PT Ltd v Spuds Surf Chatswood Pty Ltd

The Course of Proceedings 47The proceedings in the ADT did not run smoothly. The following is a brief chronological account. (i) On 12 October 2006, Spuds filed a combined Retail Tenancy and Unconscionable Conduct claim against PT. The claim, which was made pursuant to ss 71 and 71A of the RL Act, identified a number of grounds, including PT's alleged misleading, deceptive and unconscionable conduct. Spuds sought, among other relief, compensation under s 34 of the RL Act (which deals with compensation to lessees for disturbance) and urgent orders preventing PT from terminating the Lease. (ii) On 24 October 2006, the RLD made interim orders restraining PT from evicting Spuds from the Premises. (iii) Between 24 October 2006 and 21 May 2007 the RLD made various interlocutory orders. On 20 June 2007, following a hearing on 21 May 2007, Molony JM extended the restraining orders, subject to certain conditions, and made costs orders. He observed in his reasons that the word "progress" was "more than a trifle generous" to describe what had occurred in the eight months since the proceedings had commenced: Spuds Surf Chatswood Pty Ltd v PT Limited [2007] NSWADT 130, at [15]. Molony JM's reasons comprise 87 paragraphs and 24 single spaced pages. (iv) On 27 June 2007, Spuds ceased to trade and vacated the Premises. (v) On 23 April 2008, PT filed an application against Spuds, claiming unpaid rent, outgoings and other amounts totalling $291,908.55, plus interest. (vi) The hearing of the substantive claims before the RLD did not take place until May 2009. We were told that the delay was due to a 2007 hearing date being vacated at Spuds' request and the parties taking a lengthy period thereafter to file their evidence. Why such a long time was required or permitted was not explained. The hearing before the RLD occupied nineteen days spread over a period of about nine months, from May 2009 to February 2010. (vii) The RLD Decision was not handed down until 22 June 2011, two years after the hearing had commenced and sixteen months after the hearing had concluded. As the Appeal Panel subsequently held, this was a breach of s 80(3) of the ADT Act, which requires the ADT to give reasons for its decision within six months of the date on which it reserved its decision. As has been noted, the RLD dismissed Spuds' claim for relief in the Spuds Proceedings and made orders in the PT Proceedings that Spuds pay PT $327,533.35, plus interest. The RLD's decision comprises 244 paragraphs and 141 pages. (viii) On 19 July 2011, Spuds filed a notice of appeal against the RLD Decision. The notice of appeal asserted that the RLD had erred in law in a number of respects and asked the Appeal Panel for leave under s 113(2)(b) of the ADT Act to extend the appeal to the merits of the RLD Decision. The notice of appeal indicated that Spuds was appealing against the orders made in both the Spuds Proceedings and the PT Proceedings. The grounds of appeal did not, however, distinguish clearly between the issues arising in each proceeding. (ix) On 3 August 2011, the RLD determined that Spuds was liable to pay PT interest of $92,811.46. Thus Spuds' total liability to PT was $420,345.01. Spuds was ordered to pay the costs of both proceedings: Spuds Surf Chatswood Pty Ltd v P T Ltd (No 3) [2011] NSWADT 186 ("RLD Costs Decision"). (x) On 17 and 18 November 2011, the Appeal Panel of the ADT heard Spuds' application for leave for the appeal to extend to the merits. In the Leave Decision handed down on 30 January 2012, the Appeal Panel restated what it said was Spuds' unconscionability case "at its highest" (at [299]). The Appeal Panel rejected a number of grounds of Spuds' appeal, but granted leave for the appeal to extend to the merits of the RLD's findings on unconscionability. The Appeal Panel directed that a further hearing take place to receive further submissions on the following questions: (a) Whether conduct of [PT] occurring between February 2002 and July 2005 amounted to unconscionable conduct as claimed by [Spuds]. (b) Whether any such unconscionable conduct of [PT] caused [Spuds] to suffer loss for which damages may be recovered. (c) If yes to (b), what is the amount of such loss. The Leave Decision comprises 327 paragraphs and 124 pages. (xi) On 9 May 2012, Chesterman DP dealt with applications by both parties to adduce fresh evidence on the merits appeal ("Fresh Evidence Decision"). He allowed Spuds to adduce fresh evidence relating to its financial performance, but rejected PT's application to adduce fresh evidence from Mr Roberts, the then Manager of the Centre. He did so on the basis of a concession by Spuds that, in pursuing its claim of unconscionable conduct, it would not allege bad faith on the part of Mr Roberts in his dealings with Spuds. PT complains in this Court that the Fresh Evidence Decision denied it natural justice because Mr Roberts' evidence was material to the merits of Spuds' appeal on unconscionability. (xii) The hearing of the appeal took place before the Appeal Panel on 21 and 22 June 2012 and it handed down the Principal Decision on 3 October 2012. The effect of the Principal Decision, as I have noted, was to allow Spuds' appeal in part, although the orders did not say so. The Appeal Panel found that PT had engaged in unconscionable conduct, but rejected Spuds' claim for damages of $400,000, instead awarding $97,535.72. In the form provided to the Court, the Principal Judgment comprises 287 paragraphs and 55 closely typed pages. (xiii) One of the unfortunate features of this case is that the Appeal Panel assessed Spuds' damages on a basis that had not been propounded by Spuds and in respect of which PT had been given no opportunity to put submissions. Both parties agreed in this Court that the consequence of the Appeal Panel assessing damages on a basis not argued by either party is that the Appeal Panel denied them natural justice, in contravention of its duty under s 73(2) of the ADT Act. (xiv) The Appeal Panel dealt with the remaining issues in the appeal, including costs, on the papers: Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3) (RLD) [2013] NSWADTAP 11 ("Costs Decision"). In the Costs Decision, the Appeal Panel ordered that PT's liability to pay the sum of $97,535.72 to Spuds was to take effect by way of set off against Spuds' liability to pay PT a total of $420,345.01 (that liability not having been discharged). The Appeal Panel also ordered that the orders made in the Principal Decision were "to be taken" as allowing Spuds' appeal against the RLD's Decision. With minor exceptions, the Appeal Panel directed that each party should bear its own costs of the proceedings in the RLD and before the Appeal Panel itself. (xv) The Costs Decision was handed down on 1 March 2013. Thus the proceedings in the ADT were finalised some six and a half years after Spuds filed its application. 48The length of time taken to resolve the proceedings in the ADT is a matter of concern. I recognise that an appellate court is usually not in a position to assess all the factors that have contributed to delays before a tribunal. Furthermore, the parties drew our attention to some of the difficulties encountered in the present case. For example, the RLD had to address a number of issues that were not pursued in the proceedings thereafter. The length of the Appeal Panel's reasons in the Leave Decision is perhaps partly explained by the need for the Appeal Panel to explain why it intended to confine the scope of Spuds' merits appeal and why it rejected some grounds of appeal. We were also told that the fractured hearing before the RLD was partly a consequence of circumstances beyond anyone's control. As I have already noted, the dates for the hearing before the RLD were vacated and the parties apparently took the best part of two years to ready themselves for the adjourned hearing. The papers do not reveal what steps the RLD took to curtail the delays. 49Spuds' first ground in its internal appeal to the Appeal Panel was that the RLD erred in law by not giving its reasons for decision within six months, as required by s 80(3) of the ADT Act. In the Leave Decision, the Appeal Panel found (at [96]) that the delay was "substantial". The Appeal Panel did not consider that the delay, of itself, provided a ground for setting aside the RLD Decision. However, it took the view that the delay warranted careful scrutiny of the RLD's reasons to determine whether it had overlooked matters or otherwise fallen into error. 50There were many factors in the present case that contributed to the lapse of six and a half years between Spuds' initial filing and the Appeal Panel's Costs Decision. Nevertheless, the ADT is obliged by statute to "act as quickly as practicable" (ADT Act, s 73(5)(a)). It is also required to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case (s 73(3)), subject always to the obligation to afford natural justice to the parties and to ensure that they have the fullest opportunity practicable to be heard and have their submissions considered (s 73(2), (4)(c)). Taking account of the considerations to which our attention has been drawn and recognising that the parties bear considerable responsibility for the unnecessary prolongation of the proceedings (not necessarily in equal shares), it would seem that the ADT has not fulfilled its statutory mandate in the present case.

Leave Decision 51The Leave Decision identified seven issues for consideration:

1. The RLD's delay in delivering its decision, to which I have already referred (see at [49] above).
2. The significance of the 2002 Height Restrictions.
3. The attempts by Spuds to amend the terms of the Lease of the Premises.
4. The claim under s 34 of the RL Act.
5. Spuds' claim for breach of the covenant of quiet enjoyment.
6. The unconscionable conduct claim.
7. Causation and damages.

2002 Height Restrictions 52The Appeal Panel rejected (at [140]) Spuds' contention that the RLD should have found that the 2002 Height Restrictions were fundamental to Spuds' decision to enter into the Lease. The Appeal Panel pointed out (at [141]) that it was not until 21 August 2002, about seven weeks after Spuds took possession, that it attributed particular importance to the 2002 Height Restrictions. However, that did not mean that Mr Mimis had paid no attention to the Restrictions when negotiating for the Lease. 53The Appeal Panel was not prepared to conclude (at [150]) that PT's approval of the Boost Juice kiosk was wrong (in the sense of a clear breach of the 2002 Height Restrictions), as distinct from "arguably wrong" (as the RLD had found). The Appeal Panel was "inclined to agree" (at [151]) that the Boost Juice kiosk, the Telechoice kiosk and the Love Salad kiosk did in fact infringe the 2002 Height Restrictions, but it considered that the Restrictions were ambiguous. (The Appeal Panel subsequently revised its opinion in the Principal Decision, one of several issues that it revisited.)

Amendment to Lease 54The Appeal Panel upheld (at [180]) the RLD's finding that the amendment to Item 10 of the Lease proposed by Mr Mimis on 21 August 2002 did not form part of the agreement between the parties. However, as has been noted, the Appeal Panel also upheld (at [191]) the RLD's finding that by reason of s 8(1) of the RL Act, the Lease arose between the parties for the purposes of the Act when Spuds took possession of the Premises on 3 July 2002. At that point the "requisite 'consensus' existed" (at [192]).

Claim Under s 34 of the RL Act 55The Appeal Panel upheld (at [260]) the RLD's rejection of Spuds' claim for compensation under s 34 of the RL Act and refused Spuds' application seeking leave to extend the appeal to the merits of the RLD's decision on this claim.

Breach of Covenant for Quiet Enjoyment 56The Appeal Panel upheld (at [265]) the RLD's rejection of Spuds' claim that PT breached the covenant for quiet enjoyment in the Lease.

