Mr Tom Williams was the owner of Cafe Barzu located at 121 Norton Street Leichhardt and had owned the cafe since 1999. His evidence was that his cafe had performed best in 1998 and 1999 but since that time the revenue of the business began to decline. The Italian Forum opened in Leichhardt in August 1999 but took some time to build up business. Nevertheless, the initial effect on his business was a decline in revenue of about five per cent. In the following year, the Forum's business continued to grow, affecting the revenues of other businesses in the area. In the year prior to the 1999 Olympics, many new restaurants were built in the city area across all suburbs in Sydney. During the two weeks of the Olympics, Cafe Barzu suffered a 50 per cent decline in business but city fast food retailers and liquor outlets recorded boom sales. It was Mr Williams' belief that the Olympic Games had a significant impact on changing eating habits. At the same time as the Olympic Games, the New South Wales Government introduced new no-smoking legislation that caused an additional negative change in people's dining out habits. The effect of new restaurants across Sydney began to be felt at Cafe Barzu, not only in reduced takings but also in the drying up of available kitchen and floor staff. Further, in July 2001, Leichhardt Council introduced parking measures to Norton Street with a "fierce, predatory fining policy for meter overstay and illegal parking". Mr Williams said that this had the effect of driving away traditional customers from Norton Street: many of his regular customers were eating elsewhere and informed him that this was due to being fined for parking offences in Norton Street. In light of his six years' experience in running the cafe, Mr Williams believes that it might have been possible to overcome the impact of the Olympic Games and the no-smoking legislation but the development of the Forum and the introduction of parking meters and a stringent parking fine policy could not be overcome.
40 For the respondents, Theo Kotselas was Mr Galletta's accountant and had been since November 2003. He was very familiar with the Leichhardt area and had been a frequent patron of Galletta's Bar since it opened. In the second half of 2000, he had some discussions with Mr Galletta about purchasing the business - Mr Galletta told him he wanted $1m for the business. Mr Kotselas at one stage asked if Mr Galletta would remain a silent partner with a half-interest, to which Mr Galletta replied that he wanted to guarantee minimum profits and required $3,000 per week rent on the building and $2,000 per week minimum for the business. A few days later, Mr Kotselas agreed to those terms and wanted to attend the business over the next three to four weeks to see how the business was going and, if "things stack up" to discuss the details. Mr Kotselas said he started attending the business for about three to four weeks, was given complete freedom to check the cash register, the tape of the cash register, the customers and the purchase dockets etc. He ascertained that the business was improving on a weekly basis and was averaging $30,000 per week.
41 Mr Kotselas said that he had considerable experience in performing accountancy tasks for various people in the restaurant and coffee shop business and in determining the fairness or otherwise of what Mr Galletta was asking. Generally speaking, 10 per cent of the takings equated to the building rent and that is why he felt that $3,000 per week was "on the mark". He also considered that, generally, a business like Galletta's Bar would work on a net profit of 25 per cent of turnover and therefore he felt a profit of $7,000 to $7,500 per week was realistic. Because proposed partners in the business were unable to raise the necessary funds, he regrettably had to withdraw from the deal. His interest in operating a coffee shop remained and, in May 2002, with his wife and son, he set up a coffee shop at Potts Point.
42 Mr Kotselas stated that by August 2000, both the Italian Forum and Norton Plaza had opened. The Forum was slow in obtaining a full occupancy rate: it took a few years for that to be achieved. Also, at the Parramatta Road end of Norton Street there was a large shopping centre with a variety of shops and Coles Supermarket was the main tenant. It took some 18 months to two years from the opening of that shopping centre for it to achieve full occupancy. Mr Kotselas observed that, from approximately mid-2001, there was a shift in business activity from the western end of Norton Street (where Galletta's Bar was situated) to the eastern end closest to Parramatta Road. In his view, this has been brought about not only by the increased activity at the Parramatta Road end of Norton Street, such as the operations of the Forum and Norton Plaza, the cinema and substantial parking areas, but most importantly those places enjoyed substantial parking areas available to the general public, while there were no similar parking areas in the vicinity of Galletta's Bar. The whole of Norton Street had been "negatively impacted upon by the introduction of parking meters in 2001". The introduction of the parking meters induced patrons to frequent the Parramatta Road end where there were a number of off-street parking facilities. Further, the number of food outlets in the Forum and Norton Plaza had increased dramatically, creating fierce competition with food outlets at the western end of Norton Street.
