Seguin & Anor v Anglican Church Property Trust Diocese of Sydney

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``intermediate term'', ``prospective breach'', ``repudiation''

Counsel: MR R WHITINGTON QC WITH MR M SYKES - Solicitors: SYKES BIDSTRUP

Counsel: MR R WHITINGTON QC WITH MR M SYKES - Solicitors: SYKES BIDSTRUP

Judgment No. [2004] SADC 30

The plaintiffs sue for damages for breach of a joint venture contract which comprised a series of three contracts allegedly concluded with the defendant between 1994 and 1996.

They say these contracts in turn related to their joint occupancy of retail shop premises owned by the defendant at 152 Magill Road, Norwood ("152 Magill") and of adjoining leased workshop/warehouse premises at 146B Magill Road, Norwood ("146B Magill" or "the workshop" or "the warehouse"), and their joint engagement of a sales person to work at 152 Magill.

They say that the agreed period of the joint venture was nine years commencing from March 1995; alternatively, that the period was determined by the terms of what amounted to a statutory retail shop lease over 152 Magill, namely, a period of five years from 2 December 1996.

They allege the defendant breached the terms of the joint venture, however construed, by wrongfully giving notice to the plaintiffs to quit 152 Magill on 7 February 1998 and that by his continuing conduct he repudiated that venture. Ultimately, on 10 June of that year, the plaintiffs say, they accepted that repudiation.

In consequence, they contend, they suffered substantial losses in and about the relocation of their retail business, ongoing trading losses resulting from an inability to secure premises for an equivalent rental in an equally suitable location, dislocation expenses, in terms of higher operating costs resulting from the separation of retail and workshop activities, and the loss of use of the funds expended in mitigating their losses.

For his part, the defendant agrees there was a joint venture between them, but denies it was for a fixed term, whether by agreement or statute, and says it was terminable at will, that it was with the first plaintiff, Jenkinson, only, that it involved sharing of the shop premises and workshop/warehouse (albeit not on the same terms as alleged by the plaintiffs), that it did not include sharing the cost of employing a sales assistant, but did include terms ensuring Jenkinson brought to 146B Magill and made available to him and his son Damian ("Damian"), from the outset and on particular terms, Jenkinson's machinery, stock and woodworking expertise. He says that, whether at will or otherwise by reason of Jenkinson's failure to adhere to those terms, he became entitled to lawfully terminate the venture on 7 February 1998 and that he did so. Specifically, he denies the plaintiffs' alternative contention that their agreement over the joint occupation of the retail shop at 152 Magill led to the creation of a five-year retail shop lease within the meaning of the Retail and Commercial Leases Act 1995.

Finally, he disputes the plaintiffs' damages claim. He originally asserted a substantial counterclaim for losses he said arose out of the plaintiffs' breaches of the joint venture agreement, but at trial, he abandoned part of it and the remainder stood or fell according to the success of the plaintiffs' claim.

Both the first plaintiff ("Jenkinson") and the defendant ("Young") are former schoolteachers who left that profession and established their individual antique businesses. Jenkinson began trading from leased premises at Belair Road, Hawthorn ("Belair Road") in the mid-70s, at first on his own account and later, through the second plaintiff, under the business name of "Fountain Antiques". Where appropriate, I will refer to the second plaintiff as "the trustee", but for all other purposes and as Jenkinson was the sole actor and agent for the trustee, I will, in speaking of the plaintiffs, be referring to things said and done by him on behalf of one or other or both of them.

Jenkinson's principal stock interest was in Australian cedar and colonial furniture, and Fountain Antiques operated from a row of shops on Belair Road, Hawthorn ("Belair Road"), which contained retail, working and storage spaces. He was an active buyer of antique furniture, wood and fittings, whether in good or damaged condition, and had trained himself in carpentry and restoration techniques. He also employed people to do that and had purchased the machinery required for such work. In consequence, he held in storage substantial quantities of furniture pieces awaiting restoration, stocks of old wood and architectural fittings. These were kept not only at Belair Road, but also at warehouse premises he owned at 14 Townsend Street, Parkside ("Parkside"). He bought and sold in both retail and wholesale antique markets and, in consequence, spent most of his working days away from the Belair Road premises. He employed a person to conduct his retail operations during ordinary trading hours.

