SECTION 26 OF THE RETAIL TENANCIES REFORM ACT 1998

80 Section 26 of the Retail Tenancies Reform Act 1998 which it is common ground applies to the lease between the parties for No. 83 provides, inter alia:

(1) A retail premises lease is to be taken to provide that, if the landlord -

(a) inhibits the access of the tenant to the retail premises in any substantial manner; or

(d) fails to have rectified any breakdown of plant or equipment under the landlord's care and maintenance; or

(e) fails to comply with any requirement of a public statutory authority or government department if it is the landlord's responsibility to do so; or

and the landlord does not rectify the matter within a reasonably practicable time after receiving from the tenant a written notice asking the landlord to do so, then the landlord is liable to pay the tenant, for any loss or damage suffered by the tenant as a consequence, reasonable compensation as agreed in writing between the parties or, in the absence of agreement, determined under Part 3.

81 Mega Byte alleges that each of the matters set out in the extracted paragraphs above was an implied term in its lease of No. 83. The statute clearly provides for these implied terms, so there can be no question that they properly are to be regarded as forming part of the lease.

82 I can put reliance upon the term implied by Section 28(1)(d) to one side immediately. The only 'plant and equipment' that appears to be relevant to the present dispute is the electrical installation at No. 83 and possibly the roof. Neither of those items was 'under the landlord's care and maintenance'. They both formed part of the demised premises to which Mega Byte was entitled to possession to the exclusion of W.J.H. This was no mere theoretical matter as my narrative of the events above discloses. There were a number of occasions when W.J.H. wished its contractors to attend and take action but where they were refused access by Mega Byte.

83 I can also put to one side the implied obligation based upon Section 26(1)(a) because in my view there is no evidence that W.J.H. has in any way inhibited the access of the tenant to the retail premises in any manner at all. The applicant's case is that failure to attend to the defects in the premises deriving from the roof and the electrical system deprived Mega Byte of its opportunity to trade. It deprived it of a safe environment where it could have its employees in conformity with the relevant occupational health and safety legislation. I was not referred to any authority as to the meaning of 'access', whether in this context or generally. In my view it means no more than physical access. Parliament was not attempting to introduce, years before the enactment of Section 52 of the Retail Leases Act 2003, an obligation of repair or fitness of premises for the purposes of retail tenancies which did not exist at Common Law or in any direct way under the retail tenancies legislation by a side wind. Mega Byte had free access to the premises. It is the quality of the premises which it complains about. That is not in my view what Section 26(1)(a) of the Retail Tenancies Reform Act is intended to deal with.

84 The claim in so far as it is based on these two paragraphs of Section 26(1) must fail.

85 The claim based upon Section 26(1)(e) however, has greater substance. The expressions 'public statutory authority' and 'Government department' do not appear to be defined in the Retail Tenancies Reform Act. Mr Reid's submission is predicated upon the footing that the Office of the Chief Electrical Inspector was a 'public statutory authority'. Without myself wishing to propound a definition of that term, I note that under the Electricity Safety Act 1998, Section 6(1) 'there is established a body by the name "Office of the Chief Electrical Inspector" '. Sub-section (2) constitutes this office as 'a body corporate with perpetual succession'. The Office is therefore a body corporate established by a statute and therefore, 'statutory' with objectives and functions set out in Sections 7 and 8 of the statute which appear to be directed to the welfare of the public generally. As a body corporate I believe the Office could be regarded as an 'authority'. It is established for public purposes by a statute, therefore one may conclude it is a public statutory authority. Mr Reid said that the Office of the Chief Electrical Inspector gave W.J.H. one month to rectify the electrical installation at No. 83 in its notice of 24 October 2002. Therefore, said Mr Reid, 'the landlord's failure to rectify the defects as notified to it in a timely manner meant that the premises was closed for longer than it should have been ...'. Mr Reid made reference to the various complaints made by Mega Byte to W.J.H. He noted that under Section 26(1) a lessor was obliged to 'rectify the matter within a reasonably practicable time after receiving from the tenant written notice asking the landlord to do so' failing which the lessor is liable to pay compensation. Mr Reid said that the expression 'reasonably practicable time' was to be equated with the phrase 'reasonable time'. He referred to the decision of the High Court of Australia in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 532 where the Court held that what was a reasonable time had to be determined . According to Mr Reid .

86 With regard to the term implied by Section 26(1)(e) of the Retail Tenancies Reform Act 1998 this cannot be correct. For W.J.H. to be liable under this implied obligation two things must occur. First, the public statutory authority must lay down a 'requirement' and secondly, the tenant must require the landlord to comply with that requirement. The right to compensation arises only if in this case W.J.H. fails to meet the requirement within a reasonably practicable time of the request by the tenant. Time cannot begin to run against the landlord until both of these events has occurred. Given that the notice from the Office of the Chief Electrical Inspector was not despatched until the 24th of October 2002 and the repairs to the electrical installation were completed in February 2003 it is difficult to see where the six month period referred to by Mr Reid comes from. It may be accepted that the tenant was demanding from a much earlier time that W.J.H. take action with regard to the electrical installation. Logically however, Mega Byte could not have been demanding that W.J.H. meet a requirement of the Office of the Chief Electrical Inspector until that requirement was in fact laid down. The deadline stipulated by the Office was 22 November 2002. The notice from the Office observed that the following findings had been made during investigation:

1. Several circuits in the installation have low insulation resistance possibly due to the entry of water from the roof.

2. A socket outlet on the west wall of the shop where the kitchen has a defective switch, which is in the "on" position. The occupants of the shop have reportedly received electric shocks from this outlet and the wall adjacent to the outlet. There are signs of rising damp on the wall which may account for the shocks.