43 In cross-examination, Mr Kotselas said that, although the shift in business activities to the Parramatta Road end of Norton Street was expected to bring changes, it was unknown what would be the extent of those changes. The area was still changing and there were still negative impacts, especially parking. For the last few years, his firm had prepared BAS returns for Monotell Pty Ltd and he believed the figures that had been supplied to him were accurate. When he was considering purchasing this business, he did not look at any of the other financial records and was satisfied with the cash register records as indicating the takings of the business. He was a frequent customer, knew about the level of business and had been involved for over 25 years in looking after a number of clients in this type of business.
44 From documents produced, the applicant presented schedules firstly indicating that, during the lease, the amount paid as rent for the premises totalled $482,180.40 while rent for the business totalled $321,453.84 - giving a combined total of $803,634.24 for the period of the lease. BAS documents for Monotell Pty Ltd t/as Galletta's Bar showed that, between 1 July 2000, to 30 September 2000 total sales amounted to $130,922 while, for the period 1 October 2000 to 31 October 2000, showed total sales of $44,904. The total for this period was $175,826, averaging $9,768.11 per week for this 18 week period. Sales for the period 1 October 2003 to 31 December 2003 totalled $61,988.67 averaging $6,198.87 for the 10 weeks including the last four weeks of Mr Lostumbo's tenancy. For the period 1 January 2004, to 31 March 2004 sales totalled $32,070, averaging $2,466.92 per week. For the period 1 April 2004 to 30 June 2004, total sales amounted to $54,670 averaging $4,205.38 per week. Combining these last three entries, the earnings for the period 1 October 2003 to 30 June 2004 showed that a $158,262 was taken, averaging $4,396.17 for the 36 week trading period. The figures for the period 1 July 2004 to 30 September 2004 showed $72,766 in sales, averaging $5,597.38 per week while, for the period 1 October 2004 to 31 December 2004, showed gross takings of $67,554, averaging $5,196.46 for that 13 week period of trading.
DELIBERATION
45 The applicants' case was that the deed with Monotell Pty Ltd, the sub-lease between Galletta Construction Co Pty Ltd and Lostumbo Investments Pty Ltd and the deed of lease between Monotell Pty Ltd and Lostumbo Investments Pty Ltd for lease of the premises known as Galletta's Bar were inter-related, with one dependant upon the other. The applicant company and the respondent company were one or two person entities, with Mr Lostumbo being the principal of his company and Mr Galletta being the principal for his company. For the first year, the combined rent for the premises and lease of the business was $5,000 per week with a division of that amount being driven by tax advice rather than a valuation of the two components to the total amount of $5,000. The amount for "reasonable" rent was that found by Mr Garder at $104,000 per annum as being appropriate for the lease of the premises but, for reasons set out in Mr Kelly's first report, nothing should be paid for the lease of the business because of the loss position exposed by the records of takings and lack of profitability. At the very most, a modest amount was to be paid for the equipment and would amount to no more than $4,000 or $5,000 in the first year and would be severely depreciated thereafter. There was nothing payable properly on account of goodwill when the business was making a loss.
46 At the heart of the claim of unfairness were the representations made that the business was taking $28,000 to $30,000 per week. This business had been operating since 1993 and from the records available, it was apparent that for only a few months just prior to Mr Lostumbo entering the lease, had this level of takings been achieved. The representation was deceptive because, on an annual basis, the average monthly takings fell far short of $28,000. Achieving an average of $28,000 per week would result in total takings of nearly $1.5m per annum. There were no figures available from the respondent that came anywhere near that level of average income. Mr Galletta's BAS statements for the periods immediately prior to the making of the representations showed that takings were averaging $9,010 per week; significantly below the level represented. It was suggested that, if in August 2000 average weekly takings had amounted to $28,000 there was nevertheless, misrepresentation by silence, because in the preceding month or so the takings would have had to have been negligible. The agreement was therefore unfair at its inception and in its operation and practice turned out to be unfair, particularly in view of the matters that altered the trade for coffee shops in the surrounding area of Norton Street. There was no dispute about this adverse effect; it was supported by the respondents' witnesses as well as those of the applicants.