Young established Eureka Antiques at 152 Magill (premises which he later acquired) and, for a time, he shared those premises with another dealer. He focussed on a slightly different antique market from Jenkinson, describing his principal stock interest as rustic or primitive pine, depression-style packing case furniture and objects. He operated his business in a different way, as well, spending most of his working day in his shop, either working on his stock or attending to retail sales. He purchased stock at auctions or garage sales when he was able. His repair, restoration and polishing work was carried out in the back areas of the shop or outside to the rear, but the extent of his repair and restoration work was considerably less in volume and complexity than that undertaken by Jenkinson.

Young's premises at 152 Magill comprised a shopfront with an adjacent side driveway and a rear yard with its own side street entrance.

Young and Jenkinson had known each other since the early 1980s and had what might be described as a professional friendship. It centred upon their common interest in the antique business and they visited each other's shops from time to time, although Young would, more frequently, call on Jenkinson at Belair Road. It was on his way home from work. Because of Jenkinson's considerable stock of furniture awaiting restoration, wood and materials, it happened that from time to time, Young would purchase from him particular items in which he was interested, or which he needed for his own restoration work. Jenkinson usually sold these to him at a favourable price.

In early 1994, Jenkinson became concerned about his tenure of the premises at Belair Road. There is no need to detail the background to this, but it is enough to say the landlord was first wishing to sell the freehold and, when he later died, his executors were seeking to maximise the capital or investment return on the premises by whatever means.

For many years before this, the Parkside warehouse aside, Jenkinson had enjoyed the benefit of having his retail, warehouse and workshop premises side by side. This had provided distinct advantages in terms of handling and transporting items and in the ease of communication between shop and workshop.

The uncertainties over his tenure at Belair Road thus created a number of problems for him. He looked to solve them by a successful negotiation with the landlord, and later his executors, but, at the same time, he was exploring opportunities to move his shop and warehouse/workshop to other locations.

It was common ground at trial that Magill Road is a particularly suitable location for an antique retail outlet, and although there was some dissension at trial as to their relative importance in this context, other favourable locations included Unley Road, Glen Osmond Road and Goodwood Road.

Young, for his part, owned retail shop premises in that favourable antique precinct. He was plainly impressed by Jenkinson's stock and materials, his skills in restoration and his woodworking machinery. He had, in the past, benefited from access to some of this and he had it in mind that Damian would also benefit from such access (albeit that it was a matter of dispute as to what he said to Jenkinson about this).

At a certain, disputed, point in time, both parties concluded there would be a distinct advantage to each in having the other's business and facilities nearby and, after some discussions, that is what they set out to do. They agreed to share, for retail purposes, Young's shop at 152 Magill (Jenkinson to pay Young an agreed rental contribution) and to lease and share the adjoining premises at 146B Magill Road, Norwood, which were to be used by them as a combined workshop/warehouse.

These latter premises abutted the rear section of the 152 Magill shop and were later connected to it by a doorway. They were then owned by a family known as Mahains and had previously been used as a warehouse by another party. In early 1995, they were placed on the market for sale and Jenkinson then sought to negotiate a purchase on behalf of Young and himself. He thought he had done so, but to his disgust, Mahains backed out of the proposal and the premises were then offered for lease in about March 1995. Because of the breakdown in Jenkinson's relationship with Mahains, the parties agreed that Young should then negotiate a lease with Mahains and he did so, securing a three-year lease with two rights of renewal, each of three years. This was done on behalf of both of them.

The lease was first orally agreed upon with Mahains and the parties entered into possession and began paying rent on about 27 April 1995, albeit that for reasons which will emerge, the lease document itself was not executed until 8 October 1996. It is clear on all the evidence that the parties intended to use the leased premises as a warehouse and as a workshop, albeit that the latter use gave rise to other problems, which I will come to.

It is common ground, too, that in about August 1995, the parties agreed upon the construction of a mezzanine floor within 146B Magill, but that its completion was delayed by several factors, some of which were contentious and some of which were not. These included the death of the original builder, the need to strengthen faulty works undertaken by him, capital funding problems over these and other works in the premises, the need to obtain Council development approval for the construction and an issue as to whether Council consent was also required for the proposed use of the premises as a workshop (as opposed to a mere warehouse).