Unconscionability Claim 57The Appeal Panel expressed concern about aspects of the RLD's reasoning in rejecting Spuds' unconscionability claim, particularly its summary rejection of Spuds' contentions insofar as they overlapped with the claim under s 34 of the RL Act and the RLD's failure to take into account certain arguments advanced by Spuds (at [289], [292]-[295]). The Appeal Panel then reformulated Spuds' case as follows (at [299]): Taking all these considerations into account, it appears to us that [Spuds'] case on its unconscionable claim against [PT] could, at its highest, be based on the following matters occurring between February 2002 and July 2005:- 1. Through distributing the 2002 Height Restrictions to tenants and prospective tenants, [PT] established them as a guideline or code operating throughout the Centre and assumed the responsibility of ensuring that the plans for new structures in the Centre complied with them. 2. In the Restrictions, the applicability of the maximum height limit to different types of signage was left unclear. 3. In February 2002, [PT] made [Spuds] aware of the Restrictions during negotiations for the Lease. In August 2002, shortly after the Lease commenced, [Spuds] notified [PT's] solicitors that it expected any new structures being erected near the Premises to comply with them. Yet without any notification to [Spuds], [PT] proceeded during the next three months to approve plans for the Boost Juice kiosk near [Spuds'] shop, in the context of granting a long lease, even though (a) on a viable interpretation of the Restrictions, the kiosk did not comply with them on account of the height of signage extending upwards from the ground and (b) the approval was at odds with a term of this lease. 4. In May 2003, in the course of unsuccessful negotiations between the parties, [PT's] response to [Spuds'] claims that the Boost Juice kiosk contravened the Restrictions was solely to state that they must be given a different interpretation, according to which they imposed no express or implied restriction on the height of any signage. 5. At about the same time, [PT] also approved the construction of the Telechoice kiosk near the Premises, in the context of granting a long lease. It did this even though this kiosk also contravened the 2002 Height Restrictions. 6. During 2005, [PT] issued the 2005 Height Restrictions, with which both of these kiosks were compliant. At about the same time, it approved the construction of the Love Salad kiosk near the Premises, in the context of granting a long lease. It did this even though this kiosk also contravened the 2002 Restrictions (though not those of 2005). 7. [PT] claimed that it could not require the removal of any of the three kiosks, giving as a reason its own conduct in granting long leases in relation to them. 8. [PT] also claimed that the substitution of the 2005 Height Restrictions for those of 2002 provided legitimate grounds for it to reject [Spuds'] complaints about all three kiosks. 9. Despite receiving complaints during the period between August 2002 and June 2004 about the obstruction to sightlines caused by kiosks, [PT] apparently took no steps, until July 2005 at the earliest, by way of providing rental or other financial assistance to [Spuds]. Instead, it insisted that it was entitled to the full amount of rent stipulated in the Lease and it subsequently instituted legal proceedings to recover this rent. 58The Appeal Panel noted (at [300]) that its formulation did not include the unproven allegation that Spuds relied on the 2002 Height Restrictions in deciding to enter into the Lease. It also observed (at [302]) that its formulation of Spuds' case extended beyond the particulars of Spuds' unconscionable conduct claim. However, the additional matters were either dealt with in submissions or were the subject of findings by the RLD. 59The Appeal Panel's "overall conclusion" (at [303]) was that the RLD did not take into account all relevant considerations and thus erred in law. The Appeal Panel considered (at [306]) that leave should be granted to Spuds for the appeal to extend to the merits of the unconscionability claim. This would be on the basis (at [307]) that the parties would not be permitted to adduce further evidence unless there were compelling reasons to do so.

Causation and damages 60The Appeal Panel considered (at [318]) that because the questions of causation and damages had received little attention by the RLD, the parties should be invited to make further submissions on these issues.

Orders 61The Appeal Panel's orders in the Leave Decision have already been reproduced (at [47(x)]).

Principal Decision 62The Appeal Panel recorded in the Principal Decision (at [20]) that its role in an appeal on the merits is to reach the correct and preferable decision on the material before it: ADT Act, s 115(1). The Principal Decision also recorded (at [21]) that Chesterman DP, in the Fresh Evidence Decision, had given leave to Spuds to adduce further evidence on financial matters, but had rejected PT's application to adduce further evidence from Mr Roberts.

Procedural Fairness 63The Appeal Panel rejected PT's submission that it would be a denial of procedural fairness to entertain an unconscionability claim based substantially on the existence and alleged breach of the 2002 Height Restrictions. The Appeal Panel's main reasons were as follows: 43 ... Mr Angyal, in addressing the [RLD] on 12 February 2010, did not at any stage argue that, to the extent that Mr Fernon invoked the existence and alleged contravention of the 2002 Height Restrictions as a component of [Spuds'] unconscionable conduct claim, he was putting forward a claim that [PT], due to lack of prior notice, was not in a position to meet. Mr Angyal's submissions dealt at some length, chiefly in the context of the section 34 claim, with the nature of these Restrictions and with the question whether the Respondent had in fact contravened them. He subsequently acknowledged ... that Particular (a) relating to the unconscionable conduct claim 'drags in the whole s 10 case and the whole s 34 case and everything else in fact, the refund of rent claim', except for the breach of covenant for quiet enjoyment. He raised no objection to [Spuds'] seeking to include in its case on unconscionable conduct the matters on which its section 34 claim was based, but sought merely to rebut this case on its merits. 44 In the light of these submissions by Mr Fernon, we are satisfied, subject to one qualification, that no denial of procedural fairness to [PT] will be caused by our taking account of [Spuds'] assertion that the existence of both the 2002 and the 2005 Height Restrictions and [PT's] contravention of the 2002 Restrictions were matters of relevance to its unconscionable conduct claim. It appears to us that Mr Angyal, having been put on notice at the Tribunal hearing that the Tribunal was being asked to take account of this assertion and having made no objection to this, should not now be permitted to claim that we, in the discharge of our duty under section 115 of the ADT Act to arrive at the 'correct and preferable' decision, should put the assertion to one side. 64The Appeal Panel qualified this position (at [46]) by indicating that it would not take account of any evidence suggesting unconscionable conduct by any specific person employed by PT unless the allegation had been put to that person at the RLD hearing and he or she had an opportunity to respond. The Appeal Panel also made it clear (at [48]) that if an allegation of bad faith could not be made against a particular person, such as Mr Roberts, it had to be assumed that he or she acted in good faith.

Estoppel 65The Appeal Panel next dealt with an argument which the RLD had apparently raised on its own initiative during argument and which, not surprisingly, Mr Angyal enthusiastically adopted. The principal bases of the estoppel case were:

• the failure of Mr Mimis to indicate in the Disclosure Statement that he was relying on a representation by PT that it would adhere to the 2002 Height Restrictions when approving the construction of kiosks; and
• Mr Sicouri's evidence that he would not have agreed to lease the Premises to Spuds had he known that Spuds believed that a representation had been made that people entering Level 4 from the car park entrance would have a direct and unobstructed view of Shop 417 or that Spuds intended to enter into the Lease in reliance on such a representation. 66The Appeal Panel rejected PT's estoppel argument, for three main reasons. First, Mr Sicouri's evidence misapprehended the representation relied upon by Spuds in its unconscionability claim (at [82]). It was not that Spuds would enjoy an unobstructed line of sight from the car park entrance to Shop 417, but that there would be no breach of the 2002 Height Restrictions causing an obstruction to the sightline. 67Secondly, the Appeal Panel did not accept that if Mr Sicouri had known that this was Spuds' position he would have refused to enter into the Lease. Spuds was merely expecting PT to adhere to its own guidelines. It was highly unlikely that Mr Sicouri would have regarded this as a basis for refusing to grant the Lease to Spuds. If PT did not want prospective tenants to rely on the sightline provisions of the Red Book, all PT had to do was omit the relevant clauses from the material distributed to them (at [85]). 68Thirdly, a prospective tenant could not sensibly be required to disclose that it relied on the lessor complying with its own guidelines that the lessor itself had disclosed in its Disclosure Statement (at [88]).

Unconscionable Conduct 69The Appeal Panel addressed seriatim each of the nine matters it identified in the Leave Decision as constituting Spuds' case (all of which, again not surprisingly, were adopted by Mr Fernon in his submissions to the Appeal Panel on behalf of Spuds).

1. PT had implicitly accepted responsibility for ensuring compliance with the 2002 Height Restrictions (at [148]). The Red Book was analogous to an "industry code" within the meaning of s 62B(3)(h) of the RL Act. The contents of the Red Book and PT's responsibility to ensure compliance with the guidelines were therefore relevant to the issue of unconscionability (at [151]).
2. Although the Appeal Panel had said in its Leave Decision that the 2002 Height Restrictions were ambiguous, it now expressed the view (at [155]) that: the term 'overhead elements', in its natural meaning, should not be taken to include any structure that is erected from the ground merely because it reaches a height above the head of a normal person. While the conflicting interpretation urged by Mr Roberts is not wholly ruled out by the terms of the Restrictions, it is, in our opinion, a distinctly strained and awkward interpretation.
3. The Appeal Panel found (at [159]-[160]) that the existence of the 2002 Height Restrictions and an "entirely understandable assumption" by Spuds that PT would insist on compliance were factors that Spuds took into account in entering the Lease, even though they were not "fundamental". Between 2002 and 2005, a "shop opening and design team" within PT was responsible for ensuring compliance with the 2002 Height Restrictions by incoming tenants (at [163]). This team, none of whom gave evidence, approved the design for the Boost Juice kiosk including the blade sign reaching a height of 2.8 metres. The surrender of the B-Zone kiosk lease was not executed until 30 October 2002. At any time before that date, PT, being aware of Spuds' concerns, could have required Boost Juice to adhere to the 2002 Height Restrictions or informed Mr Mimis of the contravention. But PT did neither of those things (at [164]). The Appeal Panel said (at [165]) that: there was undoubtedly a failure on [PT's] part, for reasons that have not been explained, to enforce the clause contained in the lease of six years' duration to Boost Juice Pty Ltd or to respond in any other way to the specific concern about the height of 'visual impairments' communicated by [Spuds], a neighbouring tenant. This failure occurred even though the clause, according to at least one employee of [PT] (Mr Papagiannis), was intended to 'give effect to' the Height Restrictions and the interpretation of them put forward by the Applicant accorded with the terms of the clause. PT's conduct amounted to a breach of a code in the sense previously explained (at [166]). Its failure to inform Spuds of the approval of the Boost Juice kiosk amounted to an unreasonable failure by a lessor to make disclosure of intended conduct that might affect the lessee's interests (s 62B(3)(i)(i)) (at [167]).
4. Mr Roberts was able to maintain in his letter of 28 May 2003 and thereafter that "no issue" arose with respect to the height of the menu boards at the kiosks because of PT's distinctly stronger bargaining position (s 62B(3)(a)) (at [171]).
5. and 6. The approval of the plans for the Telechoice kiosk between March and May 2003 and for the Love Salad kiosk in January 2005 amounted to a breach of a "code" promulgated by PT (at [176], [179]). A tenant such as Spuds could legitimately expect PT to comply with such a code.
6. The lengthy term of each of the kiosk leases had already been sufficiently taken into account and did not constitute an independent basis for a finding of unconscionability.
7. PT's position, as the evidence revealed, was that it had amended the 2002 Height Restrictions in 2005 as part of a fundamental change of policy and that it was entitled to reject the complaints of any existing tenant that a kiosk (current or to be constructed) contravened the superseded Restrictions. This approach, having regard to the history of the dealings between the parties, could properly be characterised as "unfair tactics" (s 62B(3)(d)) (at [186]).
8. On 27 November 2002, Mr Mimis rejected an offer by PT to permit Spuds to relocate its signage to a position above Shop 415. Ms Mimis-Weeks rejected a similar offer on 23 August 2005. Spuds' rejection of the first offer on the ground that it would have to pay the costs of relocation was "not commercially wise", because the relocation would have resulted in the sightlines from the car park entrance being substantially free of obstruction (at [193]). But Spuds had already spent a large sum on the new fit-out and signage. It therefore "could hardly be blamed" for thinking that PT, which had contravened its own 2002 Height Restrictions, should bear the cost. However, the Appeal Panel found (at [194]) that Spuds did not put forward any cogent reasons for not accepting the second offer. Thus the Appeal Panel agreed with the RLD's finding that the failure of the parties' negotiations relating to signage was "attributable to fault on both sides" (at [195]). This finding did not detract from a factor "of prime importance", namely that PT did not offer any rental or other financial assistance to Spuds, in spite of it complaining between August 2002 and June 2004 about the obstruction of sightlines (at [196]). PT's actions again demonstrated that it had a distinctly stronger bargaining position than Spuds (at [197]). The Appeal Panel rejected PT's submission that offers it made in 2006 to settle the dispute were directly relevant to Spuds' unconscionable conduct claim. The reason for this conclusion was that Spuds' unconscionable conduct claim, as formulated for the merits appeal, was based only on conduct between February 2002 and July 2005 (at [201]).