47 In relation to the valuation of the business, it was submitted that Mr Rossetto's opinion was basically flawed by the instructions he received in relation to the calculations of the gross takings. According to his instructions, he took the first 25 weeks of the lease and, despite the fact that the recorded takings were available for the remainder of the financial year, he then took those figures as an average for the business allowing him to reach a net profit from the business as being nearly $73,000, while Mr Kelly's report accurately calculated it being $11,500. As opposed to Mr Rossetto's theoretical exercise, Mr Kelly looked at the applicants' level of takings to June 2001 and then concluded that no reasonable return was available to the applicants to pay for the lease of the business. Mr Kelly was able to use figures of the business takings up to the time the applicants took over Galletta's Bar with figures from 1 July to 31 October from the respondents' BAS statements: Mr Galletta in his evidence accepted that those statements correctly reflected the takings and the figures upon which GST was to be paid.
48 It was then submitted that, having regard to the average takings, the guarantee of $150,000 was unfair at the time it was made and became even more unfair in view of the circumstances that worked out in practice. In effect, the guarantee operated so that, if the takings fell below $22,500 a week on average during the four week calculation period at the end of the lease, then the applicants would pay the respondents $150,000. This was a business where the takings were known to fluctuate and no one could "look with a crystal ball into the future", especially when the representations referred to takings that were not for the period for the calculation of any amount due to the respondents under the guarantee. What was a material factor in determining whether the contract was fair or reasonable was net profit not gross profit: in effect, Mr Lostumbo was "buying himself a job".
49 In relation to the Cross-Claim, it was submitted that there were significant problems with the matters claimed relating to any damage or missing items. The managing agent Mr La Rosa, on a proper reading of his evidence, did not support the claim. He was under the impression that a number of items were included in the lease when they were not. He attended the premises five days after the end of the lease when there were people performing work at the premises: he was unable to give evidence as to when any damage occurred or when items ceased to be at the premises and was unable to give evidence as to who caused any damage. Mr La Rosa agreed that normally a claim was made in relation to a bond. However, there was no bond here and there was no notice of alleged damage served by way of claim as managing agent or the applicants, contrary to the usual practice. The Cross-Claim was simply not made out.
50 For the respondents, it was submitted that the applicants bore the onus of demonstrating unfairness in the contract which was not addressed by showing that the "optimal arrangement" had not been entered into by the parties. On many occasions, the Court and its predecessors had warned against the use of this part of the jurisdiction to become a refuge for those who were merely disgruntled with a bargain entered into on even terms. The Court would not normally interfere with bargains freely made by persons who were under no restraint or inequality. Persons who entered a business had to bear their own responsibility for assessing the business opportunities and their own suitability for the venture.
51 Any unfairness in this contract was said to have been "visited on the respondents". They had leased out a property in good condition with a business that, at the time of lease and for six months thereafter was averaging $28,500 per week - three years later they got the business back with takings of $15,250 per week, with the premises in a dirty and damaged condition and dirty and damaged to the extent of $104,000. For this result, the respondents had been paid a total sum of $5,000 per week for rent and were able to claim the benefit of a guarantee in the sum of $150,000. This $150,000 represented only 13 weeks of the loss the respondents suffered for the difference in takings between the leasing of the business and getting it back again. It was not to be considered a large sum in the context of a business taking $3.5m over three years. If the guarantee was addressed to the 13 weeks' loss, then that sum did not defray the cost of repainting and damage to the premises in circumstances where there was no bond to deal with that eventuality. Here, the respondents had been the losers in relation to this contract: the contract could not be regarded as unfair against the applicants. This was to be compared with Mr Lostumbo's position - being able to walk into a business with a name, a clientele, infrastructure, stock and the ability to take any profit from the first day. He paid nothing but the weekly rent and at the end of the first eight months of operating the Bar he had taken for himself as an employee and company director the sum of $100,000. The business had taken $3.5m during the course of the lease and according to the applicants' own expert, returned a gross profit of $600,000.
