Lesvos Pty Limited & anor v Penrith Whitewater Stadium Limited & anor [2007] NSWSC 335 | Case summary

JUDGMENT 1 HIS HONOUR: This dispute arises out of arrangements for the conduct of a café at Penrith Whitewater Stadium. This is basically a facility within which water courses can be stirred to create ripples, waves and splashes ("white" water) upon which, for recreational or competitive purposes, rafting, kayaking or the like can be engaged in. The café is situated within associated buildings. 2 Some background needs to be sketched. Penrith City Council (PCC) became interested in hosting events during the Olympic Games scheduled to take place in Sydney in September 2000. These events would take place on "white" water. Various contributors to a building of a suitable facility were approached and assembled and such events were added to the games programme. Construction began in mid 1998 at a site near another facility which is a rowing course known as Sydney International Regatta Centre (SIRC). 3 The site had previously been used for quarrying. The title to the land involved multiple holders and the intention was to transfer all title to a Minister of the Crown, apparently the Minister Administering the National Parks and Wildlife Service (NPWS) legislation. It was also the intention of PCC to pass the administration of the facility to a company limited by guarantee to be named Penrith Whitewater Stadium Limited (PWS). Neither of these intentions were fulfilled when PCC (and others) set about establishing the stadium and having it constructed. 4 I readily infer that there was a consciousness that it had to be "up and running" in time for the Olympic Games and, inevitably, had to be "tested" beforehand and therein lay the reason for the activity before transfer of title and incorporation of PWS. I further infer that there were pressures on those involved and these derived from multiple sources. The report of a "Project Control Group" identifies at one point some eight participants. They were the Olympic Coordination Authority (OCA); PCC; Penrith Lakes Development Corporation; Sydney Committee Organizing the Olympic Games (SOCOG); NPWS; the International Canoe Federation (ICF - a body which may or may not be incorporated which is apparently headquartered in Switzerland); the Australian Canoe Federation (ACF); and Pacific Power International (PPI - the constructor). No doubt it is possible to contemplate sources of pressure from further "up the line" for example, the International Olympic Committee (IOC) and the Minister holding the "Olympic" portfolio. 5 The café was obviously but one aspect of the overall scheme but arrangements were also put in train in respect of it with the same pressures for haste as applied to the whole project. Hence the publication of an advertisement by PCC in these terms: "10/99 - Expressions Of Interest For Lease Of Kiosk/Coffee Lounge For Penrith Whitewater Stadium - Closing 3pm 27 October 1998 Expressions of Interest are invited from persons/organisations interested in leasing the kiosk/coffee lounge area within the Penrith Whitewater Stadium presently under construction at Penrith. The Stadium will host the Sydney Olympics 2000 Canoe Slalom events and will operate seven days per week over extended hours. Significant visits are expected across the range of recreation programs the Stadium will offer. It is proposed that the kiosk/coffee lounge will serve hot and cold beverages, light meals, snacks, sweets and other foodstuffs. Further details and copy of Council specifications can be obtained by contacting the Recreation & Cultural Services Manager, Steve Hackett, on (02) 4732 7585. Persons/organisations submitting an Expression of Interest are advised that Council may decide to manage and operate this facility using its own resources. The attention of prospective applicants is drawn to the detailed provisions for submissions, assessment criteria and lodgement contained within the respective Expressions of Interest document and information package. Expressions of Interest packages are available by telephoning the number indicated or collecting documents at the front counter Civic Centre, 601 High Street, Penrith. Expressions of Interest must be submitted in a sealed envelope clearly marked with the Expressions of Interest Title and Number and received by the undersigned prior to 3.00pm on the day specified. Expressions of Interest received after the advertised closing time will not be considered." 6 In response a proposal was submitted by Maria Mihas, a Class 2 chef in cooperation with Arthur Alexiou, who, although a graduate aeronautical engineer, had some years experience in working at, managing and operating restaurants and other food providers. They have since married. The corporate plaintiffs are their instruments and nothing is alleged to turn on this. 7 Well prior to the abovementioned closing date for Expressions of Interest the PCC had also advertised for a Manager of what was then described as "Penrith Olympic Canoe Slalom Facility" and by letter of offer dated 15 May 1998 and acceptance dated 16 May 1998, a Ms Sherry Spurlin was employed. The letter noted agreement for her to transfer to a company when "appropriate mechanisms/structures are set up for the company to operate". PWS had not been incorporated. It is noteworthy that, as at those dates, Mr Steve Hackett confirmed the offer of appointment by PCC and sought Ms Spurlin's agreement to her dealing with the as yet unincorporated entity. In accordance with this agreement she commenced employment. 8 I am not surprised by, nor do I have any criticism of these courses of events which needed to take place in what I have described as haste, that is to say, to accommodate the Olympic timetable. The dealings with the plaintiffs (as I shall refer to Mr and Mrs Alexiou from time to time) were also conducted somewhat "in advance," as it were, and were accompanied by elements of imprecision. After the passage of time and in the light of other factors, there have arisen contradictory claims by the plaintiffs on one hand and the defendants' witnesses, principally Mr Hackett and Ms Spurlin on the other, as to what was said and what happened. Also various correspondences took place, some of it participated in by Mr Robert Paluzzano, to whom the plaintiffs had been directed by Mr Hackett. Mr Paluzzano was, and remains, an employee of PCC engaged in building activities and subordinate to Mr Hackett. Mr Paluzzano was not called as a witness. 9 Senior counsel representing the contesting parties have each made submissions about the credibility of witnesses with which it is necessary to deal. 10 Mr Hackett abovementioned was not only an employee of the PCC but in due course was appointed as a director and the secretary of PWS. It was expressly submitted by Mr Street SC that I should find that he was "a mendacious witness… (who) fabricated Exhibit 12". Exhibit 12 was presented as a photocopy of a file note by Mr Hackett concerning a meeting on 10 December 1998 between himself, Ms Spurlin and the plaintiffs. It was nominated as their first meeting. Mr Hackett gave evidence in chief on 12 March 2007 and was cross examined on that and the following day. During cross examination he made reference to the existence of a file note. He was asked to try and locate it. When cross examination was resumed on 14 March he produced the document which became Exhibit 12. 