Oraka Pty Ltd v Leda Holdings Pty Ltd

Misleading conduct His Honour upheld two of the seven alleged instances of misleading and deceptive conduct relied on by Mr Tantipech. The first was that the Centre was 80 per cent leased. In relation to the first meeting in February 1995, his Honour said it was reasonable for Mr Tantipech "to make a connection between the percentage of space not leased and the suggestion to 'act quickly' and form the opinion that there was little retail space left". In fact at that time leases had been signed for only 34 per cent of the lettable space on the retail floors and for 22 per cent of the lettable space on the ground floor. His Honour said that the reasonable construction of the "80 per cent pre‑leased or committed" passage in the brochure "would convey to a potential lessee of a retail shop on the ground floor … that, even before construction work had commenced for the Centre, about 80 per cent of the space available for retail shops and food outlets were already the subject of binding leases or prospective tenants had committed themselves to enter into leases such that they were no longer available for other prospective tenants". The trial judge rejected the appellant's contention that the reference to 80 per cent was to a percentage of the total available floor space in the Centre including the Hoyts cinema complex, the Mandarin Centre and the sports facility. His Honour concluded as follows: As mentioned previously, on 6 March 1995, leases had been signed for only 34 per cent of the lettable space on the retail floors. Arguably it is necessary to include the space that is subject to draft and executed leases. If that is done the total percentage of retail space unavailable rises to 76 per cent, a figure that is close to the 80 per cent. However that figure fell dramatically by 11 March 1995, at which time the total retail space subject to signed, executed or drafted leases fell to 55 per cent. Tantipech was not informed of this before he signed the lease in June 1995. In the result, even if I were to consider that the correct approach is to include the space that is subject to signed, executed or drafted leases, I would find that the respondent's failure to inform Tantipech of the fall in "pre‑leased or committed" retail space constituted misleading or deceptive conduct. In the circumstances, Tantipech was entitled to believe that any significant change in the pre‑leased or committed space would be communicated to him: Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, per Black CJ at 32. His Honour's reference to "executed" leases must be understood in the sense we have explained earlier of "issued but not executed". The other representation which the trial judge found misleading and deceptive was that the shops surrounding shop G17 had already been leased or were about to be leased. His Honour said that in late April 1995 Mr Uchida reported to Mr Tantipech that certain of the shops surrounding G17 were leased and that other shops were at an advanced stage of negotiations. Mr Uchida seriously overstated the position.

Clause 25.07 of the Lease and the Deed of Acknowledgment According to the trial judge, the appellant relied on clause 25.07 of the Lease and the provisions of a Deed of Acknowledgment to support an argument that Mr Tantipech was barred from pursuing his claim. It appears, however, that clause 25.07 and the Deed had also been relied on to support the contention that Mr Tantipech had not been induced to enter into the lease by the either of representations in question. The Lease and the Deed are both dated 2 June 1995. Clause 25.07 of the Lease provides that the document embodies the whole transaction of the leasing and that all representations pertaining to the leasing "are hereby cancelled". It then contains an acknowledgment by Mr Tantipech that he has entered into the Lease without relying on any representation or warranty made by the appellant. The Deed of Acknowledgment is signed by Mr Tantipech and his son John. It is set out in full in the trial judge's reasons. In clause 1 Mr Tantipech confirms that, save for the statements listed in clause 2, the appellant had made no statements which had in any way induced or influenced him to enter into a lease or to agree to any of the terms of the lease. In the space provided beside clause 2 Mr Tantipech or his son wrote the words "Please Refer to the Attached Supplement". The attached document said that Mr Uchida had made two statements on which Mr Tantipech had relied in entering into the lease. The first was that there would be only two jewellery stores in the Centre. The second was that the Centre would have 24 hour security every day of the week. Clause 3 of the Deed contains a list of ten statements, and makes provision for the lessee to indicate whether he had or had not relied on any of them by ticking a "Yes" or a "No" box beside each statement. After consultation with his father Mr Tantipech's son ticked the "Yes" box in relation to the number or types of businesses that would be permitted to operate in the Centre, and in relation to the facilities or services available in the Centre. These two statements were expanded upon in his attached statement. The son ticked the "No" box beside all other statements, including the final statement: (j) the number or proportion of leases or proposed leases which have been actually entered into, are presently proposed to be entered into or are presently being negotiated or may in the future come into existence in relation to other premises in the Centre. By clause 5 Mr Tantipech agreed to indemnify the appellant against any claim he might make against the appellant in respect of any statement not set forth in clause 2, and agreed that if any such claim were made, production of the Deed by the appellant would be a complete bar to the claim. The trial judge held that neither the Lease nor the Deed barred Mr Tantipech's claim. He said that where an agreement is obtained by misrepresentation, "a disclaimer or exclusion clause in the document itself" cannot bar the claim, and he referred to the judgment of Burchett J in Oraka Pty Ltd v Leda Holdings Pty Ltd (1997) ATPR 41‑558. Lockhart J then said: The Deed of Acknowledgment is perhaps in a slightly different position to the Lease because the Deed itself is directed specifically to the very question of representations by the lessor. It is plain from reading it that Tantipech has ticked the relevant boxes in clause 3 relating to representations of various kinds, so one would assume that his attention must have been directed to the very question of whether other leases or proposed leases in relation to other premises in the Centre had been entered into or proposed to be entered into or then being negotiated or might in the future come into existence (see clause 3(j)) …. My impression from the evidence is that Tantipech did not understand that the documents which he signed related directly to the specific representations made to him on behalf of the respondent concerning the occupancy of other shops including surrounding shops in the Centre. Indeed, in early June when he signed the documents the full impact of the failure of the respondent to secure leases over the other shops on the ground floor in particular would not have been present in Tantipech's mind. It was only later when his shop was so isolated and the risk of security to his business substantially increased that the impact of the statements made on behalf of the respondent about occupancy of other shops came home to him. As a matter of fact I am satisfied that Tantipech did not understand the full impact of the Deed of Acknowledgment or the exclusion clause in the Lease. Hence these documents have no bearing on whether certain representations concerning the proportion of retail space leased induced Tantipech to enter into the lease. Causation The trial judge concluded that the two misleading statements induced Mr Tantipech to enter into the lease. He rejected the contention that Mr Tantipech's closure of his business was caused by the robbery. His Honour did this in reliance on a letter Mr Tantipech had written to Mr Berkeley a week before the robbery in which he complained that he had not made a sale to anyone other than friends. His Honour concluded from this that business was so poor that Mr Tantipech would probably have been forced to leave even if the robbery had not occurred. His Honour found that Mr Tantipech had suffered loss as a result of the making of the false representations, and that there was a causal nexus between the representations and his loss. His Honour said he would have come to the same conclusion if the robbery had been the only reason Mr Tantipech had left the premises. There was a causal link between the representations and the damage suffered as a result of the robbery. Relief His Honour ordered that the appellant pay the respondents $143,468 in damages together with interest of $30,452 calculated from 19 April 1996. These were agreed amounts. He dismissed the cross‑claim. GROUNDS OF APPEAL The brochure representation The appellant contends that the trial judge misconstrued the brochure by treating the representation about 80 per cent leasing as relating to retail space in the Centre rather than to the Centre as a whole. It was pointed out that the crucial paragraph (set out above) begins by referring to The Centre. The reference to "it" in the second sentence is to the Centre. Thus the representation is that the Centre "is about 80% pre‑leased or committed". The rental schedule as at 6 March 1995 showed that, for the Centre as a whole, 69 per cent of the lettable space was the subject of signed leases, and if draft and "for execution leases" were included, the proportion was 88.5 per cent. On this view of the matter, so it was said, the representation was not false. The issue is not, of course, the true construction of the passage in the brochure. The appellant's counsel did not contend that it is. He did not take exception to the trial judge's formulation of the issue - whether it was a reasonable construction of the words, read by a potential lessee of a retail shop on the ground floor, that even before work had begun, about 80% of the space available for retail shops and food outlets was already leased or committed. Cf Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (1992) 111 ALR 61 at 108. Conformably with this, counsel accepted that he had to satisfy the Court that