Finding on Unconscionability 70The Appeal Panel observed (at [203]) that it had accepted that in all but one of the nine matters on which Spuds had relied for its unconscionability claim, indicia of unconscionable conduct set out in s 62B(3) of the RL Act could be discerned. However, this of itself did not establish unconscionability (at [204]): An additional criterion must also be satisfied. The conduct in question must also be shown to involve a 'high degree of moral obloquy' and to be 'highly unethical' (to quote from the judgment of Spigelman CJ in Attorney General of New South Wales v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at [121]), or at least to involve 'some degree of moral tainting... that permits the opprobrium of unconscionability to characterise [it]' (to adopt the terminology of Allsop P in Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389 at [293]). An associated observation (in the same paragraph) by Allsop P about Spigelman CJ's use of the phrase 'a high degree of moral obloquy' may be noted: 'Whether that is too stringent and whether "significant" or "real" may be preferable need not be decided.' 71The Appeal Panel continued as follows: 205 We agree with Mr Fernon's submission that the conduct of [PT], a corporation, must be the focus of investigation, rather than the conduct of any individual employee or employees .... It follows ... that [PT] may be found to have used 'unfair' tactics (within the context of section 62B(3)(d)), or to have acted 'unreasonably' (within section 62B(3)(i)(i)), even though no finding of unfairness or unreasonableness is made against one or more of its employees. 206 In addition, we reject a broad submission by Mr Angyal to the effect that unless a finding of bad faith is made against a lessor, or the relevant employee of a corporate lessor, there can be no finding of unconscionable conduct against the lessor. He was not able to cite to us any statement to this effect by a court or a tribunal. This proposition appears to us to be at odds with the status of paragraph (k) of section 62B(3) - referring to 'the extent to which the lessor and the lessee acted in good faith' - as only one of the indicia of unconscionable conduct. We have not in fact made a finding of lack of good faith against [PT], let alone against any of its employees. 207 Nevertheless, we have reached the conclusion, having regard to the foregoing matters, that between February 2002 and July 2005 various aspects of the conduct of [PT] with regard to the 2002 Height Restrictions were unconscionable vis-à-vis [Spuds]. [PT], through a number of its employees, engaged in a course of conduct whereby, after disseminating these Restrictions as part of a 'code' for the Centre, it made use of its superior bargaining power to block any attempt by [Spuds] to obtain acknowledgement of their true impact, approved without notification to [Spuds] the erection of three kiosks infringing them, sought to justify each approval by subsequently amending the Restrictions in a radical manner and refused to grant any continuing rent relief on account of the impact of the three kiosks on [Spuds'] business. On these grounds, [PT's] behaviour, in our judgment, was 'highly unethical' and had a sufficient 'degree of moral tainting' to permit 'the opprobrium of unconscionability to characterise it'.

Causation 72The Appeal Panel recorded (at [213]) that Spuds' revised summary of its heads of damages claimed loss of gross profits from lost trade and/or the lost value of its business. The first head was said to involve losses exceeding $400,000 (the RLD's jurisdictional limit) and the second head was quantified at $250,000. The Appeal Panel also recorded (at [218]) that the parties were at odds as to whether Spuds had established any causal link between PT's conduct and the economic harm Spuds claimed to have suffered. 73The Appeal Panel found (at [221]), contrary to the RLD's finding, that: on the balance of probabilities, the conduct of [PT] that we have held to be unconscionable did cause [Spuds] to sustain some measure of economic loss through making the signage at the front of the Premises less visible to potential customers approaching from the car park entrance and thereby reducing to some extent the amount of [Spuds'] gross takings. 74The Appeal Panel accepted (at [223]) PT's submission that it should not assess the pecuniary impact of any interference with sightlines caused by the kiosks by comparing the actual situation, with the kiosks in place, with the hypothetical situation that would have occurred had there been no structures whatsoever interfering with the sightlines. It was appropriate to treat the interference (if any) caused by the sign above the B-Zone kiosk as the starting point for the relevant comparison (at [224]). This was because Spuds, when entering the Lease, must be taken to have accepted the consequences of any interference to sightlines caused by the B-Zone kiosk. 75The Appeal Panel rejected (at [224]) PT's submission that the appropriate comparison was with "a hypothetical suspended sign or signs". This submission was "both impractical and at odds with the true situation between the parties". Accordingly, the question of causation was to be answered (at [226]): by determining whether, on the balance of probabilities, there was any material difference at all, adverse to [Spuds], between: (a) The pecuniary impact (if any) on its business of the obstruction to sight lines (if any) caused by the blade sign on the Boost Juice kiosk and the components of the Telechoice and Love Salad kiosks that infringed the 2002 Height Restrictions; and (b) The pecuniary impact (if any) on its business of the obstruction to sight lines (if any) that was caused by the sign suspended above the B-Zone kiosk. 76The Appeal Panel answered this question in the affirmative. It relied on the evidence of three of PT's witnesses - Mr Stevens, Mr Terrill and Ms Radosevic - all of whom acknowledged the importance to a tenant of a reduction in the sightlines to the shop. Ms Radosevic had acknowledged (at [231]) that the Telechoice blade sign, in particular, had made the sightlines to the Premises considerably worse than the position when the B-Zone kiosk was in place.

Assessment of Damages 77The Appeal Panel observed (at [236]) that it had found the assessment of damages the "most difficult" of the tasks confronting it, partly because the parties' submissions had not been particularly helpful. Perhaps for this reason, the Appeal Panel unfortunately decided (at [237]) that it should adopt a methodology that, as it acknowledged, had received no significant attention by the parties. 78The Appeal Panel's methodology was "directed solely at reducing the amount of rent and interest payable by [Spuds] to [PT]" (at [264]). It found (at [270]) that the "premium quality" of the Premises was reflected by a component of the rent designated in evidence as the "surplus" amount of $28,500 per annum. It also found (at [276]), doing the best it could, that an offer by PT to surrender 50 per cent of the so-called surplus during the period following construction of the Boost Juice kiosk "would have been sufficient to ward off any finding of unconscionable conduct". On that basis, the damages to which Spuds was entitled amounted to $76,000 (being $14,250 per annum multiplied by the actual term of the Lease, namely 5.33 years). 79In the course of its reasons, the Appeal Panel made findings relating to the damages claimed by Spuds. It found (at [241]) that: For three reasons in particular, however, we believe that the evidence relating to [Spuds'] financial performance at the Premises since the commencement of the Lease fell significantly short of what was needed to quantify any loss of profits caused by [PT's] unconscionable conduct. This evidence did not establish either (i) that the diminution in these profits during [Spuds'] occupation of the Premises was wholly attributable to this conduct of [PT] (as Mr Fernon argued) or (ii) that this conduct had no impact at all on [Spuds'] profits (as Mr Angyal argued) or (iii) most importantly, what proportion of the decline in profitability should be held attributable to this conduct. (Emphasis in original.) 80The Appeal Panel relied (at [244]) on what it said was the unchallenged expert evidence of Mr Bell, one of PT's expert witnesses, who had testified that the downward trend in Spuds' sales did not occur immediately after or even within a few months of the erection of any of the kiosks. The evidence did not suggest any correlation in time between the erection of a kiosk and a decline in turnover (at [246]). The Appeal Panel also could not discount "the possibility" that Spuds' decision in April 2004 to cease selling two prominent brands of surfwear (Billabong and Mambo) from the Premises contributed to the pronounced decline in turnover commencing in about July 2004 (at [252]). 81The Appeal Panel concluded (at [256]) on this aspect of the case as follows: Our overall assessment, however, of the evidence and submissions on which [Spuds] relied is, as we have already stated, that it has failed to establish either that the substantial decline in its turnover and profitability following construction of the Boost Juice kiosk was wholly attributable to the conduct of [PT] that we have held to be unconscionable or, most importantly, what proportion of this decline, even in broad terms, can properly be held to have been caused by this conduct. Although, in a passage from [Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64, at 83], it has been held that when evidence as [to] the amount of alleged lost profit is inconclusive, a court or tribunal may have to engage in 'guess work rather than estimation', the range of possibilities left open by the evidence is too wide to permit us simply to 'guess at' a figure. (Emphasis in original.)

Appeal Panel's Orders 82The Appeal Panel ordered PT to pay Spuds $97,535.72, being $76,000 in damages plus interest. As I have noted (at [47(xiv)]), in the Costs Decision, the Appeal Panel decided that PT's liability to pay damages to Spuds was to take effect by way of set off against Spuds' liability to pay PT a total of $420,345.01 pursuant to the RLD Decision.

Issues on the Appeal 83The appeal to this Court generated a great deal of paper and lengthy submissions. I have already noted that PT's notice of appeal identified nineteen appeal grounds, some of which (as was pointed out to Mr Angyal) could hardly be said to raise a question of law. Furthermore, PT's written submissions incorporated a document setting out PT's challenges to findings of fact made by the Appeal Panel. This is not a document one ordinarily expects to find in an appeal limited to questions of law and the point of the document remained unclear. Spuds' submissions in its cross-appeal were also not confined to questions of law. 84The Court asked counsel at the outset of the hearing to direct their attention to whether all of the many grounds of appeal and cross-appeal genuinely raised questions of law, as distinct from canvassing the merits of the Principal Decision. This request did not lead to the abandonment of any grounds of appeal or cross-appeal, although some were given little or no support in oral argument. It did, however, prompt Mr Angyal to identify four principal submissions on which he relied on PT's behalf, each of which was said to involve a question of law. It also prompted him, on the third day of the hearing in this Court (the appeal originally having been listed for two days), to produce a document which he said identified the question of law raised by each ground of appeal. This document, on the contrary, demonstrated that some of the grounds of appeal and the submissions made in support of them were essentially challenges to the Appeal Panel's findings of fact. 85The parties were in agreement on one important matter. They agreed that the Appeal Panel had failed to observe the rules of natural justice by adopting in the Principal Decision a measure of damages which was not propounded by Spuds and which had not been the subject of argument. 86In the light of this agreed position, counsel were asked to consider whether this Court has power to make findings of fact in order to reassess damages, should the Appeal Panel's finding of unconscionable conduct not be disturbed. It was pointed out that this Court has adhered to a consistent line of authority to the effect that, where an appeal is limited to questions of law, legal error in the decision appealed from does not authorise the appellate court to make findings of fact for the purpose of determining what orders should be made: Brennan v New South Wales Land and Housing Corporation [2011] NSWCA 298; 83 NSWLR 23, at [123], per Handley AJA, and cases cited there. (A different view was expressed, obiter, by French CJ in Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390, at [30], but unless and until the line of authority in this Court is overruled, it represents the position in New South Wales.) 87Both counsel accepted that the Court was constrained in its power to deal with the question of damages. This led in oral argument to modification of the parties' written submissions, some of which appear to have been prepared on the assumption that the Court has power on an appeal under s 119(1) of the ADT Act to make findings of fact. Nonetheless, some of the arguments on the cross-appeal were also essentially challenges to factual findings or invitations to this Court to make its own factual findings.

