Krimbogiannis v Fallshaw - [2015] NSWCATCD 155 - NSWCATCD 2015 case summary — Zoe

NSWNSWCATCD

Krimbogiannis v Fallshaw

[2015] NSWCATCD 155

NCAT Consumer and Commercial|2015-06-02

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Source facts

Court

NCAT Consumer and Commercial

Decision date

2015-06-02

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Original judgment source is linked above.

Judgment (24 paragraphs)

[1]

Background facts

The evidence of Mr Arthur Krimbogiannis was that he and his parents were looking for a new cafe business to purchase and operate. He states that he was told that the owner of a café business at the Connaught Building on Liverpool Street was listing it for sale. He then states that a meeting was arranged by a business broker for him to meet the operator of the premises Mr A. K Salame. A meeting took place with Mr Salame where a number of issues relevant to the business and the premises were discussed.
Mr Salame told Mr Krimbogiannis that the lessor has permitted the insertion of a glass sliding delivery door at the back of the premises. In addition Mr Salame explained how the business was operated and how the premises were used insofar as such use related to the way the business was operated.
Mr Krimbogiannis was interested in purchasing Mr Salame's business. As part of that process, Mr Krimbogiannis thought that it was necessary to meet the lessor and discuss various matters relating to the premises.
Mr Krimbogiannis' affidavit of 23 March 2015 refers to a meeting held with the lessor's representative Mr Bruce Fallshaw in early July 2006 to discuss aspects of the business being operated from the premises. Paragraphs 7-11 of Mr Krimbogiannis' affidavit refers to the meeting and the conversations held between himself and Mr Fallshaw.
The lessees allege that Mr Fallshaw failed to disclose a critical matter at this meeting which is of material significance to their case.
It is at this point relevant to consider the pleadings in these proceedings and to certain facts which are common ground.

[2]

Agreed facts

The following relevant facts are agreed by the parties as evidenced by the lessee's Further Amended Annexure A and the lessor's Defence to Further Amended Application.
At some time before 31 July 2006, the lessor caused or permitted the insertion of the delivery door into the glass common property wall of the premises where there previously had not been a door. The common property wall into which the delivery door had been inserted was not a structural wall. The delivery door was inside the line of the remainder of the glass wall and slides into the premises. During the lease period the delivery door was functional and not in need of any repairs.
The lessor did not secure authorisation under section 65A of the Strata Schemes Management Act 1996 for the insertion of the delivery door. In its Defence to Further Amended Application, the lessor denies that, as contended for by the lessees, it knew or ought to have known at the relevant time that such authorisation was required by applicable law.
I would interpose here that section 65A of the Strata Schemes Management Act provides: '(1) For the purpose of improving or enhancing the common property, an owners corporation or an owner of a lot may take any of the following action, but only if a special resolution has first been passed at a general meeting of the owners corporation that specifically authorises the taking of the particular action proposed: (a) add to the common property, (b) alter the common property, (c) erect a new structure on the common property.'
I would also add that the insertion of the delivery door into the common property wall of the premises would in my view be an alteration of the common property.
The lessor consented to the assignment of the lease of the premises by Mr Salame to the lessees in writing on 9 August 2006 and the lease was assigned to the lessees on 1 September 2006. From that time the lessees were entitled to quiet enjoyment of the premises and the physical state in which the premises were at that time.
At a date not known to the lessees until 17 November 2008, the Owners of Strata Plan 21702 being the Owners Corporation for the Connaught building where the premises are located sought an order against the lessor, but not against the lessees, from an Adjudicator under the Strata Schemes Management Act to remove the delivery door and replace it with a glass wall containing no door.

[3]

Necessary findings of fact in addition to the Agreed facts

The agreed facts are set out above. However I make the following findings of fact in order to deal with the issues in these proceedings.
Based on exhibit AK 1 to Mr Krimbogiannis' affidavit, Exhibit B in these proceedings, I find that the Deed of Assignment of Lease was dated 1 September 2006. The tenant Abdul Karim Salame assigned to the lessees all of his interest in the lease. The lessor provided its consent.
The lease conferred a term on the original lessees, Mr and Mrs Pinsker and their assignees, relevantly the lessees, commencing on 1 May 2004 and terminating on 30 April 2009. The lease also provided for an option to renew for a period of 5 years. The lessees had the right to exercise the option to renew in the period 1 November 2008 - 31 January 2009.
Based on paragraphs 21 and 22 of Mr Krimbogiannis' affidavit, I find that on 17 November 2008 the lessor's property manager mentioned to Mr Krimbogiannis the existence of orders to remove the delivery door and replace it with a fixed panel. The lessor's property manager confirmed the conversation in an email to Mr Krimbogiannis on 19 November 2008. The email stated 'Just wanted to confirm with you of our conversation of late Monday afternoon regarding the removal of the sliding door on the side of the shop we have been ordered to have this removed as explained to you. We have also been ordered to remove all tables and chairs outside shop 6. We are asking you to adhere to these orders. We will arrange for the glass to be replaced with a fixed panel. The company doing their job is Express Glass and their contact number is. They have been asked by us to contact you and make a time for the job to be completed Saturday, 29 November 2008.'
Exhibit AK 1 to Mr Krimbogiannis' affidavit is a letter from the lessee's solicitor to the lessor's solicitor dated 26 November 2008 which stated 'Our clients have been informed that your client has been issued with orders from the Consumer Trader & Tenancy Tribunal. As a result of the Orders your client has requested to enter the premises on or about Saturday, 29 November 2008 to change a door to a fixed glass panel. We are advised that our clients have, on numerous occasions, requested a copy of the Orders from your client and that your client is not provided them with these same. We put your client on notice that unless and until our clients receive a copy of the Orders, your client is not permitted to enter or carry out any work on the premises and thereby disturb our clients' quite enjoyment of the premises.'
Based on page 57 of exhibit AK 1 to Mr Krimbogiannis' affidavit, I find that the lessees exercised their Option to Renew under the lease on 10 December 2008.
Mr Krimbogiannis' evidence is that on 18 May 2009 a response was received from the lessor to the lessees' solicitor's letter of 26 November 2008. That response forms part of exhibit AK 1 to his affidavit. That evidence discloses that on 18 May 2009 a solicitor acting on behalf of the lessor wrote to the lessee's solicitor attaching orders made by the Consumer Trader and Tenancy Tribunal and requesting that the lessees' instructions be obtained as a matter of urgency. The order attached to these 18 May 2009 letter was dated 20 March 2008. Also attached to the lessor's solicitor's letter was a copy of an Adjudicator's decision dated 7 March 2008 which stated, among other things that: 'The respondent (namely the lessor) is restore the sliding glass door on the eastern perimeter of Lot 6 to their original material, colour and design as fixed plate glass window.'
Based on the above evidence, I find that on 18 May 2009 the lessor responded to the lessees solicitors' letter dated 26 November 2008 and enclosed the Consumer Trader and Tenancy Tribunal's order of 20 March 2008 and its orders and reasons for Decision dated 7 March 2008.
I find that on 10 December 2008 when they exercised their option to renew the lease term the lessees knew that the lessor had been ordered to remove the delivery door and was intending to replace the delivery door with a glass panel and was requesting them to allow a contractor engaged by the lessor to carry out the work on Saturday, 29 November 2008. I infer from the lessees' solicitors letter of 26 November 2008 that the lessees knew that the lessor had been issued with an order from the Consumer Trader and Tenancy Tribunal requiring it to replace the delivery door with a glass panel. The lessees also knew that their solicitor had stated that the lessor was denied access to the premises to carry out work until a copy of the orders was received.
I also infer from the fact that the lessor responded to the lessees' solicitor's letter only on 18 May 2009, that on 10 December 2008 the lessees knew that a response to their solicitor's letter had not been received.