3. Incorrect colour coding has been used on the insulation of air conductors at socket outlets.

4. A number of electrical accessories in the ceiling are not fixed as required.

87 After quoting from the Electrical Safety Act the notice continued:

The OCEI requires you to have the entire electrical installation inspected and repaired by Registered Electrical Contractor (REC) without delay to ensure the safety of the installation is maintained. On completion of any electrical work, the REC is required to issue you with a Certificate of Electrical Safety (COES) for the work you performed.

88 W.J.H. took the view that until it received details of the investigation of 27 August 2002 it could not be confident of compliance with the notice. In my view this was a reasonable position to adopt. Extraordinarily, given that W.J.H. was the owner of the premises and the recipient of the improvement notice of 24 October, its solicitors had to resort to the Freedom of Information Act to obtain details of the August inspection which were not obtained until 19 November. In my view, in the circumstances the 'reasonably practicable time' should be calculated from this date.

89 As it was, Mr Purcell had taken on other commitments in the meantime. He was not in a position to undertake the work prior to Christmas. Mr Purcell conceded that this was standard electrical work. Whilst it was clearly convenient that he who was conversant with the property and aware of the extent to which electrical works had already been undertaken, should complete the work, he agreed another contractor could have done the work. Even allowing for the fact that it may be difficult to complete works in the month immediately prior to Christmas because of the extensive demands made by customers of all sorts to have matters completed before Christmas, it was not reasonable in the circumstances for W.J.H. to allow the matter to stand over till after Christmas based purely upon Mr Purcell's availability. Certainly, it was convenient for W.J.H. and Mr Purcell that he should carry out the work; but as in a piece of litigation, it may sometimes be necessary to appoint alternate counsel, thereby perhaps incurring additional solicitor and client costs which may not be recoverable as between party and party and cause an additional stress for the practitioners involved including in particular the new counsel, nevertheless, the legal system regards it as reasonable to take these steps when other factors demand that a proceeding go on. Here, Mega Byte's business at No. 83 had been shut for a considerable period of time. It was open to doubt whether the business could be resuscitated. There was every reason to take urgent action including if necessary paying penalty rates to have work done at weekends. None of this seems to have occurred to W.J.H.

90 If these were the only considerations I would conclude that Mega Byte was entitled to relief based upon the breach by W.J.H. of the implied obligation constituted by Section 26(1)(e) of the Retail Tenancies Reform Act. However, as it turns out, there are complicating factors.

91 The terms of Section 26 unsurprisingly state that compensation is only payable for loss or damage sustained by a tenant as a consequence of the landlord's breach. In the circumstances can it be said that the losses claimed here were a consequence of the failure of W.J.H. to commission a contractor to comply with the requirements of the Office of the Chief Electrical Inspector prior to Christmas to 2002? If one adopts a counter-factual analysis Pledge v Roads and Traffic Authority [2004] HCA 13; (2004) 78 ALJR 572, 575 [15] per Hayne J and asks what would have happened had W.J.H. engaged a contractor to satisfy the Chief Inspector's requirements prior to Christmas, the answer is clear. Mega Byte would have refused the contractor admission to the premises save on the basis of the grant of a general indemnity by W.J.H., the basis for which is not apparent. Since Mr Purcell's proposed attendance at No. 83 in January 2003 was aborted on this ground there is no reason to think a mooted attendance in December or late November 2002 would not have met a similar fate. Since it cannot be said the work would have been done 'but for' W.J.H.'s failure to commission someone other than Mr Purcell to do it before Christmas that failure cannot have caused Mega Byte damage March v E. & M.H. Stramare [1991] HCA 12; (1991) 171 CLR 506, 515-6 per McHugh J.

92 But there are further problems even aside from this in the success of a claim by Mega Byte on this ground. It was no part of Mega Byte's case that it was trading profitably and that the period during which it was 'out of business' led to a loss of profits. Mega Byte's case was that it had not yet reached 'break even' level and that its loss and damage related to the loss of the outlay. For the acquisition of the business, costs of retrenchment of staff etc. Mega Byte said that W.J.H.'s acts and omissions but mainly omissions, forced it to close its business and it suffered loss and damage as a result. In November the Heidelberg business was listed for sale and a contract for the sale of the business was entered into before the end of 2002. Ms Kate Mahon readily agreed and Ms Fiona Mahon ultimately agreed that this decision represented a concession that in reality Mega Byte would never re-open for business at No. 83. Ms Fiona Mahon said that as at November 2002 Mega Byte 'hoped' that it would not have to return to No. 83 but that the legal situation was unclear and it might be required to do so. By the end of November the business had been closed for no less than four months. Some of the losses claimed had already been incurred, such as the costs of retrenchment of staff. In substance the business itself had also been lost. For this reason too I do not believe that any loss or damage was suffered by Mega Byte as a consequence of W.J.H.'s failure to move more swiftly.

93 The claim in so far as it is based on Section 26 of the Retail Tenancies Reform Act 1998 must fail.

94 There is a body of Australian authority supporting the view that generally an obligation of good faith and fair dealing will be implied as between contracting parties. This line of authority begins with the decision of the New South Wales Court of Appeal in Renard Constructions (M.E.) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234. The authorities were reviewed by Finn J in Hughes Aircraft Systems International v Air Services Australia (1997) 146 ALR. Byrne J in the Supreme Court of Victoria regarded these authorities as establishing the doctrine so far as the Trial Division of the Supreme Court was concerned; Far Horizons Pty Ltd v McDonalds Australia Limited [2000] VSC 310 at [120]. The High Court of Australia in Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289, 301 [40] left open the question as to whether such an obligation should generally be implied. At the Tribunal level the existence of such an implied term should be accepted on the basis of existing authority in the same way as Byrne J accepted its establishment in the Trial Division of the Supreme Court in the Far Horizons' case. Nevertheless, speaking for myself I find the critique of the alleged implied term by Gummow J, then a Judge of the Federal Court of Australia in Service Station Association Limited v Berg Bennett and Associates Pty Ltd [1993] FCA 445; (1993) 117 ALR 393 compelling. With no less than two separate sorts of unconscionability now introduced into our law at both the State (Fair Trading Act) level and the Federal (Trade Practices Act) level, the need for the development of an additional implied term along similar lines but of uncertain content is not obvious.