Issues on the Appeal 88Mr Angyal summarised PT's four principal submissions as follows:

• First, Spuds succeeded on its unconscionability claim on the basis of a reformulation of that claim by the Appeal Panel in the Leave Decision. According to Mr Angyal, the reformulation went beyond Spuds' particulars and therefore the Appeal Panel, by giving leave to Spuds to pursue the reformulated claims, denied PT procedural fairness (or natural justice). In any event, the Appeal Panel denied PT procedural fairness by rejecting PT's application to adduce fresh evidence from Mr Roberts.
• Secondly, the Appeal Panel erred by creating a form of unconscionable conduct not known to the law, which Mr Angyal characterised as "innocent unconscionable conduct". Mr Angyal submitted that a finding of unconscionability requires "moral obloquy", and consequently must be assessed by reference to the state of mind of the relevant party. It was not open to the Appeal Panel to find that PT had engaged in unconscionable conduct, when the Appeal Panel had made no finding that any of PT's officers had acted in bad faith, or with wilful blindness.
• Thirdly, in any event, it was not open to the Appeal Panel to find that PT had engaged in unconscionable conduct. The Appeal Panel accepted that Mr Roberts acted in good faith and found that his interpretation of the guidelines relating to the height of structures permitted at a kiosk, although incorrect, was not wholly untenable. In these circumstances, the relevant decision-maker of PT had not only acted in good faith, but had acted on a plausible interpretation of PT's guidelines. This conduct fell short of the moral obloquy required for a finding of unconscionable conduct.
• Fourthly, there was no evidence that PT's conduct caused Spuds to sustain loss or damage. Even if PT had acted unconscionably, Mr Angyal contended that the Appeal Panel was obliged to compare the consequences to Spuds of PT's actual (unconscionable) conduct (permitting vertical signs from the ground up) with the consequences that would have ensued had PT not engaged in unconscionable conduct. The proper comparison, so Mr Angyal argued, was between the actual position and what would have happened if horizontal signs had been suspended from the ceiling above the kiosks (this being permitted by the Red Book). Instead, the Appeal Panel had used as the comparator the degree of obstruction to the relevant sightlines that would have been caused had the B-Zone kiosk remained in place. 89Mr Angyal also repeated the estoppel argument that had been put to (and rejected by) the Appeal Panel. I refer to a number of his other submissions later in the judgment.

Issues on the Cross-Appeal 90The principal ground of Spuds' cross-appeal was that, once the Appeal Panel had found (as it did) that PT's unconscionable conduct had caused some diminution in Spuds' profits, the onus shifted to PT to prove the extent to which Spuds' lost profits were due to causes other than PT's own conduct. In other words, once Spuds had proved a causal link between the loss claimed by it and PT's unconscionable conduct, the onus was on PT to disprove that the whole of the loss was caused by its own conduct. Thus, insofar as PT contended that Spuds' loss of profits was due to general business conditions or the impact of no longer stocking certain brands, the onus was on PT to "disentangle" the various causes. It was not for Spuds to prove the precise extent to which its loss of profits was attributable to PT's unconscionable conduct. 91The Appeal Panel found (at [241]) that the evidence fell short of establishing what proportion of Spuds' decline in profitability was attributable to PT's unconscionable conduct, specifically the conduct resulting in additional interference to the sightlines to the Premises. Spuds submitted that, since the Appeal Panel could not make a finding as to the extent to which the loss of profits was attributable to PT's conduct, the Panel should have concluded that Spuds was entitled to damages for the whole of its lost profits.

PT's Challenge to the Finding of Unconscionability 92It is convenient to commence with PT's challenge to the Appeal Panel's finding that it had engaged in unconscionable conduct.

The Concept 93The concept of unconscionability falls for consideration in a variety of contexts. As was said by Gummow and Hayne JJ in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; 214 CLR 51, at [42]: The term "unconscionable" is used as a description of various grounds of equitable intervention to refuse enforcement of or to set aside transactions which offend equity and good conscience. The term is used across a broad range of the equity jurisdiction. 94In the same case, Gleeson CJ pointed out (at [7]) that under the general or unwritten law, unconscionability is a legal term, not a colloquial expression. The recent case of Kakavas v Crown Melbourne Limited [2013] HCA 25; 298 ALR 35, emphasised that a plaintiff who invokes the "conscience of equity" is relying on a juridical and not a personal conscience: at [15], per curiam, citing Pomeroy's Treatise on Equity Jurisprudence (5th ed (1941), vol 1, at 74). Thus the intervention of equity on the ground of unconscionability must be consistent with established principle. In Kakavas itself, the plaintiff (an allegedly compulsive gambler) who claimed that the defendant (a casino) had unconscionably exploited his weakness for gambling, could not rely on the doctrine of constructive notice to establish that the defendant was aware that he may have laboured under a special disadvantage. If the defendant was to be deprived of its bargain (from which both sides stood to gain or lose) on the ground of unfair exploitation of the plaintiff's weakness, proof of a "predatory state of mind" was required (at [161]). 95The concept of unconscionable conduct is now frequently incorporated in legislation. Section 51AA(1) of the Trade Practices Act 1974 (Cth) ("TP Act"), for example, which was invoked in both Berbatis and Kakavas, provided that a corporation must not, in trade or commerce, engage in conduct that is "unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories" (Section 51AA(1) has now been replaced by s 20(1) of the Australian Consumer Law, which is in similar terms, but omits the reference to the States and Territories). The effect of s 51AA(1) was to incorporate the principles of law and equity expounded from time to time in decisions respecting the common law of Australia: Berbatis, at [38], per Gummow and Hayne JJ. The section did not modify those principles. 96Certain legislation, of which s 62B of the RL Act is an example, prohibits persons from engaging in unconscionable conduct, but sets out at length the criteria to which the court or tribunal may have regard in determining whether the conduct is, in all the circumstances, unconscionable. Section 62B(3) (reproduced at [14] above) specifies eleven criteria that may be taken into account in determining whether a lessor has engaged in unconscionable conduct in connection with a retail shop lease. 97The structure of s 62B of the RL Act is not novel. The criteria stated in s 62B(3) are taken verbatim, subject only to essential linguistic modifications, from s 51AC(3) of the TP Act (now ss 21 and 22 of the Australian Consumer Law), which prohibited a person from engaging in unconscionable conduct in connection with the supply of goods or services for business purposes. (The origins of s 62B of the RL Act and its relationship to the provisions of the TP Act are explained by Spigelman CJ in Attorney General of New South Wales v World Best Holdings Limited [2005] NSWCA 261; 63 NSWLR 557, at [18]-[22], [110]-[113]. His Honour also sets out extracts from the second reading speech for the Retail Leases Amendment Act 1998, which introduced s 62B into the RL Act.) 98Other legislation incorporates a briefer list of criteria to be taken into account in determining whether a person's conduct has been unconscionable. Section 51AB(2) of the TP Act (now subsumed within s 21 of the Australian Consumer Law) identified only five criteria, drawn from the first five of the eleven criteria set out in s 51AC(3) of the TP Act, that could be taken into account in determining whether a supplier of goods and services had engaged in unconscionable conduct. Since s 51AB was concerned with unconscionable conduct in relation to consumer transactions, a more extensive list was apparently considered to be unnecessary (although s 51AB(2) expressly provided that the stated criteria were not to limit the matters to which the court could have regard). Legislation in this form (Fair Trading Act 1999 (Vic), ss 7, 8) was considered by the Victorian Court of Appeal in Director of Consumer Affairs Victoria v Scully & Anor [2013] VSCA 292; 303 ALR 168. 99in A-G v World Best Holdings, Spigelman CJ (at [121]) distinguished "what is unconscionable from what is merely unfair or unjust". His Honour suggested, obiter, that even if the concept of unconscionability in s 62B of the RL Act is not confined by equitable doctrine (as the cases suggest): restraint in decision-making remains appropriate. Unconscionability is a concept which requires a high level of moral obloquy. 100This language has influenced the approach taken in some later decisions: see, for example, Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196; 34 VR 536, at [90]-[91], [96], per Macaulay AJA (with whom Harper and Hansen JJA agreed); Violet Homes Loans Pty Ltd v Schmidt [2013] VSCA 56; 300 ALR 770, at [58], per curiam; Canon Australia Pty Ltd v Patton [2007] NSWCA 246; 244 ALR 759, at [41]-[43], per Campbell JA (with whom Harrison J agreed). 101Two comments should be made about Spigelman CJ's observation. First, as Santamaria JA (with whom Neave and Osborn JJA agreed) pointed out in Director v Scully, at [45], explanatory phrases used to elucidate the meaning of a statutory provision cannot substitute for the statutory language. The task of statutory construction must focus on the text of the statute. The text of s 62B includes the criteria in sub-section (3). It is clear enough that a number of these criteria do not necessarily involve dishonesty, sharp practice or conscious wrongdoing by the lessor: see, for example, s 62B(3)(a), (b), (c), (e), (f), (g), (h), (j). 102A second but related observation is that made by Basten JA in Canon Australia v Patton, a case that was concerned with s 51AC of the TP Act. Basten JA said (at [4]): Whether reference to the range of factors will give rise to some different concept of unconscionability from that established under the general law will then be a matter of statutory construction. However, to treat the word "unconscionable" as having some larger meaning, derived from ordinary language, and then to seek to confine it by such concepts as high moral obloquy is to risk substituting for the statutory term language of no greater precision in an attempt to impose limits without which the court may wander from well-trodden paths without clear criteria or guidance. That approach should not be adopted unless the statute clearly so requires. (Most of this passage was cited with approval in Director v Scully, at [45].) 103Basten JA's observation has particular force when one appreciates that the expression "moral obloquy" is itself ambiguous. The principal meanings of the word "obloquy" are "the discredit or disgrace resulting from public blame or revilement" (Macquarie Dictionary) or "verbal abuse directed against a person; detraction, calumny, slander" (Oxford English Dictionary). These meanings do not necessarily imply that the discredit or abuse is well-deserved. Perhaps more importantly, they do not necessarily indicate that the "discredit" or "detraction" flows from dishonesty, sharp practice or conscious wrongdoing. The addition of the word "moral" to produce a compound phrase suggests conduct that is worthy of discredit or detraction, if not disgrace. But the compound expression does not necessarily provide any clearer guidance to the resolution of a particular case than the word "unconscionable" itself. 104Conduct involving dishonesty, sharp practice or conscious wrongdoing is no doubt unconscionable and, equally, is clearly deserving of discredit or detraction. Other less heinous conduct may be more difficult to characterise. For example, the refusal by a large corporation to honour a public (but non-binding) promise made in good faith to a local community by the corporation's previous management may not involve dishonesty or conscious wrongdoing, but might still be regarded as unconscionable or deserving of discredit or detraction. It is doubtful whether substituting a test of "a high level of moral obloquy" for the standard of "unconscionability" assists in determining whether the statutory prohibition has been contravened. 105Perhaps for these reasons, in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699, Allsop P (with whom Bathurst CJ and Campbell JA agreed) suggested (at [293]) that Spigelman CJ in A-G v World Best Holdings may have stated a "too stringent" test, although Allsop P left the issue open. His Honour said that: What is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party. In a subsequent case, the Full Federal Court (Allsop CJ, Jacobson and Gordon JJ) said that the word "unconscionability" means "something not done in good conscience" or "conduct against conscience by reference to the norms of [the] society that is in question": Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90, at [41]. The formulations in Tonto v Tavares and Lux Distributors have the advantage of adhering closely to the statutory language. 106The difficulty of imposing a definitive constraint on the meaning of "unconscionability" is illustrated by other comments made by Allsop P in Tonto v Tavares, at [291]: Aspects of the content of the word "unconscionable" include the following: the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably: Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557; [2005] NSWCA 261, at [121]; the conduct must be irreconcilable with what is right or reasonable: Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132; [2005] FCAFC 226, at [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301; [2002] FCA 62, at [44]; Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262; factors similar to those that are relevant to the [Contracts Review Act 1980] are relevant: Spina v Permanent Custodians Ltd (2009) 14 BPR 26,923; [2009] NSWCA 206, at [124]; the concept of unconscionable in this context is wider than the general law and the provisions are intended to build on and not be constrained by cases at general law and equity: National Exchange at [30]; the statutory provisions focus on the conduct of the person said to have acted unconscionably: National Exchange at [44]. It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances. (Emphasis added.) (Tonto v Tavares involved ss 12CB and 12CC of Australian Securities and Investments Commission Act 2001 (Cth). The text of ss 12CB and 12CC was borrowed from s 51AC of the TP Act.)