52 In this case, it was submitted there was no unequal bargaining position: both were experienced small businessmen of equivalent standing and experience. They knew each other, they knew the particulars of the Bar, they presented as being equally shrewd and articulate and able to negotiate for themselves. They each had competent solicitors and accountants. Solicitors acted for them and negotiated the terms of the lease. It was clear from the evidence that Mr Lostumbo's solicitor was active in his interests throughout the lease discussions. Mr Lostumbo accepted that his solicitor had explained the deeds and he made no complaint that he did not understand any aspect of those documents. At no time during the three years, was there ever a complaint about the contract, the rent, the takings or the guarantee. It was submitted that there was no complaint because nobody saw any of these arrangements as being unfair. When Mr Lostumbo had seen some unfairness, he had his solicitors write about it and many of those matters were addressed. Nowhere had these matters been raised during the course of his occupancy of Galletta's Bar.
53 An essential part of the applicants' case of unfairness revolved around the takings he received. It was submitted that the evidence showed that the takings figures kept by the applicants were not accurate or reliable. Mr Lostumbo admitted paying employees cash in hand and issuing group certificates that were not accurate - in some cases by as much as $25,000 for an employee in a year. He could not be believed when he said that all the takings were recorded: the group certificates were inaccurate, his BAS statements were wrong and his financial records could not be reconciled. These were all highlighted in Mr Rossetto's report. Mr Kelly, the applicants' expert admitted in evidence that, where cash in hand payments were made, that was usually done from undeclared takings. Mr Rossetto said the same thing which was logically the case. There was no logic or benefit for an employer in paying wages out of monies that have been declared and on which tax is paid - if the wages were declared, a tax deduction could be claimed on them. The whole purpose of the practice was necessarily to under-declare the takings. In this respect, the evidence of two accountants brought by either party could be accepted.
54 It followed that Mr Lostumbo's figures could create no basis for establishing unfairness. Mr Lostumbo could not be accepted as a recorder of truth and accuracy: he had done a good deal better out of Galletta's Bar than was stated in the records he kept. He had significant, undisclosed, cash takings. The difference between the wages book and the financial statements in the last year of the lease alone was $74,000, according to Mr Rossetto. In addition, Mr Lostumbo kept any tax he did not remit to the Australian Tax Office on the wages paid. All of these matters were relevant when it was said that the rent and the guarantee figures were excessive. That attack was made by using Mr Lostumbo's assertion about his takings, which were not to be accepted as being accurate. The takings were higher than the books disclosed. The Court simply could not proceed to any conclusion based on Mr Lostumbo's figures.
55 On the other hand, Mr Galletta's figures were not under scrutiny. The representations made - that the business was taking $28,000 to $30,000 per week - were true and remained true for the six months after Mr Lostumbo moved into the business. At the end of the lease, when Mr Galletta said the takings were $60,000 over a four week period, that was to be compared to the previous four weeks under Mr Lostumbo, when the takings were $65,000. There were no other figures from Mr Galletta that mattered in this case. It was also of importance that the applicants had Mr Rossetto's report since 2005 but had not brought their own accountant to give evidence in support of their case. A Jones v Dunkel (1959) 101 CLR 298 inference could properly be drawn that the applicants' accountant's evidence would not have assisted his case.
56 In relation to the rent, it was submitted that nobody was asked to assess the fairness of the total rent of the property and business at $5,000 per week. In any event, there was no evidence suggesting that the rent was unfair or not comparable to other combined rents for a business and premises - that comparison was not undertaken.
57 The difficulty with the applicants' evidence was that Mr Garder assessed the rent of the premises, Mr Kelly assessed the rent of the business, and both proceeded on the basis that the rent was referrable to the actual worth of each element. The $5,000 per week for the lease of the business and rent of the premises was, however, arbitrarily divided on accountants' advice and the parties did not attempt to attribute an actual amount for the rental of the premises and another amount as reflecting the worth of the lease of the business. The arbitrariness of the figure in each case was accepted as affecting the views of the experts. In addition, the level of compliance with the DA was ultimately irrelevant because it did not affect the operation of Mr Lostumbo's business during the period of the lease. Mr Garder said that a 3 per cent annual rent increase was less than inflation at the time, was reasonable and therefore the rent increases could not be cause for complaint.
58 It was only in his oral evidence that Mr Lostumbo said that he made a complaint about the amount of rent to Mr La Rosa. On the other hand, Mr Kotselas, a person experienced in the operation of cafe/restaurants was prepared to pay a rent of $5,000 per week plus $500,000 to operate the business. His was the only evidence that addressed the combined rent of $5,000. Mr Kelly's view as to the value of the business rental proceeded on the applicants' records which were wholly unreliable. Mr Kelly did not go behind the figures provided to him and therefore his conclusions as to the value of the business were necessarily affected.