95 Accepting that such a term should be implied into the present lease however what does it have to say about this dispute? I was referred to no authority that indicated that the obligation to act in good faith would impart a covenant to repair by a landlord which did not otherwise exist. In oral submissions Mr Reid on behalf of Mega Byte submitted that the obligation to act in good faith would impose a duty of pre-contract disclosure, in the present circumstances no doubt focussing upon the meeting at 'QPO' and the discussion said to have taken place at or prior to settlement. However, as Mr McNamara on behalf of W.J.H. observed, if the obligation of good faith and fair dealing is a contractual term, it is difficult to see how it could be operative before the contract was made.

96 I put the obligation of good faith and fair dealing to one side.

The applicant submits that by reason of W.J.H.'s failure to comply with its obligation to repair the premises, W.J.H. has evinced an intention to be no longer bound by the lease, thereby repudiating the lease.

98 Neither the submission nor paragraphs 29 to 30, the relevant paragraphs of the points of claim, state the date at which the repudiation should be regarded as having occurred and when Mega Byte should be regarded as having accepted that repudiation. Mr Reid correctly conceded that the alleged repudiation would occur only if W.J.H. was under an obligation to repair the premises as alleged. I have sustained this obligation of repair only to a limited degree with respect to the implied obligation imposed by Section 26 of the Retail Premises Reform Act to comply within a reasonable time with the requirements of the Office of the Chief Electrical Inspector. In this regard I have found that an attempted timely compliance by W.J.H. would have been met by an unjustified demand for a general indemnity which ultimately was not pressed by Mega Byte.

99 Assuming that this breach of the implied obligation is available, in the circumstances as repudiatory conduct, the evidence does not disclose that the repudiation was accepted by Mega Byte. The Court of Appeal in Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139 has recently considered the operation of the doctrine of repudiation to real estate leases. The Court accepted that the High Court's decision in Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 established that the doctrine and other contractual doctrines do apply to real estate leases. The Court concluded that a landlord could rely upon repudiatory conduct by a tenant as a ground for terminating a lease separately from reliance upon a proviso for re-entry and without the service of a notice under Section 146 of the Property Law Act 1958. Ormiston JA at [2] said:

I confess that at first I was uncomfortable with the concept that a lessor could re-enter premises still held by a lessee on grounds which could be justified only in terms of the law of contract.

Nevertheless, His Honour ultimately concluded that this concept should be accepted. Williams AJA with whom the other members of the Court, Ormiston and Batt JJA concurred, rejected any view that a lease could be terminated as a contract leaving the leasehold estate continuing to exist in the lessee for some further time [2005] VSCA 139 at [65].

100 When Mega Byte refused to allow W.J.H.'s contractor Mr Purcell access to No. 83 in January 2003 it was asserting a right which derived from its leasehold estate and perhaps also from its contractual entitlement to quiet possession of the premises. If there was repudiatory conduct by W.J.H. far from accepting the repudiation, Mega Byte was electing to affirm the contract (the lease). In their letter of 9 December 2002 Mega Byte's then solicitors said its client was 'investigating' whether there had been a repudiation. That letter expressly contemplated that the lease remained in force. It asserted a right to rental abatement under Clause 3. Ultimately it was W.J.H. that moved to terminate the lease in March 2003.

101 The claim that the lease of No. 83 was terminated by repudiation by W.J.H., accepted by Mega Byte must be dismissed.

102 Mega Byte's Counsel submitted that W.J.H. was guilty of misleading and deceptive conduct and misrepresentation contrary to Section 9 of the Fair Trading Act 1999 in that:

A It misrepresented the state of the premises during a meeting with the applicant on 6 December 2001 [that is the QPO meeting] prior to the entry into the lease; [and]

B The disclosure statement dated 29 October 2001 is misleading or false and it is incomplete, as it does not advise the state of the premises nor does it accurately describe the lease dated 21 March 1995.

103 This contention deals with two distinct elements:

(a) An alleged duty to disclose the state of repair of the premises; and

(b) The duty of disclosure under the statutory form of disclosure statement as to certain other matters.

104 For the moment I will deal only with this contention in so far as it relates to issues of repair and I will deal presently with the rest.

105 The submission also relies upon Section 26(2)(c) of the Retail Tenancies Reform Act which implies in the lease an obligation on the lessor to compensate the lessee 'for any loss or damage suffered by the [lessee] as a consequence of a false or misleading statements or misrepresentations' made by the lessor or any person acting for him.

106 Mr Reid submitted that a consideration of these matters should be guided by the principles enunciated in Sutton v A.J. Thompson Pty Ltd (in liquidation) (1987) 73 ALR 233.

107 In my view the evidence disclosed that No. 83 was not in a satisfactory state of repair at the time that Mega Byte took an assignment of the lease of the premises. In particular the roof was defective and this had led to substantial damage to the old plaster ceiling, part of which had collapsed, and extensive staining to the newer suspended ceiling. The electrical installation was unsafe, in particular because of the dampness caused by the leaking roof. It was also not in compliance with the required electrical standards.

108 At least with regard to the roof problem Mr Harper, as the principal of W.J.H. either knew or ought reasonably to have known of the problems. The roofing plumber had reported in 1999 that the roof would require replacement sooner rather than later. Mr Purcell had reported extensive staining of the suspended ceiling which was indicative of a problem with the roof not a mere problem with the box gutter. Mr Harper had received extensive complaints from the former tenants in 2001 through their solicitor's letter and his own inspections should have revealed the truth to him. W.J.H.'s solicitor presumably on instructions had conceded that the roof needed attention. If Mr Harper thought otherwise as he asserted he did, the most charitable interpretation is that he was 'in denial'.