[5]

Retail Leases Act 1994

In their submissions dated 1 June 2015, the lessees ask whether the lessor's conduct in relation to the delivery door was misleading or deceptive within the meaning of section 62D of the Retail Leases Act 1994.
Section 62D of the Retail Leases Act states: 'A party to a retail shop lease must not, in connection with the lease, engage in conduct that it is misleading or deceptive to another party to the lease or that it is likely to mislead or deceive another party to the lease'.
Section 62E of that Act provides for recovery of loss or damage by reason of misleading or deceptive conduct and states: 'A party or former party to a retail shop lease who suffers loss or damage by reason of misleading or deceptive conduct of another party may recover the amount of the loss or damage by lodging a claim against the other party under section 71.'
At paragraph 52 of their 1 June 2015 submissions, the lessees refer to a decision of the Administrative Decisions Tribunal in Nicolaou v Gpt Re Ltd [2010] NSWADT, drawing attention to paragraphs 37 - 43 which are as follows: '37 It is the contention of the respondent that section 62D does not apply to pre-lease conduct (i.e. representations) of the parties to a lease. 38 In my opinion, such a restricted construction to the ordinary words used in this section is not warranted. The words 'in connection with', should not be construed narrowly and should be given their ordinary meaning. 39 Section 62D was inserted into the RLA, in November 2005, by the enactment of the Retail Leases Amendment Act 2005. The section was one of 3 sections that made up a newly inserted Division, Division 2, in Part 7A of the RLA. Division 1 dealt with unconscionable conduct (see sections 62A and 62B) and the newly inserted Division dealt with misleading or deceptive conduct (see sections 62C, 62D and 62E). The provisions in Division 2 commenced on 1 January 2006. 40 The unconscionable conduct provisions in Division 1 of Part 7A are expressed in similar terms to section 62D in that they prohibit a lessor and a lessee, 'in connection with' a retail lease from engaging in unconscionable conduct: see subsections 62B(1) and 62B(2) of the RLA. 41 It does not appear that the construction of subsections 62B(1) and (2), or section 62D have been the subject of consideration by the Tribunal previously. However, the Tribunal has accepted that pre-lease conduct of a lessor or lessee may fall within the unconscionable conduct provisions: see Profilio v Coogee Bay Village Pty Ltd [2009] NSWADT 211 and D.B. Reef Funds Management Ltd v Valentino Home Fashion Pty Ltd; Velention Home Fashion Pty Ltd v Westfield Hurstville (Westfield Management) [2008] NSWADT 332. 42 To accept the construction of section 62D as contended for by the respondent, it is arguable that pre-lease unconscionable conduct would not fall within subsections 62B(1) and (2) of the RLA. This would severely limit the operation of these subsections and section 62D. This cannot have been the intention of Parliament when enacting Part 7A into the Act. It is noted that in the explanatory note to the Retail Leases Amendment Act 2005 it is stated that one of the objects of the Amending Act included: '(e) to expand the jurisdiction and functions of the Administrative Decisions Tribunal (the Tribunal) in connection with retail shop leases.' The explanatory note goes on to state, in regard to the new misleading and deceptive conduct provisions of Division 2, that these provisions and those in Division 1 of Part A are to 'reflect the schemes contained in the Trade Practices Act 1974 (Commonwealth) and the Fair Trading Act 1987 (NSW).' It is well accepted that the unconscionable conduct and misleading and deceptive conduct provisions in these legislative schemes include pre-contract representations and conduct. 43 Furthermore, implicit in the respondent's contentions is that section 10 of the RLA is a code in regard to pre-lease misleading statements and representations. Following the decision of the Appeal Panel in Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (RLD) [2007] NSWADT 47 at [105] to [122], which in turn followed the decision of Palmer J in Samaha & Anor v Corbett Court Pty Limited; Corbett Court Pty Limited v Samaha & Anor [2006] NSWSC 1441, it clearly is not a code.'
The width of the words 'in connection with' has been the subject of judicial consideration in a number of cases
In Claremont Petroleum NL v Cummings [1992] FCA 446; (1992) 110 ALR 239: Wilcox J stated: "The phrase 'in connection with' is one of wide import, as I had occasion to observe in a different context in Our Town FM Pty Ltd v Australian Broadcasting Tribunal [1987] FCA 301; (1987) 16 FCR 465 at 479-80; [1987] FCA 301; 77 ALR 577 at 591-2: The words 'in connexion with' ... do not necessarily require a causal relationship between the two things: see Commissioner for Superannuation v Miller [1985] FCA 445; (1985) 8 FCR 153 at 154, 160, 163; [1985] FCA 445; 63 ALR 237 at 238, 244, 247. They may be used to describe a relationship with a contemplated future event: see Koppen v Commissioner for Community Relations (1986) 11 FCR 360 at 364, Johnson v Johnson [1952] P 47 at 50-1. In the latter case the United Kingdom Court of Appeal applied a decision of the British Columbia Court of Appeal, Re Nanaimo Community Hotel Ltd [1945] 3 DLR 25, in which the question was whether a particular court, which was given 'jurisdiction to hear and determine all questions that may arise in connection with any assessment made under this Act', had jurisdiction to deal with a matter which preceded the issue of an assessment. The trial judge held that it did, that the phrase 'in connection with' covered matters leading up to, or which might lead up to an assessment. He said ...: 'One of the very generally accepted meanings of 'connection' is 'relation between things one of which is bound up with or involved in another'; or, again 'having to do with'. The words include matters occurring prior to as well as subsequent to or consequent upon so long as they related to the principal thing. The phrase 'having to do with' perhaps gives as good a suggestion of the meaning as could be had.' This statement was upheld on appeal".
Having regard to the decision of Judicial Member Higgins in Nicolaou v Gpt Re Ltd and the discussion of the width of the words 'in connection with' as set out in the extract from Claremont Petroleum NL v Cummings, I am of the view that section 62D of the Retail Leases Act applies to facts and circumstances that occurred in the pre lease period. On the facts of this case I am satisfied that section 62D applied to the pre - lease meetings between Mr Krimbogiannis of the lessees and Mr Fallshaw of the lessor.
The lessees also make a claim under section 10 of the Retail Leases Act 1994 in connection with the first non - disclosure. Section 10 provides: '(1) A party to a retail shop lease is liable to pay another party to the lease (the injured party) reasonable compensation for damage suffered by the injured party that is attributable to the injured party's entering into the lease as a result of a false or misleading statement or representation made by the party, or any person acting under the party's authority, with knowledge that it was false or misleading. (2) The giving of a lessor's disclosure statement to a prospective lessee under a retail shop lease is considered to be the making of a representation by the lessor to the lessee as to the information in the disclosure statement. (2A) The making of a representation by a prospective lessee in a lessee's disclosure statement given to a prospective lessor under a retail shop lease that the prospective lessee has sought independent advice, or as to statements or representations relied on by the prospective lessee in entering the lease, is considered to be the making of a representation by a lessee to the lessor. (3) This section extends to apply to a statement or representation made before the commencement of this section.'
Both parties are in agreement that the case of Golden Harvest (Aust) Pty Ltd v Paing Pty Ltd & Ors [2004] NSWCA 85 applies to these proceedings in so far as the operation of section 10 of the Retail Leases Act is concerned and that the following passage is relevant: '32 I turn to the operation of s.10. No pleadings and no formal written statements spelling out the grounds of the lessees' claims under s.10 exist or are required. Before the Judicial Member the burden of establishing the facts on which entitlement to remedy existed was on the lessees, and the lessees bore the burden of proving and obtaining findings of all facts on which entitlement to remedy depended, other than facts which were established by the lessor's making its applications for orders for payment of rent under the leases, and facts established by concessions made by the lessor at the hearing. It was at least necessary for the lessees to establish: (a) that a statement or representation was made; (b) that it was made by the lessor or a person acting under the lessor's authority; (c) that the statement or representation was false; or that the statement or representation was misleading; (d) that each lessee entered into a lease as a result of the statement or representation; (e) that the lessor made the statement or representation with knowledge that it was false or misleading. (f) that each lessee suffered damage attributable to the lessee's entering into lease; and its amount; Reliance by lessees on the statement or representation - element (d) - and element (b), the authority of the persons who made the statement or representation, have been treated throughout as established before the Judicial Member and have not been under challenge. Damage - element (f)- was deferred by the Judicial Member to a later stage. The appeals and the questions of law arise out of the Judicial Member's treatment of elements (a), (c) and (e) - identifying the statement or representation, establishing the respect in which it was false, or the respect in which it was misleading, and establishing the lessor's knowledge that it was false, or that it was misleading. 33 The language of s.10 is not close to the language of s.52 of the Trade Practices Act 1974 (Cth). Although the two provisions deal with similar subjects, they operate in different ways. In s.10 it is not enough that the statement or representation should objectively be false or misleading; it is also necessary to show knowledge; nor is there any provision in the Retail Leases Act 1994 dealing expressly with the operation of a representation with respect to a future matter, as dealt with in subs.51A(1) of the Trade Practices Act 1974. A statement to the effect that a building is to be built is a statement with respect to a future matter or a prediction.' 34 Lessees' counsel referred to many authorities on s.52 but these are not directly applicable in my opinion because there is no close analogy between s.10 and s.52 in the language used. The close analogy relates to their underlying concepts; s.52 does not refer to "a false or misleading statement or representation" and s.51A, which turns on provisions relating to making a representation and treating the representation as misleading has no counterpart in the Retail Leases Act 1994. Further, knowledge that the statement or representation was false or misleading is necessary for liability under s.10 whereas liability under s.52 exists if conduct is misleading or deceptive or is likely to mislead or deceive, irrespective of intention or knowledge. It is not possible to pass readily from a decision on the operation of the Trade Practices Act 1975 to the interpretation of s.10. However such decisions can be useful as illustrations.
The elements referred to in (c) - (f) referred to above are in dispute between the parties. That is the lessor denies that: 1. the first non - disclosure was false or misleading; 2. the lessees relied on the first non - disclosure in taking the assignment of lease; 3. the lessor made the first non - disclosure with knowledge that it was false or misleading; and 4. the lessees suffered damage attributable to taking the assignment of lease by reason of the first non - disclosure
I will deal with each of these subjects in turn.

