Hanave Pty Ltd v LFOT Pty Ltd

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: HANAVE PTY LIMITED (ACN 001 416 226)

AND: LFOT PTY LIMITED (FORMERLY JAGAR PROJECTS PTY LIMITED) (ACN 050 049 182)

KIEFEL J: 12 Hanave Pty Limited ("Hanave") appeals from a decision of a Judge of this Court dismissing its application for relief which was based upon alleged contraventions of section 52 Trade Practices Act 1974 ("TPA"). The relief sought, in the event of success on the appeal, is limited to damages. This would necessitate the matter being remitted to the primary Judge for assessment. The Background 13 The first respondent, who was referred to in the proceedings by its former name Jagar Projects Pty Limited ("Jagar"), had developed a building at Leichhardt comprising 7 shops and from 1993 the building was tenanted. The principal tenant, by reason that the rental paid by it accounted for some one-third of the building's income, was Barbara's Storehouse Pty Ltd ("Barbara's Storehouse"). That company conducted several retail outlets elsewhere and was well known. Its lease was for 10 years. Another tenancy of relevance on this appeal was that held by Table Eight Pty Limited ("Table Eight") and it was for 3 years. There were other well known retailers who were tenants, such as Just Jeans Pty Ltd and Orrefors Kosta Boda Pty Ltd, but they do not assume importance in the proceedings. The grounds of appeal which concerned another tenancy were not pursued. The representations upon which Hanave's case centres relate only to Barbara's Storehouse and Table Eight. 14 On 25 June 1994, an advertisement appeared in the Sydney Morning Herald which referred to the above mentioned retailers as "Established retailers" and to the income generated from the group of shops as $312,644 per annum. Mr Burke, a solicitor and director of Hanave, as well as a beneficiary of the family trust of which Hanave was the trustee, saw the advertisement and contacted the selling agents. The agent then forwarded a "property report" which features prominently in the appeal. Of some eleven pages in length, it contained details of the land and buildings, title and town planning descriptions. The property description was in these terms: "4.00 Property Description This recently constructed, high exposure, single level, corner retail location, with 7 establishedhigh quality tenants including Barbara's Storehouse, Orrefors Kosta Boda and Just Jeans amongst others. These 7 shops have a net lettable area of 929 square metres, situated on a site area of 1338.73 square metres. Known as the Leichhardt Factory Outlet Headquarters all retailers use these premises as an outlet for factory goods, and thus becoming [sic] a destination for consumers who want quality goods at discounted prices." (the emphasis is added) 15 Annexed to the report was a tenancy schedule which identified each of the tenants and provided rental figures according to the leases held. Barbara's Storehouse had by this time transferred its lease to another company, Adelights Pty Limited ("Adelights"), which shared its directors and shareholders. In the proceedings below and on this appeal, no importance was placed upon the transfer save in respect of the construction of a contractual provision to which I later refer; the relevant tenant referred to was Barbara's Storehouse. 16 Contracts were exchanged on 20 July 1994, the day following auction, with settlement scheduled for 17 August 1994. Prior to the auction, at which Hanave had been the highest bidder, Mr Burke had received a draft contract and copies of the leases. As the evidence at trial showed, he checked the contents of the leases with the schedule provided in the property report. He did little more than verify their accuracy by this means. 17 The contract document required disclosure by Jagar of "incentive" payments with respect to the leases listed: "8. SALE SUBJECT TO COMMERCIAL LEASE OR LEASES 8.1 Lease Incentives The land is sold subject to the Lease or Leases particularised in Schedule 1 ("the Lease"). 8.2 The vendor warrants that the details of every guarantee given in support of the Lease are as set out below, provided that any guarantee, the terms of which are incorporated in the Lease, need not be particularised. [Blank space] 8.3 The vendor warrants that all incentives for the benefit of the tenant under or in connection with the Lease are either disclosed in the Lease or are as set out below …" [Blank space]

Schedule 1 referred to in cl 8.1 was, in relevant respects, in the following terms:

SCHEDULE ONE Shop No Tenant Term Annual Base Rent Dealing 1 and 2 Barbara's Storehouse Pty Limited Expires 18 May 2003 $108,150.00 U58319 Transfer of Lease to Adelights Pty Limited U170608