109 Clearly this unhappy state of affairs was unknown to Mega Byte when it entered into the lease.

110 W.J.H. will have been guilty of misleading and deceptive conduct if it either positively misrepresented the situation or being under a duty to disclose it, failed to do so and therefore misled and deceived by silence.

111 What evidence is there of positive misrepresentation as distinct from mere silence? According to Ms Fiona Mahon's witness statement, the discussion at the 'QPO' meeting on 6 December concentrated on Mega Byte's ability to pay and the substance of any guarantee that Ms Mahon might give. She said:

Prior to departing the meeting I also advised Robert Harper that the current owner of the business had said that several ceiling tiles and a floorboard needed fixing. He said he knew about the repairs and that he would let us know what he wanted. We all said good bye and left.

112 Ms Fiona Mahon also said that on the evening following the abortive settlement at Rigby Cooke she said she received a telephone call from Mr Harper who said:

His solicitor had told him about the repairs that were required. Robert Harper said he knew about the ceiling tiles and the hole in the floor and that he was prepared to fix them. Robert Harper said that as my husband had a building company he may be able to get the tiles cheaper. He asked us to fix the ceiling tiles and then give him the bill. I said I would try. He then said he would come in and look at the floor and then have it fixed as soon as possible. I said I didn't know if this was all there was and he said I should prepare a list of any other items we needed him to fix once we were in the shop and he would have a look at those too.

113 Mr Harper said he did not regard this last promise as a 'blank cheque' promise on behalf of W.J.H. to carry out any repair work which the tenant called for. All that it amounted to he said was a commitment to 'think about it'. Ms Mahon said she interpreted that statement as a promise to do any further work which was necessary.

114 In my view, no reasonable person could interpret what Ms Mahon recorded of this telephone conversation as amounting to a blank cheque to carry out any repairs that were called for or needed. All that Mr Harper was doing was agreeing to consider the situation on behalf of W.J.H. The very fact that both Ms Mahon and Mr Harper conceived that there may be further items which would require attention is clearly inconsistent with Mr Harper being regarded as giving any blanket assurance of fitness with respect to the premises. In Sutton's case relied upon by Mr Reid, the Full Court of the Federal Court (Forster, Woodward and Wilcox JJ) said that a claim for damages for misleading and deceptive conduct would fail if it appeared that the representee did not rely upon the misleading and deceptive conduct in entering into the relevant contract (1987) 73 ALR 233, 240. On the finding which I have made there was no express misrepresentation and therefore no misleading and deceptive conduct by express misrepresentation. There was also no reliance. When the Misses Mahon had their meeting with Mr Harper at QPO on 6 December they had already executed the relevant documents and entered into a commitment to purchase the Flower Reflections business. The correspondence which I quote above shows that settlement was already overdue. If W.J.H. had been prepared simply to approve the assignment of the lease to Mega Byte, the 6 December meeting need never have taken place. The account given by Ms Fiona Mahon of the meeting is that Mr Harper gave her the financial 'third degree'. He expressed himself particularly concerned that Ms Mahon did not hold any substantial assets in her own name. Following the 6 December meeting Ms Mahon complains bitterly about the delays caused by W.J.H.'s failure to consent to the assignment. The subject matter of the conversation therefore, was whether Mega Byte was a fit assignee of the lease not whether No. 83 was a fit set of premises. Mega Byte had already entered into the contract. It could not then be 'induced' to enter into it. If it matters, it had probably already executed the proposed assignment of lease. In light of the correspondence which I quote above from Leo Dimos and Associates, Ms Mahon's evidence that the documents were executed only at settlement is inconsistent with the written record and also inconsistent with the fact that the signatures of her sister and herself as guarantors are witnessed by their father who was not at settlement. The conversation that led to the suggestion of the submission of a further list took place according to Ms Mahon after the aborted settlement. Had things gone as planned, the settlement would already have been completed. In those circumstances I cannot accept that Mega Byte was in any way induced to enter into the various arrangements to acquire the Flower Reflections business and the lease even if it could be found that there was any express misleading and deceptive conduct.

115 Ms Fiona Mahon said that Mega Byte was not finally committed. It could have 'walked out' on the purchase arrangements confident in the knowledge that the vendor company had little behind it and would not therefore be able to fund legal proceedings. Doubtless if Ms Mahon had had a crystal ball to tell her how Mega Byte's enterprise at No. 83 would work out, she may very well have had the company do that very thing. The unfolding of events however, indicates that Mega Byte simply did not regard these repair issues as major matters. They were simply to be attended to along the way and were in no wise to be regarded as rendering the completion of the transaction contingent.

116 Next, I consider whether there has been any misleading and deceptive conduct by W.J.H. by way of silence. The first matter relied upon is the disclosure statement and the claim for damages or compensation here is based not only upon Section 9 of the Fair Trading Act which reproduce as Section 52 of the Trade Practices Act 1974 of the Commonwealth but also upon Section 26 of the Retail Tenancies Reform Act 1998. As previously noted I deal at this stage only with repair and condition issues. The disclosure statement addressed to the outgoing tenant which was passed on to Mega Byte admittedly made no reference at all to any repair issue.

117 The form of disclosure statement is schedule d to the Retail Tenancies Reform Act. It includes the following broad headings:

118 None of these headings seems on the face of it particularly apt to require a disclosure as to the physical condition of the demised premises.

119 The heading 'Work to be performed by the tenant' contains the following text to prompt completion:

The landlord will require the tenant to perform at the tenant's expense, the following fit-outs and any other refurbishments during the term of the lease.

Whether the tenant will be required to use tradespersons nominated by a landlord for fit-outs and any other refurbishments to be performed on the premises.