[6]

Was the first non-disclosure false or misleading

The essence of the first non-disclosure is whether or not it is misleading and whether it formed part of misleading and deceptive conduct on the part of the lessor.
The first non-disclosure is, as referred to above, whether lessor decided not to disclose the fact, which as agreed, is that it had not secured the authorisation under section 65A of the Strata Schemes Management Act 1996 for the insertion of the delivery door or alternatively, failed to disclose that it had not secured the authorisation referred to
The lessees must prove that the first non - disclosure was misleading. Since the representation relied upon is alleged to be what was not stated by the lessor's representative, it is necessary to consider the cases which deal with misrepresentation by silence.
The lessees submit that the lessor's conduct was one of telling a half truth, having regard to the conversation between the parties' representatives. Without the context of this conversation, the issue of the delivery door and the need to disclose the fact that an Owner's Corporation consent had not been obtained either before or after it had been created, would not arise. As stated by Gummow J in Demagogue Pty Ltd v Ramenensky Pty Ltd [1992] FCR 31: 'unless the circumstances are such to give rise to a reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist'.
I will therefore proceed to examine the relevant facts and circumstances to ascertain whether they give rise to a reasonable expectation that the fact that an Owner's Corporation consent had not been obtained either before or after the delivery door had been installed, would be disclosed by the lessor to the lessees during the conversation to which Mr Krimbogiannis refers at paragraphs 7 - 11 of his 23 March 2015 statement.
The relevant factual matrix in my view made up of two layers. First, what was known by the parties at the time of the meeting between Mr Fallshaw and Mr Krimbogiannis in early July 2006 and secondly what was said at the meeting.
As stated above, the following facts are admitted by the lessor.
At some time before 31 July 2006, the lessor caused or permitted the insertion of the delivery door into the common property wall of the premises where there previously had not been a door. The common property wall into which the delivery door had been inserted was not a structural wall. It was made of glass. The delivery door was inside the line of the remainder of the glass wall and slides into the premises.
The lessor did not secure authorisation under section 65A of the Strata Schemes Management Act 1996 for the insertion of the delivery door.
I will now consider the evidence of the parties as contained in their respective statements.
Mr Krimbogiannis in his statement dated 23 March 2015 gives evidence of his conversation with Mr Fallshaw in paragraphs 8, 9 and 10. He alleges that he raised issues of: 1. Putting a ventilation system into the premises; 2. Glass protection for a terrace area where customers of the café sat; and 3. Getting bi-fold doors to replace the 'existing glass panel and glass sliding door'.
The lessees plead these matters in paragraph 39a of their Further Amended Annexure A.
Mr Krimbogiannis alleges that Mr Fallshaw responded to each of the issues raised by him by stating words to the effect that the parties had to 'go through strata'.
Mr Fallshaw responded to this evidence in his affidavit of 23 April 2015. He refers to a conversation that he had with Mr Krimbogiannis on 30 June 2006. He states that the conversation included the following exchange: 'Arthur: 'Can we change the shop front to bi-fold doors? Me: Yes but you'll have to apply to the Owners Corporation. Arthur: We want to install an exhaust? Me: The company has been trying to obtain approval for exhaust, and it will be on the agenda for the upcoming AGM.'
The transcript discloses that Mr Fallshaw, when being cross examined, agreed that the lessor had sought from the Owners Corporation an exclusive use area for lots 1 and 2 in the Strata Scheme.
The transcript also discloses that the lessor's representative Mr Fallshaw admitted that he knew that Mr Krimbogiannis had visited the premises before the meeting they attended with each other and that he was hoping to take over the business being conducted from the premises. The lessor's representative also stated that he knew that Mr Krimbogiannis would have seen both doors to the premises being the delivery door and the front door(s).
In cross examination, Mr Fallshaw also stated that he remembers Mr Krimbogiannis mentioning a glass delivery door.
Having regard to the agreed facts referred to and the evidence of what was discussed between Mr Krimbogiannis and Mr Fallshaw at their meeting on 30 June 2006, I find that there was a reasonable expectation that the fact that the Owners Corporation consent had not been sought or obtained in relation to the delivery door would be disclosed by the lessor. The reason for coming to this conclusion is that the parties had been discussing matters which were acknowledged as requiring Owners Corporation consent. In the same conversation the delivery door was discussed. In discussing the ventilation system and changing the shop front to bi-fold doors, Mr Fallshaw stated that Owners Corporation consent was required. The reference to Owners Corporation consent gave rise to the expectation that all matters relating to Owners Corporation consent, including in relation to the delivery door, would be disclosed.
However, disclosure was not made in connection with the delivery door. A relevant transcript passage is at page 43 and 44 of the lessor's version of the transcript. The same passage occurs at page 48 of the lessees' version of the transcript. The transcript references set out below are from the cross examination of the lessor's witness, Mr Fallshaw.
The passage is: 'Knoll: In any event, your response was he had to go through strata. And you knew that if there was going to be any change to the doors whichever way you referred to them, you needed strata approval. And you knew at the time you had a conversation with him, that you had paid for the installation of the delivery door that you had a few months ago Fallshaw: I remember him mentioning ventilation and a glass delivery door. Knoll: Yes. And that you did not apply for Owners Corporation approval for that door, did you? Fallshaw: Yes. Knoll: And you knew that was installing something to the premises? Fallshaw: Yes. Knoll: And therefore required Owners Corporation approval? Fallshaw: Yes. 'Knoll: You've had it in your mind Mr Fallsaw that you made a clear election to not tell Mr Krimbogiannis that the sliding door had been installed by you, correct? And you made a clear election not to tell him that the door did not have Owners Corporation approval, correct? Fallshaw Yes'
The evidence referred to above, namely that contained in the parties written evidence and the evidence that emerged during cross examination indicate that: 1. that the lessor was aware that Owners Corporation consents were required in connection with using or altering common property as exampled by the references to glass delivery doors, bi-fold doors and exhausts; 2. that the glass delivery door was mentioned in the conversation; and 3. Mr Fallshaw elected not to tell Mr Krimbogiannis that the lessor had not obtained Owners Corporation approval for the delivery door.
As a result of the admissions made by Mr Fallshaw in the passage of evidence referred to above, I find that contrary to the lessor's denial referred to in paragraph 28 above and in paragraph 13 of the Defence to the Further Amended Application, the lessor knew at the time of the meeting between Mr Krimbogiannis and Mr Fallshaw that Owners Corporation consent or authorisation was required in connection with changing the common property by the provision of the delivery door.
In connection with whether silence or non-disclosure can be misleading, the lessor has referred me to the case of Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31.
In Demagogue Pty Ltd v Ramenensky Pty Ltd Black C.J. stated that silence was to be assessed as a circumstance like any other. He stated that : 'the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive.'
The High Court of Australia in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited referred to these passages when considering issues of misleading or deceptive non-disclosure.
At paragraph 20 of the joint judgement of French C.J. and Keiffel J. in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited their honours stated in connection with section 52 of the Trade Practices Act: 'In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s,52'
The lessor submits that there were a range of factors which lead to the conclusion that that there could not be any reasonable expectation that the lessor's failure to obtain Owners Corporation approval for the delivery door would, or should have, been disclosed to the lessees before they took the assignment of lease.
I have found via what was admitted on the pleadings and what was said by Mr Fallshaw in evidence that at the relevant time, namely the date of the meeting between Mr Krimbogiannis and Mr Fallshaw, that the lessor: 1. Knew that Mr Krimbogiannis had inspected the premises before the meeting with Mr Fallshaw, that the lessees were hoping to take over the business being conducted from the premises and that Mr Krimbogiannis would have seen the delivery door and the front door to the premises; 2. Had discussed the issue of the exhaust with Mr Krimbogiannis and had told him that approval for the exhaust was being sought and was on the agenda of an Owners Corporation meeting; 3. Had discussed the issue of the bi-fold doors with Mr Krimbogiannis and had told him that the lessees would have to 'apply to the Owners Corporation' according to the lessor or 'go through strata' according to the lessees. Both expressions mean the same in my view; 4. knew that it had caused or permitted the insertion of the delivery door into the glass common property wall of the premises; 5. knew that it had not secured authorisation for the insertion of the delivery door from the Owners Corporation under section 65A of the Strata Schemes Management Act; 6. was aware that Owners Corporation approval was required for the insertion of the delivery door; and 7. had decided not to tell the lessees representative, Mr Arthur Krimbogiannis that the delivery door had been installed by the lessor and that it did not have Owners Corporation consent.
In my view in context of all the factual matters in the preceding paragraph the failure of the lessor to disclose the fact that it had not obtained Owners Corporation approval to the creation of the delivery door by the alteration of common property constituted misleading conduct for the purpose of sections 65D of the Retail Leases Act and a false and misleading statement or representation for the purpose of section 10 (1) of the Retail Leases Act.