18 There were no incentive payments set out in the blank space below clause 8.3. 19 With respect to Barbara's Storehouse, the uncontradicted evidence was that a payment of $60,000 had been paid by means of two payments in April and May 1993 as an incentive to enter into a lease. It was not apparent what those monies were expended on. When the lease was transferred to the associated company, in May 1994, it did not receive any part of the monies earlier paid to Barbara's Storehouse. Further, a schedule tendered at trial, but which was not itself in existence or available to Hanave at the time of purchase, disclosed that Barbara's Storehouse departed from its obligations to pay rent monthly in advance at an early point, and for some months paid rent by two payments in the month. No rental was however paid in March 1994 and the balance of rent outstanding as at the end of the months of April, May, June and July 1994 was in the order of $5,000; $2,000; $2,000 and $3,000 respectively. His Honour accepted that there was a "measure" of preferential payment made by Barbara's Storehouse to suppliers instead of towards its monthly rent. 20 The evidence before his Honour showed that the rent paid by Barbara's Storehouse was a little under three times the rent usual in the market. Mr Slatyer of Barbara's Storehouse advised Mr Tresidder, a director of Jagar, that the business of Barbara's Storehouse conducted in the premises was not doing well. A variation of the lease then held by Adelights was agreed upon. It removed the automatic annual increase of 8 per cent and substituted a provision for increase according to the Consumer Price Index. This was agreed to by Jagar to assist Barbara's Storehouse in any sale of its business, or part of it, since the former provision for rent increase was likely to be unacceptable to most potential purchasers. It was not accepted that Barbara's Storehouse had claimed that it would be unable to pay the rent. 21 In August 1994, Mr Slatyer met with Mr Tresidder and Mr Glew, another director of Jagar. In the version of events accepted by his Honour, and not challenged on appeal, Mr Slatyer received the sum of $8,000 by way of short-term loan. He had explained to them that he intended to sell the Leichhardt business of Barbara's Storehouse and open another elsewhere, but that he would have difficulty obtaining a loan for that purpose from a bank. This advice was accompanied by a threat to approach the intending purchaser, Hanave, since he appreciated that Jagar was to make a substantial profit on the sale. The offer of the advance of monies, albeit by way of loan, was made in order to deter Mr Slatyer from communication with the purchaser which may have affected the contract or its price. 22 Pursuant to the contract with Hanave, Jagar was able to claim an adjustment on the purchase price to take account of any amounts unpaid by tenants at the date of settlement. Jagar did not make such a claim, although the August payments had not in fact been paid by Barbara's Storehouse. Nothing turns upon this. 23 There remains to mention events concerning Table Eight. In May 1994, a letter written on behalf of that company to Jagar advised of its intention to vacate the shop premises at Leichhardt due to their being unprofitable. Evidence given by Mr Baral of Table Eight was to the effect that up to that time business in the shop had been reasonable, but he believed its current trading to be poor. Table Eight was an established clothing retailer having a number of other outlets. Mr Baral then made a decision to cease trading at Leichhardt, but to continue to pay rent until a sub-tenant could be found; he gave instructions to have the words "Closing Down Sale" printed on the shop window. Mr Tresidder called him shortly afterwards and asked Mr Baral to remove the sign because attempts to sell the shop were underway and the sign would render that more difficult. Mr Baral removed the sign.

Table Eight 24 It is convenient to deal, in the first place, with the allegation concerning Jagar's conduct in relation to Table Eight. Hanave's submission at trial, and on the appeal is that Jagar was obliged to disclose the fact of the removal of the sign and that its conduct in failing to do so was proscribed by s 52 TPA. The primary judge did not accept that contention. In his Honour's view the request to remove the sign was superseded by a decision by Table Eight to continue trading. Hanave had not established, in his Honour's view, that a prospective purchaser would have seen such a sign if the request to remove it had not been made. His Honour also observed that Table Eight at no time appeared unable or unwilling to continue to pay rent and indeed it had been advised by Jagar, through Mr Glew, that it was expected to continue to meet its obligations and it did so. 25 It was submitted that the non-disclosure alleged had the ability to mislead when viewed in the context of the representation made in the property report that Table Eight was an "established high quality tenant". In so far as that description conveys a landlord's advices as to a tenant's history and reliability in the payment of rental, the true facts relating to Table Eight were consistent with such a statement. Put at its highest, all that Table Eight had conveyed to Jagar, prior to the property being offered for sale to the public, was its intention to cease trading and find another tenant. That is to say, it had expressed a view to Jagar that, in the context of its operations, it considered that it was not in its interests to continue trading. If it was implicit in this that Table Eight considered the location not to be profitable, or the rental too high having regard to sales generated, Jagar nevertheless was not obliged to pass this on to Hanave as an intending purchaser and no statement was made by it to Hanave that rendered such a disclosure necessary. This ground is not made out.