The individual responsibilities of the parties over these delays were contentious, but one way or another, the workshop was not ready for full occupation until January 1998, a time just two months short of the lease renewal date.

In the meantime, Jenkinson had moved into joint occupation with Young of the retail premises at 152 Magill on 5 December 1996. On 7 February 1998, Young gave notice to Jenkinson to leave 152 Magill. Ultimately, he left there on 13 July 1998, albeit that he had in the meantime, and with Young's consent, dealt with Mahains, "renewed" the lease and become the sole tenant of 146B Magill.

As to the retail premises, whilst it is common ground that the parties had, at some point, agreed to share them, in the sense of each having access to equal space within them, there were serious issues at trial as to the time when it was agreed that sharing would commence, whether it was agreed the premises would first be renovated and expanded, and as to Jenkinson's claim that the joint employment of a shop assistant there was inherent in these arrangements.

It is undisputed, however, that after Young had, at his own expense, substantially renovated and expanded the shop premises, Jenkinson moved his retail operation there on 5 December 1996, it having been agreed in November 1996 that he would pay a rental contribution to Young of $250 per week plus rates and taxes. It was further undisputed that Young later agreed to contribute to the wages of a shop assistant.

It is common ground, too, that during the period of joint occupation of the retail premises, each of the parties used approximately 50 per cent of the available retail space, albeit that neither had dedicated access to specific areas within it. Jenkinson was rarely present in the shop during retail trading periods, whereas Young was generally always there or in the adjoining workshop. In addition, Young opened the shop and ran it by himself on Tuesdays and, at a later stage, on Sundays.

When, in July 1998, the plaintiffs left 152 Magill, they moved to alternative leased retail premises at 33-37 Glen Osmond Road, Eastwood ("Glen Osmond"). They have remained there since and have otherwise continued to use the warehouse/workshop at 146B Magill, again renewing that lease in April 2001.

After their ways parted, there was a limited financial reconciliation agreed upon between the parties, but neither contended it completely resolved all issues between them.

There were numerous disputes at trial, but the principal ones centred upon the formation, content and duration of the joint venture agreement and whether Young was, as he contended, entitled to terminate it at will. Damages were also in issue.

I will not attempt to traverse all the evidence given in what became a lengthy trial, but will, rather, deal with it in focussing upon the separate areas of dispute. Before I do that, however, it is appropriate that I make some observations as to the credibility of witnesses.

There were a number of sharp conflicts between the evidence of Jenkinson and that of Young. In resolving them, I will have regard not only to the evidence each gave, the manner in which it was given and how each dealt with cross-examination, but to other evidence I received in the case, comprising documents and the oral testimony of witnesses variously supporting or challenging one or other version.

I will specifically address here, the evidence and demeanour of each of Jenkinson and Young, but will comment on the presentation and credibility of the other non-expert witnesses as I come to discuss the separate issues on which each gave evidence. With respect to those witnesses, I should say I generally found their evidence to be credible and reliable. I refer here to Tottman, McConchie, Damian, Barker and Byfield. Where there was internal conflict between them, I was not satisfied that it arose out of any attempt by any of them to mislead the court.

Although Jenkinson and Young had similar backgrounds and were of similar age, they were quite different personalities and conducted their separate businesses in distinctly different ways.

Jenkinson presented as bold and entrepreneurial, confident in decision-making and prepared to take business risks. He had expanded his business operation at Belair Road to occupy several adjoining shop spaces and had the machinery, stock and fittings I have previously described. He employed a person to conduct retail and spent most of his time supervising repair or renovation works, or away from Belair Road buying for retail or buying and selling in the wholesale market. He had taught himself and acquired substantial skills in restoration.

In his own counsel's description, he was a "wheeler dealer" and prepared to delegate renovation and retail tasks to employees. At the same time, he was a tidy, indeed fastidious, person.