59 In relation to the guarantee, the amount of $150,000 was discussed by the parties and by their legal representatives. There was never a complaint about the size of the guarantee but some discussion which led to the figure of $25,000 per week being chosen as the average for the four week trial period at the end of the lease. At the end of the lease, instead of taking $28,500 per week as it had been when Mr Lostumbo took over and for the six months of its initial operation under his charge, the takings had fallen to just over $16,000 per week. The takings were nowhere near $25,000 and there was no room for Mr Galletta to ameliorate the operation of the guarantee when the disparity was so large. The significant point was that Mr Galletta had leased a business which was able to take over $28,000 for the first six months of its operation, and at the end of the lease was returned a business that was earning approximately $16,000 per week with no appreciable difference in the outgoings. The business was described as being "rundown". The $150,000 represented only 13 weeks of the drop in takings and acted only as restitution to Mr Galletta for the rundown state of the business for that short period. It did not cover the loss and damage of the premises detailed by Mr La Rosa and was not, on a proper approach, a large sum.
60 The applicants' suggestion that the takings in the trial period at the conclusion of the lease were affected by work undertaken by Mr Galletta but this was not supported by the evidence. Mr Galletta denied it: Mr La Rosa observed cleaning taking place, but no renovations, when he visited five days after the lease concluded. In any event, in the four weeks prior to the lease expiring Mr Lostumbo's records show that he took $65,000. In the four weeks after the lease terminated Mr Galletta took $60,000. Those figures suggested that the business was in a rundown state and that there was nothing unusual or unusually low about the returns achieved by Mr Galletta in the trial period.
61 It was argued for the respondents that there was no pleaded unfairness going to assertions as to the takings made by the respondents. No such allegation could be made because those representations were accurate and continued to be accurate for the first six months of the operation of the business in the hands of Mr Lostumbo. Mr Kotselas had satisfied himself of the returns when he looked at the cash register takings at about the same time as Mr Lostumbo was looking at the business. Mr Lostumbo had the assistance of legal representatives and an accountant. He also had the benefit of the four week trial period to satisfy himself that the business was viable. Mr Lostumbo did not walk out during this four week period and in the first 25 weeks of the lease, the takings averaged $28,500.
62 The fact that the takings decreased after six months could not be laid at Mr Galletta's door nor did that fact make the contract unfair. There may be any number of reasons for the takings being reduced including the failure to keep the premises tidy (as observed by Mr Galletta in 2002 and also as observed by Mr La Rosa in November 2003) or, perhaps, by external competition from the Italian Forum or changes in the nature of the industry. Those changes were a fact of business life and Mr Lostumbo knew the industry and knew it was seasonal. He also knew that the Italian Forum was open before entering into the lease. The takings could have been affected by the Council installing parking meters in Norton Street: all witnesses seemed to agree that was a matter that affected business. It was unfair to require Mr Galletta to be accountable for that eventuality.
63 It was also submitted that Mr Lostumbo knew that businesses in the hospitality industry could change and, even before he took up his lease, he had seen restaurants opening and closing in the area and that "nobody guaranteed the takings of Galletta's Bar for three years". He knew before he entered the lease that the takings were affected in winter and were likely to be affected by competition and he acknowledged that none of this could be Mr Galletta's fault. The requirement for a guarantee if takings fell below $25,000 per week was not an indication to Mr Lostumbo that he was guaranteed that the takings would be sustained - on the contrary, it alerted him to the fact that there was a possibility of fluctuation and that Mr Galletta wanted to be protected against that fluctuation and saw a need to be protected in that way. The possibility of fluctuation in the business was discussed by the parties so that, when the takings were averaging $30,000 in the first four weeks of the lease, a figure of $25,000 was agreed as the average takings per week for the operation of the guarantee. It was common ground between the applicants and the respondents that that adjustment was made to allow for fluctuations in the economy over time. That adjustment of $5,000 in $30,000 was not a small or token adjustment.