11 It was observed that the document had a round hole perforation in the bottom left corner of a type that would facilitate the document being placed on a file spike. Ordinarily, if such a use was intended, I would expect the hole in the top corner. The plain paper photocopy had been made on paper which had been used on the other side to print a map. It was not suggested that the map was relevant to the file note. Mr Hackett's explanation was that it was a practice at PCC to recycle paper when photocopying and this was what he had done. He said that the document which he found was loose in a file which he maintained personally. He did not bring to court the file from which the document had been extracted. 12 He denied that he had fabricated the document overnight. 13 Mr Jacobs QC for the defendants asserted that Mr Street's "theory" was based upon three facts: the existence of the hole which I have described; the printing on recycled paper and the correspondence of the content of the note (with some precision) with the evidence given by Mr Hackett prior to his production of the document. 14 I interpolate that Exhibit R consists of a collection of files produced by the defendants which I admitted for the limited purpose of demonstration whether there was an apparent practice at PCC of using recycled paper for photocopying. The collection of files and papers standing flat stands about sixteen centimetres tall. The transcript records the different assertions. To the extent that I have examined the "flagged" pages indicated by junior counsel for the defendants, I find three (and possibly a fourth) sheets within a greenish coloured file which appear to meet the description. In the blue file it is apparent that the page which has been flagged does not represent the use of recycled paper but copying of a particular document on both sides of the page. It and the following page are numbered (55, 56, 57 and 58) but, somewhat oddly, if they are placed in order, the spike holes are on different sides. This may simply represent an idiosyncrasy of a filing clerk. No other file was asserted to contain samples of the use of recycled paper for photocopying. 15 Exhibit R does not persuade me that there existed a practice at PCC of using recycled paper for photocopying but it does demonstrate that it happened on occasions. 16 Mr Jacobs' submissions do not recognize some of the thrust in Mr Street's contentions about Exhibit 12. Exhibit 12 was plainly a discoverable document. It was not discovered. The original note has not been produced and there is no explanation of what happened to it or where it is. It is claimed that the content of the note was used to prepare an affidavit by Mr Hackett but it was accepted that there was no reference in that affidavit to the existence of this alleged source document. 17 Although the document which constitutes Exhibit 12 and its provenance are suspect, I am not satisfied that Mr Hackett fabricated it as alleged by Mr Street. Nor am I satisfied of its authenticity as a contemporaneous record accurately summarizing the events of the meeting. In the circumstances I set it to one side as neither providing destruction of nor support for Mr Hackett's testimony covering the events of a meeting with the plaintiffs. 18 In the course of evidence Mr Hackett (as did Ms Spurlin as I will indicate later) recited virtually as a mantra that the plaintiffs were the "preferred operators" of the café in distinction from accepting that there had been any agreement that they would operate the café. Maintenance of that contention after the plaintiffs were in actual occupation of and operating the café verges upon absurdity. Inter alia, Mr Hackett overlooked his attendance at the Penrith Canoe Slalom Steering Committee on 22 February 1999 where it is recommended that "the sub-licence over the café between Penrith Whitewater Stadium and M. Mihas be endorsed" followed within the relevant document by a record "adopted at Ordinary Meeting Monday 1 March 1999." 19 I shall turn to some detail of some contradictions between the plaintiffs and Mr Hackett but in general I do not find him reliable. What I consider to be his reconstruction of memory is simply inconsistent with events that occurred. As I have contemplated, it may be by reason of the need to meet the Olympic Games deadline that the agreement might be categorized as skeletal but there were obvious attempts to impose terms and conditions of agreement upon the plaintiffs ex post facto. 20 The plaintiffs had fitted out the café and had been notified that they could commence to trade with the public on and from 17 October 1999, however, a letter was sent afterwards (dated 16 November 1999) under the hand of Mr Hackett as Company Secretary of PWS, the first paragraph of which, in the third sentence is somewhat cryptic, but in the first sentence is somewhat telling. It reads: "I refer to the Deed of Sub-Licence that Penrith Whitewater Stadium Ltd and Lesvos Pty Ltd and Koffee Pty Ltd have agreed to. The land transfer of the site to National Parks and Wildlife Services has not been finalised as yet. Accordingly until this transfer is finalised or until further notice this letter is to confirm that Penrith Whitewater Stadium may operate on normal commercial terms in all respects in accordance with the agreement documentation on and from 18 October 1999." 21 It is common ground that no written agreement was executed by the parties. Exactly what is identifiable as "the agreement documentation" is dependent upon which of the stances in the dispute is adopted. 22 The second paragraph of the letter, given its date and what had already happened, represents, to say the least, an attempt to rewrite history and to renege from any agreement previously made. It reads: "This advice applies to the operation of the Café of the Penrith Whitewater Stadium premises. Please note that there is no intention in this to bind Penrith Whitewater Stadium Ltd for the term of the proposed Sub-Licence. Penrith Whitewater Stadium Ltd considers that it will only be bound for the term of the proposed Sub-Licence upon execution of the Sub-Licence Agreement. I will be back in touch when more information is to hand." 23 There is one aspect of Mr Hackett's evidence which fortifies my finding that he has reconstructed his recounting of events to a large extent to fit what has become, in essence, the defendants' case. At what was probably the first meeting with the plaintiffs it was, to put it neutrally, made known to the plaintiffs they could not operate while a contractor to some element of the pyramid of organizations running the Games (SOCOG? OCA? IOC?) would be operating the catering. The plaintiffs maintain that they were told that they had to close during the Olympic Games and they agreed to that condition. Mr Alexiou was not challenged when he said that he was aware that there was a head contractor for catering to the Games. He was aware that that contractor had mobile facilities. It would readily be understood that such a contract would have been made by the Games organizers. 