Nicolaou v GPT Re Ltd

[2004] NSWCA 85

Court of Appeal (NSW)|2009-09-04

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Source facts

Court

Court of Appeal (NSW)

Decision date

2009-09-04

Catchwords

Claim for compensation for pre lease representations

Source

Original judgment source is linked above.

Catchwords

Claim for compensation for pre lease representations

Judgment (101 paragraphs)

[1]

Introduction 1 The applicants, Lenia Nicolaou and Theodoulos Nicolaou (Mr and Mrs Nicolaou), have brought a claim, under section 71 Retail Leases Act 1994 (the RLA), against the respondent, GPT Re Limited (File no 085171). The applicants' claim arises from a retail lease they entered on 10 October 2006. The applicants were the lessee and the respondent was the lessor. The premises the subject of the lease was Shop 02 (the shop or the premises), on the lower level of the Charleston Square Shopping Mall (the Centre), from which Mr and Mrs Nicolaou operated a business, known as 'Let's Eat at Charleston Deli' (the applicants' business).

[2]

2 The applicants seek a number of orders under section 72 of the RLA, including an order that the respondent pay it $400,000 (being the maximum amount the Tribunal has jurisdiction to award) by way of damages for alleged pre-lease misleading representations (i.e. damages arising from alleged breaches of sections 10 and 62D of the RLA) and an order that they be relieved from their obligation to pay rent (i.e. arising from an alleged breach of clause 39.2 of the lease). The alleged pre-lease representations and the alleged breach of the lease relate to disturbances to the applicants' business as a result of a substantial redevelopment of the Centre that commenced on 4 February 2008 and was ongoing up until the applicants' lease was terminated on 1 August 2009. 3 The respondent contends that the applicants' claims are misconceived in that the sections of the RLA relied on by applicants do not apply, or alternatively the evidence does not support their claims. Instead, the respondent has brought its own claim against the applicants, under the RLA (file no 095096). In that claim the respondent seeks an order that the applicants pay it (a) a sum of $67,986.00 for outstanding rent and outgoings, and (b) an amount of $35,800 for the costs incurred by the respondent in meeting the applicants' obligation to make good the premises as at the date of the termination of the lease as required under clause 29 of the lease. There is no dispute as to the amount of outstanding rent. The only area of dispute is whether the applicants' should be relieved from paying it.

[6]

10 The2006 lease negotiations Initially, in June 2006, the applicants were offered a one-year lease, but after discussions Mr Nicolaou had with Ms Belinda Sanhueza, the then leasing executive of the respondent at the centre, he and his wife were offered a 5 year lease. A formal offer was made on or about 17 July 2006 and as part of that offer the applicants were provided with a Lessor Disclosure Statement (as per section 11 of the RLA) and a copy of the tenancy plan for the Centre as at 14 October 2005. The Disclosure Statement contained a statement that no known disturbances to trading were likely to occur during the term of the new lease and that the respondent was 'undertaking a master planning exercise to determine future opportunities for the Centre, car parks, entries & exit and surrounding roads' and that it was 'possible' that changes would occur during the term of the lease: see paragraph 51 below where the statements are set out in full. 11 On 29 July 2006, the applicants signed the lease and wrote to the respondent identifying the representations of the respondent on which they relied in entering into the lease (see section 11A of the RLA which deals with the lessee's Disclosure Statement). The relevant representation of the respondent on which the applicants' said they relied was as follows: 'We understand that the Lessor is undertaking a master planning exercise and if successful, it may or may not affect our business. We request that the channels of communication remain open to us at any given time to express any concerns of real/possible affects that the renovation will have on our trade. If the effects are major we request an undertaking of assistance by the lessor.' 12 The redevelopment of the Centre In the early part of 2002, the respondent developed a proposal to substantially expand and enhance the Centre and its surrounds. The plan involved purchasing surrounding land from the Bowlers Club and the Local Council. It also involved road changes and a re-zoning of surrounding land and required the necessary statutory development approvals. At various stages during the development process, funding approval and other contractual approvals were required from the respondent's Board of Directors (the Board).