the reading he advanced was "the one that must be adopted because I am in dangerous waters as soon as I retreat to something which accepts that there is another reasonable view open". In our view it was open to the trial judge to conclude that it was reasonable for someone in Mr Tantipech's position to treat the relevant part of the brochure as stating that about 80 per cent of the space available for retail shops and food outlets had already been let or committed. Two matters point in this direction. The first, and more powerful, is that immediately after the 80 per cent sentence, the brochure says that "Demand for the remaining retail space is very strong". The second is that immediately before the 80 per cent sentence, the emphasis has shifted from the Centre as a whole to the concept of "shopping". It was not in dispute that on this reasonable construction of the brochure the representation was false, as the trial judge found. Mr Uchida's oral representation The appellant does not seek to disturb the finding that Mr Uchida told Mr Tantipech that around 80 per cent of the Centre had already been leased. Mr Tantipech's evidence was that Mr Uchida said "I think you should know that around 80 per cent of the Centre has already been leased and there is a lot of interest". He added "You should act quickly if you want to lease the shop". Mr Uchida then showed Mr Tantipech the floor plan marked to indicate the majority of shops as already leased. Read in isolation, the words "around 80 per cent of the Centre has already been leased" point to the Centre as a whole. But they must be understood in the context of Mr Tantipech's evidence as a whole. He had come to see Mr Uchida because he had seen an advertisement seeking retail tenants for the Centre. He was interested in opening a retail jewellery store in the completed building. He told Mr Uchida he was interested in leasing a shop for his jewellery business, and asked for some details. Mr Uchida showed him plans which divided some of the floors into shop spaces. Mr Tantipech said he was interested in the ground floor. He was then shown the ground floor plan, some of the shop spaces on which had been coloured to signify that they had already been leased. While looking at the plan Mr Tantipech realised that the remaining shops were too large for his purposes. He said he wanted a shop around 20 to 25 square metres in area. Mr Uchida said there was no shop of that size left. Mr Tantipech said the remaining shops were too big, and asked whether one of the larger ones could be partitioned into a suitable size. Mr Uchida said he would look into the matter and get back to Mr Tantipech. It was at this stage that he said that around 80 per cent of the Centre had already been leased, and that Mr Tantipech should act quickly if he wanted to lease a shop. In that context, it was reasonable for someone in the position of a person interested in taking a lease of a shop to understand Mr Uchida to be saying that only 20 per cent of the area of relevance to the prospective lessee was available, and accordingly he should be quick about it. The trial judge was quite entitled so to conclude. Adjoining shops representation The appellant sought to overturn the trial judge's finding that Mr Uchida represented that the shops surrounding shop G17 had already been leased or were about to be leased. It was said that this finding was based on Mr Tantipech's affidavit, and took no account of contrary evidence he had given in the course of his cross‑examination. What Mr Uchida said in his affidavit was - "Shop S8/9 is leased and will be a book and magazine store, shop S13 will be wholesale jewellery manufacturer and is already leased, shop S16 will be a bridal store and is already leased, shop S18 will be a flower store and the lease arrangements are being finalised, shop S19 is planned to be a bank and the lease arrangements are being finalised". The passage in the cross‑examination which is said to involve a retraction of part of the affidavit evidence is as follows: COUNSEL: What do you say he said? WITNESS: I ask him what about the surrounding shop business and he told me the shops 8 and 17, 8 and 9, is decided to be a book shop, and shop 13 will become a manufacturer jewellery shop and shop 16, which is also next to mine - 17 - is a dress for the wedding dress shop and the shop 18, which is opposite 17, is going to be a flower shop. This flower shop is going to sign the lease soon, that is not - lease is not signed yet but going to sign it and then the shop 19 also going to be a bank. That is what he told me. COUNSEL: So he told you that shop 18 had not yet signed the lease but was going to soon? WITNESS: Yes. COUNSEL: He did not say to you that any of the shops had signed a lease, did he? WITNESS: No, he didn't - he didn't specify the special number. COUNSEL: So the only comment he made about leasing was that shop 18 was going to sign a lease shortly? WITNESS: 18, yes. COUNSEL: 18, thank you? WITNESS: 18 and 19. The affidavit evidence is clear. Three shops (8/9, 13 and 16) had been leased and two (18 and 19) were not yet leased, but arrangements were being finalised. The longer of the answers in cross‑examination is consistent with this. Mr Tantipech divides