[7]

Did each lessee enter into the assignment as a result of the first non-disclosure

Having found in the lessees favour that first non - disclosure was false and misleading, the next issue is whether each lessee entered into the assignment as a result of the first non-disclosure.
Mr Krimbogiannis' evidence at paragraphs 19 and 20 of his 23 March affidavit supports the proposition that each lessee entered into the assignment as a result of the first non-disclosure.
Mr Krimbogiannis states: 'My parents and I would not have purchased the business or taken over the lease if there was any real risk that the owners corporation might require the Delivery Door to be replaced by a wall. My parents and I did not suspect that any part of the Shop was in a state which had not been authorised by the Owners Corporation.'
The lessor deals with the issue at paragraphs 17 - 23 of its written submissions dated 28 August 2015.
The lessee's deal with this issue at paragraphs 18 - 27 of their Reply Submissions.
The lessor concludes it submissions by stating that there was no evidence from Andrew or Connie Kimbogiannis reliance on the first non - disclosure in taking an assignment of the lease or suffering any damage with the consequence that their section 10 claim must fail.
In reply, the lessees point out that there was no cross examination of Mr Kimbogiannis on his evidence which I have extracted above.
The lessor has submitted in connection with the words 'My parents and I', as referred to in the extracted paragraphs above, that their objection taken at the hearing to the hearsay nature of that evidence should be upheld. I did not allow the objection at the hearing and see no reason to do so in response to a final submission. Pursuant to section 38(2) of the Civil and Administrative Tribunal Act 2013 I am not bound by the rules of evidence. I will not uphold the lessor's objection because the proceedings were conducted on the basis that the words referred to were in evidence. It would create procedural unfairness to the lessees to uphold the objection, after it had been declined, on the basis of a final submission.
I accept Mr Krimbogiannis' evidence as extracted above.
The issue is whether as stated 'each lessee entered into a lease as a result of the statement or representation'. Whether or not Mr Arthur Krimbogiannis was an agent for his parents, as submitted by the lessee's is not in my view to the point.
The lessees are obliged to prove on the balance of probabilities that each of them entered into the lease as a result of the first non-disclosure. The only evidence there on this point is the unchallenged evidence which I have extracted above and which I have stated that I accept. This evidence induces in my mind an actual persuasion that each of the lessees entered into the Deed of Assignment of Lease dated 1 September 2006 which document forms part of Exhibit B as a result of the first non-disclosure.
The next issue raised is that of the Lessee's Disclosure Statement. The lessor points out that in Part 2 of the Disclosure statement the lessees have not made any entry under paragraph 5 which gives them the opportunity to set out statements or representations made to them by the lessor or its agents.
This leads the lessor to point out that the failure of the lessees to specify in the disclosure statement any representations made by it upon which they were relying on in taking the assignment raises an evidentiary presumption that there were no relevant representations made or that if any representations were made, the lessees do not place any reliance upon them. It is stated that there was no evidence given to rebut such a presumption.
It seems that the lessor relies upon paragraph 6 of the Lessee's Disclosure Statement which states: 'Apart from these statements or representations set out above, no other promises, representations, warranties or undertakings (other than those contained in the lease) have been made by the lessor to the lessee in respect of the premises or the business to be carried out on the premises.'
The lessees rely on the decision in Armstrong Jones Management Pty Ltd v Saies - Bond Associates Pty Ltd [2007] NSWADTAP 47 (6 September 2007) and in particular the following paragraphs to rebut the lessor's submission that there is an evidentiary presumption that there were no relevant representations made or that if any representations were made, the lessees do not place any reliance upon them: '120 Similarly, lessors should actively set out in their disclosure statement the representations which they have made in the course of negotiations and perceive as going to material matters. So far as the lessor is concerned, it is self-evident we think that any representation as to the identity of a major anchor tenant, however conditionally expressed, is of major importance to prospective small tenants. It is not sufficient, we think, for lessors simply to use the blank space under the heading 'details of agreements and representations' to list the agreements which they have procured which favour them, and ignore the representations they made to secure the deal (as occurred here). It is not fair to leave it entirely up to the lessee to identify the representations that have been made. 121 In the present case there was, in our view, substantial evidence that Mr Draper had made the alleged representation, and that at the time of entering into the lease S-B had relied upon it. There were no similar findings in Samaha. An evidentiary presumption founded in the omission of the statement from the lessee disclosure statement can be overcome by contrary evidence; and was, we think, overcome in this case. 122 As we read Palmer J's reasons, his Honour would raise an estoppel once the allegedly material representation is not disclosed by the lessee in the disclosure statement. We are not inclined to go that far. The factors referred to by Duncan may be such that a lessee can be forgiven for not noting down all relevant representations in the lessee disclosure statement. The failure to live up to a representation may only become apparent on entry into occupation. A lessee should not be barred by an omission at the disclosure statement stage from taking action on a pre-lease representation that was important but not included in the disclosure statement. But we accept that at some point an estoppel may arise.'
I accept and am content to adopt the position stated in paragraph 122 extracted above that 'A lessee should not be barred by an omission at the disclosure statement stage from taking action on a pre-lease representation that was important but not included in the disclosure statement'.
Given that these proceedings are concerned with a state of affairs that was not disclosed to the lessees and their case for the purposes of section 10(1) of the Retail Leases Act is that there was a non-disclosure which was on the facts which applied, misleading it is my view that the lessees were in no position to set out under paragraph 5 matters which apply to the delivery door because it was as I have found, something that the lessor chose to remain silent about.
I also accept the lessees' submission at paragraph 25 of the Reply submissions that the lessees were under no obligation to have made their own enquiries regarding the delivery door as suggested by the lessor in paragraphs 12(g) and 23 (d) and (f) of its submissions. As submitted by the lessees, Henjo Investments Pty Limited and Ors v Collins Marrickville Pty Limited (1988) 39 FCR 546 is an authority for the proposition that the lessor was under an obligation to make the relevant disclosure. In addition I am not persuaded that the lessees as persons about to take an assignment of a lease would have been in any position to search the Owners Corporations records.
I do not accept paragraph 23 (a) - (h) of the lessor's submissions. Reference to the discussions about replacing the delivery door with bi-fold doors misses the point that the lessor failed to disclose the fact that there was no approval for the delivery door under section 65A of the Strata Schemes Management Act.
I will deal with the lessor's submission in paragraph 23(i) separately.

