acting for Mr Gerace and to Mr Cerreto. On 13 May 1997 (or according to Mr Freeman on 8 May - nothing really turns on the date) Mr Freeman spoke to Mr Cheung by telephone and announced that he was acting for Fresh Express and that that company had agreed to advance money to Larridren, the company which was to be the lessee of the shop premises. The telephone conversation was confirmed by a facsimile from Mr Freeman to Mr Cheung enclosing in draft a Deed of Consent to a mortgage over the lease. Mr Cheung rang Mr Cerreto that day and advised him of the conversation and of the possibility of a conflict of interest as he and Mr Freeman were partners. Mr Cerreto did not have a problem about the potential conflict. It seems on the same day that Mr Cheung explained to Mr Cerreto the effect of the Deed of Consent to the mortgage of the lease. Mr Cheung advised Mr Cerreto that he should require a guarantee of the lessee's obligations under the lease from Fresh Express in the event that there should be a default by Mr Gerace's company. 64 On 14 May Mr Cheung wrote to Mr Cerreto saying that he saw no reason to object to the mortgage of the lease. Nor did he see any reason for objecting to the request to consent to it. He wrote: "I do not see the ground for objecting, particularly when you want the present lessee whom you know to take up the lease." Certainly the letter enables one to find that Mr Cerreto was keen to have Mr Gerace's company as tenant. But it does not follow from this that Mr Cerreto was so keen as to give away the fittings and fixtures (including the built in coolroom) to that company. 65 There was thereafter further correspondence passing between Mr Cheung and Mr Freeman and Mr Cheung and Mr Cerreto. It may be noted that the lease particulars which Mr Cheung prepared contained no reference to fixtures and fittings and that on 19 May Mr Cheung told Mr Freeman that a guarantee from Fresh Express was required. 66 It was not until 28 May 1997 that Mr Cheung received from Mr Muriniti the lease documents executed by Larridren and Mr Gerace and not until 30 May 1997 that the lease and Deed of Consent were signed by Alramon. The Deed of Consent appears not to have been signed by the parties other than Alramon until sometime around 2 June 1997. 67 Although the documentation had not been completed it would seem that Larridren commenced trading approximately a week before the end of May 1997. The lease showed a commencement date of 22 March 1997 with the rent free period continuing until May of that year. 68 From an early date it must have been clear that Larridren had financial difficulties. On 27 May 1997 Mr Muriniti told Mr Cheung that Larridren would have difficulty in making the payment of $4,345.24 for the June rent, the first rental payable under the lease. In fact this amount was paid out of the money which Fresh Express advanced. 69 It seems that around August 1997 Larridren defaulted in repaying amounts it owed Fresh Express. Certainly this was what was alleged by Fresh Express and it does not seem to have been denied by Mr Gerace. The evidence does not make it clear when the monies were repayable, although Mr Freeman's instructions from Mr Musumeci were that the $50,000 was to be repaid in December and the $85,000 was to be repaid in April 1998. In any event on 2 September 1997 Mr Musumeci instructed Mr Freeman to give Mr Gerace a 14 day notice of demand. It seems that the demand was effectively ignored. On 23 September Mr Freeman was instructed by Mr Musumeci that there was a default and notified Mr Cheung of the default and that Fresh Express was going to take over the lease. 70 On some date in September 1997 Mr Gerace, it seems, left a message on Mr Cerreto's answering machine saying that he was leaving the business and was giving the keys to Mr Musumeci who was to take over the shop the next morning. 71 Mr Cheung advised Mr Cerreto of the intention of Fresh Express to take over the lease. On instructions Mr Cheung wrote on 24 September 1997 to Mr Freeman thanking him for the advice and indicating that he was instructed that the following chattels belonged to Alramon, viz: "a. Steel frame timber benches located around the walls b. Mirrors c. Three check out counters d. Fork lift e. Cool room and f. Wrapping machine." The emphasis on instructions probably reflects the understanding Mr Cheung had that the fixtures had been transferred to Larridren. 