In contrast, Young was a careful, conservative man who preferred to do his own buying and selling, who was less inclined to purchase items that required substantial renovation and who generally limited himself, in the workshop, to what might be called "finishing" antique goods, that is to say, carrying out a limited range of repairing, polishing and preparing items for sale. Even so, with the restricted storage and workspace he had, he did not carry a large quantity of unprepared goods. He presented as a quieter, less assured, less articulate, less adventurous person who preferred to stick to doing the things he was familiar with and in his own market area.

Their coming together in some form of business venture was prompted by their common interest in antiques generally, their reasonably longstanding professional friendship (it could barely be described as a personal friendship), the problems facing Jenkinson in securing alterative premises for his activities, his interest in the Magill Road precinct, Young's interest in his stock and plant, and the fact that each foresaw benefits to be derived from the proposed association.

There was a substantial measure of enthusiasm on each of their parts for the venture, indeed to the point where, as I find it, each became blinded to the particular financial and personal implications inherent in it. Neither appears to have had a real appreciation of the time which would be occupied in setting up the venture, nor what it would cost, there was no business or venture plan and no serious attempt was made to document its terms, nor even to resolve in advance numerous matters of detail, which later became quite contentious. So poorly did they plan, that the workshop lease was arranged by Young and they entered into possession of it even before there was any consensus about how the retail or workshop areas would be improved and divided, how this would be paid for and what rental contribution Jenkinson would make towards the shop. Neither appears to have carried out any projections on the time and cost of the shop or the workshop renovations, nor the cost to Jenkinson of moving from Belair Road. In the end and almost inevitably, these factors, their differing operating styles and financial resources brought a swift conclusion to the possibility of an enduring relationship.

Even before Jenkinson moved his retail business to 152 Magill, problems had arisen in their relationship which were ultimately to prove fatal. In the event, they shared those premises for 18 months only and were virtually at arm's length for the last six months of that. Their joint expectations of using the workshop/warehouse as such were never realised.

The evidence of each of their partners, McConchie and Barker, as to various of the meetings they attended with Jenkinson and Young in the latter part of 1997, was eloquent testimony to their respective inabilities to properly communicate, let alone establish a satisfactory business relationship.

As the case unfolded, it became plain that each harboured deep resentment at the actions of the other and I was obliged to treat certain aspects of the evidence of each of them with considerable reservation and, in some cases, outright disbelief.

A substantial part of Young's case comprised a concerted attack on Jenkinson's credit with respect to various of the financial documents discovered by the plaintiffs and referred to in the report of their expert, Mr McPharlin. For a number of reasons, it is necessary that I deal at some length with that challenge. In doing so, it is necessary that I also discuss various objections made by the plaintiffs' counsel to the cross-examination of Jenkinson and the tendering of certain documents pertinent to that attack.

The starting point for this topic is really the evidence and two reports of McPharlin. Those reports became P27 and P39, and I will henceforth refer to them variously as McPharlin's "first" or "second" reports. They set out his assumptions and his calculation of the plaintiffs' losses said to have arisen from the defendant's wrongful repudiation of the joint venture.

In preparing his first report, McPharlin expressly stated that it was based on the documents referred to in its Appendix 2. (His second report identified further documents upon the basis of which his calculations in the first report were varied.) It is significant to note, then, that the documents comprised in Appendix 2 of the first report included, inter alia, all of the plaintiffs' documents discovered in the action and, in particular, financial statements and tax returns of the plaintiffs for the years 1994 onwards, the Jenkinson Family Trust ("the trust") general ledger, two schedules of retail and shop sales for the period between November 1996 and January 2001, and the cash book for the year ending June 2000. I specify these because, included in them, are documents which the defence sought to tender and to which plaintiffs' counsel objected.

In both reports, McPharlin went on to comment upon the profit and loss accounts and balance sheets for the trust, being the operating entity of the business over relevant periods. Pertinently, at paragraph 3.6 of his first report, he observed:

"The overhead expenses appear to be substantially 'fixed' in nature rather than varying with turnover."

