Justin Len Miller v Elwood's Eatery atf the Allcock Family Trust - [2024] NSWDC 570 - NSWDC 2024 case summary — Zoe

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Justin Len Miller v Elwood's Eatery atf the Allcock Family Trust

[2024] NSWDC 570

District Court of NSW|2024-11-21

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At a glance

Source facts

Court

District Court of NSW

Decision date

2024-11-21

Source

Original judgment source is linked above.

Judgment (25 paragraphs)

[1]

Overview

It is common ground that the parties entered into an agreement sometime in late 2022/early 2023. They agree it was oral, and that it came into existence in a series of conversations between the Plaintiff and Mr Ben Allcock of the Defendant, to the effect that the Plaintiff would be allowed to install approximately 25 arcade gaming machines in premises under the control of the Defendant.
There is no dispute that the Plaintiff agreed to pay the Defendant an amount of money for that right and that, in return, the Plaintiff could keep all of the takings from those machines. It is also accepted that the arrangement could be terminated by either party at will.
By sometime around August 2023, the parties were in dispute as to the precise terms of the deal. The Defendant terminated the arrangement and effectively locked out the Plaintiff and wrongfully has refused to allow the Plaintiff to retake possession of the machines, notwithstanding requests to do so.
The fundamental dispute between the parties was then and remains what were the terms of the agreement as to how much the Plaintiff was required to pay to the Defendant for the right to install and operate the machines in the Defendant's premises.

[2]

The Plaintiff's claim

The Plaintiff sought orders for the delivery up of the machines. In the alternative, he sought damages for the value of the machines. During the course of the hearing the Plaintiff abandoned his claim for return of the machines and elected to claim only damages, being the sum of $37,500, said to be the value of the machines at the time the Defendant declined to return them.

[4]

The issues

The central issue for determination arises on the cross-claim, viz what are the terms of the contract.
In particular: 1. Was the amount to be payable weekly or monthly? The Plaintiff's case is that it was $1,100 (inclusive of GST) per month. The Defendant's case is that it was $1,100 (inclusive of GST) per week. 2. Did the obligation to pay the regular amount commence on the date the Plaintiff moved the machines in (the Defendant's case) or the date the business commenced operation (the Plaintiff's case)? 3. What, if anything, was the Plaintiff's obligation to contribute to the cost of signage? 4. What, if anything, was the Plaintiff's obligation to contribute to the cost of a roller door(s)? 5. What, if anything, was the Plaintiff's obligation to pay for electrical works? 6. What, if anything, was the Plaintiff's obligation to pay for power points? 7. What, if anything, was the Plaintiff's obligation to contribute to ongoing electricity costs? 8. What, if anything, was the Plaintiff's obligation to contribute to plumbing costs? 9. The Plaintiff's claim for lost profits.
The Plaintiff, on the premise that the contract is on the terms as contended for by the Defendant, says a contract on those terms is unfair within the meaning of s 7 of the Contracts Review Act 1980 (NSW) ("Contracts Review Act"). The Plaintiff seeks relief under s 9 of that Act to the effect that in substance the contract would be rewritten so as to accord with his subjective understanding of the bargain.
As to the issues on the claim, there is no dispute that the Plaintiff has been, at all times, entitled to retake possession of the machines and that the Defendant's refusal to allow him to do so was wrongful. Nor is there any issue but that the value of those machines at the time the Plaintiff made demand for their return was $37,500 and that the Plaintiff is entitled to an award of damages in that amount. There is, however, a significant issue around the Plaintiff's claimed loss of profit.

[5]