Barbara's Storehouse 26 The statement made by Jagar to Hanave concerning the quality of the tenant Barbara's Storehouse did have the potential to mislead. Whether a cause of action accrued to Hanave depended upon whether it was connected with Hanave's entry into the contract which, the evidence disclosed, was for a price in excess of its true market value, although there was some dispute about the extent of this. 27 In the view of the primary Judge, nothing turned on the tenancy schedule to the property report, viewed by itself. It simply contained a description of the terms of the existing leases and, it will be recalled, Mr Burke checked this himself. However the information it conveyed, more particularly that as to the rental payable under the lease, was in his Honour's view "coloured" by the description of Barbara's Storehouse as an "established high quality tenant". His Honour went on: ". . . .Even though the rent identified in the property report can be treated as a description of the rent payable under the lease, reference to "high quality" involves, in my opinion, a representation about the experience of the vendor in relation to the historical operation of the lease. That is, the tenant has been, in relation to its obligations under the lease, an extremely satisfactory tenant." 28 To this his Honour added reference to Smith v Land & House Property Corporation(1884) 28 ChD 7 where, in circumstances involving a sale of property, a tenant had been described as "a most desirable tenant". At the time of the statement, however, the tenant was in fact in arrears. Bowen LJ observed that where the facts are not equally well known, a statement of opinion by the person who does know them often involves a statement of material fact, that that person impliedly knows the facts that justify the opinion. Bowen LJ went on (15): "…Now a landlord knows the relationship between himself and his tenant, other persons either do not know them at all or do not know them equally well, and if the landlord says that he considers that the relations between himself and his tenant are satisfactory, he really affirms that the facts peculiarly within his knowledge are such as to render that opinion reasonable. Now, are the statements here statements which involve such a representation of material facts? They are statements in a subject to which prima facie the vendors know everything and the purchasers nothing. The vendor stated that the property is let to a most desirable tenant, what does that mean? I agree that it is not a guarantee that the tenant will go on paying his rent, but, it is to my mind a guarantee of a different sort, and amounts at least to an assertion that nothing has occurred in the relations between the landlord and the tenant which can be considered to make the tenant an unsatisfactory one. That is an assertion of a specific fact. Was it a true assertion?" That passage was referred to with approval by the Full Court of this Court in RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164. Here, the primary judge concluded that, in the circumstances affecting Barbara's Storehouse, the representation in the property statement was false. In his Honour's view, a tenant with its history of rental payment could not reasonably be described as a high quality tenant with the connotations, earlier referred to, namely that it was an extremely satisfactory tenant. It was a false representation. I respectfully agree. 29 As earlier observed, the critical issue in this case was causation. The question which needed to be addressed was whether the misrepresentation as to the history of Barbara's Storehouse as a tenant operated as an inducement to Hanave when it entered into the contract in question at the price it later paid, or whether it can be taken to have had some such effect. The respondents' submissions were that such a conclusion could not be reached upon the evidence of Mr Burke. 30 His Honour did not consider that Jagar was contractually obliged to disclose the earlier incentive payment of $60,000 to Barbara's Storehouse. It followed that Hanave's case, founded upon there having been a positive representation that no incentive payment had been made, could not be made out. The primary judge's view of cl 8 was that Adelights was the tenant for the purposes of cl 8.3, although his Honour at a later point conceded that this might be a narrow view. 31 Clause 8 commences with the statement that the land is sold subject to the leases identified (cl 8.1) and goes on to state that all incentives are either disclosed in the lease document itself, or are set out (cl 8.3). The lease current with respect to shops 1 and 2 at the time of sale was that which had been transferred to Adelights and no incentive had been paid to that company "under or in connection with the lease". Nevertheless, Barbara's Storehouse was listed in Schedule One. The impression clearly conveyed, in my view, was that no incentive payment had been made with respect to that lease. It was not necessary for Hanave to show that obligations of disclosure under the clause had not been met, where what was conveyed was misleading. The TPA creates rights and remedies between parties in addition to those arising from a relationship of vendor and purchaser: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, 37. I would add that, in any event, it would seem to me that on a proper construction of cl 8.1 and cl 8.3, disclosure was required. The property was in fact sold subject to the lease in terms which had been granted to Barbara's Storehouse. Clause 8.1 required that it be particularised in Schedule 1, as it was. Clause 8.3 then required that incentives paid with respect to it be disclosed. The fact of a transfer of obligations under it to Adelights did not obviate the obligation to provide that information. If there be doubt about what was intended by the reference to the lease or leases connected with the sale of the land, the purpose of the clause, in a background of recent first tenancies would in my view have given rise to a wider, not narrower, requirement of disclosure. 32 As I have said, however, Hanave did not need to establish this. Jagar had misrepresented the true position by referring to Barbara's Storehouse and its associated company and failing to disclose the payment of any incentive. The clause and schedule conveyed, positively, that there were no incentives paid. 33 His Honour the primary Judge did go on to consider the situation which may have arisen had the non-disclosure of the incentive operated as a misrepresentation. The difficulty here for the applicant is that his Honour did not accept the evidence of Mr Burke, which was that knowledge of the incentive payment of $60,000 would itself have raised doubts in his mind about the capacity of Barbara's Storehouse to pay rent in accordance with the lease and that he may have sought advice about rescinding the agreement. His Honour rejected this evidence, principally by having regard to the time at which this matter was first raised. 