64 In relation to the Cross-Claim, the respondents alleged that they suffered loss and damage as a result of their premises being returned in a poor state. This was supported by Mr La Rosa's evidence. It was unfair if the lease operated so that a lessor could return to the property in a substantially damaged condition without redress. There was no bond and the contract was unfair in not providing for the respondent to be recompensed for substantial damage to the premises. The applicants contested some $64,000 of the Cross-Claim leaving at least $20,000 of the Cross-Claim uncontested. It was suggested that it was open to the Court to award the respondents that sum without having to enter into a determination of a contested amount even if the applicants' Summons was dismissed. Equally, it was open to the Court, if it found any kind of unfairness in the contract, to hold that it was offset by the unfairness afforded under the contract to the respondents.
65 The Amended Summons for Relief, besides seeking an order declaring unfair the contract or arrangement entered into in late 2000 between the applicants and the respondents, sought an order varying in whole or in part the contracts or agreements and, in particular, sought an order declaring the deed of lease, the deed of guarantee, the sub-lease of the premises or any combination of those documents as being unfair, harsh or unconscionable and against the public interest, and a further order declaring the "collateral arrangement" providing a $150,000 guarantee to Monotell Pty Ltd was unfair, harsh and unconscionable and against the public interest. An order was sought that the respondents pay $600,000 to the applicants and that the respondents be jointly and severally liable for any order that money be paid to the applicants.
66 The Amended Summons for Relief also made it clear that the rent payable should be reduced to $104,000 per annum for the lease of the business, said to be a reduction from $130,000 as required by the terms of the lease, although that figure does not appear to be correct. The Amended Summons for Relief also alleged that, at the time of the lease, the Bar was running at a significant loss and had been so for some years. The goodwill of the business was said to be worth nothing and the business was unsaleable to any reasonable buyer: the only value in the business was the saleable value of its fixtures and fittings. The respondents misled the applicants into believing that the business of the Bar was profitable and the applicants relied upon the representations of Mr Galletta that the business was profitable and a good business to lease. The unfairness was claimed to be: the inappropriateness of the $150,000 guarantee, in view of the fact that the takings of the business at all relevant times were totally unrelated to the profitability of the business; that the business could (for reasons totally unassociated with the applicant) be taking less money than was forecast it would take some three years earlier; the occurrence of events that adversely affected takings; the fact that the business was worth nothing when it was leased; and, that it was only approved and registered for 70 seats. It was alleged that the payment of rent of over $300,000 for the lease of the business was excessive and should not have been paid and that there should be reimbursement to the applicants for losses made and profits not made.
67 When the case was opened by counsel for the applicants, it was made clear that there were only two issues, namely, the excessive rent with a general claim that only approximately $2,500 per week should be paid rather than the $5,000 actually paid, and that the guarantee should be set aside and the equivalent amount be returned to the applicants. There was no contest that the three documents were inter-related and together provided for Mr Lostumbo and others to work in the cafe/hospitality industry and so fell within the scope of s 106 of the Act.
68 Before turning to the merit of the claim as pleaded in the Amended Summons, it is appropriate to make some remarks at this stage about one particular submission put for the respondents. The respondents' expert evidence called into question the takings recorded by Mr Lostumbo during the three year period of the lease of the business and also raised the prospect that there were undisclosed takings and cash in hand payments to employees. These possibilities were said to flow from irreconcilable differences between financial statements and BAS returns that were said to render it an impossible task of verifying the takings as recorded by the applicants. The thrust of that evidence was not contested by any expert evidence called by the applicants nor was the applicants' accountant called, however, in evidence in-chief Mr Lostumbo frankly stated that he had made a number of cash in hand payments to employees and steadfastly asserted that he did not take any cash monies for himself, that the records of takings were accurate because he had to know how the business was performing. In addition, he was not the only one recording the takings from the till.
69 The result of cash in hand payments to employees was the likely underpayment of income tax to the Australian Tax Office, although Mr Lustombo was not prepared to accept that occurrence, simply saying that he relied upon his accountant. Importantly, Mr Lostumbo said that this practice was adopted because it was the way in which he was told to run the business although in giving that evidence he did not identify who gave that advice although, the most obvious source, if that statement was true, was Mr Galletta. Surprisingly, Mr Lostumbo was not cross-examined on this matter nor did Mr Galletta deny in his oral evidence that he had been the source of that instruction.
70 To the extent that the respondents raise issues of credit, particularly in relation to Mr Lostumbo, it is to be noted that similar observations could be made about Mr Galletta and the respondents' operation.