The basic facts

From about July 2021, the Plaintiff frequented a southern American-styled BBQ restaurant in Orange, named 'Smoking Brothers'. During this time, he met Mr Allcock, director of the Defendant, and struck up a friendship. The Plaintiff was very impressed with Mr Allcock and later had tattooed on his thigh, the 'Smoking Brothers' logo.
In May 2022, the Plaintiff purchased 60 arcade gaming machines for $120,000. He stored 50 of the machines at a storage unit, incurring weekly storage fees. The other 10 were stored in his mother's garage at no cost.
In October 2022, Mr Allcock told the Plaintiff that he intended to move his restaurant to a bigger venue and raised the prospect of the Plaintiff operating some of his arcade machines from the new venue. On 25 November, and again on 8 December, the Plaintiff inspected the proposed new premises with Mr Allcock.
During the 8 December meeting, the first phase of an oral agreement between the parties was made. Mr Allcock told the Plaintiff he would be charged an occupation fee of $1,000 plus GST to place and operate his machines in the new premises. It was agreed that the Plaintiff could keep whatever income he earned from the arcade machines. Mr Allcock stated that the Plaintiff might have to pay some outgoings, however that would be discussed later. The parties are at odds as to whether the agreed occupation fee was to be paid weekly or monthly. They also do not agree as to the starting date of the arrangement.
In about March 2023, Mr Allcock alleges that he advised the Plaintiff that he would be required to pay one third of the costs of installing power points to run the machines. Further, Mr Allcock stated they would discuss costs associated with actual power usage, at a later time. There were other discussions during this period as to the costs of roller shutters.
In late April 2023, the Plaintiff installed the machines.
In April 2023, Mr Allcock informed the Plaintiff that he intended to install vinyl wrapping (wall art) in the venue. There is an issue between the parties as to whether the Plaintiff agreed to pay one third of the cost.
The Smoking Brothers restaurant commenced trading on 9 June 2023 and customers commenced using the Plaintiff's machines from that date.
In July, Mr Allcock and his wife Elouise went on holiday. On 29 July 2023, the Plaintiff received an invoice from the Defendant. It was calculated on the basis of $1,100 (inclusive of GST) per week.
The Plaintiff gave evidence that he observed the amount charged for rent was not as he considered had been agreed. As Mr Allcock was on holiday, the Plaintiff said he chose to wait for his return to discuss that with him.
On 18 August, the Plaintiff received two further invoices, again calculated on a weekly basis.
Upon Mr Allcock's return from holiday, the Plaintiff says he spoke with Mr Allcock about the amounts charged, disputing the amounts. Mr Allcock denies this conversation, but it is accepted there came a point in time where the parties were in furious disagreement. Both the Plaintiff and Mr Allcock were steadfast in asserting their version of the deal.
At some point, Mr Allcock and the Plaintiff fell out as a result of this disagreement. The Plaintiff informed Mr Allcock of his intention to list the machines for sale on Facebook, although he first offered them to Mr Allcock for $50,000.
The Plaintiff then listed the arcade machines on Facebook. He was contacted by Mr Nigel Baldwin on 26 August, and ultimately agreed to sell him the machines for $37,500. The Plaintiff's case is this amount reflects the true market value of the machines, that is what an arm's length willing buyer was prepared to pay. So much is accepted by the Defendant.
26 August 2023 was the last date the Plaintiff took any money from the machines.
On 15 September 2023, Mr Baldwin attended the premises. He inspected the machines and deposited $37,500 into the Plaintiff's account. Upon returning to the premises to collect the machines, the Plaintiff spoke with Mr Allcock, who refused to allow Mr Baldwin to remove the machines until he was paid the full amount claimed from the Plaintiff. On 15 September 2023, the Defendant issued the Plaintiff with a 'Trespasser's Notice', denying the Plaintiff access to the premises.
Since 15 September 2023, the Defendant has had possession of the machines and has refused to return them.
On 18 September 2023, the Plaintiff refunded $37,500 to Mr Baldwin.
On 12 October 2023, the Plaintiff's solicitors wrote to Mr Allcock asserting the Plaintiff's version of the agreement and again demanded return of the machines.

[7]