34 Mr Burke had first said that he did not become aware of the payment of $60,000 until 28 March 1997. His Honour found that to be an untruth and that he had earlier known of it from a discussion with Mr Slatyer in February 1995, as he had effectively conceded in cross-examination. All that was missing, until that later time, was the documentary evidence concerning it. His Honour then reasoned that if the non-disclosure had been an issue of substance, such that it was likely to have affected Mr Burke's decision to purchase, it would have been relatively prominent in his mind and formed part of Hanave's case as originally pleaded and filed in September 1995. It was not raised as an issue until the first day of the trial, eighteen months later. At other points, it needs be observed, his Honour made findings against Mr Burke's credit and observed that on some occasions Mr Burke appeared to tailor his evidence to suit Hanave's case. A reference to the evidence bears out this latter observation. As to the question of the importance of the incentive payment to Mr Burke, his Honour concluded that had the information been known to Mr Burke it would not have had a bearing on Hanave's decision to purchase the Leichhardt property. His Honour was of the view that it was merely identified by him as a gloss to the case as originally set up. 35 Different views might be reached about the importance to be attached to a failure to raise a matter which is said would have been important to a party entering into a contract, had it been known. Much will depend upon the nature of the information withheld. Taken by itself, the fact that there had been an incentive payment to the principal tenant would not have conveyed anything adverse about that tenant to an intending purchaser. In those circumstances, it was incumbent upon Hanave to show that it would have viewed the matter more seriously. The fact that it was not even raised as an issue until the action was well advanced, weighs heavily against the acceptance of Hanave's assertion. The conclusion reached by his Honour was clearly open. 36 That leaves unanswered, however, the question whether this non-disclosure took on a different complexion in the background of the misrepresentation found to have been made, whereby Jagar put forward Barbara's Storehouse as a good and reliable tenant (or "extremely satisfactory", as his Honour held) contrary to the true position. The fact of an incentive payment to the principal tenant might well alert a purchaser to a potential problem if there were other facts to which it was relevant. Here, Barbara's Storehouse had a poor history in the payment of rental at an early step in its tenancy despite having received a payment of $60,000 when the annual lease rent was some $108,000. 37 The misrepresentations, combined, were to the effect that the principal tenant had been wholly reliable in meeting its lease obligations, which obviously included that to pay rent; and that no incentive payment had been received. If either the former alone, or the combination, is to be considered as material and likely to induce an intending purchaser, it may fall to Jagar to show that that was not the result: see Gould v Vaggelas (1985) 157 CLR 215, 237-8. There are some difficulties in reaching such a conclusion, at least with respect to the two representations taken together, since it would be difficult to accept that a prospective purchaser would not be quite concerned about what is conveyed in respect of the tenant which was to produce about one-third of the anticipated rental. Nevertheless, the respondent submits that such a conclusion must be reached on the evidence in this case. 38 Before returning to this question, it is necessary to consider how his Honour dealt with the misrepresentation which flowed from the reference to the quality of Barbara's Storehouse as a tenant under the lease. Again, taken alone, his Honour considered that it had no material influence on Hanave's decision to purchase. 39 His Honour referred to that part of Mr Burke's evidence which was to the effect that the description of Barbara's Storehouse in the tenancy schedule was attractive, as it combined a long lease with a substantial, well-known tenant and accounted for about one-third of the total income. In that sense, it provided an anchor and stood as a tenant which had a long term commitment to the centre. He went on to say that he would not have purchased the centre if there was a likelihood that Barbara's Storehouse would not be able to continue to pay the level of rental that its lease showed and for the balance of the term of the lease. He further said that had he known that Barbara's Storehouse had not been complying with its rental obligations, he would have asked Mr Slatyer why this was the case. 40 His Honour however concluded that Mr Burke did not rely on the property report. His Honour went over the lengthy cross-examination of Mr Burke, which touched upon the reasons why Hanave had purchased the property and the steps, if any, he had taken to assess whether it was likely whether the rental income he was seeking to secure would be generated by the property. At this point, it may be observed, as the primary Judge accepted, that the motivation for the purchase was the level of rental reflected by the leases, and the rate of return which could then be achieved. 41 Mr Burke accepted that he did not rely upon what was contained in the property report, in that he verified the information contained in it by reference to the contract document and the leases. In relation to the tenants, he attended and viewed the shops, but did little else. He did not undertake further enquiries, although he accepted also that there had been nothing to prevent him talking to tenants or asking for files relating to the various tenancies. 42 Mr Burke said that he read the property report, where it dealt with the income received. The following exchange then took place in cross-examination in connexion with the words the subject of the misrepresentation: "… when you read the advertisement and in the property report and you saw discussion about established retailers and high quality tenants, that was in relation to the Leichhardt outlet? Put it this way, when you read the advertisements where it said established retailer at the Leichhardt outlet, you did understand that as being at that outlet?… No that's not what I understood by established retailer. What did you understand that to be?… Someone with a reputation. Everywhere? … Everywhere When you get the property report and it talked about seven high quality tenants at the particular outlet, did that tell you that they were talking about those people at that outlet?….Those people at the outlet with their broader reputation." 43 This passage was set out in his Honour's reasons, no doubt because it was the only direct evidence as to what meaning Mr Burke attributed to the contentious words. His Honour held that Mr Burke did not rely upon the reference to the "high quality tenants" in the property report as a statement about Barbara's Storehouse payment of rental. His Honour added that Mr Burke "proceeded with the sale unaware of the true position in relation to the circumstances of Barbara's Storehouse because of a combination of complacency and careless disregard for matters of detail and his reliance on his own knowledge and perfunctory enquiries". 