24 It is the evidence of Mr Hackett and Ms Spurlin that the plaintiffs were told that they could not trade for some unspecified span of time which was referred to in various expressions, one of which was "the exclusive Games period". I observe that Mr Fowler, the Chairman of PWS, did not learn what this was until January 1999. As events turned out, PWS demanded somewhat more of the plaintiffs than closure during the Olympic Games or during the "exclusive Games period". It defies credibility to assert, as the defendants do, that the plaintiffs would have gone ahead with fitting out and operating the café on the basis that they would have to quit for some undefined period and it is even more incredible that they would have gone ahead if they had been told (even if able to commence occupation in March 1999) that they would have to quit the premises from June 2000 until the expiry of some post Games time which might extend until January 2001. 25 On the other hand I find entirely credible, and I accept, that what was represented was that the plaintiffs would have to close their café during the Olympic Games and that they agreed to this, armed with the knowledge of the existence of a head caterer to the Olympics, and they recognized that they would "take a holiday" during the Games which would be a period of up to two weeks. 26 As I have noted, Ms Spurlin was appointed manager of PWS. It is plain that from a very early stage she clashed with the plaintiffs. Mrs Alexiou in particular protested that she interfered with the running of the café. There are indications that Ms Spurlin was perhaps a difficult person and this is to an extent independently confirmed by somewhat guarded reference to problems with her by Mr Hodge who is now the manager of PWS. 27 There is convincing evidence that Ms Spurlin wanted, as manager, to exercise control over the whole facility including the café in particular. In a report to the Board for its meeting of 14 January 1999 Ms Spurlin stated: "Robert Paluzzano, Building Works Supervisor for PCC has been working with preferred applicant, M Mihas, to ascertain building fit-out requirements. Initial discussions have lead to several unexpected results: a. This provider is interested in leasing the space to run a full service café of a scope not previously envisioned. As Manager, I envisioned contracting with a service provider in our facility. This operator wants lease and major control of the social heart of PWS. I am not comfortable with provision of services of this magnitude." 28 After the commencement of operations by the plaintiffs the records manifest frequent criticisms by Ms Spurlin of the conduct of the café by the plaintiffs. Much of it is strongly suggestive of a bias on the part of Ms Spurlin against the plaintiffs which is consistent with her objection to their having control of "the social heart of PWS". 29 There is, however, beyond anything which might be implied from these matters of conflict, a matter of credibility which relates to a critical element of the dispute. By letter dated 8 May 2000 Ms Spurlin wrote to the plaintiffs in these terms: " Unofficial Notice to Leave for Exclusive Games Period (7th July - 12th October 2000) Arthur and Maria: As you are aware, the Olympic Games period is approaching. Penrith City Council is in the course of preparation to hand back the Penrith Whitewater Stadium premises to the Olympic Co-Ordination Authority for the duration of the Exclusive Games period. This letter is intended to notify you that you must be in a position to vacate the premises by 5:00pm close of business day on Friday, 7th July 2000 unless there is a separate agreement with the SOCOG Master Caterer and the Whitewater Café to remain and provide catering services to SOCOG during this time. Vacation of the premises would include all shop fittings and equipment. Please contact me if you have inquiries concerning the above." 30 Exactly what was intended to be conveyed by "unofficial" is not clear to me. Ms Spurlin was cross examined about the despatch of this letter and I quote from her testimony: "Q. You certainly intended by serving the unofficial notice to vacate, the initial notice to vacate to get them to leave permanently the premises, correct? A. My job as the manager was to pass on the information passed on to us by OCA that the venue was being taken back over by OCA and that Penrith Whitewater Stadium and any and all people and equipment that we had brought into the stadium would have to be removed unless other arrangements had been made. So the decision was made by OCA and SOCOG and that notice was passed to us and we in turn passed it to them. Q. But you were the author of the unofficial notice to vacate and the author of the official notice to vacate? A. That letter was faxed, similar to the letter that we received from OCA and I did write it and sign it, yes." 31 No such letter from OCA had been discovered. An express call for production failed to bring forth such a letter or anything in similar vein to the claim by Ms Spurlin. 32 Mr Hughes, an engineer, and at the time Project Director Sports West of OCA was called. His evidence included: "Q. Were you at all involved in taking steps in relation to setting up that arrangement for the use of that equipment by the external caterers arranged by SOCOG? A. We had to vacate the facility, provide the fixtures and fittings and effectively hand over the venue to SOCOG, then they brought their contractors in, so we had to decamp and decant and then they took over. Q. The position is this; in relation to the use of the Sydney International Regatta Centre and its café is it fair to say what happened was the fixtures and fittings were not required to be removed by the operator in respect to the Olympic Games period, correct? A. Yes, that's my understanding, yes. Q. And as far as you were concerned there was no reason why a similar situation might not have been able to be applied to the Penrith Whitewater Stadium so far as SOCOG and OCA are concerned, correct? A. Correct. Q. Is it fair to say you never were aware of any direction from OCA telling the operator of the café at Penrith Whitewater Stadium that this was necessary for them to remove all their fixtures and fittings? A. For the period of the Olympic Games, no, I am not aware of that. Q. Can I show you a document in exhibit D at page 198? I want you to assume this is a letter that has been sent to the operator of the café by Penrith Whitewater Stadium Ltd dated 8 May 2000. I want to take you to the last, second last paragraph and the last sentence, you will see it there refers to vacation of the premises would include all shop fittings and equipment. You are not aware, are you, of any direction that was given so far as you are concerned by the Olympic Coordination Authority or SOCOG that all the shop fittings and equipment should be removed, that's correct? A. That's correct." 33 The reference to Exhibit D at page 198 is to the "unofficial notice" which I have above set out. 34 I am satisfied that the probability is that the demand to remove fittings and equipment in particular was not a requirement of OCA (nor any other authority associated with the Olympics) but was made by Ms Spurlin as part of her aim to regain for PWS (and herself as manager) control of "the social heart of PWS". 35 I find that her evidence about passing on an instruction from OCA in particular requiring removal of shop fitting and equipment was untruthful. I do not consider her to have been a reliable witness. I treat her evidence generally with caution and reserve. As I earlier noted, she shared with Mr Hackett a propensity to incant the mantra that the plaintiffs never achieved status beyond being "preferred operators". Unlike Mr Fowler, whom I gathered thought that writing was essential before there could be any agreement, Ms Spurlin took the stance that there had been no agreement although she did not seek to formulate any basis upon which the plaintiffs were in fact in occupation of and operating the café. 36 I turn to the issue of credibility of the plaintiffs. 