120 There were no such arrangements with regard to No. 83 and there was no obligation in my view for W.J.H. to include under this heading a description of the physical condition of the premises. Similarly, the heading 'general disclosures' includes the following additional text to prompt or identify the matters which should be disclosed in this section:

The following circumstances affecting or likely to adversely affect the trading or trading profits of the proposed business have arisen.

The tenancy mix or usage mix of the shopping centre will/will not/may change over the term of the lease.

121 The focus here seems to be upon economic and organisational arrangements rather than the physical condition of the demised premises. The section for additional representations seems to call for disclosure of any further express statements or representations made to the tenant to induce it to enter into a lease. Here, as I have found there were no express statements asserting the fitness of these premises. Had Parliament intended that an assessment of the physical condition of the demised premises should be included in the disclosure statement if it was not the subject of express representation by the landlord, it would have specifically so provided. No reasonable tenant in my view could conclude from the absence of any statements about the physical condition of the proposed demised premises in a disclosure statement that they were being warranted as fit in any way.

122 The leading case on misleading and deceptive conduct by silence under Section 52 of the Trade Practices Act 1974 is the decision of the Full Federal Court in Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 110 ALR 608. Earlier authorities had suggested that there could be misleading and deceptive conduct by silence only if there was a duty to disclose the matter which remained undisclosed by the mere silence. The Full Court in Demagogue rejected this as a proper approach. Black CJ said:

Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is whether, having regard to all relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of "mere silence" or the duty of disclosure can divert attention from that primary question. Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as "mere silence" because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, but if particular matters exist they will be disclosed.

[1992] FCA 557; (1992) 110 ALR 608, 609-10

123 Was there a 'reasonable expectation' at any relevant time that W.J.H. would disclose the repair history of No. 83, in particular the roof? For the reasons already given I do not believe that the submission of the disclosure statement in itself created any such reasonable expectation. Since the disclosure statement absent any specific representations as to the fitness of premises does not appear to deal with the physical condition of the proposed demised premises at all, a proposed tenant could not have a reasonable expectation that the disclosure statement would contain a condition report or a warning of any defects. Certainly that was the case in 2001-2 when no statute imposed liability upon a landlord for the maintenance of the structure of demised premises or services and the Common Law implied no such obligation upon a landlord. The starting point therefore being that the premises were taken by the tenant 'as is '. For similar reasons there could be no reasonable expectation that a landlord being asked to consent to the assignment to a new tenant of an existing lease would in this state of statute law have been expected to disclose defects in the premises at a meeting held primarily to discuss the financial substance of the proposed assignee and its guarantor likewise in a discussion dealing with certain specific maintenance items and in the wake of an aborted settlement which settlement had been re-scheduled and was aborted for no reason connected with the condition of the premises.

124 There were other criticisms of the disclosure statement and Mr Reid submitted that in these other respects the statement was inaccurate or incomplete. There was no evidence however that Mega Byte relied to its detriment upon any of those matters and so therefore those matters, even if made out, cannot form the basis of any damages claim or claim for compensation either under Section 9 of the Fair Trading Act 1999 or Section 26 of the Retail Tenancies Reform Act 1998. They may form the basis of relief under Section 23 of the Retail Tenancies Reform Act to which I will turn shortly.

125 Mega Byte also contends that W.J.H. engaged in unconscionable conduct within the meaning of Sections 7 or 8A of the Fair Trading Act. These claims were set out at paragraphs 37 and 44 of the most recent version of the applicant's points of claim. As I understand these allegations of unconscionability they stand upon the same factual basis as the allegation of misrepresentation. The two sections in the Fair Trading Act 1999 are as follows:

7. Unconscionable conduct within the meaning of the unwritten law

(1) A person must not, in trade or commerce, engage in conduct which is unconscionable, within the meaning of the unwritten law, from time to time.

(2) This section does not apply to conduct that is prohibited by section 8 or 8A

8A. Unconscionable conduct in business transactions

(1) A person must not, in trade or commerce, in connection with -

(a) the supply or possible supply of goods or services to another person (other than a listed public company); or

(b) the acquisition or possible acquisition of goods or services from another person (other than a listed public company) -

engage in conduct that is, in all the circumstances, unconscionable.

(a) the supply or possible supply of goods or services to a person; or

(b) the acquisition or possible acquisition of goods or services by a person -

whose acquisition or possible acquisition of the goods or services is or would be for the purpose of trade or commerce.

(3) Without in any way limiting the matters to which a court or the Tribunal may have regard for the purpose of determining whether a person (the "supplier") has contravened sub-section (1) in connection with the supply or possible supply of goods or services to another person (the "business consumer"), the court or Tribunal may have regard to -

(a) the relative strengths of the bargaining positions of the supplier and the business consumer; and

(b) whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

(c) whether the business consumer was able to understand any documents relating to the supply or possible supply of the goods or services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business consumer or a person acting on behalf of the business consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and

(e) the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier; and

(f) the extent to which the supplier's conduct towards the business consumer was consistent with the supplier's conduct in similar transactions between the supplier and other like business consumers; and

(g) the requirements of any applicable industry code; and

(h) the requirements of any other industry code, if the business consumer acted on the reasonable belief that the supplier would comply with that code; and

(i) the extent to which the supplier unreasonably failed to disclose to the business consumer -

(i) any intended conduct of the supplier that might affect the interests of the business consumer; and

(ii) any risks to the business consumer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the business consumer); and

(j) the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the goods or services with the business consumer; and

(k) the extent to which the supplier and the business consumer acted in good faith.