72 By 30 September 1997 Mr Freeman had notified Mr Cheung that Fresh Express had taken possession of the premises. It appears that there had been difficulty in registering the lease and mortgage of the lease as a result of there being a mortgage on the title of the premises. Mr Freeman suggested that rather than that Fresh Express take over the existing lease a new lease be granted to Fresh Express in identical terms to overcome concerns about registration of the lease and mortgage of lease. Mr Cerreto advised Mr Cheung that he had no objection to this course. Mr Cheung conveyed this to Mr Freeman in a letter dated 30 September 1997. The penultimate paragraph of the letter reads: "And as regards our letter of 24 September 1997, Alramon Pty Ltd maintains that the chattels belong to Alramon Pty Ltd." 73 Nothing appears to have happened then until 6 November 1997 when Mr Cheung wrote to Mr Freeman asking whether Fresh Express had given Mr Freeman any further instructions. On 18 November Mr Cheung wrote to Alramon advising that Fresh Express was to take up a new lease for the balance of the original term and on the same terms and conditions. He enclosed a disclosure statement for the information of Alramon. The disclosure statement notes that the lessee was to pay for all fittings, fixtures, etc required by the lessee for the business and that no fixtures etc were to be provided by the lessor. 74 That evening Mr Cerreto faxed Mr Cheung a list of fittings and fixtures which, presumably Alramon claimed to be its property. It seems that Mr Cerreto had before sending the facsimile told Mr Cheung that he wanted an acknowledgment of ownership of these items in the disclosure statement. The list was as follows: "* 3 check out benches

• Rheem hot water service
• CROWN pallet jack, Model number: GYSS5-NT
• LARGE COOLROOM Including: Motor Serial number 152770 Model Number F35170A
• Office
• 1 Rapping [sic] Machine: COLLAR electric: Serial Number 2911
• 2 Double Shelfing [sic] Benches all around the walls of the shop including mirrors
• Datsun Fork lift vehicle - Model Number FG 103 Capacity - 1300kg Engine Model D-11
• 1 Boral gas bottle." Otherwise Mr Cerreto had no difficulty with the disclosure statement. 75 On 19 November Mr Cheung sent an amended disclosure statement to Mr Freeman with the request that it be signed by Mr Musumeci as guarantor and Fresh Express as lessee. The amended statement contained an acknowledgement to be given by Fresh Express that the fittings enumerated in the previous paragraph were fixtures of the lessor. There was another change concerning a bank guarantee requirement which is not presently relevant. 76 There was some cross-examination directed at why Mr Cerreto had in September or November, and apparently for the first time, raised with his solicitor and with Mr Musumeci the question of the role of fixtures in the lease. Mr Cerreto said that as between Mr Gerace and him they both had understood which fixtures belonged to Mr Cerreto, albeit that they had never got around to put it down in writing. Mr Cerreto said that he had been careful to put down in the list only those items that were clearly the property of Alramon. It may be noted that the list in the letter of November 1997 differed from the list in the letter of 24 September 1997. The discrepancy was, Mr Cerreto said, merely an oversight. Mr Cerreto was vague as to whether he had read with care the correspondence as it emanated from Mr Cheung. 77 On the whole I would accept Mr Cerreto's explanation. The correspondence in question is really the first time that Mr Cerreto had to face the real prospect of having Fresh Express as a tenant. If one accepts, as I do, that as between Mr Cerreto and Mr Gerace there had been no suggestion that the fittings and fixtures were to be transferred to Mr Gerace but that, subject to any new items, whether they were cash registers or fork life truck or otherwise which Mr Gerace may have acquired in commencing the business of Larridren they were the property of Alramon, on the premises and ready for use in the retail store it would not be surprising that Mr Cerreto would want to have the position as to fixtures made clear as between himself and Mr Musumeci, particularly when it would have been obvious that Mr Musumeci would not want to operate the shop himself but more likely would be seeking another operator of the shop at least in the future. That is a more likely explanation for Mr Cerreto raising the question of the fittings and fixtures than the explanation which senior counsel for Fresh Express urged upon me, namely that for reasons which are hard to explain Mr Cerreto deliberately and falsely asserted for the first time that he had title to the items, despite having transferred that title to Larridren beforehand. 78 It is appropriate at this stage to note that in the time Larridren had occupied the shop it had erected new signage, constructed three new counters at the front of the shop, two very large counters in the middle of the shop, constructed decking under the counters in the shop, purchased three cash registers and brought five scales into the shop. Mr Cerreto did not seek to assert ownership of most, at least, of these items. 