44 I shall return to the issue concerning Mr Burke's failure to enquire later. At this point it may be observed that his Honour's reasons may encompass the finding that Mr Burke was unaware of or unconcerned with any misleading statement in the property report and that this is borne out by his only interest being in the reputation of the retailers, and he had formed his own opinion about that. 45 The question of causation can sometimes be resolved not by direct evidence as to what part a misrepresentation played in the process of entry into contract, but by a Court determining what effect must be taken to have resulted. Indeed this course may sometimes be preferable to one which rested solely on evidence later given on the point. In Gould v Vaggelas (236) Wilson J held that if a material representation is calculated (which is to say, objectively likely: Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993) 41 FCR 229; Henderson v Amadio Pty Ltd (No 1) (1995) 62 FCR 1, 166) to induce the representee to enter into a contract and the person in fact enters into a contract, a fair inference arises that the representation operated as an inducement, adding that it need not be the only cause. The latter point is now uncontroversial. It suffices for liability if a misrepresentation played some part in inducing entry into contract for the price agreed. That part of Wilson J's judgment was not stated to be an exhaustive rule, but is to be seen as a guide to a question of fact which may arise. A conclusion of inducement may then be reached where a combination of factors, including the quality of the representation itself, goes unanswered. In relation to the representation itself it would need to be of a kind likely to provide that inducement and such that "…commonsense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract." (Wilson J, 238), a statement regarded by the Full Court in Ricochet as providing a practical guide to the drawing of inferences in such cases. 46 In Gould v Vaggelas the representations were of that kind and the inference, that the purchasers were thereby influenced, arose. Evidence to the contrary was considered not to negative the inference of reliance (see 236-7). In Sibley v Grosvenor (1916) 21 CLR 469 a conclusion that a representation had materially affected purchasers in the price they considered paying for land was reached because it was such as to "naturally operate" on their minds (473 and see 481). The Full Court in Ricochet pointed out that the fact the relevant misrepresentation might have had some such effect will not suffice. There would not be the level of certainty necessary to enable an inference to be drawn. 47 In the present case, his Honour was invited to draw the inference that the contravening conduct of Jagar "caused Hanave loss and damage" but considered that the "…direct evidence Burke gave makes the drawing of any such inference inappropriate" and that there was no relevant connexion between the damage Hanave may have suffered and the conduct in question. 48 A statement to the effect that a principal and long-term tenant has been very satisfactory in meeting its lease obligations, which include the payment of rental, cannot in my view be regarded as uninfluential on the mind of a purchaser considering making an offer, even if a purchaser already has an understanding or opinion about their reputation as well established retailers. The statement of fact made not only supports a positive opinion otherwise reached, it adds to it something on a topic known to the landlord. Indeed, it seems likely that his Honour thought that to be the case, since it was only the direct evidence of Mr Burke, referred to above, which was pointed to as rendering a conclusion of inducement impossible. That is to say, it was seen as negativing that inference. 49 It is, in my respectful opinion, difficult to take Mr Burke's evidence as foreclosing the prospect that the statement he had read was only understood to refer to reputation and conveyed nothing in the nature of the landlord's opinion. It is, with respect, to draw too much from a partly unresponsive answer to a question which contains a reference to the words "high quality tenants" without enquiring as to their meaning. The passage of evidence commences, it seems to me, with an attempt to limit Mr Burke's understanding of the words "established retailer" as meaning established at the Leichhardt premises. Mr Burke countered that he understood those words to have a wider meaning and to extend to the general reputation of the retailer, which I take to be the public, including potential customers. The question then put to him, or its purpose, is not entirely clear but seems to amount to no more than an enquiry as to whether he understood the reference to the tenants in the property report likewise to be concerned with their outlet at Leichhardt. The reference in the question to the property report talking about "7 high quality tenants" identified the phrase in question in the property report, but the enquiry which followed was not as to its meaning or his understanding of it. To the answer, that he understood the property report to be talking about the tenants as tenants at Leichhardt, Mr Burke obviously felt the need to add the words "with their broader reputation". In light of his earlier answer it was likely to have been an attempt to reinforce what he had earlier said about an "established retailer" carrying the connotation of public reputation. In my view it cannot be concluded, with any degree of confidence, that Mr Burke was then addressing his understanding of "high quality tenants" and neither the question which followed, nor any other question in cross-examination touched upon that topic. Nor, in my respectful view, is one able to conclude from that passage that Mr Burke attributed no meaning to the words. 50 It was submitted for Jagar that Hanave was itself obliged to present evidence of knowledge and reliance and failed to do so. The submission however overlooks the kind of misrepresentation involved and that a Court would, in the first place, draw such an inference. In any event it would seem to me that Courts ought to be, and no doubt are, cautious in accepting mere assertions of reliance as essentially self-serving: see Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471, 483 and will usually attempt to assess that prospect by reference to objective criteria. This will be so particularly where the misrepresentation is not necessarily likely to be recalled as having had a strong impact. Its message may be more subtle. Here Mr Burke read the report. Even allowing for views as to the creditworthiness of his evidence given at trial, there seems no reason to doubt that it would have conveyed to him what any reasonable reader would apprehend, namely that Barbara's Storehouse was an excellent tenant and that he ought then have no concerns about the figures put forward as rental payments to be made by it. 51 The likelihood that Hanave felt assured about Barbara's Storehouse when it made its offer is strengthened by the further misrepresentation that no incentive payment had been paid to it. The combination of this misstatement of fact and Jagar's assurance about it as a tenant must be taken to have been of significance to any rational prospective purchaser and to operate as influential when considering an investment in the centre, or the price paid for it. His Honour's findings did not require or permit consideration as to whether they together operated as a factor in the purchaser making an offer for the property. Mr Burke had stated in evidence that the actions of Hanave would have been otherwise. In my view, that conclusion is inescapable, regardless of the view taken of his credit. There was no other evidence which would weigh against this conclusion. 52 That leaves for consideration the question of Mr Burke's carelessness, a matter referred to generally by his Honour in connexion with causation. However, once it is accepted that the misrepresentations were effective as a cause of Hanave's entry into the contract, it is no answer that it may have discovered the untruths had Mr Burke undertaken more extensive enquiries (see Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302, 309). Loss suffered by Hanave was caused "by" the conduct of Jagar within the meaning of s 82(1) TPA.