37 The salient of an attack on Mr Alexiou was directed at his records and trading accounts (and lack of them) as well as against the integrity of some documents such as a balance sheet and taxation returns. As I shall recognize when I address issues of damage, there are significant deficiencies in the information available. 38 There were two principal items relied on by the defendants to support a submission that Mr Alexiou should be rejected as a witness of credit. 39 First, in a profit and loss statement of the partnership corporations trading as the café, there appeared a deducted expense described as "consultant's fees" of $89,300. I am satisfied that no actual payments of such a character were made. There was also criticism, which it is not clear whether it is still pressed, of the record of an expenditure for hire of plant and equipment of $40,600. This was undoubtedly an erroneous description by the accountant who prepared the statement and what had been hired were human workers rather than inanimate plant. The former were acquired through a labour hire entity and the mistake can easily be understood. The statement shows distribution to each partner companies. I do not detect any item representing wages or drawings by Mr or Mrs Alexiou but I cannot deduce that the item of $89,300 may be related to that. It remains an unexplained entry in the document, but it was not disguised and was patent to observation. 40 An associated attack was founded upon the non production of the journal or notebook wherein it was said to be recorded the takings of the café which were later transferred into a record of monthly gross takings stored in the computer. The content has been printed out under a title "General Journal". 41 The difficulty, indeed impossibility, of reconciliation between the plaintiffs' claims and the records (other than the journal) was sought to be met by evidence from Mr Alexiou that he kept cash unbanked in substantial amounts. He said he kept this cash in a shoebox at his residence. 42 In various vigorous articulations Mr Jacobs QC submitted that I should hold that the existence of this cache of cash was a fantasy which emerged from invention. The gap between revenue asserted in the general journal and the bank deposits exceeded, over ten months, more than $350,000. The monthly discrepancies are conveniently scheduled in Exhibit 11. 43 Contrary to the submission, I accept that Mr Alexiou refrained from banking all the cash that passed into the coffers of the café. Whilst it is not necessary for me to determine the motive for doing this, there is a suggestion of one possible explanation for such conduct in the exhibits to the joint experts report (Exhibit 6) where cafes and restaurants are mentioned among the five "reported most often" in the Australian Tax Office publication concerning "Tax Evasion and the Community" issued in July 2006 as well as in its monograph "The ATO's Strategies to Address the Cash Economy". 44 I do not find, for the reasons advanced or otherwise, that Mr Alexiou is a witness of no credibility. That is not to say, however, that I do not treat some of the evidence which he has given about the takings and profits with reserve. I will deal with this when I come to issues concerning damages. 45 Mrs Alexiou, as I have mentioned, is a qualified chef. The impression that I have formed was that she did not pay great attention to administrative (or contractual) matters and was content to leave those things to her husband. It was argued that her evidence that she knew nothing about the cash kept at the residence supported the incredibility of Mr Alexiou's evidence to that effect but such ignorance was consistent with the apparent divisions of responsibilities between them and her lack of interest in administration. 46 The evidence that numerous letters signed by Mrs Alexiou had been drafted and written by Mr Alexiou was not disputed. Very substantially over the course of years I consider that her beliefs have transcended into memory but that is not to say that her beliefs are necessarily wrong. Where what she now says appears inconsistent with records, the probable explanation is to be found in that phenomenon of transference. I did not find her a dishonest witness but I recognize that she was, at times, inaccurate. 47 Much was sought to be made of her claim that, if no agreement about the Penrith Whitewater Stadium Café had been reached, she had secured rights to a café at Fort Denison. Obviously to a lawyer or businessman or businesswoman that was not so, but I do not find that Mrs Alexiou distinguished that phrase from her subjective certainty that, if she had sought to become the operator of the Fort Denison Café, she would have succeeded. 48 In order to determine the basic issue of the existence of contract it is necessary to canvass what happened. I harbour some confidence that a tier of government such as PCC would not have conducted business in the fashion that it did in this instance but for perceived pressure to keep to deadlines related to the forthcoming games. The same consideration applies to PWS, a corporation which PCC spawned. The events do not combine tidily into a lawyer's classical analysis of contract but that does not mean that none came into existence. Nor is it contradictory of existence of contract that the parties deferred to the future some aspects of detail concerning the conduct of the café and the stadium. 49 As was apparent, the relevant conduct of the parties took place in an atmosphere of enthusiasm as well as haste. I should qualify this perhaps in the case of Ms Spurlin who, as abovementioned, did not wish to lose control of the café. The documents show her intense criticism of the café operators. There is documentation concerning her seemingly petulant departure from a meeting where the plaintiffs were making complaints because she considered that her superiors were accepting their complaints rather than supporting her. As I reminded counsel several times during the hearing I was not conducting a commission of inquiry into the situation of aggravation between the plaintiffs and the defendants and there is a practical limit to dealing with every item of contest, many of which do not possess sufficient significance to affect the outcome. 50 The initial event was the placing of the advertisement above quoted to which the plaintiffs responded through Mrs Alexiou, then Miss Mihas. 51 There is an immediate indication of some laxity in the terms of the advertisement itself in that PCC was not the owner of the land nor intended to be the owner, and hence could not grant a lease as advertised. No doubt, it was contemplated that PCC (or PWS if incorporated) would lease from the Minister (once he or she obtained title) and it was a sub-lease which was on offer. Nothing turns on this but it offers confirmation of the conclusions which I have drawn about the haste with which negotiations and agreement were attended. But what is plain is that PCC was seeking an operator for the café at the stadium site. The purpose of calling for expressions of interest rather than tender was because PCC wished to reserve the right (as stated) to operate the café itself. I gather that it might have been thought that using the language of tender might oblige the selection of an operator even if there was only one tenderer. It is noteworthy that prospective applicants were directed by the advertisement to comply with "detailed provisions for submissions". In a letter signed by the Chairman of PWS from which I will later quote he refers to "your tender document." 