Was a Finding of Impropriety Against Individuals Required? 107Mr Angyal was unable to point to any authority which holds that a finding of unconscionable conduct cannot be made against a corporation unless the Court also makes a finding that one or more officers of the corporation have acted in bad faith or have engaged in conscious wrongdoing. The absence of any such authority is not surprising. Under s 62B(1) of the RL Act it is the lessor that must not engage in unconscionable conduct. If the lessor is a corporation, that means that it is the corporation that must not act unconscionably; the statutory prohibition is not directed to officers or employees of the corporation. No doubt the conduct of individual employees of the corporation may be very important, especially if they have acted with deliberate impropriety. But there is no reason for the statutory language to be read as implying a qualification that is not expressed, namely that at least one officer must be found to have acted in bad faith or to have engaged in conscious wrongdoing. This is particularly so when the legislation expressly permits the decision maker to take into account a wide range of factors, many of which do not necessarily involve dishonesty or conscious wrongdoing by anyone (including the corporation itself). 108It can be readily accepted that there is a distinction between conduct that merely causes unfairness or loss to another party and conduct that is capable of being characterised as unconscionable: Kakavas v Crown Melbourne, at [19]; Director v Scully, at [39]. Even so, a corporate lessor may well conduct itself in a manner that is capable of being characterised in this way without any individual officer or employee of the corporation acting dishonestly or engaging in conscious wrongdoing. It follows that a decision-maker, considering the conduct of the corporation as a whole, might properly conclude that it has acted unconscionably having regard to the criteria in s 62B(3) of the RL Act and any other relevant circumstances, despite no particular officer or employee having acted with deliberate impropriety. 109The point can be illustrated by an example. Suppose that officers of a corporate lessor discuss with its tenants plans for upgrading the centre of which the leasehold premises form part. One of the tenants, acting on the basis of these discussions and a misinterpretation of a poorly drafted document issued by the lessor, commits itself to substantial expenditure in the expectation that the upgraded premises will attract more customers. The lessor inadvertently omits to tell its tenant that the plans cannot be implemented without the lessor receiving finance from its bankers. However, the lessor does tell other tenants of the finance requirement. As events transpire, finance is available, but at a cost which the lessor's head office considers to be unjustifiable. Head office overrules the plans of local management and the lessor does not proceed with them. Head office also refuses to compensate the tenant for the expenditure to which it has committed itself. The tenant acts in complete good faith. All of this might happen without any conscious impropriety on the part of any of the lessor's officers or employees. Indeed, all of them may act quite honestly in what they regard as the legitimate interests of the lessor. Yet when the circumstances as a whole are considered, in particular the matters identified in s 62B(3)(a), (c), (f), (i) and (k), a decision maker may well conclude that the lessor's conduct, to use the language of Allsop P in Tonto v Tavares, at [293], justifies the opprobrium of unconscionability being attached to it. 110In Director v Scully, Santamaria JA observed (at [49]) that: it is a noticeable feature of all the cases, thus far, in which conduct has been held to be 'unconscionable' that the conduct has been found to be unethical in some manner or other. While that may be so, a corporation can engage in what a reasonable observer might properly regard as unethical behaviour even though no individual officer or employee acts with conscious impropriety. Moral obtuseness can be one reason, but there may be many others, such as sheer inefficiency, discontinuity in decision-making or internal disagreements resulting in "collateral damage" to third parties. The ethical quality of a corporation's behaviour must be assessed by reference to the actions of the corporation itself. The honesty or good faith of the corporation's officers or employees is but one element in determining whether the corporation has engaged in unconscionable conduct. 111The Appeal Panel was correct to reject PT's submission that no finding of unconscionability could be made pursuant to s 62B(3) of the RL Act without a finding that at least one individual officer or employee of PT had acted in bad faith or had engaged in conscious wrongdoing.

Did the Finding of Unconscionability Involve an Error of Law? 112In determining whether conduct is unconscionable within the meaning of s 62B(1) of the RL Act, several steps are ordinarily necessary. First, the correct principles of law governing a decision as to whether conduct is unconscionable must be stated. Secondly, the court must find the primary facts on the basis of which the court makes its determination as to whether the impugned conduct was unconscionable. Thirdly, the court must decide whether, on the facts as found, the conduct should be characterised as unconscionable. 113A failure to state and apply the correct principles of law constitutes an error of law. On an appeal limited to questions of law the appellate court can correct an error of this kind. 114The position is different with findings of primary fact. Ordinarily, a challenge to such findings gives rise only to questions of fact and does not involve a question of law. There are, however, qualifications to this proposition. For example, a contention that there was no evidence to support an important finding of primary fact raises a question of law: Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321, at 355, per Mason CJ (with whom Brennan, Toohey and Gaudron JJ agreed); Kostas v HIA Insurance Services, at [33], per French CJ. 115The determination by a court or tribunal, on the basis of findings of primary fact, that conduct is or is not unconscionable involves a "broadly based value judgment": Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41; 14 BPR 26,639, at [40]; Tonto v Tavares, at [293]; ACCC v Berbatis, at [167], per Callinan J. The task confronting the court was described by Allsop CJ in ACCC v Lux Distributors, at [23], as: the evaluation of the facts by reference to a normative standard of conscience. That normative standard is permeated with accepted and acceptable community values. ... Values, norms and community expectations can develop and change over time. 116The evaluative determination of whether the facts warrant characterising the impugned conduct as unconscionable is a question of fact: Singer v Berghouse [1994] HCA 40; 181 CLR 201, at 210-211, per Mason CJ, Deane and McHugh JJ (addressing the evaluative term "adequate"); Perpetual v Khoshaba, at [40] ("unjust"); ACCC v Berbatis, at [82]-[83], per Kirby J (dissenting, but not on this point).

The Appeal Panel's Statement of Principle 117I have already rejected Mr Angyal's submission that the Appeal Panel erred in law by making a finding of unconscionability against PT without finding that any officers of PT had engaged in conscious wrongdoing or acted in bad faith. Because Mr Angyal's submissions did not clearly distinguish between questions of law and fact, it is not entirely clear whether he contended that the Appeal Panel otherwise misstated the principles governing a determination of unconscionability. If he did intend to make that submission, I reject it. 118The Appeal Panel discussed (at [96]-[102] of the Principal Decision) the authorities at some length. By reference to the judgment of Spigelman CJ in A-G v World Best Holdings and Allsop P in Tonto v Tavares, the Appeal Panel accepted (at [204], reproduced at [70] above) that the conduct in question (which it took to be that of the corporation, rather than any individual employee) had to be shown to involve a "high degree of moral obloquy" or at least to involve "some degree of moral tainting ... that permits the opprobrium of unconscionability to characterise [it]". This was essentially the proposition for which Mr Angyal contended, both before the Appeal Panel and in this Court. PT can have no legitimate complaint about the Appeal Panel's formulation of the governing principle. Moreover, the Appeal Panel framed the ultimate conclusion (at [207], reproduced at [71] above) by reference to the principles it had articulated earlier. 119The Appeal Panel quoted (at [92]) s 62B(3) of the RL Act. It paid careful attention to the sub-paragraphs it considered to be particularly relevant: see, for example, at [149]-[151], [166] (sub-para (h)); [157]-[158], [167], [176], [179] (sub paras (c), (i)(i)); [170]-[171], [188], [197] (sub para (a); [202] (sub para (k)). Mr Angyal made no submission that the Appeal Panel misconstrued the statutory criteria, for example by regarding some or all of the criteria as an exhaustive set of factors by which to test the impugned conduct or regarding one particular criterion as determinative on the issue of unconscionability: cf Director v Scully, at [42]-[44]. 120Mr Angyal did submit that the Appeal Panel misconstrued s 62B(3)(g) and (h) of the RL Act (which allows the RLD to take into account the requirements of any applicable industry code or the requirements of any other industry code if the lessee acts in the reasonable belief that the lessor will comply with the code). The argument seemed to be that the 2002 Height Restrictions were not even "loosely analogous" to an industry code (as the Appeal Panel found) and thus s 62B(3)(g) and (h) did not authorise the Appeal Panel to take the Restrictions into account. The submission misunderstood the Appeal Panel's reasoning. It recognised that the 2002 Height Restrictions were not an "industry code" for the purposes of s 62B(3). However, the Appeal Panel correctly acted on the bases that s 62B(3) permits the ADT to take into account eleven specific matters, but does so "[w]ithout in any way limiting the matters to which the [ADT] may have regard". 121The Appeal Panel made a finding, clearly open to it on the evidence, that the terms of the Restrictions and PT's approach to compliance with the Restrictions were relevant to - indeed at the heart of - Spuds' claim that PT had engaged in unconscionable conduct. In doing so, the Appeal Panel did not depart from the language of s 62B(1) and (3) of the RL Act.