(4) Without in any way limiting the matters to which a court or the Tribunal may have regard for the purpose of determining whether a person (the "acquirer") has contravened sub-section (1) in connection with the acquisition or possible acquisition of goods or services from another person (the "small business supplier"), the court or Tribunal may have regard to -

(a) the relative strengths of the bargaining positions of the acquirer and the small business supplier; and

(b) whether, as a result of conduct engaged in by the acquirer, the small business supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and

(c) whether the small business supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the small business supplier or a person acting on behalf of the small business supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and

(e) the amount for which, and the circumstances in which, the small business supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and

(f) the extent to which the acquirer's conduct towards the small business supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like small business suppliers; and

(g) the requirements of any applicable industry code; and

(h) the requirements of any other industry code, if the small business supplier acted on the reasonable belief that the acquirer would comply with that code; and

(i) the extent to which the acquirer unreasonably failed to disclose to the small business supplier -

(i) any intended conduct of the acquirer that might affect the interests of the small business supplier; and

(ii) any risks to the small business supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the small business supplier); and

(j) the extent to which the acquirer was willing to negotiate the terms and conditions of any contract for the acquisition of the goods and services with the small business supplier; and

(k) the extent to which the acquirer and the small business supplier acted in good faith.

126 Mr Reid on behalf of Mega Byte referred to and relied upon the dictum of Mason J (as he then was) in Commercial Bank of Australia Limited v Amadio [1983] HCA 14; (1983) 151 CLR 447 where His Honour identified unconscionable conduct as occurring:

Whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis a vis another and unfair or unconscientious advantage has been taken of the opportunity thereby created.

[1983] HCA 14; (1983) 151 CLR 447, 462

It is submitted that the condition placing the parties at special disadvantage was that W.J.H. not Mega Byte knew of the state of the premise. W.J.H. took advantage of this disadvantage and executed the assignment of lease and pursued rental payments from Mega Byte. In such circumstances it is submitted that W.J.H.'s actions were unconscionable.

128 In Australian Competition and Consumer Commission v C.G. Berbatis Holdings Pty Ltd (2003) 214 CLR 61 the High Court of Australia considered a contention that a retail shop tenant not having any right to a further lease term on its shop being required as a condition of the grant of a further term to withdraw from group proceedings brought against the shopping centre lessor was the victim of unconscionable conduct. Gleeson CJ said:

A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests.

[2003] HCA 18; (2003) 214 CLR 51, 64 [11]

129 Later, on the same page at [14] the learned Chief Justice said:

Unconscientious exploitation of another's inability, or diminished ability, to conserve his or her interests is not to be confused with taking advantage of a superior bargaining position.

130 First, it is not obvious that these parties were necessarily of an unequal bargaining power. The evidence disclosed that Mr Harper is the alter ego of his company, W.J.H. and that he is a man of wide commercial experience and now retired to the beach resort of Sorrento and living on the proceeds of investments. Mega Byte is the alter ego of the Mahon sisters, both of whom have substantial commercial experience. Ms Fiona Mahon, who took the lead in negotiations was a former general manager of the Como Shopping Centre. Her husband Mr Corsello is a property developer who carries on his business through a number of companies. There was no minute accounting of the relative wealth of the two families; but neither is a family of tycoons or paupers. Clearly Mr Harper had superior historical knowledge of the premises at No. 83; but the obligation to avoid unconscionable conduct does not require one to ignore one's own interests. For reasons already given there was no affirmative duty upon Mr Harper in the circumstances as they existed to make disclosure of negative information relative to the state of No. 83. On the other hand as the events of June to August 2002 indicate, through her husband's contacts, Ms Fiona Mahon had the opportunity to commission consultants to investigate both the structural and electrical state of the premises. It was open to her and Mega Byte to have carried out the same investigations in November 2001 prior to executing the contract. In addition, Mega Byte had a national law firm acting for it in the process of obtaining an assignment of the leasehold interest in No. 83. The Deed of Assignment was prepared by that firm. If Mega Byte desired any warranties as to the fitness of the premises from W.J.H. it could have sought to include such provision in the Deed of Assignment. One may infer in the circumstances that W.J.H. would have declined to give any such warranty and it would then have been incumbent upon Mega Byte to make such enquiries as it saw fit. In the circumstances I do not believe that Mega Byte was in any position of special disadvantage which would attract any doctrine of unconscionability to its feelings with W.J.H.

131 The claim based on unconscionable conduct fails.

132 Mega Byte sought a determination that its lease of No. 83 should be declared void ab initio with the result that all payments made under the terms of the lease by it should be ordered refunded. The authority to grant such relief was said to be found in Sections 108 and 158 of the Fair Trading Act 1999. The application for this relief is premised upon a finding that W.J.H. had breached one or more of Sections 7, 8, 8A or 9 of the Fair Trading Act. For the reasons given above I decline to make any such findings. It follows that the declaration that the lease is void ab initio must be refused.

133 Mr Reid in submission and cross-examination pointed out a number of deficiencies or irregularities in the disclosure statement furnished to Flower Reflections Pty Ltd and passed on to Mega Byte. For instance, in the outgoings schedule an amount was disclosed for 'land tax' whereas the term of the renewed lease going back as it necessarily did to the original 1995 lease excluded any liability on the tenant's part for Land Tax. There are a number of places throughout the statement where the form offers a series of options and no option has been chosen and no option deleted. Whilst the amended points of claim do not directly assert that the document purporting to be a disclosure statement was no disclosure statement at all and the situation was as if no disclosure statement had been provided, in his written submissions Mr Read made reference to a number of Tribunal decisions under Section 8 of the Retail Tenancies Reform Act dealing with disclosure at the time of initial grant of a lease. In particular he referred to Nature's World Chadstone Pty Ltd v Perpetual Trustees (unreported 1 March 2001) (where I held it was arguable that incorrect information in a disclosure statement rendered it no disclosure statement at all) and Jovanovski v Santana [2001] VCAT 1549; (2001) V Conv R 58-564 where I held that failure to give a disclosure statement in breach of Section 8 by a landlord left it liable to a restitutionary claim for rent paid under an estate. The obligation to furnish a disclosure statement, if it existed, arose under Section 23 of the Retail Tenancies Reform Act 1998. That Section provides as follows:

(1) A tenant who proposes to assign a retail premises lease may request the landlord in writing to provide a disclosure statement in the form of the Schedule providing information abut the matters set out in the Schedule.