79 It is clear that Mr Cerreto required terms in the proposed new lease to Fresh Express that were different from those in the lease to Larridren. A bank guarantee of rent was proposed where previously there had been none. Title to the fixtures and fittings enumerated was to be acknowledged. When no agreement as to the terms of the new lease was forthcoming Mr Cerreto instructed his solicitors to threaten Fresh Express with termination of the existing lease. On 1 December 1997 Blessington Judd attempted to serve upon Mr Musumeci a notice terminating the lease. By this time, however, it was clear to both Mr Freeman and to Mr Cheung that they could no longer continue to act for Mr Musumeci and Mr Cerreto at the same time. 80 On 21 January 1998 McCabes, by then the new solicitors for Mr Musumeci and Fresh Express wrote to Alramon (it seems that at that time Mr Cerreto had not yet instructed a new solicitor) asserting that the notice of termination was invalid. The letter referred to the draft of a new lease and indicated that with the exception of the item relating to fixtures and fittings Fresh Express agreed to all terms in the Disclosure Statement. As to the fixtures and fittings the letter said: "It is our clients' position that the following fixtures are the assets of Larridren Pty Limited as a result of a specific agreement between Larridren Pty Limited and Alramon Pty Limited when entering the initial lease. The list of equipment Three checkout benches; Rheem Hotwater service; Crown pallet jack model number GYSS5-NT; Large Coolroom motor, serial number 152770 model number F35170A; One wrapping machine collar electric serial number 2911; Two double shelfing [sic] benches all round the walls of the shop including mirrors; One Datsum forklift vehicle, model number FG103 capacity 1300 kilos engine number D-11; One Boral Gas Bottle." Again it may be noted that this claim of ownership did not seek to cover most, at least, of the items acquired by Larridren after it commenced to fit out the shop. 81 The letter requested Alramon to confirm that these items in fact formed part of the equipment owned by the Tenant. On 9 February, when there was no reply McCabes followed up the letter requesting a reply as a matter of urgency. When no written reply was received McCabes wrote again on 4 March 1998. It seems that in between the last two letters there was a telephone conversation in which Mr Cerreto denied that the fittings and fixtures listed belonged to Mr Gerace. Mr Cerreto made it clear that he was not prepared to enter a lease unless Fresh Express accepted that Alramon owned the fixtures and fittings. As Mr Cerreto said in his oral evidence: "I wasn't prepared to give him the fixtures and fittings. That's what they wanted." 82 By 24 July 1998 Fresh Express, which by then had changed solicitors, threatened legal proceedings. The nature of the threatened proceedings was not mentioned. 83 From the time Fresh Express took possession of the business until 30 April 2000 Fresh Express carried on the fruit and vegetable business, employing a manager to run it. Details of the business results are dealt with hereafter under the heading of Damages. On or about 1 May Fresh Express vacated the premises. They remained vacant thereafter until the middle of February 2001. 84 According to Mr Cerreto Fresh Express left the premises in a messy condition which took between three or four days and two weeks to clean up. There were, he said, rats, cockroaches rubbish and dirt to be removed, windows to be cleaned and the premises required painting. The roller door in the premises was damaged and had to be fixed and there was some repair work to benches, trolleys and the like. The painting was not done until July/August 2000, the window cleaning on 20 May 2000, the repairs for benches were only completed by the end of July 2000. 85 Between the end of July and December 2000 Mr Cerreto endeavoured to lease the shop. He said that he advertised it for lease in the Sydney Morning Herald three times (each at a cost of $150 per advertisement) and left a large sign in the window of the shop indicating that it was for lease. There were some 40 inquiries from prospective tenants in response to the advertisements. No tenant was, however, forthcoming. The premises were still vacant in September 2000 when Mr Cerreto swore an affidavit dealing with the damages claimed to be suffered by Alramon in its cross-claim. Mr Cerreto said in that affidavit that he then intended to open the premises and trade from it himself as a fruit and vegetable market from 1 December 2000. At the time of hearing Alramon had gone into possession (probably in February 2001) and had operated the shop for some time, but had then vacated the premises to allow some building work to be carried out. 86 According to Mr Cerreto's evidence the majority of prospective tenants with whom he spoke were insisting upon rent free periods. Some wanted up to twelve months. Mr Cerreto was not in favour of rent free periods, he said, save that he had agreed to give Mr Gerace a three month rent free period. Some tenants were not "bona fide" by which Mr Cerreto meant that they had no experience in fruit and vegetables or did not speak English fluently.