52 Be that as it may, the plaintiffs lodged a submission entitled "Proposal For Penrith Whitewater Stadium Café". Exactly what was in the package said to be available as referred to in the advertisement is obscure but at some stage the plaintiffs were given a plan (Exhibit A). A section of this plan is entitled "Retail/Café Plan". At one point a souvenir shop was in contemplation but this did not occur. The plan clearly delineates the shop and terrace area. Another drawing subsequently supplied to the plaintiffs (Exhibit C) is to similar effect in delineating the café and terrace area. Cross examination was directed at the plaintiffs suggesting that they had been told that the lease/licence/occupation agreement would not include the terrace area and that they were shown a plan separately delineating these two areas in red and green. Such a plan, coloured as described, has not been produced. 53 It is convenient now to digress to deal with some skirmishes about the terrace area. The tables and chairs upon which dining could take place on the terrace were supplied by the plaintiffs. Exhibited photographs show a typical outdoor café such as can be seen in many parts of this city. At one point the plaintiffs placed a sign "Café Food and Patrons Only" on the terrace and placed flower boxes along the border. The boxes did not prevent entry onto the terrace. Ms Spurlin told the plaintiffs to remove the boxes and the sign. They did so. In correspondence about this and other things the plaintiffs appeared to recognize that the terrace was a "shared area" and they suggested that if PWS claimed this, they should contribute to its cleaning. A suggestion by Ms Spurlin to the Board that they replace the furniture supplied by the plaintiffs was not taken up and the available furniture remained that which the plaintiffs had supplied. 54 The recognition by the plaintiffs that the terrace area was shared conveyed no more than that lawful entrants to the stadium were not trespassers upon the terrace. There is no reason to think that the sign would not be understood to refer to the dining facilities made available by the tables and chairs. I do not find that the reference to sharing the terrace was inconsistent with the plaintiffs' evidence that the agreement that they made included conduct of the café on the terrace area. The PWS website proclaimed: "We also have a café that is situated at the eastern end of the course and the world famous Blue Mountains provide a picturesque backdrop, which can be viewed from the café's terrace ." (Emphasis added) 55 After the receipt of the plaintiffs' proposal there was an initial meeting attended by the plaintiffs and Mr Hackett with Ms Spurlin in attendance. The plaintiffs had been directed to make some enquiries of Mr Paluzzano whose diary, if he kept one, might have helped to establish dates. The meeting was either in late November or early December. It is possible that there was more than one meeting and that memories have merged them but it is still possible to determine on the probabilities whether agreement was reached and the terms of such agreement. 56 Some capital was sought to be made on behalf of the defendants out of oral evidence by Mr and Mrs Alexiou when they accepted cross-examination that, after the first meeting, they regarded themselves as having an agreement. It was pointed out that the proposal which they had submitted contained alternatives depending upon whether they or PCC paid for the fit out of the café. Thus, it was claimed, there could have been no agreement consummated at the first meeting. 57 It is observed that the plaintiffs were never asked to submit tender documentation beyond what was in their proposal. Their pleading is in these terms: "On or about November-December 1998 during a series of meetings between the plaintiffs and the defendants an agreement was entered into for the operation of a kiosk/café and provision of food services at the Penrith Whitewater Stadium in consideration of the plaintiffs paying a licence fee to the first defendant (some terms of which are then alleged)." 58 The pleadings were particularized in these terms: "The agreement was partly oral and partly in writing. To the extent that the agreement was oral it was constituted by conversations taking place at meetings convened in November and December 1998 between Maria Mihis (sic) and Arthur Alexiou on behalf of the plaintiffs and Sherry Spurlin and Steve Hackett on behalf of the defendants. To the extent that the agreement was written the plaintiffs rely upon correspondence between the plaintiffs and defendants from 23 November 1998 until 28 February 1999." 59 The conduct of the case by the defendants resulted in the admission into evidence of affidavits of Mr and Mrs Alexiou, the content of which is available in addition to their oral testimony. 60 I am satisfied that the following matters were agreed. It will be of no benefit to dilate upon distinctions in expression which were explored in lengthy examinations and cross examinations. 61 The elements agreed were: (a) That the plaintiffs would operate the café at Penrith Whitewater Stadium. (b) That in an appropriate fashion the plaintiffs would be secured in conducting the operation for a period of five years with an option to extend for a further five years. (c) That the plaintiffs would not be able to operate the café during the Olympic Games. (d) That the area in which they could operate the café was as delineated in the plans which had been supplied to them and described as the shop and terrace areas. (e) That they would pay "rent" for the occupation of the area. (f) That the food and services provided by the café would be along the lines set out in the proposal documents. 62 The correspondence referred to in the pleading shows negotiation and agreement on a number of peripheral matters. It is not entirely clear when it was agreed that the alternative of the plaintiffs paying for the fit out was adopted but clearly it was and the defendants (expressly through Mr Paluzzano) cooperated in the physical undertaking of the fit out by the plaintiffs. 63 It is convenient to make some observations about the defendants' case. The written outline of submissions premises a first question "whether there is proof that there was a valid agreement of lease". The plaintiffs do not sue upon a lease but upon an agreement as described in the extract from the pleading which I have set out above. I therefore find no relevance in references by counsel to provisions in the Conveyancing Act, the Local Government Act nor, otherwise, in the Corporations Law. 64 The somewhat lengthy submissions are tainted by the assumption that the plaintiffs are suing for breach of an agreement of lease but there are nevertheless a number of matters raised which could be applicable to the plaintiffs' action and they should be addressed. I do so in no particular order. 