the shops into two groups: 18 and 19 in respect of which negotiations were still taking place, and 8/9, 13 and 16 in respect of which, by implication, leases had been signed. Given Mr Tantipech's clear affidavit evidence, that is the only reasonable construction of this passage. Then follows the question whether Mr Uchida had said that any of the shops had signed a lease. The answer is not "No" (he didn't say that any of the shops had signed a lease). It is "No, he didn't specify the special number". This suggests that Mr Tantipech misunderstood the question, thinking he was being asked whether Mr Uchida had said how many of the shops had signed a lease. His complete answer is responsive to that question, though not to the actual question asked. It is to be remembered that English is not Mr Tantipech's first language. On a number of occasions he and counsel were at cross‑purposes. On others the assistance of the interpreter was sought. In view of the language difficulty, the answers elicited in cross‑examination are not sufficiently clear to amount to a retraction of the affidavit evidence. In order to have established a retraction counsel would need to have put squarely to Mr Tantipech, as to each of shops 8/9, 13 and 16, that Mr Uchida had not said to him that a lease had been signed. No criticism of counsel is intended, because he, like us, probably thought he had got as much as he could safely seek. For these reasons we reject the challenge to Lockhart J's findings on this point. In particular we reject the suggestion that because that very experienced judge did not mention material that was arguably inconsistent with the clear affidavit evidence of a witness whose truthfulness and reliability he accepted, he had "ignored" it. The Deed as a bar to the action The appellant relied on clause 5 of the Deed as a bar to the action. The trial judge's observation that where an agreement is obtained by misrepresentation, a disclaimer or exclusion clause in the document itself cannot bar the claim, was not challenged. Although the case relied on by his Honour, Oraka Pty Ltd v Leda Holdings Pty Ltd (1997) ATPR 41‑558, was reversed on appeal after his Honour had reserved his decision, the principle relied on was affirmed in the joint judgment of Branson and Emmett JJ on the appeal: (1998) ATPR 41‑601 at 40,517‑40,518. Counsel accepted that the principle applied to the disclaimer in the Lease, but the Deed was said to be in a different position because there was no evidence that Mr Tantipech had been induced to execute it by any representation about the leasing of the surrounding shops. If the provisions of the Deed had been incorporated in the Lease they would have been ineffective. Having induced Mr Tantipech to enter into the lease by misleading and deceptive conduct, the appellant could not rely upon an exculpatory term in the same document to relieve itself of liability. It would seem to us to be strange if this consequence could be avoided by the simple device of putting the exculpatory clause in a separate document. The formulation approved in Leda Holdings was sufficient for the purposes of that case, where the exculpatory provision was part of the agreement for lease. However, the public policy which lies behind the court's refusal to allow a party to contract out of liability under s 52 of the Act is not exhausted by application to the case of an exculpatory provision which is contained in a document into which the complainant has been induced to enter by a misrepresentation. It must extend to any document which purports to excuse a misrepresentor from liability for contravention of s 52. Statements in the cases that a party in breach of s 52 cannot rely on an exculpatory provision of the very agreement into which the other party has by the breach been induced to enter, do not expose the full ambit of the principle, which is based on more general considerations. In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1987) 79 ALR 83 at 98‑99 Lockhart J, with whom Burchett and Foster JJ agreed, said: Section 52 is a section in the consumer protection provisions of an Act concerned to protect the public from misleading or deceptive conduct and unfair trade practices which may result in contravention of the Act. It has been held that exclusion clauses … cannot operate to defeat claims under s 52. … There are wider objections to allowing effect to such clauses. Otherwise the operation of the Act, a public policy statute, could be ousted by private agreement. Parliament passed the Act to stamp out unfair or improper conduct in trade or commerce; it would be contrary to public policy for special conditions such as those with which this contract was concerned to deny or prohibit a statutory remedy for offending conduct under the Act. There are various judgments of judges of this court where this approach has been adopted and they are collected in the judgment of the trial judge, so I need not repeat them. Although the clause in question in Henjo was part of the contract the applicant had been induced to enter into by representations in contravention of s 52, the public policy basis for the denial of its effectiveness is applicable to a case such as the present where the exculpatory clause