That comment is important in the reasoning process which he then adopted for the calculation of the plaintiffs' asserted losses. The process was as follows:

(1) He said it was "reasonable to assume that only retail sales have been affected by the matters claimed" - that is to say, the alleged wrongful termination of the joint venture and the need for the plaintiffs to relocate their retail outlet away from Magill Road. Wholesale sales, he observed, were not location-specific. He went on: "Consequently, for the purposes of this report, the relevant sales (I interpolate, for the purposes of comparing trading at 152 Magill with that at Glen Osmond) have been determined by deducting all wholesale sales from shop sales".

(2) Putting aside for a moment the plaintiffs' contention about loss of retail business due to tensions in the shop between May and July 1998, he said, the figures showed that the value of retail sales declined after Jenkinson relocated his retail operations to Glen Osmond.

(3) The amount of this decline could be measured, he said, by comparing average monthly retail sales over a fixed period at Magill Road with average monthly retail sales subsequently obtained at Glen Osmond Road.

(4) Overheads being generally fixed in nature, he said, one could calculate an average gross profit margin for retail sales generally - that is to say, at either location - and that margin could then be applied to the difference between the average monthly sales figures shown by the comparison in paragraph 3 to calculate the true average monthly loss in the period since Jenkinson left 152 Magill.

(5) That average monthly loss could then be multiplied over the unfulfilled term of the joint venture in order to establish the plaintiffs' overall trading loss figure.

Young responded to this aspect of the plaintiffs' case on damages in a number of ways:

(a) whilst he did not, in a general sense, oppose the methodology adopted by McPharlin, through his own expert, Mr Crase, he pointed to different interpretations of the source material;

(b) by challenging the accuracy of various factual assumptions made by McPharlin, in particular where he expressly relied upon Jenkinson's instructions on the topics mentioned above;

(c) by otherwise challenging the reliability or completeness of certain of the financial materials upon which McPharlin relied.

I will come to discuss the first of those matters in due course, but it was the second and third challenges which became particularly contentious and which obliged me to make certain rulings as to reception of evidence.

In compiling Appendices 4 and 6 of his first report, McPharlin had had regard to invoice books for the relevant periods and had assumed they were accurate and complete. He had relied upon specific instructions from Jenkinson categorising sales and identifying labour allegedly expended by the trust in bringing particular items into sale condition. To the extent he had thus relied upon Jenkinson's instructions, Jenkinson's credibility came under concerted attack in these areas:

(1) In respect of the financial year ending 1998 (a date corresponding very nearly with the time when Jenkinson moved to Glen Osmond), Young sought (over the plaintiffs' objection) to have introduced into evidence the trust's cash books and banking records (D8 and D9), which, along with an explanatory document used for the purposes of cross-examination (D11), appeared to show that cash receipts for the relevant year totalled $30,985 against cash bankings of $2,000. Faced with that documentation, Jenkinson acknowledged "there does seem to be a deficiency in banking of the amount of $28,000 that was banked or that could or should have been banked in the PB Jenkinson Pty Ltd account" (p.596).

(2) Separately, in respect of the financial year ending 1999, Young sought (over the plaintiffs' objection) to tender the plaintiffs' cash books and bank statements for the period (along with a summary document prepared for the purpose of the cross-examination - D18), which prima facie appeared to disclose recorded cash sales of $19,049 as against cash bankings of $40,500.

With respect to this discrepancy, Jenkinson rejected any suggestion that he had not recorded all cash sales or that he had made shop sales which were not in the invoice book. He said the discrepancy had likely resulted from introduced capital funds or retaining moneys for his cash float or from sales of his private tool collection or from delay in banking or sloppy bookkeeping.

He denied he had deliberately concealed receipts in order to bolster his claim.

(3) With respect to the year ending 2000, Young's challenge to Jenkinson was that there was a marked lack of correspondence between the amounts and timing of cash receipts and the amounts and timing of bankings.

Jenkinson agreed that he had not banked cash totalling $9,770 at or about the times that he had received it during that year.

During cross-examination of Jenkinson on all of those matters, his counsel objected to defence counsel pursuing his questioning beyond certain points, contending that it went to collateral issues and upon which Jenkinson had already given firm answers, and he otherwise objected to the defence tendering certain of the plaintiffs' financial documents.