Findings of Primary Fact 122As I have noted, PT filed a "Statement Raising Substantial Challenges to Findings of Fact". None of the matters addressed in this document involved (or was said to involve) a question of law. This was pointed out to Mr Angyal on more than one occasion. Mr Angyal's response was to reformulate some of the arguments as "no evidence" submissions. For the most part, the reformulations amounted to no more than assertions that the findings were unsupported by evidence. When the submissions were bolstered by references to the evidence before the Appeal Panel, they proved to have little substance. One example will suffice. 123In his oral argument in opposition to Spuds' cross-appeal, Mr Angyal developed a written submission that the Appeal Panel erred in finding (at [270]) that the erection of the three kiosks interfered with the sightlines from the car park to the Premises to a greater extent than the interference previously caused by the B-Zone kiosk. Although PT's written submissions did not assert that there was no evidence to support the Appeal Panel's finding, in his oral argument Mr Angyal did make that submission. 124The argument is untenable. As the Court pointed out to Mr Angyal, the Appeal Panel expressly relied, among other evidence, on concessions made by Ms Radosevic, an "architectural draftsperson" called by PT as an expert on sightlines. Ms Radosevic prepared computerised drawings intended to demonstrate the limited extent of the interference to the sightlines between the car park and the Premises caused by the erection of the three kiosks and the blade signs in particular. 125In Ms Radosevic's cross-examination, the transcript of which was before the Appeal Panel, she accepted that she had made several significant errors in preparing the drawings. More importantly, as the Appeal Panel recorded (Leave Decision, at [231], [232]), she concluded that the erection of the three kiosks had made the position concerning sightlines considerably worse than had been the case when only the B-Zone kiosk was in place. Her concessions, even without regard to other evidence cited by the Appeal Panel (of which there was a good deal), show that its finding was supported by evidence. The Appeal Panel's finding did not involve any error of law.

The Evaluative Judgment on Unconscionability 126Because the appeal to this Court is confined to questions of law, it is not open to PT to submit that the Appeal Panel should have made a different evaluative judgment on the question of unconscionability. That would not demonstrate an error of law. As Mr Angyal ultimately accepted, to show that the Appeal Panel erred in law PT must establish that it was not open to the Appeal Panel to conclude, on the basis of its factual findings, that PT had engaged in unconscionable conduct. 127As I have noted, the Appeal Panel accepted that there could be no finding of unconscionable conduct unless PT's actions amounted to "highly unethical" conduct or had a sufficient degree of "moral tainting" to permit the opprobrium of unconscionability to attach to PT's conduct. I have recorded (at [70]-[71]) the reasons the Appeal Panel gave for concluding that that test had been satisfied. 128In my view, whether or not this Court would have reached the same conclusion, on the evidence it was clearly open to the Appeal Panel to characterise PT's conduct as it did. The findings that are particularly significant are these:

• PT accepted responsibility for ensuring that kiosks complied with the 2002 Height Restrictions.
• It was entirely understandable that Spuds assumed that PT would do exactly that. Moreover, Spuds made its position clear at an early stage.
• The 2002 Height Restrictions, despite Mr Roberts' interpretation to the contrary, quite clearly prevented the erection of kiosks incorporating the blade signs that were erected in each of the kiosks. Spuds understood the 2002 Height Restrictions in accordance with their plain language.
• PT not only did not insist on compliance with the 2002 Height Restrictions, it took no steps to enforce cl 29 of the Boost Juice Lease (and the equivalent clauses in the other kiosk leases) which would have solved Spuds' sightline difficulties. The failure to enforce the unequivocal provision in each lease was unexplained, despite PT's Director of Leasing conceding in evidence that cl 29 was intended to give effect to the 2002 Height Restrictions. (Although the Appeal Panel did not place particular emphasis on this concession, it demonstrates that Mr Roberts' interpretation of the 2002 Height Restrictions was not universally held within PT.)
• PT used its superior bargaining power to adopt an uncompromising position in its negotiations with Spuds concerning removing sightline interference cased by the kiosks.
• PT, having failed to enforce either the 2002 Height Restrictions in accordance with their plain meaning or the corresponding clauses in each of the kiosk leases, decided in 2005 simply to change course, and promulgated new guidelines. It did so in spite of the complaints by an existing tenant. The Appeal Panel characterised this conduct as "unfair tactics"; "high handed" would also be an appropriate description. 129In the light of these findings and the statutory criteria to which the Appeal Panel quite properly had regard, it was entitled to conclude (using its own language) that PT acted in an unethical way and that its conduct involved some degree of "moral tainting" deserving of the opprobrium of unconscionability. In essence, on the Appeal Panel's findings, this was a case of a powerful lessor using its superior bargaining power and unfair tactics to override the legitimate expectations held by a tenant as a consequence of the lessor's own actions. Other decision makers might have given more weight to countervailing factors, such as PT's offer to allow Spuds to relocate its signage. But this possibility does not involve any error of law. 130I should add that a persistent theme in Mr Angyal's argument on the issue of unconscionability was that Mr Roberts genuinely (albeit mistakenly) interpreted the 2002 Height Restrictions as permitting the kiosks to be constructed with the blade signs in place. For the reasons I have given, the fact that Mr Roberts held this belief and acted in good faith (as the Appeal Panel assumed) is not inconsistent with a finding that PT, having regard to all the circumstances, engaged in unconscionable conduct.

The Temporal Limitation 131PT complained that the Appeal Panel had not taken into account a number of matters that arose after 2005. These were said to bear on the issue of whether Spuds had acted in good faith. Some of these matters appear to be of no relevance whatsoever to any issue between the parties, such as an allegation that Spuds had illegally tape-recorded a conversation with a potential purchaser in 2009. Others related to negotiations between PT and Spuds that failed to produce any agreement. 132The Appeal Panel considered (Principal Decision, at [201]) that evidence, for example, of offers made by PT after 2005 to settle the dispute was not directly relevant to Spuds' unconscionable conduct claim because, as formulated for the purposes of the merits hearing, the claim was based only on PT's conduct between 2002 and 2005. Accordingly, the evidence was material only insofar as it cast light on the parties' relationship during the relevant period. Similarly, evidence of improper conduct by Ms Mimis-Weeks after 2005 was relevant only to the limited extent that it shed light on the parties' conduct and relationship during the period 2002 to 2005. 133As Mr Fernon pointed out, the Appeal Panel's ruling was a consequence of the temporal limitation imposed on the scope of the merits review by the Leave Decision. One consequence of that temporal limitation was that the Appeal Panel substantially disregarded allegations made by Spuds about PT's conduct after 2005. Neither party has sought to challenge the Appeal Panel's decision to impose a temporal limitation on the scope of its merits review of the RLD Decision. That decision was no doubt an attempt to curtail the scope of litigation that had already involved disproportionate time and resources. 134The Appeal Panel committed no error of law in its approach to events post-dating the period of PT's alleged unconscionable conduct.

Conclusion 135The Appeal Panel's finding that PT engaged in unconscionable conduct was open to it on the evidence and, subject to the other arguments raised by PT, did not involve any error of law.

Procedural Fairness 136PT's submission that the Appeal Panel failed to observe "the first rule of natural justice" is essentially the same argument that was put to and rejected by the Appeal Panel itself. I have summarised the Appeal Panel's reasons (at [63]-[64] above). 137Spuds' second further amended application ("Application") filed with the RLD alleged (at para 20) that PT had engaged in unconscionable conduct in contravention of s 62B of the RL Act. Particulars (a) and (b) of para 20 were as follows: a) The conduct described in paragraphs 1 to 16 above is unconscionable. b) Between late 2002 and 2007 the respondent failed to remove the kiosks and other structures in front of the Premises despite repeated requests and complaints by the applicant. 138The reference in particular (a) to paras 1-16 of the Application incorporated Spuds' pleadings on three issues. The first was Spuds' claim to be entitled to relief under s 10 of the RL Act. The second was Spuds' claim that Mr Mimis' handwritten alteration to item 10 of the Lease formed part of the Lease. The third was Spuds' claim to be entitled to relief under s 34 of the RL Act. 139It will be recalled that Mr Mimis' handwritten alteration to the Lease sought compensation for every day that there was a "visual impediment to the shop front above 1.4m high". This was plainly a reference to the 2002 Height Restrictions, which had been the subject of discussions between the parties before Mr Mimis sought to amend item 10 of the Lease. 140Paragraphs 10 and 11 of the Application pleaded part of Spuds' case for relief under s 34 of the RL Act as follows: 10. In relation to the Boost Juice Kiosk: a) The kiosk blocked the line of sight to the Premises by customers walking through level 4 of Westfield Chatswood, in particular customers walking in a southerly direction along the corridor between the car park blue level entrance and shop 417. ... 11. As a result of the matters in the above paragraph, the Boost Juice Kiosk: a) inhibited or altered to a substantial extent the flow of customers to the Premises; and b) caused significant disruption and had a significant adverse effect on trading at the Premises, within the meaning of s 34 of the Retail Leases Act. 141I find it difficult to see why Spuds' case on unconscionability, as reformulated by the Appeal Panel in the Leave Decision (see at [57] above), was outside the pleaded case (even though the Appeal Panel said it travelled outside the particulars). It is true that the pleading might have been more specific in identifying the way in which Spuds intended to rely on the 2002 Height Restrictions in its unconscionability case. But it is clear enough that Spuds was alleging that PT had acted unconscionably by permitting the Boost Juice kiosk to be erected in contravention of the 2002 Height Restrictions and that, in consequence of the unconscionable conduct, Spuds suffered a loss of revenue. It is also clear enough that Spuds was alleging that PT had failed to take such action as was available to it to remove the kiosks, notwithstanding repeated complaints by Spuds. 142Even if Spuds' case was not entirely within the pleadings, in my opinion, the Appeal Panel was fully justified in concluding (Principal Decision, at [44]) that PT was put on notice during the hearing before the RLD of the substance of Spuds' unconscionability case. As Mr Fernon pointed out in his submissions to this Court, the RLD admitted the Red Book into evidence. The cross-examination of PT's witnesses extended to the contents of the Red Book, the manner of its distribution and the significance that prospective tenants could reasonably be expected to attach to its contents. Spuds' submissions to the RLD expressly relied on PT's contraventions of the 2002 Height Restrictions and its failure to remedy those contraventions as significant elements in Spuds' unconscionability case. 143No submission was made to the RLD that PT was unable to meet Spuds' unconscionability case. The submissions made on behalf of PT concentrated on Spuds' s 34 case, but also addressed and sought to rebut Spuds' claim for damages based on s 62B(8) of the RL Act. 144In any event, PT could hardly have been in any doubt about the particulars of Spuds' unconscionability claim once the Appeal Panel restated the elements of that claim in the Leave Decision. With one exception, PT has not contended that it was denied the opportunity to adduce such evidence as it wished in opposition to Spuds' claim. The exception is the refusal in the Fresh Evidence Decision to allow PT to adduce further evidence from Mr Roberts. I have explained the basis of that decision (at [47(xi)] above). 145PT's claim that it was denied procedural fairness by the Fresh Evidence Decision rested in large measure on its submission that no finding of unconscionability could be made unless a finding was also made that one or more of its key personal acted in bad faith or dishonesty. I have given my reasons for concluding that the Appeal Panel was correct to reject PT's contention to this effect. 146The evidence PT sought to adduce from Mr Roberts went no further than the evidence he had already given before the RLD, except insofar as it explained why he interpreted the 2002 Height Restrictions in the manner he did. But all that evidence went to was Mr Roberts' state of mind. The Appeal Panel rejected the proffered evidence on the ground that Spuds undertook to make no submission that Mr Roberts acted in bad faith. The Appeal Panel correctly took that to mean that it had to proceed on the basis that Mr Roberts (and for that matter all of PT's officers and employees) had acted in good faith. The rejected evidence therefore was not material to any fact in issue before the Appeal Panel and its rejection involved no denial of procedural fairness to PT.