is found in another document. In Waltip Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) ATPR 40‑975 the landlord was found to have contravened s 52, and the question was whether it had a defence based on a deed of acknowledgment signed by the parties. Clause 1 provided for the specification of any statements that had been made to the tenant in relation to the proposed lease which had induced or influenced it to decide to enter into the lease. In the space provided, the tenant wrote "No such statements have been taken into account in any manner whatsoever by me". Clause 2 provided that, except as set out in clause 1, the tenant represented and warranted that no statements had been taken into account by it in deciding to enter into the lease. Clause 3 particularised this by listing ten different types of statements which, the tenant said, had not been made. By clause 5 the tenant agreed to indemnify the landlord against any claim the tenant might make in respect of any statement as defined in the deed. Pincus J, after referring to Henjo, held that the deed did not operate as a defence. The report does not disclose whether the argument propounded for the appellant in the present case, (that the execution of the Deed was not induced by misleading conduct), had been put to Pincus J, but it was certainly available in that case. However it is clear that, in reliance on the public policy basis of Henjo, his Honour would have rejected this argument, if indeed his decision on the point does not involve its rejection sub silentio. Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR 46‑048 also involved a deed of acknowledgment containing provisions similar to those of the deeds in Waltip and the present case. Spender J at 53,161, after referring to several cases involving disclaimer clauses in leases, said that "if in fact the misleading conduct of the respondent has induced an applicant to enter into an agreement, that inducement is not negated because, in a document separate to the agreement itself, the applicant says to the contrary". His Honour accepted that a deed of this type has some value as evidence on the question whether the tenant was in fact induced by the representations. But the deed could not be conclusive on the question, for otherwise such a deed would be a "convenient roundabout route of circumventing the policy of the statute": at 53,161. Accordingly, we reject the contention that the Deed is a bar to Mr Tantipech's case. The Deed - inducement Although an exculpatory clause cannot be relied on to answer a claim based on s 52, the fact that an applicant states that he was not induced to enter into an agreement in reliance on representations may bear upon the question whether he should be believed when he asserts that the representations were an inducement: Keen Mar Corporation at 53,146 and 53,161. The trial judge was satisfied that Mr Tantipech did not understand the full impact of the Deed, and that accordingly it had no bearing on whether the representations about the proportion of retail space that had been leased induced him to enter into the lease. Counsel for the appellant took us to the evidence that his Honour might have had in mind in concluding that Mr Tantipech did not understand that the Deed related directly to the specific representations made to him concerning the occupancy of the surrounding shops. In the course of cross‑examination about the Deed, Mr Tantipech's attention was drawn to the "attached supplement" containing his statement that his desire to lease the premises was dependent on the information provided by Mr Uchida that there would be only two jewellery stores and that there would be 24 hour security guards, and the following exchange occurred: COUNSEL: … is it correct that you caused [the last paragraph] to be written and signed so that it would be very clear to the lessor that Mr Uchida had told you the Mandarin Centre would have 24 hour 7 day security guards? Is that why that paragraph is put there? INTERPRETER: After the final agreement about the price, how much the rent was going to be, Mr Uchida agree that these two conditions will be accepted. COUNSEL: And they were the only two conditions that Mr Uchida agreed were to be accepted, were not they? WITNESS: Yes, this is the two main require from me. COUNSEL: And these were the matters that you viewed as very important in deciding whether or not to sign the lease? WITNESS: Yes. COUNSEL: And if I can take you through to the paragraph 3 of the Deed of Acknowledgment on the first page. This is the document that you discussed with your solicitor? WITNESS: Yes, this is the information that are translated to me by my son. I myself cannot understand all this. COUNSEL: …. And so your son spoke to you about it; he translated it to you, and … did you tell your son which box to tick or did you tick the boxes? WITNESS: My son he tick the box for me. COUNSEL: Did your son explain to you with condition (j) on page 2 that you were ticking a box which said nothing had been said to you about how many leases had been entered into or were proposed to be entered into or were being negotiated? WITNESS: At this moment I cannot remember whether he explained this one to me. COUNSEL: But … you will agree