Conclusions as to liability 87 It was conceded by senior counsel on behalf of Alramon that provided Fresh Express could make out the factual basis of either or both of the substantial claims based upon breach of s 52 of the Trade Practices Act it would be entitled to recover damages. The submissions turned, therefore, on whether Fresh Express had made out the factual basis of either claim. SLANDER ON THE TITLE 88 As an alternative to the first trade practices claim Fresh Express pleaded that Alramon had committed the tort of slander on the title. It is convenient to deal first with this alternative claim 89 There is some doubt as to the status of this tort in NSW. To establish the elements of slander of title it is necessary to prove there was malicious publication to a third party of a false statement disparaging the title to real or personal property causing special damage. Both proof of malice and special damage must be proven. It would be necessary, therefore for Fresh Express to prove that Mr Cerreto asserted ownership by Alramon of the fittings and fixtures, knowing the title had been transferred to Larridren, with the intent to injure and so cause special damage to Fresh Express such that the company was unable to dispose of the lease of the retail fruit shop or only able to dispose of it at a considerably reduced price. 90 The Trade Practices Act "offers an alternative remedy against 'misleading anddeceptive conduct' … not dependent on proof of malice and special damage": J G Fleming The Law of Torts, 9th ed. 1998 at p. 781. It is only necessary in a trade practices claim to establish that the misrepresentation was made, that it was misleading or deceptive and that the applicant relied on the representation. The intent or belief of the defendant is not relevant. The focus of s 52 is "upon the misleading of others rather than upon the injury to a competitor": Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 per Stephen J at 228. If it is not possible for Fresh Express to establish liability under the Trade Practices Act it would not be possible for it to succeed under the higher standard necessary to establish slander of title. 91 It is unnecessary to decide whether the tort does still exist in NSW, also because at the least a claim made out under s 52 of the Trade Practices Act would entitle the applicant to the same damages as would the corresponding claim in tort. As already noted, failure to make out a claim under s 52 of the Trade Practices Act would likewise result in a failure to make out the claim for slander on the title. CONCLUSION OF THE FIRST TRADE PRACTICES CLAIM 92 For the reasons which I have given in the discussion on fact above I am of the view that the applicant has not satisfied the burden of showing on the balance of probabilities that Alramon had transferred or agreed to transfer title in the fittings and fixtures to Larridren so as to permit that company to charge the items in question to Fresh Express. It follows, therefore, that the assertion by Alramon in September 1998 that it had title to the fittings and fixtures in question did not constitute a contravention of s 52. THE SECOND TRADE PRACTICES CLAIM 93 So far as the second way in which Fresh Express has put its claim Fresh Express has not satisfied the burden of showing, on the balance of probabilities, that Alramon represented at any time, whether before or after May 1997 that it would transfer, or that it had transferred title in the relevant fittings and fixtures to Larridren so as to enable Larridren both to represent that this had happened to Fresh Express and to give a charge over these assets to Fresh Express. The second Trade Practices claim must therefore fail. 94 Had I found to the contrary of the last paragraph I would not, in any case, have found that Fresh Express relied upon the representation said to have been made in making any advance to Larridren. Rather, it seems to me, that Fresh Express would have not only advanced the amount of $15,000 which it advanced on or before 13 May 1997 and before the security documents were in place (and Mr Musumeci was aware that the security was not in place on this day) but also would have, if necessary, advanced the balance of the amount which Mr Musumeci had agreed with Mr Gerace would be advanced. 95 There is, additionally, a case pleaded in estoppel, based upon the representation said to have been made by Alramon that that company would transfer, or had transferred, title in the fittings and fixtures to Larridren for the purpose of enabling Fresh Express to take security over them. Since Fresh Express has not proved that that representation was ever made the claim in estoppel must likewise fail. 96 As a result of these conclusions it is strictly not necessary to set out my conclusions on the question of damages. However, in case the case should go further I set out now, albeit briefly, a summary of the evidence on damages and my conclusions on it.