Estoppel 147Mr Angyal repeated in this Court the submission made to the Appeal Panel to the effect that Spuds was estopped from alleging that PT had acted unconscionably in failing to insist on compliance with the 2002 Height Restrictions. I have summarised the Appeal Panel's reasons for rejecting that submission (at [65]-[68] above). 148Mr Angyal's submissions essentially challenged the findings of fact made by the Appeal Panel. The principal reason for the Appeal Panel rejecting PT's estoppel argument was that Mr Sicouri's evidence did not demonstrate that PT had relied to its detriment on any representation made by or on behalf of Spuds. As the Appeal Panel explained (and as the Panel's reformulation of Spuds' case makes clear), Spuds was not claiming that it acted on a representation by PT that it would enjoy a direct and unobstructed line of sight from the car park to Shop 417. Spuds' claim was that it became aware of the 2002 Height Restrictions during its negotiations for leasing the Premises and was led to expect that any new kiosks would comply with the Restrictions. 149Mr Sicouri's evidence was to the effect that if Spuds had stated that it expected clear and unobstructed sightlines to the Premises, he would not have agreed to grant the Lease. His evidence did not suggest that if Mr Mimis had made it clear before taking possession of Shop 417 on 3 July 2002 that Spuds expected PT to adhere to and enforce the 2002 Height Restrictions, PT would not have agreed to lease the Premises to Spuds. As the Appeal Panel found, it is hardly likely that PT would have refused to enter into the lease if Spuds had stated expressly that it expected PT to comply with the document that PT itself had issued and drawn to the attention of prospective lessees. 150A second and independent basis for the Appeal Panel's rejecting PT's estoppel argument was that Spuds made no representation that it would not insist on PT complying with and enforcing the 2002 Height Restrictions. That finding was one of fact, amply justified by the evidence. 151PT's challenge to the Appeal Panel's rejection of its estoppel argument fails.

Causation 152One of PT's four principal contentions was that the Appeal Panel erred in law on the issue of causation by applying a wrong test (see at [88]) above). The submission characterised the asserted error as one of law. However, in my opinion, if the Appeal Panel erred, the error was one of fact only. 153The Appeal Panel accepted PT's submission that Spuds could not establish that PT's unconscionable conduct had caused Spuds to sustain loss simply by comparing the interference with sightlines resulting from the construction of the kiosks in contravention of the 2002 Height Restrictions with the position had there been no interference at all with the sightlines. The Appeal Panel also rejected PT's submission that the proper comparison was between the situation with the kiosks in place and the interference to sightlines that would have occurred had "hypothetical suspended signs" been erected above the Boost Juice kiosk (by which Mr Angyal appeared to mean signs that would interfere with sightlines, but would comply with the 2002 Height Restrictions, since they would be suspended from the ceiling). The Appeal Panel considered (at [224]) PT's formulation to be "impractical and at odds with the true situation between the parties". 154The Appeal Panel selected as the appropriate comparator the situation that would have prevailed had the B-Zone kiosk remained in place. Thus the comparison it made was between the actual interference with sightlines caused by the kiosks' contravention of the 2002 Height Restrictions and the interference with sightlines that would have been caused had the B-Zone kiosk remained in place. Mr Angyal submitted that this demonstrated that the Appeal Panel had failed to apply the correct principle when finding that PT's unconscionable conduct caused some loss to Spuds. 155There was no dispute between the parties that in order to determine whether PT's unconscionable conduct caused any loss to Spuds, it was necessary to compare the actual situation (with the kiosks in place) with a hypothetical situation, namely, the situation that would have faced Spuds had PT not engaged in unconscionable conduct: see Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64, at 116, per Deane J. Although the Appeal Panel's reasons are not as clear as they might have been, I interpret them as incorporating a finding that, had PT not engaged in unconscionable conduct, the most likely outcome would have been that the B-Zone kiosk (or a structure very similar to it) would have remained in place. 156Mr Angyal would perhaps have been on stronger ground if he had been able to point to evidence as to what PT (or its lessees) would have done had PT not engaged in the conduct found to be unconscionable. But he did not point to any such evidence. Given the paucity of evidence as to the likely position had PT not engaged in unconscionable conduct, it is not altogether surprising that the Appeal Panel made the choice it did. 157It may be that a close analysis of the evidence would show that the Appeal Panel's finding did not reflect the weight of the evidence before it. But even assuming that to be so, it does not demonstrate that the Appeal Panel erred in law. I therefore do not accept PT's submission that the Appeal Panel erred in law in finding that PT's unconscionable conduct caused Spuds to sustain some loss.

Denial of Natural Justice 158It was common ground that the Appeal Panel denied the parties natural justice by assessing damages on a basis that had not been advanced by Spuds and to which PT had no opportunity to respond. The parties correctly submitted that this constituted an error of law by the Appeal Panel. Its assessment of damages therefore cannot stand. 159As I have explained, it is not open to the Court to re-assess damages, if that process requires further findings of fact. Therefore, unless Spuds can make out its contention that the Appeal Panel was bound as a matter of law to award damages of $400,000, regrettably the proceedings must be remitted to the Appeal Panel to assess damages. I now turn to the contention advanced by Spuds.

Spuds' Onus Argument 160Although Spuds put its damages claim in various ways, the key submission for present purposes was that it had lost gross profits because of the diminution in the volume of its trade caused by PT's unconscionable conduct. Thus, so Spuds argued, it was entitled to damages under s 62B(8) assessed by reference to its lost profits. 161Mr Fernon submitted that once Spuds proved a causal link between its losses and PT's unconscionable conduct (which he says it did) the onus was on PT to prove the extent to which the losses were attributable to other causes. It was for PT to prove, for example, that any losses sustained by Spuds were in truth attributable to Spuds' own business decision in April 2004 to discontinue stocking two well-known brands of surf wear, rather than to any unconscionable conduct on the part of PT. 162According to Mr Fernon, the Appeal Panel found that some of Spuds' lost profits were attributable to PT's unconscionable conduct. Since PT had not established what proportion of Spuds' lost profits could be attributed to factors other than PT's own unconscionable conduct, Spuds was entitled to be compensated for the whole of its losses. Mr Fernon further contended that on any view the amount of lost profits assessed in this way must have exceeded the RLD's jurisdictional limit of $400,000. 163Mr Fernon principally relied on Henville v Walker [2001] HCA 52; 206 CLR 459. In that case developers relied on misleading advice from a real estate agent concerning the demand for "quality" units when deciding to undertake a particular project. However, the developers also prepared a feasibility study which seriously underestimated the costs of the project. If either the demand for units or the costs of the project had been estimated accurately, the project would not have proceeded. The developers sued the agent for misleading or deceptive conduct in contravention of s 52 of the TP Act and claimed pursuant to s 82 of the TP Act the entirety of their losses on the project. 164By majority (McHugh, Gummow and Hayne JJ; Gleeson CJ and Gaudron J dissenting), the High Court upheld the developers' claim. McHugh J (with whom Gummow J agreed) pointed out (at [144]) that one fundamental purpose of the TP Act was to protect consumers from being induced to enter into transactions by false or misleading conduct. Thus an award of damages made under s 82 of the TP Act had to compensate the claimant for the loss suffered in consequence of altering his or her position on the inducement of the false representation. 165On that basis, his Honour held (at [146]) that the Full Court of the Supreme Court of Western Australia had erred in concluding that, because there were concurrent causes of the developers' losses, their claim had to fail. McHugh J added this observation (at [148]): Arguably, once a plaintiff demonstrates that a breach of duty has occurred that is closely followed by damage, a prima facie causal connection will be established. It is then for the defendant to show that the plaintiff should not recover damages. In the words of Dixon CJ in Watts v Rake [[1960] HCA 58; 108 CLR 158, at 160], it is the defendant who must disentangle, so far as possible, the various contributing factors. 166Hayne J (with whom Gummow J also agreed) reached the same conclusion: 160 First, it is necessary to identify the loss sustained by the [developers]. The loss which the [developers] suffered is a single sum. It is the amount by which their expenditures exceeded their receipts. ... Further, the whole of that loss was brought about by the decision to proceed with the project, a decision which was ... made in reliance upon the wrong estimates of both costs and likely receipts. ... 161 Both the estimate of likely receipts and the estimate of likely expenditures were wrong. That does not mean, however, that, in this case, attention can be confined to one side of the profit and loss account in determining what loss and damage was caused by the respondents' misleading and deceptive conduct. The question presented by the statute is what loss was suffered by the [developers] that was caused by the relevant contravention? 162 The conclusion that the [developers] suffered loss requires comparison between the position in which the [developers] found themselves after the project was finished, and the position in which they would have been if, instead of relying on what they were told by the respondents, they had not undertaken the project. ... 163 Secondly, seldom, if ever, will contravening conduct be the sole cause of a person suffering loss. ... What the Act directs attention to is whether the contravening conduct was a cause. It does not require, or permit, the attribution of some qualification such as "solely" or "principally" to the word "by". (Emphasis in original.) 167As Mr Fernon acknowledged in argument, the facts of Henville v Walker were different to the present case. The starting point for the majority of the High Court was that the agent's misleading conduct was a cause of the developers' entire loss on the project: that is, but for the misleading conduct the developers would not have undertaken the ill-fated development. The fact that there were other circumstances inducing the developers to undertake the project was not to the point. By contrast, the present is not a "no transaction" case. Spuds does not say (at least not now) that PT's unconscionable conduct induced it to enter into the Lease. It says that PT's conduct was a cause of its loss of gross profits and that it is for PT to "disentangle" any other factors that may have contributed to the loss. 168Mr Fernon submitted that although the facts in Henville v Walker were different, the principle was nonetheless apposite to this case. He relied on the carefully reasoned judgment of Jagot J in Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242; 254 ALR 273. 169The issue in Haviv was the quantum of damages to be awarded to a franchisee (Haviv) for the franchisor's breach of contract in permitting a second franchisee to operate within Haviv's exclusive territory. Jagot J applied the principle that: while the plaintiff has the onus of showing loss caused by the breach, "if the loss in question is the apparent or likely result of the breach, the onus shifts to the contract-breaker to prove that it was not" [Cheshire and Fifoot's Law of Contract, (9th Aust ed, 2008), at [23.34]] 170Jagot J assessed damages by comparing the net profits Haviv in fact earned from its store (when it had to compete with the second franchisee's business) with the hypothetical net profits it would have earned had the franchisor not breached the contract (Scenario 1). Her Honour accepted Haviv's submission that its hypothetical net profits for the relevant period could be ascertained by reference to a benchmark derived from the performance during that period of several exclusive franchisees whose outlets were comparable to Haviv's. On this basis, her Honour found (at [45]) that under Scenario 1 there had been an immediate decrease in sales revenue (and thus of the potential for net profits) following the opening of the second franchisee's store. The decrease continued thereafter. 171The franchisor identified several factors which it said had contributed to the decline in sales revenue. One of these, the opening of a modern retail complex at Rhodes (near Haviv's store), probably had the effect of attracting some customers away from Haviv. However, there was no evidence as to the magnitude of the likely impact on Haviv's revenue (at [42]). In her Honour's view, the onus was on the franchisor to disentangle the extent to which the opening of the Rhodes complex contributed to Haviv's loss of revenue (at [46]): These circumstances ... show a breach of contract "closely followed by damage", thus indicative of a "prima facie causal connection" between the breach and damage: see the observations of Kirby J in Chappel [Chappel v Hart [1998] HCA 55; 195 CLR 232] at [93]. A "practical commonsense" approach to the question of damage indicates that the Rhodes store was a material cause of loss of net profits from [Haviv's] store after November 2004. I also accept Haviv's submissions that, as Haviv had proved a prima facie causal connection between the breach and the loss, it was a matter for [the franchisor] as the party in breach to "disentangle" any contribution to Haviv's loss caused by the Rhodes shopping centre: Henville at [148]; see also Amann Aviation at 94. [The franchisor] did not do so. When this is considered with the proper function of the discount rate ... it is apparent that the state of the evidence does not disclose any fundamental gap in or undermine Haviv's case for damages. No allowance need or should be made for any potential contribution of the Rhodes shopping centre because [the franchisor] has not proven any such effect and, in any event, that is part of the function of the application of a discount rate. (Emphasis added.) 172The critical element in Jagot J's reasoning was the finding that the opening of the second franchisee's store had an immediate and continuing impact on Haviv's gross profits. Thus there was a prima facie causal connection between the franchisor's breach of contract and the loss sustained by Haviv. (I leave to one side the role played by the discount rate in the case). The Appeal Panel in this case made no comparable finding. 173As Mr Fernon explained, Spuds attempted to establish a causal relationship between PT's unconscionable conduct and Spuds' claimed losses by using a benchmark as a guide to the gross profits Spuds would have earned had PT not engaged in unconscionable conduct. Spuds relied on expert evidence to demonstrate the percentage increase in turnover that Spuds would have expected to derive from the increase in floor space through the addition of Shop 417 to its retail outlet. The experts did not agree, providing estimates that varied from 15 to 50 per cent of turnover. The Appeal Panel did not indicate which of the expert opinions it preferred (if any) and made no finding as to the percentage increase in turnover Spuds could have expected had there been no interference with the sightlines resulting from PT's failure to comply with or enforce the 2002 Height Restrictions. 174In the section of its reasons dealing with causation, the Appeal Panel found (Principal Decision, at [221]) that PT's unconscionable conduct caused Spuds: some measure of economic loss through making the signage at the front of the Premises less visible to potential customers approaching from the car park entrance[.] 175But in the section of its reasons dealing with damages, the Appeal Panel found (at [246]) that Spuds' assertion of a substantial overall decline in the profitability of its business on account of the kiosks was "not backed up at all by financial data". On the contrary, there appeared to be "no correlation in time between the erection of a kiosk and a decline in turnover". The Appeal Panel's finding on this point reflected evidence that Spuds' turnover for each of the 2002-2003 and 2003-2004 financial years increased by more than 20 per cent when compared with the 2001-2002 financial year (the Boost Juice kiosk opened on 15 November 2002). 176There was no substantial downturn in Spuds' turnover until the 2004-2005 year. As it appears, that decline occurred shortly after Spuds decided to discontinue stocking two major brands of sports wear. The Appeal Panel referred to the evidence, but made a curiously equivocal finding. It said (at [252]) that the evidence was "far from conclusive", but that: [t]he possibility that this event in April 2004 [the commercial decision by Spuds] was a contributing cause of some significance to the pronounced decline in turnover commencing in or about July 2004 cannot be discounted. 177This case is unlike Haviv in that the Appeal Panel made no finding that any particular, quantifiable diminution in gross revenue was caused by PT's unconscionable conduct. In other words, it made no finding that there was a prima facie causal connection between PT's contravention of s 62B(1) of the RL Act and a quantifiable loss sustained by Spuds. What the Appeal Panel found (at [241]) was this:

• the evidence of Spuds' financial performance after the Lease was granted fell considerably short of what was needed to quantify any loss of profits caused by PT's unconscionable conduct;
• the evidence did not establish that the diminution in Spuds' profits was wholly caused by PT's conduct;
• the evidence did not show that PT's conduct had no impact at all on Spuds' profits; and
• the evidence did not establish what proportion of the decline in profits was attributable to PT's conduct. 178I accept that, where a lessee seeks damages pursuant to s 62B(8) of the RL Act by reason of the lessor's unconscionable conduct, there may be circumstances in which the onus shifts to the lessor to "disentangle" the contribution made to the lessee's losses by factors other than the lessor's unconscionable conduct. But before the onus can shift in this way, there must at least be a finding that the unconscionable conduct is a cause of a quantifiable loss sustained by the lessee. No such finding - or anything close to it - has been made in the present case. 179It follows that I reject Spuds' submission that on the findings made by the Appeal Panel, Spuds is entitled to damages of at least $400,000. Regrettably, further findings of fact are required before any damages award can be made. Those findings must be made by the Appeal Panel itself on remitter.

Mr Bell's Evidence 180Mr Fernon submitted that the Appeal Panel had erred in stating (Principal Decision, at [245]) that particular passages in a report prepared by Mr Bell, an accountant engaged by PT, had not been challenged in cross-examination at the Appeal Panel's second hearing. 181Mr Bell prepared a report on 22 April 2008, in which he said that he could not substantiate any trading loss claimed by Spuds as a consequence of the erection of the Boost Juice kiosk. Mr Bell was cross-examined on his report at the RLD hearing. In the course of that cross-examination, he conceded that he had not taken into account the increase in revenue that might have been expected from the addition of Shop 417 to Spuds' outlet at the Centre. 182Mr Bell prepared a second report, dated 4 June 2012. In this report, he expressly referred to the increase in the size of Spuds' Premises. Nonetheless, in a passage quoted by the Appeal Panel (at [244]), he repeated his opinion that "there was no apparent detriment to sales following the opening of the Boost Juice and Telechoice Kiosks". He also observed in another passage quoted by the Appeal Panel that the decline in sales in the September and December 2004 quarters began about 20 months after the opening of the Boost Juice kiosk, 12 months after the opening of the Telechoice kiosk and seven months before the opening of the Love Salad kiosk. 183Mr Bell was cross-examined at the second Appeal Panel hearing. The only reference to his evidence at trial was the following question and answer: Q. You will recall that you were cross-examined by me on the last occasion about movements in the figures over a particular period and the evidence that you gave on the last occasion is still applicable to the evidence that you give today on the same issue is that correct? A. I assume it is. Mr Bell was not asked any question about the particular paragraphs from his second report quoted by the Appeal Panel. 184The Appeal Panel's statement in the Principal Decision that Mr Bell was not cross-examined on those specific passages in his second report was correct.

A Jurisdictional Issue 185Spuds' amended notice of cross-appeal challenged the award to PT of $420,445.01 (inclusive of interest) on the ground that it exceeded the ADT's jurisdictional limit of $400,000 applicable to a "particular retail tenancy claim": RL Act, s 73(1). PT's money claim was a "retail tenancy claim": s 70(a)(i). 186In its written submissions, Spuds acknowledged that the jurisdictional question had not been brought to the Appeal Panel's attention. Nonetheless, it was submitted that the Appeal Panel should have corrected the RLD's order of its own motion and reduced the amount awarded to PT by the excess over $400,000. 187In its written submissions, PT contended that the answer to Spuds' jurisdictional argument was that the monetary limited imposed by s 73(1) of the RL Act is exceeded only if the total amount to be paid under the orders made by the Appeal Panel is greater than $400,000 "whether on a balance of account or after set-off or otherwise". Since the Appeal Panel's final orders required the damages payable by PT to Spuds to be set off against the amount payable by Spuds to PT, the result was that the total amount payable by Spuds after set off was less than $400,000. Mr Fernon made no oral submissions in support of this ground of appeal, presumably because he accepted PT's contention. 188The effect of the orders made by this Court is that the orders in favour of Spuds have been set aside, but the orders of the RLD in favour of PT remains on foot. Mr Angyal accepts that if Spuds ultimately fails in its claim for damages against PT, the RLD's order that Spuds pay $420,445.01 will have to be varied to $400,000. 189There may be a question as to whether any award in favour of Spuds pursuant to s 62B(8) of the RL Act can be set off against the amount due to PT. The Appeal Panel assumed that it could and neither party made submissions to this Court as to whether the assumption is correct. 190It is premature to reduce the amount awarded to PT to $400,000 because the final orders made by the Appeal Panel may require payment to PT of an amount less than $400,000 in a manner that does not involve the Appeal Panel's jurisdictional limit being exceeded. The Appeal Panel should address any jurisdictional issues that arise on the remitter.

Orders 191PT's appeal succeeds only to the extent that the Appeal Panel's award of damages must be set aside. PT's appeal, insofar as it challenges the Appeal Panel's finding on unconscionability, must be dismissed. 192Spuds' cross-appeal also succeeds to the extent that the Appeal Panel's award of damages must be set aside. However, Spuds' cross-appeal, insofar as it seeks to have this Court order PT to pay $400,000 in damages, must be dismissed. 193For the reasons that have been given, the unfortunate consequence of the Appeal Panel's departure from procedural fairness in the assessment of damages is that the matter must be remitted to the Appeal Panel for damages to be reassessed (see ADT Act, s 120(2)). It will be a matter for the Appeal Panel to determine whether any further evidence should be received on this question. 194I add this observation. These proceedings have continued for far too long and have cost far too much. One would have thought that it is in the interests of the parties to resolve the matter without further hearings, involving yet more delay and expense. It is not open to this Court to make the findings of fact necessary to reassess damages. Even so, in the course of the hearing of the appeal, the Court was taken to a great deal of the evidence. Without in any way binding the Appeal Panel, it is difficult to resist the impression that the result reached by the Appeal Panel, albeit procedurally inappropriate, was not very far off the mark. 195The orders I propose are: (1)The appeal be allowed in part. (2)The cross-appeal be allowed in part. (3)Set aside Order 1 made by the Appeal Panel on 3 October 2012. (4)Set aside Orders 1 and 2 made by the Appeal Panel on 1 March 2013. (5)Remit the proceedings to the Appeal Panel to assess the damages (if any) to be awarded to Spuds by reason of PT's unconscionable conduct, consistently with this Judgment. 196In my view, PT should pay Spuds' costs of the appeal. PT's appeal has been almost entirely unsuccessful. The one point on which it has succeeded is its complaint that the Appeal Panel denied it natural justice in relation to the assessment of damages, but this was common ground and, in any event, the denial of natural justice affected both parties. 197I think that justice will be done if each party has to bear its own costs of the cross-appeal. Both were put in a somewhat difficult position by the approach taken by the Appeal Panel but neither fully appreciated the limitations on this Court in an appeal on a question of law. 198I do not think that there is any sound basis for disturbing the costs orders made by the Appeal Panel. The costs of the remitted proceedings will be a matter for it. 199I therefore propose the following orders as to costs: (6)Order PT to pay Spuds' costs of the appeal. (7)No order as to the costs of the cross-appeal.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 January 2014