65 I do not ignore the supply to the plaintiffs on occasions, and with the informality and casualness with which the participants conducted themselves, of various "draft" documents of lease and licence as some sort of precedent with a view to the execution of something in writing at some future time. I do not regard these distributions as demonstrating that no agreement between the parties had been reached. Nor do I attach any significance of consequence to the apparent misconception of the plaintiffs' solicitors that one of these drafts was "operative" when he took up some then current complaints on their behalf. 66 The plaintiffs were directed by the advertisement to deal with Mr Hackett. The defendants seek to rely upon an asserted absence of his authority to contract on behalf of either PCC or PWS. The minutes of the PWS board meeting of 19 November 1998 record this resolution: "1. Discussions continue with M. Mihas as the preferred operator of kiosk/coffee lounge services to Penrith Whitewater Stadium Ltd. 2. A further report be presented to the board." 67 I mention incidentally that such a record contributes to what I think are confusions about dates. Some evidence (including Exhibit 12 abovementioned) related to a "first" meeting on 10 December but here is a reference to continuation of discussions in November and the apparent existence of some earlier report about them being made to the board. Although it is in parts circumlocutious, the evidence of Mr Fowler (T567-8) demonstrates the vesting of authority in Mr Hackett to negotiate with the plaintiffs and plainly to conclude the negotiations. To be able to negotiate without being able to conclude would vest nothing. At no time were the plaintiffs directed to deal with anybody else. The somewhat belated supply of draft documents of lease or licence did not alter that situation. 68 So far as I can gauge, the first suggestion that Mr Hackett in particular lacked necessary authority emerged in the context of litigation. Until then, it is clear that both PCC and PWS acquiesced to his acting on their behalf. If it be needed to turn to concepts of ostensible authority, again, Mr Hackett who wore two "hats" as a senior executive of PCC and a director and the secretary of PWS met the requirements to bind his principals to contract. 69 It is further to be noted that in a letter from PWS signed by the chairman Mr Fowler and addressed to the plaintiffs, dated 14 March 2000, the following appeared: "Sherry Spurlin as Manager of the Whitewater Stadium has our full support in directing the operation of the facility. As manager, she is directly responsible for all communication (defects, requests, complaints, grievances all of which should be made in writing) and all matters arising from your occupation of the café premises. Your communication with Penrith Whitewater Stadium Limited concerning matters related to your occupation of the café premises is to be through her. As sub-licensee of Penrith Whitewater Stadium Limited you are granted certain rights to occupy the café (defined in the Lease Agreement as the 'premises') and to operate as a business preparing and serving food and beverage. This Lease Agreement does not in any way convey additional rights or privileges to you as the café operators with regard to expansion, additions, improvements or other business potential. Fundamentally, Penrith Whitewater has leased you the specific, finite space you agreed to accept to conduct the operation proposed in your tender document. Penrith Whitewater Stadium has no obligation to accommodate desired change to either the scope of the space leased or the operation conducted from that space." 70 The first paragraph, and a litany of complaints which appear later in the letter, are corroborative of Ms Spurlin's expressed preference to have PWS control the café. Mr Fowler accepted that someone else would have drafted this letter which he signed but, when asked, he said he was not certain that it was Ms Spurlin but he doubted that it would have been Mr Hackett. He thought it may have been a PCC legal officer. When I asked if PWS got a bill for such a service he said there was "an understanding that the resource is there if need be". Such loose arrangement between PWS and PCC is consistent with Mr Hackett representing them both in dealings with the plaintiffs. 71 Amidst the mountain of paper tendered, mainly by the defendants, I have located in Exhibit 3D at tab 4.80 drafts of the particular letter. They are within a section indexed by the defendants as "file notes of Ms Spurlin re board meeting re café with draft letter and handwritten notes". Tab 4.80 was not put to Ms Spurlin and her evidence, no doubt therefore based only on memory, was that she "could" have assisted in drafting the letter but in any event would have seen and checked it before it was sent. The file note identifies her as the drafter. 72 The second paragraph above quoted acquired considerable significance. When it was put to Ms Spurlin that the letter expressed "the true and correct" position, a position in obvious conflict with the testimony which she had given she responded "it's semantics". On the other hand, Mr Fowler recognized the inconsistency therein with the case being presented on behalf of the defendants. His evidence included: "Q. Mr Fowler, are you telling his Honour now that the content of what is in this letter and specifically the sentence that starts 'fundamentally' is something which you tell his Honour now is in fact wrong? A. Yes. Q. And despite the steps that you say you took to ensure the letter was correct you now regard what is said in that sentence as something that you regard as erroneous, is that right? A. Yes. Q. And you would agree with me, wouldn't you, that that sentence is completely inconsistent with your assertion in the evidence you have given in chief of there being no agreement to lease the café site to Miss Mihas's interests do you agree with that? A. Can you repeat that please? Q. Would you agree with me that you recognise that this sentence in the letter signed by you that I have drawn your attention to, you recognise as being inconsistent with the evidence that you have given in chief that there is no agreement to lease the site to the Mihas interests, do you agree with that? A. There is no written agreement, yes. Q. No, Mr Fowler, please listen to the question. You recognise, don't you, that this sentence that I have drawn your attention to in this letter is inconsistent with the evidence that you have given in chief to his Honour that there was no agreement to lease the site to the Mihas interests, correct? A. Yes. Q. And you would agree with me, wouldn't you, the reason why you are now saying that what is said there is wrong is because your recognise it is inconsistent with what you told his Honour in chief, correct? A. It's not correct, it's not fact, yes. Q. No Mr Fowler, what I am suggesting to you the reason why you are telling this Honour it is wrong is because you realise it is inconsistent with what you have told his Honour in chief, that's correct? A. Yes. Q. And Mr Fowler, you would agree with me, wouldn't you, looking at the letter now, may I take it that your evidence is that before this letter was sent you had the benefit of legal advice in relation to the sending of this letter, is that what you tell his Honour? A. My understanding, your Honour, is that a legal eye did cast a glance at that letter before it was given to me to sign, yes. Q. May I take it that you accept that what is actually in that sentence that I have drawn your attention to is fundamentally