Other Ground of Appeal 53 Hanave also submitted that the representations made by Jagar in the newspaper advertisement, that the retailers were "established" operated as misleading when regard was had to all the circumstances. For the reasons given by Emmett J I do not consider this ground to be made out.

Orders on the Appeal 54 In my view the appeal should be allowed and judgment entered for Hanave against the first respondent. In the proceedings below Hanave also sought orders against the second and third respondents as having aided and abetted Jagar or as being knowingly concerned in the conduct complained of. Different positions were taken by those respondents on the pleadings. Although some concessions were made on the appeal, as to the position of the second respondent, the findings made do not permit conclusions to be reached concerning their respective liability. The matter ought then to be remitted to his Honour the primary Judge for determination of that issue and the outstanding cross claim brought against Mr Burke as a joint tortfeasor, together with an assessment of damages. Jagar should pay the costs of the appeal and the hearing below. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel.

AND: LFOT PTY LIMITED (FORMERLY JAGAR PTY LIMITED)

EMMETT J 55 On 20 July 1994 the Appellant, Hanave Pty Ltd ("the Purchaser") entered into a contract ("the Contract") whereby the Purchaser agreed to buy from the first respondent, Jagar Projects Pty Ltd ("the Vendor") a parcel of land situated at the corner of Lords Road and Flood Street, Leichhardt on which seven shops are constructed ("the Property"). The Purchaser claimed that it was induced to enter into the Contract by conduct engaged in by the Vendor in contravention of section 52 of the Trade Practices Act 1974 and sought seeks damages under section 82 of that Act. 56 The conduct said to constitute contravention of section 52 of the Trade Practices Act comprised: 57 Representations allegedly made in an advertisement calling attention to a proposed auction of the Property. 58 Representations allegedly made in a property report relating to the Property circulated by Laing & Simmons Commercial, the Vendor's agent, relating to the tenancies of the shops. 59 Failure by the Vendor to disclose to the Purchaser information concerning the tenancies of the shops. 60 A Judge of the Court dismissed the Purchaser's application to the Court. The Purchaser has appealed from that decision on numerous grounds as set out in its notice of appeal. In the course of the hearing of the appeal, the issues were crystallised on a much narrower basis than would be apparent from consideration of the notice of appeal. The hearing before the Trial Judge continued over many days although the real issues in the proceedings are very much more contained than the hearing time would suggest. 61 On appeal, the Purchaser's complaints were limited to shops 1 and 2 and shop 4B. At the time of the Contract, shops 1 and 2 were occupied by a single tenant, Adelights Pty Ltd ("Adelights") which had taken an assignment from the original tenant, Barbara's Storehouse Pty Ltd ("Barbara's Storehouse"). Shop 4 was divided into two. Shop 4B was occupied by Table Eight Pty Ltd ("Table Eight"). The other shops were also occupied. 62 The gravamen of the Purchaser's case was that the Vendor conveyed a misleading impression about the financial status or worth of tenants, which in turn affected the value of the Property. The thrust of the complaint pursued on appeal was that the businesses of two of the tenants, Barbara's Storehouse and Table Eight were, to varying degrees, failing and that their future as tenants and their capacity to pay the rent reserved in their respective leases was doubtful. 63 The principal complaint was in respect of Barbara's Storehouse. The evidence before the Trial Judge made clear that between 19 May 1993 and 17 August 1994, there was only one occasion when the amount due under the lease was paid in full and on time. That was the first payment on 12 May 1993. The pattern of payment is consistent with the Vendor having to go to Barbara's Storehouse on many occasions to talk about outstanding rent. 64 In addition, the evidence disclosed that the sum of $60,000 was paid to Barbara's Storehouse by two instalments, one of $15,000 on 29 April 1993 and one of $45,000 on 12 May 1993. A question arose as to whether that was a payment to defray costs in fitting out shops 1 and 2 or whether it was a rent subsidy. For present purposes, the precise purpose for the payment is not critical. It is clear, however, that it was an incentive of some kind to induce Barbara's Storehouse to take its lease. 65 The advertisement calling attention to the auction of the property was in the form set out in Schedule 1 to these reasons. The Purchaser complained that by that advertisement the following representations were made: (i) a tenant in the retail outlet was Barbara's Storehouse, which was an established retailer; (ii) that having Barbara's Storehouse as a tenant was a significant feature of the retail outlet; (iii) that having Barbara's Storehouse as a tenant was an attraction to a potential purchaser of the retail outlet; (iv) that Barbara's Storehouse was a substantial tenant to have in the retail outlet; (v) the retail outlet would provide an income of $312,644 per annum from the tenants thereof. 66 There is no basis for concluding that any of those representations, assuming they are to be found in the advertisement, was false. The evidence shows that Barbara's Storehouse was in fact an established retailer with outlets in several locations in and around Sydney. The Purchaser itself contended that having Barbara's Storehouse as a tenant was a significant attraction to a retail purchaser. In fact, Barbara's Storehouse was a substantial tenant having a lease for 10 years under which the rent provided approximately one-third of the total rent for the Property. The statement of the rent was an accurate statement of the rent reserved under the leases. The proceeding, so far as it based on the advertisement, must fail. 67 The Purchaser also relied on the property report, which was received by its director Mr Robert Burke. Mr Burke was a solicitor and director and shareholder of the Purchaser. He said that he was attracted by the advertisement and was induced by it to telephone Mr Phillip Kyle at Laing & Simmons in consequence of which Mr Burke received the property report. The property report contained uncontroversial information concerning the location of the Property, a description of it, title particulars, zoning and a description of the building constructed on the Property. The part complained about was headed "Property Description" and contained the following: "This recently constructed, high exposure, single level, corner retail location, with 7 established high quality tenants including Barbara's Storehouse, Orrefors Kosta Boda and Just Jeans amongst others.

These 7 shops have a net lettable area of 929 square metres, situated on a site area of 1338.73 square metres.