DAMAGES 97 Fresh Express claimed damages pursuant to s 82 of the Trade Practices Act for the alleged breaches of s 52 of the Trade Practices Act or damages for breach of the equivalent section of the Fair Trading Act 1987 (NSW) in excess of $750,000. Given that on the evidence the fixtures in dispute were worth at the most $80,000 including the coolroom and that the coolroom was admittedly a fixture so that it passed with the lease of the shop and could not easily be removed, and that there was nothing special about any of the fixtures such that they could not be easily replaced, it is hard to see that any breach of s 52 would result in damages of that order. 98 Expert evidence was given upon behalf of Fresh Express by Mr Frank Gelonesi of Gelonesi DeBortoli & Co and on behalf of Alramon by Ms Tammy Lindsay, a director of Horwath (NSW) Pty Limited. Mr Gelonesi, in addition to practising as a chartered accountant specialising in accountancy and tax law also lectured part time at the University of Western Sydney to students, both undergraduate and graduate in accountancy. Ms Lindsay practised as a chartered accountant and was a partner of the Howath Sydney Partnership. 99 Mr Gelonesi, working from the primary records of Fresh Express calculated that for the period until 30 June 1998 Fresh Express operated the retail business (here referred to as "Nino") at a loss of $109,461.04. For the full financial year ended 30 June 1999 the business was operated at a loss of $134,524.88 and for the year ended 30 June 2000 the business made a loss of $139,770.89. 100 Ms Lindsay in her initial report drew attention to what she saw as inadequacies in the records. She formed the view that sales figures were understated by $2,741 for the 1998 year, $3,502 for the 1999 year and $3,457 for the 2000 year. She said that she was unable to verify purchases. Her report does not suggest any major differences in the figures calculated by Mr Gelonesi and she was of the view that the categories of expenses in the Nino's profit and loss statements were reasonable. Her biggest criticism lay in management fees to which reference will shortly be made. 101 In accordance with the Court's practice Mr Gelonesi and Ms Lindsay conferred and as a result of their discussions there was produced a joint statement setting out the matters upon which they disagreed and the matters upon which they agreed. At the last minute, however, Mr Gelonesi declined to sign the joint statement because he had changed his mind with respect to an important matter, namely the relevance of industry gross profit margins as prepared by the FMRC Benchmarking Team Pty Ltd, associated with the University of New England for retail fruit and vegetable shops. I shall return to that matter later. 102 Although Ms Lindsay had expressed reservations concerning the accounting records of Fresh Express it is to be noted, subject to the qualification below, that verification checks she undertook did not disclose any major discrepancies. It is no doubt true that Ms Lindsay was unable to confirm the accuracy of every item of the Nino's Profit and Loss Statement. However, it seems clear to me that subject to matters which were agreed between Ms Lindsay and Mr Gelonesi the figures contained in the profit and loss statement should be taken as correct. The qualification is that the sales figure in the accounts of the business were understated by the relatively minor amounts calculated by Ms Lindsay. There was no evidence to suggest that purchases shown in the Nino's accounts included some of the Fresh Express wholesale purchases. I would accept the corrections of the purchases as shown in the profit and loss statement. 103 One area of disagreement between the experts was the item in the accounts referred to as "management fees". It seems that employees of the Fresh Express wholesale business spent time on the Nino's retail business and accordingly that a percentage of their earnings was charged to the retail business in calculating the loss. It was Ms Lindsay's view that this item should not be taken into account since the wholesale business was conducted not by a separate legal entity but rather by the same legal entity as conducted the retail business. It can be accepted, of course, that the management fee was an "interdivisional charge" but it does not follow from this, in my opinion, that it should be eliminated. It seems clear on the evidence that the charge represents no more than the time cost of Fresh Express employees to the extent that they were engaged in the retail business in performing the "back office" functions of the shop such as accounting, paying creditors, organising employees, record keeping, arranging insurance etc. Had their time not been utilised for these functions it would have been necessary to engage employees to do this work. It is no answer to say that because these persons were employed already by Fresh Express the time they worked on the retail business could not be a loss of the retail business. I agree with Mr Gelonesi that the management charge should be taken into account in calculating the loss of the retail business. 104 It was apparent that the trading figures showed that the business had been run at a gross profit margin significantly below industry average. The reason for this was not clear. One explanation could have been that the sales figures were understated. Another, perhaps, that the cost of sales figures included some costs from the wholesale business. Other possibilities could be that sales were heavily discounted to attract customers or that because the business was run by a manager there could have been considerable waste as the manager might not have taken the care to avoid waste which a prudent operator would take. There is always the possibility of fraud. 