The evidence

Both the Plaintiff and Mr Allcock gave evidence as to their recollection of the various conversations. I formed the impression that they were both honest and doing the best they could to remember. That being said, the topics being discussed were complicated and liable to ambiguity. I formed a strong impression that both were confused from time to time and there was miscommunication and misunderstanding involved, going in both directions.
Neither of them profess to have a clear recollection of precisely what words were said by each in the various conversations. Nonetheless, they both gave confident and emphatic evidence as to their subjective understanding of the "gist" of what was said. On the question of whether the amount payable was monthly or weekly, they both gave convincing evidence and were steadfast under cross-examination.
There is very little, if any, objective evidence other than the invoices which were issued by the Defendant to the Plaintiff. The Plaintiff did not take issue with those invoices in writing, however the Plaintiff gave evidence that, whilst he did not complain immediately because he understood Mr Allcock and his wife were on holidays, upon their return he did complain and took the position, which has remained his position, that the amount payable was monthly not weekly - I accept his evidence in that regard because I consider it probable for him to have waited and it is clear to me that, at all times, the Plaintiff has believed the arrangement was for monthly payments and see no reason why he would not have raised this with Mr Allcock, whom at the time he regarded as his friend and mentor.
Other than that, both parties sought to make submissions demonstrating that the alternative version of the contract did not make commercial sense. I was not impressed with either party's submissions in that regard. The unstated premise in each party's position was an understanding of how much money could be expected to be received by way of takings by the Plaintiff from the machines once they were up and operating. However, it is clear to me that no one at the time had any idea as to how much those takings might be and so I do not think an analysis of the probabilities based on commercial likelihood is of much assistance.
The Plaintiff's mother also gave evidence which was consistent with the Plaintiff at all times having a subjective understanding that the amount payable was to be calculated on a monthly basis and not a weekly basis, and that he was upset and frustrated when he found out that Mr Allcock did not agree. Other than that, the Plaintiff's mother gave no direct evidence as to what was actually said between the Plaintiff and Mr Allcock. I accept the Plaintiff's mother's evidence.
Mrs Elouise Allcock also gave evidence to similar effect in regard to her husband, Mr Allcock, namely that his subjective understanding of the deal has remained consistent, although it is clear there was some confusion in his mind as to some of the fit out costs. Like the Plaintiff's mother, Mrs Allcock gave no direct evidence of the arrangement, but her evidence, which I accept, does confirm that Mr Allcock has always believed the payments were to be weekly.
Of significance is the evidence of Mr Bloomfield, who was an employee of the Defendant at the time, working behind the bar. He assisted the Plaintiff in April 2023 in moving the machines into the premises. Mr Bloomfield gave evidence to the effect that, after the business was operating, the Plaintiff said to him on an occasion "my rent is $1,000 a week". Mr Bloomfield also said that there was a number of conversations wherein the Plaintiff would tell him, by reference to the quantum of takings received in any particular week, whether or not that amount was more or less than the rent he had to pay.
Mr Bloomfield also said that to the effect that on one occasion the Plaintiff said to him: "I still owe Ben for some of the costs of the wall art and some other things he paid for."
Mr Bloomfield also gave evidence that, after the Plaintiff received invoices from the Defendant, he showed frustration and anger about the total amount. Such a response is consistent with the Plaintiff being surprised by and not agreeing with the amount claimed in the invoices.
I accept Mr Bloomfield's evidence was honestly given, but for reasons I will explain, I do not consider it reliable.
Before returning to the resolution of the monthly/weekly aspect of the case, I will consider the other aspects of the Defendant's claim, there are a number. Each of which, unfortunately, is worth a very small amount of money.

[14]