Known as the Leichhardt Factory Outlet Headquarters all retailers use these premises as an outlet for factory goods, and thus becoming [sic] a destination for consumers who want quality goods at discounted prices." 68 There is no basis for contending that, in the absence of any enquiry, failure to disclose the rent history of the tenant Barbara's Storehouse would constitute misleading or deceptive conduct as regards the Purchaser. Nor is there any basis for concluding that the failure, in the absence of any enquiry by the Purchaser, to disclose the payment of the $60,000 incentive constituted misleading or deceptive conduct by the Vendor in relation to the Purchaser. However, the Purchaser contended that, in the light of the contents of the property report set out above, it was misleading not to furnish information concerning the rent payment history of Barbara's Storehouse and not to disclose the incentive payment. 69 The Trial Judge accepted observations made by Bowen LJ in Smith v Land & House Property Corporation (1884) 28 Ch D 7 which were relied on by the Purchaser. In RAIA Insurance Brokers Ltd v FAI General Insurance Co. Ltd (1993) 41 FCR 164, the Full Court of this Court cited with approved passages from the judgment of Bowen LJ. The relevant passage is as follows: "If the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion. Now a landlord knows the relations between himself and his tenant, other persons either do not know them at all or do not know them equally well, and if the landlord says that he considers that the relations between himself and his tenant are satisfactory, he really avers that the facts peculiarly within his knowledge are such as to render that opinion reasonable… The vendors state that the property is let to a most desirable tenant, what does that mean? I agree that it is not a guarantee that the tenant will go on paying his rent, but it is to my mind a guarantee of a different sort, and amounts at least to an assertion that nothing has occurred in the relations between the landlords and the tenant which can be considered to make the tenant an unsatisfactory one. That is an assertion of a specific fact." 70 Applying those principles to the present circumstances, a statement that Barbara's Warehouse is an "established high quality tenant" is capable of carrying the representation that the Purchaser considers that the performance of Barbara's Storehouse as a tenant is such as to make the epithet "high quality tenant" a reasonable one. In fact, the Purchaser knew well that, having regard to the constant rent default, Barbara's Storehouse was not a high quality tenant. Accordingly, his Honour held, by making available the property report to a prospective purchaser, the Vendor engaged in conduct, which was misleading and deceptive or likely to mislead or deceive in contravention of section 52 of the Act. 71 However, engaging in conduct is not sufficient to give rise to a cause of action under section 52. Where loss has been suffered, it is an essential element of the cause of action that the loss has been suffered by the conduct. That is to say, there must be some causal link between the contravening conduct and the loss. Where the conduct complained of is a representation, that causal link will normally involve some reliance, either by the claimant or some third party, on the representation as inducing some act to the detriment of the claimant. In the present case, there is no question of reliance by a third party. The Purchaser's case is that there was that reliance by it on the property report and that reliance induced the Purchaser to enter into the Contract to its detriment. 72 Accordingly, therefore, for the Purchaser to succeed, there must be evidence upon which the Court can make a finding that the Purchaser relied on the alleged misleading or deceptive conduct in entering into the Contract. That requires a finding, not only that the relevant representation was made and that it was misleading, but also that the Purchaser understood that the representation in the misleading sense. Even if the property report is capable of bearing the representation that the dealings between the Vendor and Barbara's Storehouse are such that Barbara's Storehouse can be said to be a high quality tenant, that is of no relevance unless the Purchaser understood the property report in that way. 73 Mr Burke's mind appears to have been, for relevant purposes, the mind of the Purchaser. However, while Mr Burke said that he read the property report, he did not say that he read it as a representation concerning the rent history of Barbara's Storehouse. The evidence which he gave in his affidavit is as follows: "I saw on page 5 the reference to the high quality tenants including Barbara's Storehouse… which I had seen in the advertisement… and with which I was familiar and which initially attracted my attention. I looked at the tenancy schedule attached to [the property report]. I noted that Barbara's Storehouse was the major tenant because it had a 10 year lease. It was attractive to me to have such a high profile and well-known tenant for such a long period of time as a tenant. I noted that Barbara's Storehouse was roughly one-third of the annual net income of the centre and that was important to me to have a substantial well-known tenant providing an anchor for the rental income and a tenant which had a long term commitment to the centre. I also noted there was to be a market review every three years with annual CPI increases." 74 Mr Burke also said the following in his affidavit: "I certainly would not have purchased the shopping centre or retail outlet if I had been aware that there was a likelihood that Barbara's Storehouse would not be able to continue to pay the level of rental that its lease showed and for the period of the lease which remained." 75 Thus, while Mr Burke said the Purchaser may have not entered into the Contract if he had known the rental history of Barbara's Storehouse, Mr Burke did not say that he understood from the property report that the Purchaser was saying anything about the rental history. Rather, he understood the report to be saying that the tenants were tenants who had a high profile and were well known. That was perfectly true. 76 The Purchaser contended that an inference should be drawn that the Purchaser was in fact induced by the representations in question. Reliance was placed on the decisions of the Full Court of this Court in Dominelli Ford (Hurstville) Pty Limited v Karmot Auto Spares Pty Limited (1992) 38 FCR 471 and the New South Wales Court of Appeal in Huntsman Chemical Co. Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242. However, in neither of those cases, was there positive evidence that the representatives understood the alleged representations in a way which would not justify a finding of reliance. In the present case, in circumstances where Mr Burke gave evidence as to his understanding of the report which did not indicate that he understood the property report to say anything about rent history and made no enquiry as to the rent history of Barbara's Storehouse, it was open to the Trial Judge to conclude that Mr Burke, acting on behalf of the Purchaser, was not induced by any representation concerning the rent history of Barbara's Storehouse. The Trial Judge was satisfied that Mr Burke did not rely on the reference to "high quality tenants" in the property report as a statement about whether Barbara's Storehouse or Adelights had paid rent in accordance with the lease. His Honour concluded that Mr Burke did not rely on the property report at all but was content to enter into the Contract on the basis of his assessment of the strength of the tenants because they were well known and had a high profile. 77 The Trial Judge concluded that Mr Burke proceeded with the sale unaware of the true position in relation to the circumstances of Barbara's Storehouse because of a combination of complacency and careless disregard for matters of detail and his reliance on his own knowledge and perfunctory enquiries. That is a finding which was open to his Honour on the evidence before him. In rejecting the invitation to draw inferences, his Honour considered that this was a case where the direct evidence given by Mr Burke made the drawing of any such inference inappropriate. Accordingly, his Honour concluded there was no causal link between any loss which the Purchaser may have suffered by entering into the Contract and any contravention of section 52 occasioned by the publication and circulation of the property report. That conclusion was open to his Honour on the evidence before him. 78 In relation to the incentive payment of $60,000, the Purchaser relied on the terms of the Contract which was submitted to Mr Burke in draft before it was executed. Clause 8 of the Contract was in the following terms: "8. Sales subject to commercial lease or leases 8.1 Lease incentives The land is sold subject to the lease or leases particularised in schedule 1 ("the lease").

8.2 The vendor warrants that the details of every guarantee given in support of the lease are as set out below, provided that any guarantee, the terms of which are incorporated in the lease, need not be particularised:

8.3 The vendor warrants that all incentives for the benefit of the tenant under or in connection with the lease are either disclosed in the lease or are as set out below:

[Blank space]" 79 Thus, in the Contract there were blank spaces in which particulars of guarantees or of incentives could be inserted. Nothing was inserted. The Purchaser contended that the conduct of the Vendor in failing to disclose the incentive payment in the Contract constituted misleading and deceptive conduct. To furnish a draft contract with the blank space carried with it a representation that there was no incentive. 80 However, there is no evidence that Mr Burke ever looked at clause 8.3, much less relied on it as an inducement to enter into the Contract. Mr Burke gave evidence in his affidavit as follows: "I refer to the sum of $60,000 paid to shops 1 and 2 in cash allegedly as a fit-out allowance… I note that the lease for shops 1 and 2 commenced 13 May 1993 and the alleged fit-out payment of $60,000 was paid around 13 May 1993.