(2) A landlord who receives a request under sub-section (1) must, within 21 days after receipt of the request, give the tenant -

(a) a copy of the disclosure statement that the landlord gave the tenant relating to the lease; or

(b) a copy of a new disclosure statement in the form of the Schedule providing information about the matters set out in the Schedule that is current as at a date within 3 months before the statement is given.

(3) A tenant who proposes to assign a retail premises lease must give to the proposed assignee a copy of a disclosure statement received under sub-section (2) within 7 days before the assignment of the retail premises lease.

(4) If the assignee of the retail premises lease has not been given a disclosure statement before the assignment, the assignee may withhold payment of the rent until the landlord gives the tenant referred to in sub-section (1) a copy of the disclosure statement and the assignee is not liable to pay rent attributable to the period during which the landlord has not given the tenant a copy of the disclosure statement.

134 It will be seen that the obligation created by the section is put in motion by the outgoing tenant, in this case, Flower Reflections, requesting W.J.H. in writing to provide a disclosure statement (see sub-section (1)). There was no evidence of such a request. Sub-section (4) suspends or annihilates the obligation of the assignee to pay rent when the landlord fails to comply with its obligations; but this arises only during the time that the landlord fails to give 'the tenant referred to in sub-section (1) a copy of the disclosure statement'. Since in this case there was no evidence that Flower Reflections made a written request for a disclosure statement in connection with the assignment, the provisions of sub-section (4) are not called into effect.

135 As previously noted there is no evidence of any reliance or any loss on the part of Mega Byte as a result of any inaccuracies or lack of completeness in the disclosure statement that it did receive.

136 The applicant's claim must be dismissed. I now turn to the respondent's counterclaim.

137 W.J.H. seeks a sum of $19,631.22 for unpaid rent and outgoings for the period until 13 March 2003. As Mr Reid, counsel for Mega Byte and the Mahons correctly observed, the 1995 lease which was renewed and extended in 1998 and 2001 did not render the tenant at No. 83 liable for land tax. Mr Harper appears to have conceived that he could unilaterally impose an obligation on the tenant for land tax by so stipulating in the disclosure statement. This is clearly misconceived. The claim for the sums of $230 and $61.65 for Land Tax must therefore fail.

138 Mega Byte's principal defence for the claim for rent is a contention that the obligation to pay rent abated pursuant to Clause 3(a) of the lease. The abatement of rental provision in Clause 3(a) operates:

If the premises or any part are totally or partially destroyed or damaged during the term by fire, storm, tempest, earthquake, explosure or inevitable accident so as to be unfit for use and occupation by the lessee ...

139 Mega Byte says that the premises were unfit for occupation until the completion of electrical works by Mr Purcell in mid-February 2003. Without expressing a view as to whether the premises were in truth unfit for occupation, assuming that they were, such unfitness was not caused by 'fire, storm, tempest, earthquake, explosion or inevitable accident'. It was caused by progressive deterioration in the structure and by poor practice in the installation of wiring. Clause 3(a) has no application and so there is no entitlement to a rent abatement.

140 The respondent's counterclaim for rental and outgoings with the exception of claims for Land Tax must succeed.

141 The respondent also counterclaimed for $3,100 damages representing costs of reinstatement, carpentry and plumbing work, cleaning of shop, garden, removal of rubbish, rough sanding of floors, cleaning out light well, clearing out unwanted plants and the cost of the supply of mini-skip for bins. Clause 1(m) of the lease obliged Mega Byte to remove its fixtures and fittings and to reinstate them to their original condition. I am satisfied generally that the amounts incurred for cleaning the premises were properly recoverable for breaches of this covenant. Part of the costs were incurred to remove a sink. The evidence appeared to suggest that this sink was installed by Flower Reflections Pty Ltd prior to the commencement of the lease which Mega Byte took an assignment of. The costs of removal of that sink should not therefore be recoverable because the sink pre-dated the 2001 lease. Similarly, whilst it was a reasonable expense to incur for the purposes of re-letting, I am not satisfied that the cost of the rough sanding should be allowable for a breach of Clause 1(m) or any repair obligation on the part of Mega Byte under the lease.

142 W.J.H. counterclaimed that by failing to pay the rent, failing to pay the outgoings and failing to pay insurance premiums, Mega Byte repudiated the lease which repudiation was accepted by the service of its notice of termination dated 12 March 2003. The obligation to pay rent, outgoings and insurance premiums is imposed respectively by Clauses 1(a), 1(b) and 1(d) of the lease. Clause 3(e) designates each of these obligations as essential terms of the lease and entitles the landlord in addition to terminating the lease 'to sue the lessee for loss of the benefits which performance of the covenants by the lessee would have conferred', that is, entitles the party in W.J.H.'s situation to loss of bargain damages. Therefore, whether the damages sought in the counterclaim by W.J.H. for loss of the bargain are characterised as being brought under Clause 3(e) or under Common Law for repudiation seems immaterial. I should record however, that non-payment of rental and outgoings over many months in circumstances where I have found there is no defence justifying the non-payment would amount to a repudiation. Hence, W.J.H. is entitled to claim for the loss of the bargain constituted by the lease. Once the lease is terminated by repudiation, W.J.H. came under a duty of mitigating its loss British Westinghouse Co v Underground Railway Company [1912] AC 673, 689. The outlays necessarily incurred are recoverable as damages. McGregor on Damages (16th Edition 1997) [333]. The costs of the rough sanding in my view are properly recoverable as such damages because the evidence disclosed that the rough sanding was a vital step towards obtaining a substitute tenant and mitigating the loss of rental income caused by the termination of the 2001 lease. The costs of cleaning the premises would be likewise recoverable, if not to be regarded as recoverable under the express covenants of the lease because again the evidence indicated that cleaning the premises was a necessary step to finding a new tenant viz. Mr Hose. There is no reason to think that the removal of the sink was a necessary expenditure to mitigate loss.