[8]

The lessor made the first non - disclosure with knowledge that it was false or misleading

I have found that the lessor knew at the time of the meeting between Mr Krimbogiannis and Mr Fallshaw that Owners Corporation consent or authorisation was required in connection with changing the common property by the provision of the delivery door. I have also found that Mr Fallshaw on behalf of the lessor had, at the time of the meeting with Mr Krimbogiannis, decided not to tell him that the delivery door had been installed by the lessor and that it did not have Owners Corporation's consent.
I have had regard to the lessee's submissions at paragraphs 54 - 58. I have also had regard to the lessor's submissions and the lessee's submissions in reply.
The question is whether the lessor knew that the first non - disclosure was false and misleading.
The respondent states that there is no basis for finding that the lessor knew that the first non - disclosure was false and misleading because: 1. the Owners Corporation did not complain about or seek the removal of the delivery door; 2. the lessees were interested in replacing the delivery door with bi-fold doors; and 3. Mr Fallshaw denied when being cross -examined that he knew that there was a risk that the Owners Corporation might seek the removal of the delivery door.
In reply the lessees submit that because Mr Fallshaw, as I have found, decided not to tell Mr Krimbogiannis that the delivery door had been installed by the lessor and that it did not have Owners Corporation's consent, the other matters that he disclosed, namely the exhaust and the area outside lots 1 and 2 were knowingly misleading.
In my view the lessees must establish that the lessor's silence that the delivery door had been installed by it and that it did not have Owners Corporation's consent was 'made', if I may use that expression from section 10, with knowledge that such silence was false or misleading. It is not to the point of section 10(1) that the silence made other representations knowingly misleading.
In my view because Mr Fallshaw knew that at the time of his meeting with Mr Krimbogiannis that Owners Corporation consent or authorisation was required in connection with changing the common property by the provision of the delivery door, but had not been obtained, and given that at the time he decided not to tell Mr Krimbogiannis these things, he must have known that Mr Krimbogiannis would not know and would have no reason to suppose that Owners Corporation consent had not been obtained.
In my view Mr Fallshaw must have known that his conscious decision not to tell Mr Krimbogiannis the true situation regarding the lack of Owners Corporation consent to the delivery door was false and misleading for the simple reason that his silence prevented the true facts from being known in a situation in which the potential lessee had a legitimate interest in being told the true state of affairs.
Contrary to the lessor's submission, the fact that Mr Fallshaw stated he did not know that there was a risk that the Owners Corporation might seek the removal of the delivery door (while hardly being credible) is not in my view relevant to whether the silence was knowingly false or misleading.

[9]

The lessees suffered damage attributable to taking the assignment of lease by reason of the first non - disclosure.