Weekly/monthly

The significant battleground is the issue as to whether the $1,100 (inclusive of GST) payment was to be paid weekly or monthly.
As to whether the amount was payable weekly or monthly and having heard both of the principal witnesses and in light of my finding on the other issues, I think there is real scope for their having been a misunderstanding between the parties at the time, with one assuming that their discussions concerned weekly payments and the other assuming monthly. I consider it likely that there was never a true "meeting of the minds".
Because neither party has a real memory of the actual words spoken and because there is no unequivocal, objective support for either party's understanding, it is necessary for me to seek to glean from each party's subjective understanding or opinion, as to the meaning conveyed by the words used at the time, what their mutual intention was. Of course, each party's subjective understanding of the meaning of the contract is not itself directly admissible to prove the terms of a contract: see for example Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40]. As is explained in the recent spate of cases concerning the quality of evidence to be given concerning oral conversations (see for example: Kanes Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381; Gan v Xie [2023] NSWCA 163; Wild v Meduri [2024] NSWCA 230), that evidence is admissible as "lay opinion" evidence as to the meaning conveyed by the actual words spoken. As 'lay opinion', it represents parties' subjective understanding of what was said. So it can be seen to be extremely problematic as evidence of what was actually said, which ultimately must be the basis of the Court's objective determination of the contractual terms.
As was so clearly explained by McClellan CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 where, as here, the matter has to be judged by reference to the objective theory of contract, with the Court seeking to determine what a reasonable businessperson listening to the actual words and observing the conduct of the parties at the time would have considered to be the terms of the arrangement, such a process is fraught with difficulties in the absence of precise findings as to those actual words.
As far as the demeanour of each of Mr Allcock and the Plaintiff was concerned, they both presented as impressive witnesses and I would not be prepared to judge either by their performance in the witness box.
I was a little unimpressed with Mr Allcock's approach to invoicing for the cost of the power points, wherein he put forward and maintained a position that the agreement by the Plaintiff to pay one third of the power point costs, meant that the Plaintiff was obliged to pay the cost of the electrician before the electrician granted to the Defendant a discount from that initial starting point. I did not consider that made any sense at all, nor could it be justified by the Defendant's own explanation of his understanding of the contract, and I do think reflected poorly on his credit. Nonetheless, I consider he was being honest as to the central issue of whether the payments were weekly or monthly.
There is then the objective fact of the invoices, although, as I have said, I think they do no more than reflect the competing versions of the arrangement put forward by the parties, as I accept the Plaintiff's evidence that he waited until Mr Allcock returned from holidays before raising the issue.
The Plaintiff's mother does no more than confirm the Plaintiff's subjective understanding of the arrangement and that he has held that understanding at all relevant times. The same can be said of the evidence of Mrs Allcock.
That then leaves the evidence of Mr Bloomfield.
Mr Bloomfield's evidence is couched and was presented in a rather unusual way. The conversation whereby he says the Plaintiff accepted that the amount payable was weekly, as far as his affidavit evidence is concerned, comes completely "out of the blue", in that it was presented without any surrounding context and, in those circumstances, seems implausible.
The same can be said for the alleged conversations to the effect that monies were owed for the wall art and other matters.
Moreover, I consider the topic was something that Mr Bloomfield would have had no interest in at the time and I find it difficult to accept he has an actual memory of their conversation. On the other hand, he accepts that Mr Allcock had told him, after the matter had turned into a dispute, that Mr Allcock believed it was $1,100 (inclusive of GST) per week. This information may have unconsciously influenced him to believe he has a memory of the conversation.
On balance, I do not place any weight on the evidence of Mr Bloomfield. I consider it honest, but unreliable.
As to whether the payments were to be weekly or monthly, the onus is on the Cross-claimant to present evidence which satisfies me to the requisite standard that particular words were said that would support a finding of a term to that effect.
I am not so satisfied. Having considered all of the evidence, I find myself unsure as to what was said between the Plaintiff and Mr Allcock. It must follow that the party with the onus of proof, viz the Cross-claimant, has failed to prove its case.
The only thing I am satisfied of is that there probably was no meeting of the minds between the parties as to this important term of the contract, albeit they both believed that there had been.
For those reasons, the Cross-claimant's case in relation to the $1100 payment fails, other than it succeeds to the amount admitted by the Plaintiff/Cross-defendant, being $1100 per month.

[19]

Ongoing lost profits

The Plaintiff has a much larger claim for lost profits. That claim commences from 15 September 2023, and continues to the date of this judgment, a period of approximately 61 or 62 weeks. It raises significant and complex legal and factual questions.
I have decided this aspect of the Plaintiff's claim fails at the level of basic principle. Ultimately, the claim was not pressed by counsel for the Plaintiff. I consider that decision to have been appropriate.
The reason this aspect of the claim had to fail was because, however the cause of action is characterised as a matter of law, the ultimate purpose of an award for damages is to put the injured party back into the position it would have been in if not for the wrongful act.
The wrongful act here was the failure of the Defendant to return the machines. I have already determined, on orthodox principles, to compensate the Plaintiff for that failure by awarding him damages, being the market value of those goods from the date of refusal. On top of that amount, the Plaintiff will be entitled to interest at the Court rates from that time forward.
It seems to me axiomatic that, having done so, to allow lost profits from those same machines, for the same period, must be inconsistent and involve double counting.
Perhaps even more fundamentally, as a matter of evidence, it is clear beyond almost any doubt that the Plaintiff had no other opportunity himself to make profits from the machines. He had already explored all opportunities in Orange and there were none available, and his intention was, the project having failed, to sell the machines as he was prevented to do by the Defendant.
In those circumstances, I just do not think that the Plaintiff suffered any further lost profits as a result of the Defendant's conduct. The Defendant was entitled to terminate the arrangement at will. If it had done so and the machines returned, the Plaintiff would not have made any money, indeed, he probably would have been worse off because he would have to pay storage costs. Because of this, he would have sold them at the earliest opportunity, which is in fact what he attempted to do.
No doubt this is why counsel for the Plaintiff was ultimately driven to characterise the claim as an account of profits.
Without getting into difficult areas as to whether an account of profits would be available in the circumstances, I think that, as the claim primarily is at common law, the damages that I have awarded for the loss of the machines themselves is adequate compensation for the fact that the Defendants effectively took the machines. Again, to require the Defendant to pay the market value of the machines as well as account for profits made on the machines seems to me to be not consistent with the overarching principle of an award of damages, at least at Common Law.

Justin Len Miller v Elwood's Eatery atf the Allcock Family Trust

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Judgment (25 paragraphs)

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