I say that had I been aware of the $60,000 payment… I would have drawn the conclusion that the tenant in shops 1 and 2, who was the main tenant, could not be relied upon to fulfil its obligations under the lease…. Whether incentives had been offered to a tenant, and in particular cash incentives had been offered to a tenant, I knew was important, because I was interested in obtaining a particular return on the investment of the applicant. It was thus important for me to know that the major tenant under a 10 year lease at a very attractive rental rate was able to meet its obligations under the lease." 81 In another affidavit, Mr Burke gave evidence of having read several provisions of the Contract. That affidavit was filed in relation to the cross-claim filed against him as solicitor for the Purchaser, seeking contribution on the basis of a breach of his duty to the Purchaser. It is significant that it was only by way of response to the evidence filed against him that Mr Burke made any mention of having read the Contract. Even then, he made no mention of having seen clause 8 or having attached any significance to it. Thus, even if it may have been misleading or deceptive of the Vendor to furnish a contract in those terms, it did not operate in any way on Mr Burke's mind in his decision to enter into the Contract. 82 It is also significant that the claim in respect of the incentive payment was not made until the beginning of the trial, some 18 months after the first affidavit was filed, notwithstanding that Mr Burke had been told about the payment a long time before the complaint was made. There is no basis for concluding that, in the absence of any enquiry, the failure to disclose the incentive payment was in any way misleading or deceptive. In the circumstances, there was material upon which his Honour could properly draw the conclusion, as he did, that Mr Burke was not induced to enter into the Contract by reason of any representation that there had been no incentive. 83 It follows that it was open to his Honour to reach the conclusion which he reached that there was no reliance by Mr Burke on any conduct of the Vendor relating to Barbara's Storehouse. Accordingly, his Honour's conclusion that the proceeding be dismissed in so far as it relies upon conduct concerning Barbara's Storehouse was correct. 84 The complaint in respect of Table Eight can be disposed of shortly. On 16 May 1994, a letter was written to the Vendor on behalf of Table Eight. The letter indicated that Table Eight intended to cease operations at the Property and would vacate Shop 4B before 1 June 1994. The letter said: "The decision has been made due to the continued unprofitability of the location. We are presently losing in excess of our fixed costs. This situation has been exacerbated due to seasonal cash flow difficulties." 85 Shortly after the letter of 16 May 1994 was sent, the words "closing down sale" were printed on the window of shop 4B. Shortly afterwards, a request was made on behalf of the Vendor for the sign to be removed. One of the principals of Table Eight was informed that the Vendor was endeavouring to sell the shop and that if the sign was left there it would be difficult. Table Eight was prepared to do so because the Vendor might have been able to find a tenant who could take over the lease of Shop 4. 86 The Vendor responded to the letter of 16 May 1994 with a letter dated 20 May 1994 expressing surprise and disappointment and an exhortation that Table Eight continue to honour its obligations under the lease. The letter said that the Vendor would be willing to endeavour to secure a suitable assignee. The Purchaser contended that the Vendor should have disclosed to the Purchaser the communications with Table Eight concerning its decision to cease trading and that the failure to do so constituted misleading and deceptive conduct in contravention of section 52. 87 Thus before the Property was advertised for sale, Table Eight had decided to continue trading and had removed the offending sign. Accordingly, as at the time of the advertisement and delivery of the property report to the Purchaser, Table Eight remained as a tenant of the Property. There is no suggestion that there had been any default by Table Eight in the payment of rent or in the performance of its other obligations under its lease. 88 In the absence of any enquiry, I do not consider that the failure to disclose Table Eight's communication of its desire to vacate Shop 4B was of itself misleading or deceptive. The Purchaser, however, relied on similar arguments to those advanced in relation to Barbara's Storehouse. That is to say, the Purchaser contended that it was misleading and deceptive, in the light of the description of the tenants as "high quality tenants" not to disclose Table Eight's desire to vacate the premises. 89 However, Mr Burke did not say that he understood the property report to say anything about the intentions of any of the tenants as to the future. Even if the property could be construed as saying something about the future intentions of the tenants, including Table Eight, saying that Table Eight was a high quality tenant in circumstances where it had expressed a desire to vacate Shop 4B, there was no evidence from Mr Burke that he understood the property report in that way. 90 It follows that it was open to his Honour to reach the conclusion which he reached that there was no reliance by Mr Burke on any conduct of the Vendor relating to Table Eight. Accordingly, his Honour's conclusion that the proceeding be dismissed in so far as it relies upon conduct concerning Table Eight was correct. 91 Claims were also made against directors of the Vendor on the basis of their having aided and abetted the contravention by the Vendor. However, in the light of the conclusion that there was no liability on the Vendor, it must also follow that the proceeding should be dismissed as against the second and third respondents who were directors of the Vendor. 92 The result in my opinion is that the appeal should be dismissed with costs. Because of the conclusion that his Honour reached, the issues under the cross-claim did not arise. The cross-claim was predicated upon the Vendor being held liable. It follows that the cross-claim should have been dismissed. However, his Honour did not formally dispose of the cross-claim. Nevertheless there is no cross appeal relating to the cross-claim.

I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Counsel for the Respondents: C.C. Hodgekiss; M. Richmond