The lessees claim damages which allegedly arise from the first non - disclosure. The damage claimed is $133,685.32 being legal fees incurred by the lessees as from 20 August 2010 to 20 March 2015. The legal fees were incurred by the lessees in defending legal proceedings brought by the Owners Corporation against them seeking orders for the removal of the delivery door and its replacement with a fixed glass panel wall without a door.
The litigation was commenced by the Owners Corporation on 2 August 2010 before an Adjudicator in the Consumer, Trader and Tenancy Tribunal. The Owners Corporation was unsuccessful before the Adjudicator. It appealed the Adjudicator's decision also in the Consumer, Trader and Tenancy Tribunal, but was unsuccessful. The Owners Corporation then appealed from the Consumer, Trader and Tenancy Tribunal to the District Court of New South Wales in 2012. The District Court dismissed the Owners Corporation's appeal. In 2013, the Owners Corporation appealed the District Court's decision in the New South Wales Court of Appeal. On 5 December 2014, the Court of Appeal upheld the Owners Corporation's appeal.
The result of the litigation referred to was that on 5 December 2014 the Court of Appeal found in favour of the Owners Corporation and set aside the judgement of the District Court. Ultimately on 5 December 2014, the Owners Corporation was entitled to an order that the delivery door be removed and replaced by a fixed glass wall. Ironically, the lessees were not in possession of the premises at that time having vacated at the end of the lease on 30 April 2014. The delivery door had been replaced before the proceedings were heard.
The lessees' case as I understand it, is that they opposed the Owners Corporation's legal efforts to have the delivery door removed and replaced with a fixed glass panel because they were entitled to the quiet enjoyment of the premises and the physical state that the premises were in as at 1 September 2006. The lessor agrees that the lessees were entitled to the quiet enjoyment of the premises and the physical state that the premises were in as at 1 September 2006.
The lessees submit that the defence of the proceedings commenced by the Owners Corporation was justified as they were mitigating any loss that they may have incurred by reason of the first non - disclosure. The lessees set out the basis of their case in paragraphs 18 - 29 of their 1 June 2015 submissions. They state that costs incurred in a reasonable attempt to mitigate a loss are recoverable, relying on Hellyer Drilling Co v Macdonald Hamilton & Co Pty Ltd (1983) 51 ALR 177 at 192 and that the lessor bears the onus of proving that reasonable steps to mitigate were not taken, relying on Moss v Lowe Hunt and Partners Pty Ltd [2010] FCA 1181 at 167 -168. I accept the authorities referred to as stating the correct principles of law to be applied. In relation to mitigation as stated in Moss at [168] 'A failure to mitigate loss will only be established if the conduct was unreasonable'. In TCN Channel 9 v Hayden Enterprises 16 NSWLR130 at 158 Hope JA stated: 'The important point of principle in relation to mitigation is that the onus is on the defendant. The plaintiff does not have to show that he has fulfilled his duty; the onus is on the defendant to show that he has not, and to show the extent to which he has not done so.'
In addition the lessees state in their submissions that legal costs incurred, as they were here, are recoverable as costs incurred in mitigation. I accept that the lessees having incurred costs in defending the proceedings brought by the Owners Corporation are entitled as a matter of principle to claim those costs from the lessor in these proceedings. The case of Queanbeyan leagues Club Ltd v Poldune Pty Ltd & Ors [2000] NSWSC 1100 at 41 and 45[4] is authority for that.
The lessor addresses the issue whether the lessees suffered damage attributable to taking the assignment of lease by reason of the first non - disclosure in paragraph 21 and in paragraphs 25 - 38 of its submissions dated 28 August 2015.
The lessees respond to these submissions in their Reply submissions.
The lessor submits that the lessees have not proved that they suffered damage attributable to taking an assignment of lease. The lessor asks 'as a matter of common sense', how did the lessees suffer any actual damage?
The lessor raises a number of issues in paragraph 32 of its submissions in response to the proposition that the lessees have suffered damage. The matters raised by the lessor appear to me to go to causation and reasonableness of the lessees' actions. The issues which I consider to be the most relevant are: 1. The fact that the lessees exercised an option for a further term on 10 December 2008 when they knew since 17 November 2008 that the lessor had been ordered by the Consumer Trader and Tenancy Tribunal to remove the delivery door ('the exercise of the option to renew'); 2. The fact that the Owners Corporation wrote to the lessees seeking access to the premises to carry out work for the restoration of the glass wall panel, but the lessees did not acede to the Owners Corporation's request (the 3 March 2010 letter); 3. The fact that the lessees wrote to the lessor on 2 July 2010 refusing to pay the cost of replacing the delivery door with another form of sliding door (the 2 July 2010 letter); 4. The request of the lessor's solicitor in August 2010 requesting the lessees to submit a redrafted change of by-law for submission to the Owners Corporation for authorisation (the change of by-law); 5. The assertion that the lessees have not produced evidence of economic loss or damage with which their costs of mitigation can be compared (no comparable financial loss evidence); and 6. The assertion that the lessees have not produced evidence to establish whether the business they operated on the premises was profitable ( no profitability evidence);
It is also submitted that the lessees should have consented to the orders sought by the Owners Corporation, allowed access for whatever work that had to be carried out and either surrendered the lease or commenced proceedings for whatever relief they wished to seek against the lessor for any misrepresentation or the like.

[10]

The exercise of the option to renew

I have found that on 10 December 2008 when they exercised their option for a further term, the lessees knew that the lessor had been ordered to remove the delivery door and was intending to replace it with a glass panel and was requesting them to allow a contractor engaged by the lessor to carry out the replacement work on Saturday, 29 November 2008. I infer from the lessees' solicitor's letter of 26 November 2008 that the lessees knew that the lessor had been issued with an order from the Consumer Trader and Tenancy Tribunal requiring it to replace the delivery door with a glass panel. I find that the lessees also knew that their solicitor had stated that the lessor was denied access to the premises to carry out work until a copy of the Tribunal orders was received.
I have also inferred from the fact that the lessor responded to the lessees' solicitor's letter on 18 May 2009, that on 10 December 2008 the lessees knew that a response to their solicitor's letter and a copy of the Tribunal's orders had not been received.
The issue is whether, having regard to those findings and the inference that I have drawn, as a matter of common sense, the action of the lessees in exercising the option to renew the term of the lease caused the loss for which they now seek to recover against the lessor.
As at 10 December 2008 no proceedings had been instituted against the lessees for removal of the delivery door and no order had been made against them requiring the removal of the delivery door. Moreover, the lessor had not responded to the lessees request for the provision of the Tribunal orders. I find that having regard to these facts that the lessees were entitled to have regard to the fact that they were as at 10 December 2008 entitled to quiet possession of the premises which included the delivery door. Yet they knew that the lessor had been ordered to remove it by the Tribunal. However as at 10 December 2008 the Owners Corporation had not threatened action against them if they failed to allow the removal of the delivery door.
In my view dealing with the issue as a matter of common sense, the lessees when exercising the option to renew with the knowledge that I have found that they had at the time and in the circumstances that that I have referred to in the preceding paragraph, did not cause the loss that they now seek to recover. It was in my view prudent for them to have done so to protect their interests under the lease, in particular their right of quiet enjoyment and the value of the business that they had paid to the assignor, Mr Salame. This was especially so given that that they had asked for copies of the Tribunal orders, but none were provided. They therefore had no understanding as at 10 December 2008 whether there was a proper basis for the orders against the lessor. As I have stated they were not on notice that the Owners Corporation would take action against them in connection with the delivery door.
For the reasons expressed above, I find that the lessees by their exercise of the option to renew were not the cause of the loss which they now seek to recover.

[17]

Remoteness and Issue Estoppel

The lessor states that recovery is too remote and barred because of issue estoppel.
The question of costs as between the lessees and the lessor was not dealt with by the Court of Appeal.
It appears that the Court of Appeal proceedings were brought with a view to dealing with the costs order made in the District Court and also to deal with an issue of public interest. If that was not their original purpose that was their effect at the time the case was heard and judgement given.
At paragraph 5 of his judgement, Basten JA records the fact that as at 30 April 2014 the lessees' lease had expired. They had left the premises. The Owners Corporation had access and carried out the necessary work. The lessees' interests in the litigation was said to be limited to maintaining the costs orders made in their favour in the District Court. At paragraph 32 Basten JA explained that the Owners Corporation adjourned the appeal proceedings to join the lessor 'under threat that the proceedings might be dismissed for want of a proper party if that step were not taken.'
At paragraph 7 of his judgement Basten JA stated: 'It would, however, be open to the Court to decline to grant relief on the basis that the issue between the parties is moot and the owners' corporation no longer requires an order for access, refusal of which led to the initiation of the proceedings. There is, however, not merely a live question as to costs (which alone would rarely if ever justify a further round of litigation) but also an issue involving an ongoing public interest as to the powers of an owners' corporation under s 62 of the Strata Schemes Management Act. There is also an issue as to the relevance and application of observations in Ridis v Strata Plan 10308 [2005] NSWCA 246; 63 NSWLR 449 as to the operation of s 62. The respondents expressly supported the reliance placed by the primary judge on the reasoning in that case. Because the answers to these questions are clear and the reasoning and findings of the District Court are erroneous, the Court should not decline relief on discretionary grounds.'