105 Whatever the reason the experts were in agreement that the profit and loss figures should be recast using the FMRC data for businesses of comparable size and locality. Calculations were made using percentages varying from 20% to 28% with Mr Gelonesi supporting the lowest percentage. The higher the percentage adopted the lower the loss suffered. However, Mr Gelonesi resiled from adopting the 25% figure he initially favoured because he said that he realised that the FMRC figures used were gathered from owner operated businesses, whereas the shop from the time of the departure of Mr Gerace until Fresh Express vacated the premises was being managed by a paid manager. This caused him to press for a lower percentage. 106 Mr Gelonesi said in oral evidence that a percentage of 25% was an appropriate percentage. However he had no experience of advising management businesses in the fruit and vegetable retail market and I do not think that I can accept his expertise as such as to permit me to rely upon this figure. Indeed, the evidence does not really enable me to determine whether the 25% figure originally adopted would be more or less appropriate than the 20% figure which he subsequently espoused. I do accept that it would be likely that owner/operated businesses would produce better returns than managed businesses. However the FMRC data does not suggest that a 20% figure should be used and there is no other expert evidence supporting it. 107 Accordingly I would adopt as indicating the real loss suffered by Fresh Express the calculation made using the 25% gross profit margin but not eliminating the management fee. On this basis the adjusted net loss would be for each of the three periods: 1998 - $16,199; 1999 - $73,472 and 2000 - $93,930. As I understand it these figures take into account the adjustment for sales. 108 There is a question whether it was reasonable for Fresh Express to continue to trade at a loss for the period it did. Alramon claimed that Fresh Express was under a duty to mitigate its loss and that it had failed to do so, with the consequence that any loss suffered should be reduced so as not to continue beyond the period that it was reasonable for Fresh Express to continue to operate at a loss. Ms Lindsay in her evidence argued that Fresh Express should have shut down the operation within 12 to 18 months of having commenced it because of the persistent operating losses. It is true that Fresh Express was liable for the rent anyway, and that unless it operated the business it would have no chance of recouping that loss. However it does seem to me that Fresh Express did continue operating at a loss beyond the period that was reasonable and that some account should be taken of this. 109 Evidence was adduced on behalf of the Fourth Respondents and relied upon by Alramon from a Mr Jamieson, a licensed business agent and principal of Jamieson Corporate Services Pty Ltd who had been a management consultant and project investment manager with the Australian Industry Development Corporation from 1970 to 1975 among other positions he had held. 110 Mr Jamieson in his affidavit evidence was asked to address two questions. The first was whether in a business of similar kind to Ninos the landlord's ownership of fixtures and fittings would affect the saleability of the business and the second was what steps a reasonable vendor in the position of Fresh Express would take in order to sell the business as a going concern and whether Fresh Express had taken all reasonable steps to sell the business. Mr Jamieson expressed the view that because the fittings were not unique and because the lessor had in any event allowed the business unfettered access to and use of fixtures and fittings for no additional cost the lack of ownership would not have had any substantial effect on the saleability of the business. I am not sure that this evidence is really correct in that it did not take into account that Mr Cerreto asserted that anyone who wished a lease of the shop would have to deal with him concerning the fixtures. In cross-examination Mr Jamieson accepted that the existence of a dispute between landlord and tenant about fixtures could lead him to advise a prospective purchaser of the business to approach the landlord to see if he could do a deal with the landlord and where it was clear the landlord was difficult could lead him to advise the prospective purchaser to look elsewhere to another business to purchase. 111 As to the second question Mr Jamieson set out the steps that a vendor would ordinarily take to realise a business, such as preparing a sale proposal, advertising the sale, directly approach proprietors of fruit and vegetable shops in the same neighbourhood and negotiate a sale. However, he said that having read the affidavit of Mr Musumeci which dealt with the steps he had taken to attempt a sale these steps were not reasonable. 112 The relevant affidavit of Mr Musumeci showed that in October 1997 Mr Musumeci had approached a Mr Pagano at the Flemington markets and asked him whether he was interested in buying the shop, he having before that approach spoken to Mr Gerace who had offered the shop for sale at $180,000. Mr Musumeci had then told Mr Freeman of the possibility of sale and had been advised that it was necessary for there to be a fresh lease from the lessor. Mr Pagano had approached Mr Musumeci from time to time thereafter, including in November 1997 when Mr Pagano had an offer of a lease of another shop. Conversations which Mr Musumeci had at this time with Mr Freeman made it clear that Mr Cerreto was playing a waiting game and that he was a difficult person to deal with. Ultimately Mr Pagano, it would seem, took the other lease. 