143 The counterclaim sought $32,379.04 damages being losses of rent and non-recoupment of outgoings for that period. The rent was in the sum of $25,013.19. $40.25 in one amount and $61.65 in another has been allocated to Land Tax. For the reasons already given the Land Tax was not recoverable under the lease in the first place, therefore, non-recoupment of Land Tax after the termination of the lease cannot be regarded as an item of damage flowing from the termination of the lease. This part of the claim must fail. Re-letting expenses in the sum of $3,410 seemed to fall properly within the principle enunciated by McGregor and quoted above. The length of time for which rental losses and non-recoupment of outgoings are claimed is problematic. Mr Read drew attention to the fact that Mr Harper conceded in cross-examination that it took him three months to place No. 83 in the hands of a letting agent, six months to clear the backyard and nine months to repaint the premises. Ultimately it was the belated taking of these various steps which led to the new letting. Before the premises were listed Mr Harper pursued some private leads which came to nothing. No doubt it was quite proper to follow-up those private leads and there is no reason to think that even although they came to nothing, they were anything other than serious prospects. However a serious attempt to mitigate loss would have offered the property to the market as well as following up on private leads. It would also have presented the property to the market in an attractive and acceptable manner not in an unpainted and uncleaned manner. A more vigorous marketing campaign should in my view have led to the premises being re-let in a period of six months and the damages recoverable for loss of rent and loss of recoupment of outgoings should be limited to that six month period.

144 The Mahon sisters executed as part of the Deed of Assignment of the 2001 lease, a guarantee to be found in paragraph 8. The guarantee in fairly orthodox terms entailed a guarantee by them that Mega Byte would:

Duly and punctually pay to W.J.H. the rent hereby reserved and [would] duly perform and observe all the covenants, agreements and conditions contained herein on its part to be performed and observed.

145 Paragraph (b) entailed a promise that in the event of default in the punctual payment of rent or other moneys, they as guarantors would on demand pay W.J.H. 'the whole of such rent and other money'. Paragraph (c) obliged the sisters upon default in the observance and performance 'on demand pay and make good and indemnify and keep indemnified' W.J.H. against its losses, damages and claims.

146 The guarantors' liability clearly extends to the amount of unpaid rent and outgoings for the period up to 13 March 2003. Mr Reid submitted that the termination of the lease terminated the guarantors' liability for any amounts thereafter. He referred to Insurance Office of Australia Limited v Bourke [1935] NSWStRp 43; (1935) 35 SR (NSW) 438; National Westminster Bank PLC v Riley [1986] FLR 213 and Chatfield v Elsmore Resthouse Limited [1975] 2 NZLR 269, 276. He said that the guarantee was 'not one of indemnity'. Consequently, liability only attaches to the guarantors that liability attaches to Mega Byte.

147 The passage which I have already quoted from Clause 8 of the Deed of Assignment indicates that the guarantee goes beyond being merely a guarantee and also entails an element of indemnity. In any event I have already found that Mega Byte is liable for damages relative to the loss of the bargain being the 2001 lease. The Insurance Office of Australia Limited case was about a contract which was rescinded by a moratorium legislation and is not really in point.

148 In Nangus Pty Ltd v Charles Donovan Pty Ltd [1989] VicRp 17; [1989] VR 184 Kaye and Southwell JJ (with whom Young CJ concurred) considered the liability of a tenant and the guarantors of a tenant where the tenant repudiated the lease. By reference to well known authority they concluded that the tenant was liable, as Mega Byte is here, for loss of bargain damages. Their Honours considered that whereas here the guarantee extended not only to the payment of rental but also to the performance of covenants, the liability of the guarantor:

Was for the performance of the covenant by the [tenant] during the entire period reserved by the lease, and for the consequences of the [tenant's] failure to perform the covenant. Damages to which [the lessors] were entitled accrued to them as a result of the [tenant's] failure to perform the covenants during the unexpired period of the term; and the [tenant's] liability for damages as lessee accrued at the time of the acceptance of its repudiation. The [guarantor's] liability for the consequence of the [tenants] failure to perform the covenants yet to be performed continued after the [tenant] terminated the lease.

[1989] VicRp 17; [1989] VR 184, 193

149 In substance therefore, the guarantor was liable to the same extent as the tenant was.

150 Since the Mahon sisters guaranteed not only the payment of rent (none of which would accrue after the termination of the lease) but also the performance of covenants by Mega Byte, their liability is to the same extent as Mega Byte's.

151 To similar effect Mason CJ in Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, 255 said:

If the subject of the guarantee is payment of a debt or a sum of money which has accrued due, the creditor may, on default by the principal debtor, sue the guarantor instead of the principal debtor for the debt or sum of money, his claim being for a liquidated amount. If, on the other hand, the subject of the guarantee is the performance of some other obligation, then the person having the benefit of the guarantee may, upon default, sue the guarantor for damages for breach of contract.

152 In this case Clause 8 of the assignment deed constituting the guarantee covered both liquidated sums viz. rent and other money and also the performance of other contracts, so it partook of the character of both classes of guarantee referred to by His Honour.

153 I have not sustained the entirety of the counterclaim. Therefore there will be some recalculation required. Further, there may be issues as to interest. In the circumstances the appropriate course is to publish these reasons and require the parties to bring in short minutes to give effect to them.

154 I have heard no submissions on costs and so I will reserve them.