[9]

18 The Development Applications (6 in total) for the proposed development were lodged with the Local Council in February 2007. They were subsequently given approval in early December of that year. All other matters having been finalised, work on the development of the Centre commenced on 4 February 2008. 19 In a memorandum, dated 29 January 2008, Mr Francis informed all retailers that work would commence on this date with the demolition, in part, of the southern multi-level car park. Three days later, on 1 February 2008, retailers were sent a further memorandum from Mr Francis in which he confirmed the starting date of the redevelopment work and that on this day the existing entry from the southern car park to Harris Farm would be closed. (i.e. the entry opposite the applicants' shop). 20 It is the contention of the applicants that this closure and the ongoing development work to the Centre caused a severe disturbance and disruption to their business as there was a substantial loss of traffic (i.e. potential customers) to the lower ground level, and particularly at the eastern end of that level. They contended that had they been made aware of the extent of the proposed re-development work they would not have entered the lease. 21 Rent abatement In April 2008, Mr Nicolaou, approached the respondent's leasing agent and requested financial assistance. He said with the changes to traffic flow he could no longer meet his obligations under the lease. The respondent acknowledged that the re-development work had caused a disturbance to the applicants' business through a loss of customers. However, its position was that this was not entirely the reason for a downturn in customers. It contended that the re-opening, in September and October 2007, of the near-by refurbished Kotara Shopping Centre (Kotara) had already resulted in a loss of customers prior to any development work having commenced. The respondent also contended that there were matters the applicants' could do to improve their business and hence customer base. This and the Kotara re-opening were matters that were not in the control of the respondent. After being provided with accounts from the applicants' business the respondent did provide the applicants with an offer of an abatement of rent, on 7 May 2008. Further offers of rental abatement were made on 22 May 2008 and again on 29 April 2009. The latter offer was made some 6 months after the applicants' had filed their claim with the Tribunal. 22 Termination of the lease The applicants' lease was terminated on 5 August 2009. It was terminated on the applicants' election after the respondent issued them with a demolition notice under clause 41 of the lease.

[32]

The alleged misleading representations 45 In their amended application, filed on 20 August 2009, the applicants particularised the alleged misleading representations and conduct of the respondent (see grounds 1 and 2) as follows: -an oral representation by Ms Amber Pardy, of the respondent, to Mr Nicolaou, in which Ms Pardy represented: (a) that the respondent's future plans involved the creation of a cinema complex, cafes and restaurants, (b) that the applicants would likely have to relocate within the Centre and (c) that customer traffic would be unchanged. ( Ms Pardy's oral representation ) -a written representation in its disclosure statement to the applicants in which the respondent represented: (a) that it was undertaking a master planning exercise; and (b) during the currency of the lease there was no likelihood of there being a disturbance to the applicants' business which would have a significant adverse affect on trading when the respondent knew of its detailed plans for a substantial redevelopment of the Centre which would have the consequence of detrimentally affecting, as it did, the business of the applicants ( the Disclosure Statement representation ) -a representation by silence that no 'substantial redevelopment' of the Centre would take place during the term of the applicants' lease, in circumstances where the respondent was under a duty to disclose to the applicants the scale and scope of the substantial redevelopment of the Centre during the term of the applicants' proposed lease and which would detrimentally affect the applicants' business. ( the representation by silence ) 46 Ms Pardy's oral representation - In his affidavit, sworn on 2 September 2008, Mr Nicolaou set out a conversation he asserted he had with Ms Pardy (the leasing executive employed by the respondent) in about June 2006 in the course of negotiating a new lease for the premises: see Exhibit A2 at paragraphs 2 and 3. He asserts that after making enquiries about 'the future plans for the centre', Ms Pardy said words to the effect: 'Escalators are going to be changed to travelators in front of your shop.' He asserts he responded by saying words to the effect: 'Will this mean a redirection in traffic and will this have an effect on our business?' Mr Nicolaou asserts that Ms Pardy responded with words to the effect: 'That's not going to happen. No development application has been lodged and this is not likely to occur until late this year. Traffic will move exactly the same way. …'