113 In late January or early February 1998 Mr Musumeci had been approached by a Mr Ortato who had worked for Mr Musumeci at the time when Fresh Express had gone into possession. Mr Ortato expressed interest in buying the shop. Mr Musumeci told him that he wanted $120,000 for the business. Mr Ortato later told Mr Musumeci that he was not interested in buying the shop if he was not going to get title to the plant and equipment. Mr Musumeci told him that at that time he could not transfer title of these items, but that if in the future he could he would get back to Mr Ortago. 114 Mr Musumeci then deposed to a conversation in late July or early August 1998 with a Mr Barba at the Flemington market when Mr Barba indicated an interest in buying the shop. Mr Musumeci had nominated a price of $120,000. He told Mr Barba that there was a problem with Mr Cerreto concerning the fittings and fixtures. Some weeks later Mr Barba told Mr Musumeci that he was not prepared to get involved because he knew Mr Cerreto and that Mr Cerreto had a reputation of reneging on agreements. He told Mr Musumeci that if the problem was resolved Mr Musumeci should get back to Mr Barba. 115 Finally Mr Musumeci gave evidence concerning a conversation with a Mr Pozzolungo in late December 1999 when Mr Pozzolungo approached Mr Musumeci on the basis that he understood that Mr Musumeci had a shop he was interested in selling. The nominated price had, by this time, dropped to $80,000. Again mention was made of the dispute over title to the fixtures and fittings with Mr Cerreto. Mr Pozzolungo indicated interest and details of solicitors were exchanged. However in late January Mr Pozzolungo indicated that his solicitors had recommended that he wait until the dispute with the landlord was resolved. Mr Pozzolungo indicated that if and when the dispute was finalised Mr Musumeci should come back to him. 116 Both Mr Pozzolungo and Mr Barba gave affidavit evidence which in essence confirmed that these discussions had taken place. In the case of Mr Pozzulongo it seems that he was going through a divorce at the time and that he was advised not to provide financial details to any prospective landlord as this could impact upon the family law case. Mr Pozzulongo's decision not to proceed further with sale discussions was influenced by the advice he received about the impact of the purchase on his family law matter rather more than the dispute over fixtures. In around May or June 2000 Mr Pozzolungo had approached Mr Cerreto and told him that he was interested in the shop. He asked Mr Cerreto whether he was interested in leasing the premises but was told by Mr Cerreto that he had decided to open the shop himself. Mr Cerreto gave evidence that he did not recall this conversation with Mr Pozzolungo. 117 I think that it is clear that Mr Musumeci did not take the steps which would normally be taken to attempt to sell the business of actively advertising for prospective purchasers. However, it is also clear that where a dispute existed between landlord and tenant over the fixtures and fittings that a tenant would most likely be turned away from being interested in the premises, except so far as the tenant purchased the fittings and fixtures necessary from the landlord or another source, this was a matter that would impact upon the price Mr Musumeci might have obtained for the business. 118 I find it difficult to accept that the lease had any real sale value anyway. The rent (which included a rental holiday which had expired) was clearly a full market rental (it can be argued that a rent holiday operates to reduce the overall rental, so that after it has been used up the rental is actually in excess of market rental). Certainly Fresh Express has not shown that the business had a value, particularly since it operated at a loss in the hands of Fresh Express. The only issue is whether Fresh Express had a duty to mitigate its loss by vacating the premises when it would continue to be liable for rent under its guarantee. 119 Ultimately the question is one of judgment. However, if it were necessary to decide the issue I would accept the evidence of Ms Lindsay and hold that it was unreasonable after the end of the first full year of trading for Fresh Express to continue to trade at a loss when clearly there was no indication that there would be any turn around in the loss. Accordingly in my view the damages of Fresh Express, assuming it was entitled at all to damages, should be limited to $89,671, being the loss for the period to the end of June 1999. 120 In my view Fresh Express did not show that its loss included any of the amount which it had advanced to Larridren or Mr Gerace. This is not a matter which in my view would arise if the misleading conduct were as firstly alleged, the false statement by Mr Cerreto that title had not passed to Larridren. However, it does arise if the misleading conduct relied upon were a representation (falsely) that title in the fittings and fixtures had passed to Larridren. In my view, given the way loans had, in a rather haphazard way been made in the past to Mr Gerace without security and the fact that Mr Musumeci advanced yet a further $15,000 of the additional $50,000 on 13 May 1997 before any security was given I do not think that Fresh Express has satisfied the onus of showing that it would not have advanced the remaining $35,000 had Mr Cerreto advised that title in the fittings and fixtures would not pass to Larridren.