inconsistent with the position Penrith Whitewater Stadium and Penrith City Council has been taking in these proceedings as to whether in fact there was an agreement, is that your understanding? A. My understanding is that there is no written agreement as such. HIS HONOUR: Q. Mr Fowler, you may have some understanding about the magic of writing but nobody has asked you about written agreements. It would help if you just answer the question. A. Thank you, your Honour. STREET: Q. You would agree with me, wouldn't you, that you recognise this sentence that I have drawn your attention to in this letter signed by you is inconsistent with the stance that Penrith Whitewater Stadium Ltd had sought to adopt in these proceedings and Penrith City Council as to their (sic) being no agreement to lease to Miss Mihas, correct? A. The wording in this letter is inconsistent, yes. Q. And inconsistent with the case being advanced by Penrith Whitewater Stadium Ltd and Penrith City Council in these proceedings, correct? A. I don't think I can answer that. Q. You are chairman of the board of Penrith Whitewater Stadium Ltd Mr Fowler, could you answer the question please? A. Can you repeat the question please? Q. You would agree with me, wouldn't you, that you recognise what you have said in this letter as being inconsistent in relation to the sentence I drawn your attention to with the stance that Penrith Whitewater Stadium have sought to adopt in these proceedings, correct? A. Yes." 73 As can be seen from this evidence, Mr Fowler appeared to believe that there could be no agreement unless it was reduced to writing. If he had such a belief, it was incorrect. 74 I find the second paragraph of the letter confirmatory of the existence of contract and, as Mr Fowler conceded, contradictory of his evidence in chief and I further find it is contradictory of the essence of the case being advanced by the defendants. 75 The next series of matters with which I deal are also germane to the alternative basis of the plaintiffs' claims pursuant to the Trade Practice Act and/or the Fair Trading Act. In their final submissions Mr Street SC and Mr Price for the plaintiffs contended that there were three relevant false representations:

(a) That the plaintiffs would be exclusive caterers to the stadium. (b) That the plaintiffs would commence trading in March 1999, and (c) That the plaintiffs would have a 5 x 5 lease. 76 As I have found, it was an express condition of agreement that the plaintiffs could not trade during the Olympic Games. The question is whether it was represented that they would otherwise be the exclusive caterers at the stadium. I am satisfied that there was some discussion about catering for "events" at the stadium. It was, I expect, regarded as obvious that at other times the café would be the only available facility of its type. I found the evidence about what was said on this subject vague and a little confused, and my finding is that a representation that the plaintiffs would be the exclusive caterers at all times other than during the Olympic Games, is not proved. 77 It is not in contest that the plaintiffs were told that it was anticipated that the stadium would open and that they could commence trading then. They were informed that the expected opening would be in March 1999. It is no novelty that builders' timetables from whence the estimate of March 1999 was derived be not met. I am not satisfied that Mr Hackett went beyond representing the expectation that the plaintiffs could commence in March 1999. Even if what he said could be regarded as a representation and is caught by deeming provisions I am satisfied that it is established that he had reasonable grounds for making it. It is abundantly clear that this estimate was based upon information from the builders and I need not pause to recite the content of the progress reports and the recording of conveyed information in the board minutes, which no doubt was passed by PWS to its "parent" PCC. 78 As I have already recorded, the defendants, through Mr Hackett, agreed that the plaintiffs could have a 5 x 5 "lease." As can be gleaned from matters earlier discussed the concept of lease in the discussions and agreement was not attended by any precision. What was understood on both sides was that occupation and operation of the café would be secured on some basis for the period specified. 79 That the promise was not fulfilled is not a demonstration that it was not, at the time that it was made, intended that it be fulfilled. Nor was it misleading if, in this case Mr Hackett, has been shown to have had an adequate foundation for making it. The collapse of the agreement was brought about by factors other than any attempt by the defendants to renege upon the offer of a 5 x 5 term. It was within the scope of Mr Hackett's authority to agree as he did and, when he did, he believed on reasonable grounds that it could and would be fulfilled. There is no basis for concluding that, if other events had not intervened, the 5 x 5 period would not have been met. 80 The claim for damages based upon the statutes fails. 81 Reference should be made to two other matters of collateral dispute. The sample menu attached to the plaintiffs' proposal included what was described as a "lunch/dinner" menu. The plaintiffs claim that it was agreed that they could trade at night, hence the reference to dinner. I find it improbable that the defendants unconditionally agreed to this. Although it is likely that the topic would have been touched upon, having regard to the reference to operations "over extended hours" in the advertisement, this would not rationally be limited to the Olympic Games as it was common ground that, at least, the café would not be operated by a successful applicant during them. Except possibly during "events", the stadium had closing times in the late afternoon. Aspects of dispute about night trading revealed understandable concern about security as the stadium is somewhat remotely located. At a time when relations between Ms Spurlin and Mr and Mrs Alexiou were obviously at their nadir, there was a request/demand for prior notification of intended night trading. The plaintiffs refused, contending that they were not required so to do. 82 From the evidence including the cross correspondence, I can detect that the plaintiffs held a belief that they had a right to unrestricted night trade but I am unable to be satisfied that this was based upon anything precisely agreed in the relevant meetings between them and Mr Hackett and Ms Spurlin. 