[43]

56 Although I found evidence of this nature given by Mr Francis to be self-serving, on balance, having regard to the documentary evidence filed by the respondent, I find that the applicants have failed to establish that, the statements/representations were misleading. That is, the applicants failed to establish that, at the time the statements/representations were made, the respondent had no reasonable basis to say that during the term of their lease there were to be no known disturbances and that there was only a 'possibility' that changes to the Centre and its surrounds would be made. 57 The phrase 'major planning exercise' appears to have been chosen very carefully and had it appeared on its own without any further explanation, I may have come to a different conclusion. It is a phrase that had a particular meaning within the respondent. Mr Anthony McNulty (General Manager of Retail Development for the respondent) explained that every retail development had two very separate phases: see Exhibit R10. He said there was the 'planning for development, or master planning phase' and the 'under development phase'. Everything occurring prior to the physical construction of the development, he said fell within the 'master planning phase.' He said that until the 'master planning' phase was completed, every proposed development was no more than a 'possible' development. Mr Francis gave similar evidence. While the respondent categorises everything that occurs prior to the commencement of construction as falling within the 'master planning phase', in my opinion, this does not mean that this is how these words are understood more generally. I accept that no development can occur until such time as the appropriate planning approvals have been granted and in that sense any proposed development is no more than 'a possibility'. To put it in another way, until such time as planning approval is obtained, it is always 'possible' that any proposed developments will not proceed in part or whole. The extent of the 'possibility' of the proposed development proceeding, or not proceeding, will of course depend on the overall circumstances at any particular time.

[45]

59 On the material before the Tribunal, it is evident that as at July 2006, the respondent was reaching towards the finalisation of these 2 stages in its re-development plan for the Centre. That progress is recorded in the minutes of the 'Charlestown Square Project Control Group' (the PCG), an internal committee of the respondent to oversee and monitor the progress of the proposed re-development of the Centre and its surrounds. The PCG was formed some time prior to 2003. The Committee met every 6 weeks and Mr Francis and Mr McNulty were members: see Exhibit R5 at paragraph 7. Mr Francis' membership of the Committee meant that he was at all times informed about progress of the proposed re-development. 60 Although the proposed re-development had not progressed as scheduled in November 2002, by the end of 2004 there had been widespread community consultation about the proposal. The consultation led to the 3 D model of the proposed re-development being put on public display, in February 2005. The evidence shows that the Local Council Mayor opened this display and strongly supported it. Discussions were also commenced with the Bowlers Club and the Council in regard to acquisition of land and the issue of re-zoning. In February 2006, Bovis Lend Lease (BLL) (the contracted developer) prepared a detailed 'concept plan' for the proposed re-development: see Exhibit R1 tab 18. This 'concept plan' included details of the proposed re-development of retail areas on each level of the Centre and the surrounding car parks. It is evident from these plans that the proposal included an extension to the southern multi level car park and the western (Big W) and eastern (Coles) ends of the lower ground level. However, there were no proposed changes to the applicants' shop, or the surrounding smaller shops. The concept plan also identified changes to the upper levels of the Centre and the surrounds to the Centre. A copy of the plans had been tabled and endorsed at the meeting of the respondent Board on 26 April 2006. During cross-examination, Mr Francis conceded that the 'concept plan' followed the outline of the 3-D model that had been on public display and that the development applications that were ultimately lodged and approved by the Local Council did not substantially depart from these. However, the lodgement of the development applications did not occur until 6 months after the respondent's statements/representations were. There is no evidence before the Tribunal that preparation of the development application had been completed before the statements/representations were made or before the applicants' lease came into force.

Nicolaou v GPT Re Ltd

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Judgment (101 paragraphs)

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