The cross claim for Rent 121 It is clear that Fresh Express is liable under its guarantee for the unpaid rent. Given my findings on the main claim no estoppel can be relied upon by Fresh Express by way of defence to the cross claim. 122 In the course of submissions Fresh Express raised the question whether Alramon had a duty to mitigate its damages by taking appropriate steps to relet the property in the period between the date when Fresh Express went out of possession until the date when Alramon itself took possession of the shop and ran it in or around the middle of February 2001. Senior counsel for Alramon in supplementary written submissions argued that the question of mitigation was not raised in the pleadings and accordingly that it would be necessary for there to be an application at a very late stage and after both evidence and submissions were finished for leave to amend the pleadings. 123 Leave was sought on the last day of submissions to file a second further amended notice of defence to the second cross claim to include a defence of failure to mitigate. In my view it is now too late for leave to be given to amend the pleadings when the issue of mitigation would call for evidence to be adduced. Grant of leave would operate to the prejudice of the Respondent. Accordingly it is unnecessary for me to determine whether it was unreasonable for Alramon not to relet the property in the period in question. 124 I should note, however, that both parties in their supplementary written submissions agreed that the doctrine of mitigation of damages was applicable to rent in this case as the applicant abandoned the premises which amounted to a repudiation of the lease and this repudiation was accepted by the third respondent which re-entered possession the day after the applicant vacated the premises. For this proposition reliance was placed upon the decisions of the High Court in Shevill v The Builders Licensing Board (1981) 149 CLR 620 and The Progressive Mailing House Pty Ltd v Tabali Pty Limited (1985) 157 CLR 17, decisions which stand for the proposition that the principles of contract apply to leases, notwithstanding that a lease is also the grant of an estate in land. Austin J said in Young v Lamb (No 2) [2001] NSWSC 1014: "Where a contract has been validly repudiated and the innocent party accepts the repudiation, that party has a right to recover damages for breach of contract, assessed in accordance with ordinary contractual principles. Those principles include principles in respect of mitigation of damages: Buchanan v Byrnes (1983) 3 CLR 179." The situation may be different in a case where a lessee abandons the demised premises but the lease is not repudiated. In that situation it may be that the lessor is not required to mitigate damage (see Halsbury's Laws of Australia [245-4405]; Maridakis v Kouvaris (1974-5) 5 ALR 197 at 199; De Landgrafft v Brown (1993) 9 SR (WA) 236). However, that is not this case as the parties agree that there was a valid repudiation of the lease. 125 Were it necessary to determine whether there was a failure by Alramon to mitigate its damages where many months passed without obtaining a tenant on the evidence that was led I would not find that that Alramon in fact failed to take reasonable steps to mitigate the loss. The standard of the duty to mitigate damages is not particularly high, since the lessee is a wrongdoer, and the lessor is not required to do anything other than in the ordinary course of business: Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5 at 9; Young v Lamb (No 2) (supra) at [31]. Mr Cerretto, on behalf of Alramon, placed advertisements in The Sydney Morning Herald on three occasions, left a large sign in the shop window indicating that it was for lease and fielded around 40 inquiries in an attempt to re-let the shop. This, in my view, would have satisfied the duty of Alramon to mitigate the loss. In assessing damages for breach of contract, the plaintiff carries the onus of establishing that it had taken reasonable steps to mitigate its loss. That said, the onus shifts to Fresh Express to show that Alramon could have taken other steps to further reduce or eliminate the loss: Murray-Oates v Jjadd Pty Ltd (1999) 76 SASR 38 at 48, [59]. There was no evidence that suggested this.

Conclusion 126 It follows from my reasons that the application should be dismissed and that the Applicant must pay the costs of the Second and Third Respondents. Judgment should be given for Alramon against Fresh Express on the cross claim. I would direct the solicitors for Alramon to calculate the amount for which judgment should be given and file and serve short minutes of order on the cross claim within seven days of the delivery of these reasons. I would stand over the cross claim for 14 days from the date of delivery of these reasons when the matter will be relisted at 9.30am to hear any argument that there might be on the calculation. Fresh Express should pay the cost of the cross claim. I certify that the preceding one hundred and twenty-six (126) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.

Associate: Dated: 29 November 2002 Counsel for the Applicant: N Cotman SC with R Beasley

Solicitor for the Applicant: Dominic David Stamfords

Counsel for the Second & Third Respondents: R McDougall QC with A Ivansoff; S Reuben

Solicitor for the Second & Third Respondents: Wight & Strickland

Counsel for the Fourth Respondent: C Adamson

Solicitor for the Forth Respondent: Phillips Fox

Dates of Hearing: 29 & 30 April, 1, 2 & 3 May, 1 & 2 October 2002

Date of Judgment: 29 November 2002