[18]

Amount claimed too remote

The lessor submits a paragraph 35 of its submissions that the lessees' legal costs claimed in these proceedings are too remote from any contravention by the lessor of section 10 of the Retail Leases Act. The lessor relies upon the case of Burns v M.A.N. Automotive (AUST.) Pty Ltd 161 C.L.R. 653. It also states that the costs fail the common sense test of causation applicable to cases where persons have suffered loss or damage by misleading conduct. I have dealt with causation above. So far as remoteness is concerned, in Burns v M.A.N. Automotive (AUST.) Pty Ltd the joint judgement of Wilson, Dean and Dawson JJ at p.662 deals with the remoteness aspect of that case.
Burns v M.A.N. Automotive (AUST.) Pty Ltd concerned a case of the appellant taking action based on a warranty that the engine of a M.A.N. diesel prime mover vehicle had been fully reconditioned. The issue was the amount in damages the appellant could recover when he had taken delivery of the vehicle in August 1977 and having become aware of the fact that it had not been fully reconditioned either soon after taking delivery or, at the latest in July 1978. The High Court upheld the decision of the Queensland Court of Appeal that the damages sought by the appellant after July 1978 were too remote because on the facts he should have known about the failure to recondition the vehicle at that time and taken action then.
In reply the lessees make the telling point that the joint judgement of Wilson, Dean and Dawson JJ at p.668 expressly distinguishes cases where the injured party 'was tricked into buying a business' and state 'in such cases different considerations apply'.
In Burns v M.A.N. Automotive (AUST.) Pty Ltd the joint judgement points out that the appellant could have terminated the hiring at any time by returning the vehicle at an early point in time and then taken action against the respondent. The lessees had no equivalent right to do so on the facts at hand. In my view, the decision in Burns v M.A.N. Automotive (AUST.) Pty Ltd does not lead to a conclusion that the lessees' costs as claimed in these proceedings are too remote.
If the lessees costs are to be assessed on a tort basis, as it is clear that such basis applies to assessing damages in actions for misleading and deceptive conduct, refer Gates v City Mutual Life Assurance Society Ltd 160 CLR ,1 the amount claimed in these proceedings is not too remote in my view as it is associated with the lessees' efforts to maintain their right of quiet enjoyment as that right was at the commencement of the lease. Since the majority of the costs incurred were responding to appeals against their initial success, the lessees in my view had no choice but to attempt to secure the result they obtained in the Tribunal adjudication when they resisted the Owners Corporation's application to remove the delivery door and reinstate the fixed glass wall.
In addition, having regard to the history of the litigation between the lessees and the Owners Corporation, there was no point in time before the Court of Appeal's decision was handed down when the lessees should have known that their opposition to the orders sought by the Owners Corporation was futile. On that basis the facts at hand may be distinguished from those in Burns v M.A.N. Automotive (AUST.) Pty Ltd where the Queensland Court of Appeal found a point in time when the appellant should have known about the failure to recondition the vehicle and taken action then.
For the reasons expressed above I find that the damages sought by the lessees are not too remote.

[19]

Issue estoppel

The essence of an issue estoppel is that there has been an issue between the parties litigated The lessor refers to the decision of the High Court in Blair v Curran(1939) 62 CLR where Dixon J stated: "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue-estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, degree or order. Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue- estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J. in R. v. Inhabitants of the Township of Hartington Middle Quarter [(1885) 4 E & B 780 at 794] the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.'
In my view there is no issue estoppel which arises out of the Court of Appeal proceedings as regards whether the lessees may claim the costs incurred in those proceedings against the lessor as arising out of the first non - disclosure. The issue of the lessees' claim to be indemnified by the lessor against the costs of the Court of Appeal proceedings was never agitated between the parties or considered by the Court of Appeal. Because of that there is no 'state of fact or law .. alleged or denied the existence of which is a matter necessarily decided by the' Court of Appeal.
The lessees' submissions state that their claim for recovery of the costs in the Court of Appeal is akin to a Bullock order or a Sanderson order. I disagree.
The Judicial Commission of New South Wales website states: 'A "Bullock order" requires the unsuccessful defendant(s) to pay the plaintiff by way of reimbursement any costs the plaintiff has paid to the successful defendant(s): Bullock v London General Omnibus Company [1907] 1 KB 264. A "Sanderson order" is more direct, and simply requires the unsuccessful defendant(s) to pay the costs of the successful defendant(s), leaving the plaintiff out of the process entirely: Sanderson v Blyth Theatre Co [1903] 2 KB 533.'
In these proceedings orders of that type were not made in the Court of Appeal.
For the purposes of their claim against the lessor for the costs they are liable to pay in the Court of Appeal, I do not find the reference to Bullock orders by the lessees in their submissions to be of assistance.
The issue is whether the costs the lessees became liable to pay in the Court of Appeal form part of their costs of mitigation.
In the circumstances of these proceedings, the lessees took action in the Consumer Trader & Tenancy Tribunal to safeguard the quiet enjoyment of the premises that they contend they were entitled to enjoy. They state that step and the associated costs were taken and incurred in mitigation of the damage that they would have sustained had the delivery door been replaced with a solid glass wall panel.
From that point on the lessees became the subject of the appeal process by the Owners Corporation. This was an inevitable consequence of their success in the Tribunal when they obtained an adjudicator's decision in their favour.
The lessees were successful in two appeal proceedings; in the Tribunal and in the District Court. The fact that they were unsuccessful on one occasion does not in my view mean that the costs incurred and to be incurred by way of their satisfaction of a costs order against them in the Court of Appeal should be treated in a different way to the costs they incurred in the appeal proceedings in which they were successful.
In my view the costs consequences of that appeal process should be viewed as a part of the costs of mitigation as a whole and not according to whether the lessees were successful or not in an appeal proceeding.
Moreover there is nothing in the decision in the Court of Appeal that indicates that the lessees' resistance to the orders sought by the Owners Corporation was completely hopeless and should never have been initiated. Such a finding would weigh heavily against recovery by the lessees.
If it is suggested that the lessees cannot recover the amount claimed as being expended in mitigation because they were ultimately unsuccessful in the Court of Appeal, I have come to the conclusion that is not the case. In Simonius Vischer & Co v Holt & Thompson [1979] 2 N.S.W.L.R.332 Samuels J.A. stated at [355 G] that 'as a result of reasonable steps to mitigate their damage, the plaintiffs suffered a further loss of money.'
In these proceedings the lessees' actions may be seen in a similar way. That is to say that after reasonable steps to safeguard their right of quiet enjoyment of the premises, which included success on two occasions in the Consumer Trader and Tenancy Tribunal and success in the District Court, they suffered a reversal of fortune in the Court of Appeal.
In Simonius Vischer & Co v Holt & Thompson Samuels J.A accepted the principle stated in McGregor on Damages 13 ed., par 237: that recovery is allowed: "for losses and expenses reasonably incurred in mitigation even although the resulting damage is in the event greater than it would have been had the mitigating steps not been taken".
The same position applies to the costs incurred by the lessees in the Court of Appeal.