that he ticked "no" for all of them except for two and he ticked "yes" for … just two matters. WITNESS: Yes, he ticked two. COUNSEL: And that is because those two were the only two matters that were important to you. WITNESS: Yes, I think this is very important to me. Although the appellant's counsel took us to this passage, he did not submit that the trial judge was not entitled to conclude that Mr Tantipech did not understand that the Deed related directly to the representations relating to the occupancy of the surrounding shops. That was because he contended that Mr Tantipech's lack of understanding of the Deed was irrelevant as a matter of law. Because we do not consider it was irrelevant, we should say that we think his Honour was entitled to conclude as he did about Mr Tantipech's lack of understanding of the Deed. His Honour was better placed than we are to assess Mr Tantipech's understanding of matters, and to evaluate the import of his answers to questions and his demeanour in answering them. Our impression from the cross‑examination set out above, and from other parts of the cross‑examination, is that Mr Tantipech often did not seem to understand the point of a question. In relation to some of the questions put to him in the above passage, his answers are non‑responsive and appear to be merely reactions to some of the words of the question. For example, the response to the question whether the two jewellery stores and security were the only two conditions that Mr Uchida agreed to cannot safely be taken to be "Yes". Nor can Mr Tantipech safely be taken to have given an affirmative answer to the question whether the only important matters were the two marked with a tick. One can discern from the transcript some of the difficulty the witness was encountering. The trial judge had the advantage of watching the witness grappling with the questions, and was much better placed than we are to come to a conclusion as to whether the witness understood that in signing the Deed he was representing that he had not been influenced in his decision to take the lease by Mr Uchida's statement about the other shops. As we understood it, the appellant's argument was that it did not need to challenge the trial judge's finding about Mr Tantipech's lack of understanding of the Deed because his understanding was irrelevant since the Deed stood as a bar to the claim unless it was for some reason set aside. We do not agree. The question for the trial judge was whether Mr Tantipech had been induced to enter into the lease by the representation about the surrounding shops. But for the Deed, his Honour was entitled to find that he had been. The question was whether he was disabled from so finding because Mr Tantipech had stated in the Deed that he had not been induced to enter into the lease by any representation other than the two specified. The Deed could not have this effect if Mr Tantipech did not understand that that is what he agreed to when signing it. Because, on his Honour's finding, Mr Tantipech did not understand that the Deed related to representations about the occupancy of surrounding shops, he was entitled to find as a matter of fact that Mr Tantipech was relevantly induced. Cf Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) ATPR 46,048 at 53,146 and 53,160‑53,161. Clause 25.07 of the lease In the appellant's grounds of appeal it is claimed that the trial judge made errors in relation to clause 25.07 of the lease. The assertion is repeated in a heading to its outline of submissions, but is not mentioned in the body of the document. In the course of argument the appellant's counsel abandoned any reliance on the clause. The robbery as a novus actus interveniens The appellant contended that the robbery was a novus actus interveniens, and that there was no basis reasonably open for the finding that the misleading conduct in any way caused loss. The robbery was over in a few minutes, and could not have been prevented by a security guard. The police could not have arrived more quickly than they did after the alarm was set off by Mr Tantipech's wife. Reference was made to the decision of the Appeal Division of the Supreme Court of Victoria in JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 where it was held that misleading conduct had not caused the loss suffered as a result of a robbery of leased premises. Lockhart J reached his conclusion on causation without reliance on the robbery. He found a causal connexion between the making of the two false representations and Mr Tantipech's loss of business, and no error has been shown in his approach. His Honour's reference to the robbery was what might be called a fall‑back position, and was not the actual ground of his decision. The reliance on JLW is misplaced. Although the trial judge spoke of loss resulting from the robbery, Mr Tantipech did not claim damages for that loss. CONCLUSION The appeal must be dismissed with costs. I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Honourable Justices Lee, Nicholson and Sundberg

Associate: Dated: 4 August 1998 Counsel for the Applicant: B W Walker SC and I C Davidson

Counsel for the Respondents: R C McDougall QC and L J W Aitken

Solicitors for the Respondents: Furlong & Associates