83 Another item of dispute was the refusal of PWS to allow construction of a cool room. I deduce that the expression in the letter signed by Mr Fowler that "PWS has no obligation to accommodate desired change" may be a cryptic reference to this dispute. I am unable to detect any evidence that this was a subject of agreement but it appears rather to have been a matter first raised after the plaintiffs had gone into occupation of the café and had experienced the need for a cool room. It is an indication of the depth to which relations had sunk that permission for a mobile cool room was not granted, apparently on the ground that there was nowhere to locate it. I could not fail to notice the bitterness in the testimony which suggested that a suitable spot did exist but it was a place where Ms Spurlin liked to park her car. I acknowledge that Ms Spurlin rejected this contention and I make no finding about it. However, I am unable to find that there was any agreement nor any breach relating to agreement by reason of the denials concerning the cool room. 84 I turn to issues of breach and repudiation of the contract. In response to protests by the defendants concerning pleading, I record that I find the pleading of facts by the plaintiffs adequate to fulfil the requirements in those regards and I reject the submission that there was any obligation to plead what are matters of law. 85 The critical matter in my view is the ejection of the plaintiffs from the premises including the requirement to remove fixtures and fittings which is to be contrasted with the agreement of which the relevant term was simply that the plaintiffs could not trade during the Olympic Games. I have set out above the terms of the "unofficial notice". The "official" notice was contained in a letter dated 5 June 2000, the terms of which were: " Official Notice to Leave for Exclusive Games Period (7th July - 12th October 2000) Arthur and Maria: Pursuant to the letter dated 08/05/00, this letter is intended to notify you that you will be required to vacate the premises by 5:00pm on close of business day on Friday 7th July 2000. Vacation of the premises will include all equipment, fittings, fixtures and personal belongings brought to the premises by you. The premises must be reasonably clean. You will be required to return all keys to the premises and gate. All outstanding debts should be paid. The electricity metre(sic) for the café will be read at 5:00pm on the 7th July 2000 and you will be invoiced for the hours used since the metre was installed on 5th April 2000. All power consumption prior to that date has been provided free of charge by Penrith Whitewater. Penrith Whitewater will cease trading at close of business day on Sunday 25th June 2000. This date is at the request of OCA to enable them to complete critical overlay works. The Stadium premises will remain open to the public until Friday 30th June. From Saturday July 1st the premises will be closed to the public. On Saturday and Sunday 1st - 2nd July, Integral Energy will have all electrical power to PWS turned off so that they can bring a higher capacity line through the quarry and into the Stadium. From Monday 3rd July through to Friday 7th July Penrith Whitewater will be packing and moving off the premises in order to hand over the venue to OCA. You are further advised that your return to Whitewater Stadium is not guaranteed to be the 13th October 2000. The Olympic Co-Ordination Authority (OCA) has not given Penrith City Council or Penrith Whitewater Stadium Ltd any guarantee concerning the readiness of the venue for occupation on this date. The Exclusive Games Period is defined as the time when the Sydney Organising Committee (SOCOG) occupies the venue. OCA has rights to occupy the venue until 22nd January 2001 for purposes of bump-out, clean-up and reinstatement. At the date of this writing, Penrith Whitewater does not have a firm agreement in place with OCA that guarantees a date for our business to move back to the Whitewater Stadium to resume operations. You will be advised of this date as soon as it is negotiated and guaranteed. Further, Penrith Whitewater will not open for business immediately on the date of re-occupation. We will be carrying out some improvement to the facility that must be completed before it is safe and convenient to open the facility to the public. The completion date of these works is predicated on negotiation of the aforementioned dates with OCA. At present, our planned re-opening is 1st November 2000. We would request that you provide us with current contact details so that we can keep you informed as dates are confirmed with OCA. You need to arrange for delivery of Whitewater Café mail to your own address and notify your correspondents of your new mailing address. Thank you for your cooperation." 86 In the light of the stance of the defendants concerning the dispute as to what was said about the plaintiffs not being able to trade, it is of interest to note that content of this letter which states that the venue is to be handed to OCA for the "exclusive Games period" which is described merely as "when SOCOG occupies the venue". However, it can be gleaned from the heading that it is intended to refer to the period between 7th July and 12th October but the plaintiffs were also being told in this letter that they may or may not be excluded until 22 January 2001. Even on the defendants' case (which I have rejected) that the plaintiffs were told that they would have to leave for the exclusive Games period this letter suggests that they may be excluded beyond the end of that period on 12 October until January the following year. 87 I gain an impression that there is a tinge of hypocrisy manifest in the final paragraph of the letter. The evidence shows that PWS and Ms Spurlin knew perfectly well how to contact the plaintiffs and their address was the same at all relevant times. In any event, the plaintiffs commenced action in the District Court (later removed to this Court) on 8 September 2000 and, once served, the defendants had an address for the plaintiffs care of their solicitors of whose identity the defendants were well aware beforehand. 88 As against the term of agreement that the plaintiffs would not trade during the Olympic Games, the requirement by the defendants that they vacate the premises and, in addition, remove fixtures and fittings by 7th July 2000 and remain quit of the premises until at least 13th October and possibly 22 January 2001, was a plain breach of a level of seriousness so as to amount to repudiation. The plaintiffs packed up and left. They had no effective choice. That conduct amounted to acceptance of the defendants' repudiation. Hypotheticals explored in cross examination of Mr and Mrs Alexiou do not alter this situation. 89 I add a further matter of significance. I have referred to the intermittent supply by the defendants to the plaintiffs of various draft documents of sub-lease and sub-licence. There is no present need to summarize the contents save to note that what appears to have been the final draft presented an effective ultimatum to the plaintiffs to agree to a clause which made their tenure subject to performance levels being achieved. These levels would be set and achievement judged by the defendants, specifically PWS. This amounted to an attempt to introduce something entirely new into the extant agreement and the plaintiffs were entitled to decline to engage in agreement to such a term. I am aware as I commented earlier that the plaintiffs' solicitors seemed to operate at least at one stage under the impression that a draft of a sub-licence was an operative document. This misconception by the solicitor does not alter my acceptance of the case presented by the plaintiffs. 90 In the circumstances it is unnecessary to proceed with determination of whether all or any of the interventions (to use a neutral term) by Ms Spurlin, of which the plaintiffs protest amounted to breach of an implied term that the plaintiffs enjoy quiet enjoyment of their occupation of the café. As I have said, the repudiation by the defendants and acceptance of that repudiation by the plaintiffs are clear.

Lesvos Pty Limited & anor v Penrith Whitewater Stadium Limited & anor

At a glance

Court

Decision date

Before

Source

Judgment (21 paragraphs)

Parties

Cases Cited (1)

Cited By (2)