[21]

The lessor's case against the lessees based on a rental determination - COM 14/ 45236

The lessor claims the sum of $46,523.94 under this heading. Its claim is set out in Points of Claim attached to its application in COM14/ 45236. At the hearing virtually no time was spent on this application.
The lease stated that the term commenced on 1 May 2004 and terminated on 30 April 2009. There was an option to renew for a further 5 year term from 1 May 2009 to 31 April 2014.
The lease also provided that there would be rent reviews during the 5 year term. In connection with the rent to be paid during the option period, the lease is not particularly clear. At best the lease provides for rent during the further period the subject of the option, if exercised, to be current market rent.
The parties seem to accept this.
At paragraph 11 of its Points of Claim the lessor states that on 3 December 2013 pursuant to the provisions of clause 5.12 of Annexure B to the lease, Mr Terry Davis determined that the current market rent of the shop from 1 May 2009 was $30,474.00 per annum.
The lessees make no meaningful admissions in their Defence despite a suggestion to the contrary by the lessor. The lessees deny that Mr Terry Davis made a valid determination of the rent of the premises in accordance with the lease, or sections 19 and 31 of the Retail Leases Act.
The evidence of Mr Fallshaw does not provide any support to the lessor's claim in that no factual evidence from him is provided in support of the claim. There are annexures F, G and H to his 2 October 2014 affidavit which are, a rental determination dated 3 December 2013 by Terry Davis, a letter dated 16 April 2004 from the lessor's solicitors to the lessees and the lessor's rental ledger relating to the occupation of the premises.
Mr Krimbogiannis swore an affidavit in these proceedings dated 23 March 2015. It was tendered but was given no exhibit number, mainly because all attention at the hearing was given to his affidavit in the lessees' case.
The lessor has referred to paragraphs 4.7 and 4.8 of Mr Krimbogiannis' affidavit. These paragraphs state that on or about 8 August 2012 the lessor and the lessees reached agreement for a rent review to be conducted for the market rent of the premises as at 1 May 2009. Further Mr Krimbogiannis states that the lessees started paying the sum of $2,800.00 per month rental as from about October 2012.
Mr TJ Davis of T.J. Davis and Associates prepared in 19 page report dated 3 December 2013 in relation to the premises. The report stated that Mr Davis was instructed by both the lessees and the lessor to prepare a market rental valuation of shop 6, The Connaught, 187 Liverpool Street Sydney. It was said that the parties appointed Mr Davis as determining Specialist Retail Valuer under section 31(1)(b) of the Retail Leases Act 1994. The valuation date was stated to be 1 May 2009.
The valuation concluded by stating that: 'We are of the opinion and determine for the purposes of section 31 of the Act, that the current market rent of the Shop, as per clause 5.12 of in the Lease, as at the review date of 1st May 2009, is in the sum of $30,474 00 PA.'
Section 31(1)(b) of the Retail Leases Act provides: '(1) A retail shop lease that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect: (b) If the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement, by the Tribunal.'
Section 31(1)(a) of the Retail Leases Act deals with current market rent. It states: '(a) The current market rent is the rent that would reasonably be expected to be paid for the shop, as between a willing lessor and a willing lessee in an arm's length transaction (where the parties are each acting knowledgeably, prudently and without compulsion), determined on an effective rent basis, having regard to the following matters: (i) the provisions of the lease, (ii) the rent that would reasonably be expected to be paid for the shop if it were unoccupied and offered for renting for the same or a substantially similar use to which the shop may be put under the lease, (iii) the gross rent, less the lessor's outgoings payable by the lessee, (iv) rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops. The current market rent is not to take into account the value of goodwill created by the lessee's occupation or the value of the lessee's fixtures and fittings on the retail shop premises.'
The lessees raise a number of criticisms of the valuation in their 1 June 2015 submissions. They state, among other criticisms, that the valuation does not comply with sections 31 (1)(a)(ii), (iv) and 31(1)(e) of the Retail Leases Act.
The lessees submit that the valuation does not comply with section 31 (1)(a)(ii) of the Retail Leases Act in that it fails to have regard to 'the rent that would reasonably be expected to be paid for the shop if it were unoccupied and offered for renting for the same or a substantially similar use to which the shop may be put under the lease.'
I have had regard to the T.J. Davis and Associates 19 page report dated 3 December 2013 in relation to the premises. The report reviews a number of relevant matters. However it does not as submitted by the lessees pay any regard to the subject of section 31(1)(a)(ii) as extracted in the preceding paragraph.
After considering all matters which he considers to be relevant and appropriate Mr Davis refers to the premises as they are at the time of the review date. He states as follows in the penultimate paragraph of page 15 of his report: 'Taking cognizance of the various conflicting positive and negative characteristics of the Shop, we are of the opinion that its current market rental value is in the approximate rate of $1375 psmpa gross, equating to $635 per week'
In his further analysis Mr Davis continues to have regard to the premises, or the 'Shop' as he has defined them in the first paragraph of his report as it is and not 'if it were unoccupied and offered for renting for the same or a substantially similar use to which the shop may be put under the lease'
In my view because the valuation report does not comply with section 31 (1)(a)(ii) of the Retail Leases Act it is not a proper valuation for the purposes of the lease or the Act.
As a result of the finding in the preceding paragraph I accept the lessees' submission that no market review of the rent of the premises during the option period is validly in place.

Parties

Applicant/Plaintiff:

Krimbogiannis

Respondent/Defendant:

Fallshaw

Legislation Cited (2)

Trade Practices Act 1974(Cth)

Fair Trading Act 1987(NSW)

Cases Cited (18)

Extension of Time

These proceedings were commenced by the lessees on 16 April 2014. However the proceedings have been brought out of time. I will deal with the lessees' claim for an extension of time first, noting that at the hearing very little time or attention was devoted to the issue.
Section 71 of the Retail Leases Act states: 'Lodging of retail tenancy claims with Tribunal (1) A party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim. (2) A claim may not be lodged more than 3 years after the liability or obligation that is the subject of the claim arose.'
The lessees submit that time began to run when the lessees first learnt on 17 November 2008 about the orders against the lessor obtained by the Owners Corporation or on 2 August 2010 when the Owners Corporation commenced proceedings against them.
In either case the proceedings were commenced out of time.
Given that the proceedings have been brought out of time, the lessees rely upon section 71B of the Retail Leases Act which states, so far as is relevant: 71B Lodging of claims after 3 years (1) A retail tenancy claim may be lodged more than 3 years but no later than 6 years after the liability or obligation that is the subject of the claim arose, if the Tribunal orders that the claim may be lodged with the Tribunal. (2) (3) The Tribunal may make an order under this section: (a) on application by the party or former party concerned, and (b) after hearing such of the persons likely to be affected by the application as it sees fit, and (c) if the applicant satisfies the Tribunal that it is just and reasonable to make the order.
The lessees have satisfied section 71B(3)(a), and the lessor has had the opportunity of being heard on the application to extend time. If an extension of time was granted, the proceedings would be within time on either of the dates asserted by the lessees as to when time began to run.
The lessor's written submissions dated 28 August 2015 do not address the extension of time issue.
As regards section 71B(3)(c) of the Retail Leases Act, the lessees submit in effect that the lessees were preoccupied with the running of their business from the premises and in defending the claim brought against them by the Owners Corporation. In addition they state that it was only when the Court of Appeal proceedings were concluded that they could know the precise costs that are now in issue. These matters are offered as the explanation as to why the proceedings were not brought within time. I note that these matters are made by way of submission. Mr Krimbogiannis does not deal with them in his affidavit.
The lessees also submit that the availability of an extension of time is to be construed liberally, referring to a number of decisions one of which is Polyux Pty Ltd v Corpers (No 5) Pty Ltd [2009] NSWADT 284. In that case Judicial Member Bluth stated at paragraph 44: '44 The primary test for determination as to whether or not an extension of time should be granted is "whether there can be a fair trial of the issues between the parties"; see Brisbane South Regional Health Service v Taylor [I961] [1996] HCA 25; 186 CLR 541 and - South Western Sydney Area Health Service v Gabriel [2001] NSWCA 477 (17 December 2001). In other words, whether there is prejudice to be suffered by the defendant if the extension is granted; Sydney City Council v Sezegarac [I998] 43 - NSWLR'
I find that the lessees' failure to institute these proceedings within 3 years of either 17 November 2008 or 2 August 2010 has not adversely affected a fair trial of the issues between the parties. The lessor has been able to give a full account of its position. Its ability to give evidence before the Tribunal has not been prejudicially affected by the lessees delay.
As a result I will make an order under section 71B of the Retail Leases Act to allow the lodging of the lessees claim in these proceedings.