The basis of his objection was that in formulating their loss claim, the plaintiffs had specifically not relied upon the financial documents sought to be tendered, but had relied solely upon the invoice books of the business and their own instructions to McPharlin as to the proper categorisation of sales and moneys expended on preparing items for sale. Thus, he argued, the defendant had to be content with the answers given by Jenkinson to challenges made with respect to other financial documents and could not seek to further cross-examine Jenkinson on the answers given by him as to them, nor to introduce documentary evidence relating to those matters (by seeking to tender the financial documents under attack).

In response to that objection, defence counsel said that his cross-examination and the contentious documentation went not merely to credit, but to matters directly in issue, namely, the quantum of the alleged loss, that the documents sought to be adduced were, in any event, documents discovered by the plaintiffs and documents upon which McPharlin had expressly "based" his opinion.

In the event, I ruled in the defendant's favour in connection with all the evidence subject to objection, and I did so for the following reasons:

(1) I was not persuaded that the collateral evidence rule operates to inhibit further cross-examination of a witness seeking to challenge an answer given on a collateral issue. Of course, that is not to say that ordinary rules of relevance might not intervene. No such stricture is acknowledged in Goldsmith v Sandilands [2002] HCA 31; (2002) 190 ALR 370 or Piddington v Bennett and Wood Pty Ltd [1940] HCA 2; (1940) 63 CLR 533, save and except that at paragraph 66 of the judgment of Kirby J in Goldsmith, his Honour appears to refer to specific provisions relating to this, in the uniform evidence legislation.

(2) I did not take plaintiffs' counsel to be objecting to there being tendered in evidence the memoranda prepared by defence counsel for the purposes of cross-examination and which became Exhibits D11, D18 and D28. Those documents were not evidence per se, were only receivable if the primary documents were admissible and otherwise served a useful purpose in enabling the witness to focus his attention on the entries under challenge and as an aid to the court.

(3) To the extent that defence counsel otherwise tendered in cross-examination various of the plaintiffs' documents, including cash books, bank statements and the like, I received them for a number of reasons:

(a) they were documents discovered by the defendant in the action;

(b) McPharlin had expressly said he relied upon them in preparing his reports - no attempt was made by the plaintiffs (other than in argument) to discount that claim;

(c) with respect to the years following June 1998, they were directly relevant to the asserted quantum of the plaintiffs' claim;

(d) with respect to the 1997/98 year, they were facts relevant to facts in issue. In that respect, I refer to McPharlin's expressed reliance upon those documents and, in particular, his conclusion in paragraph 3.6 of his first report, based on a review of all financial accounts for that year, along with other years, that "(t)he overhead expenses appear to be substantially 'fixed' in nature rather than varying with turnover". Such a conclusion must necessarily be based upon an acceptance of the accuracy of source or primary documents for the relevant years. That conclusion was a necessary plank in the methodology adopted by him for calculating asserted losses;

(e) in any event, to the extent it might be argued that any of the challenged documentation was not relied upon by McPharlin, I was mindful of the general discretion I have to admit evidence which I am satisfied has sufficient relevance to a fact in issue. Here, the whole question of the plaintiffs' prepared accounts and the way in which they were interpreted by McPharlin, on the basis of the plaintiffs' instructions, was relevant to a fact in issue, namely, the asserted calculation of the plaintiffs' loss. I was not persuaded that the plaintiffs could simply choose to isolate from all their other financial information a particular document upon which they sought to rely and thereby avoid detailed challenge to other documents forming part of the same series of business records, and which potentially challenged the accuracy of those they relied upon;

(f) as well, an accepted exclusion to the "finality" rule arises in connection with prior inconsistent statements and, indeed, under section 29 of the Evidence Act, I was satisfied that the defence was entitled to put to Jenkinson those written financial materials relating to the plaintiffs' business which tended to contradict his evidence at trial and his invoice books upon which he sought to solely rely. Although, during the course of his cross-examination, Jenkinson on occasions sought to distance himself from the preparation of those books, he ultimately conceded that they were adopted and relied upon by him for the purposes of preparing final accounts and, indeed, it appeared that that information ultimately found its way into relevant tax returns. I was thus satisfied that these were prior statements in writing for which Jenkinson was responsible, which were adopted by him, and that they were properly put to him. I thus elected to receive them.

The receipt of that documentary evidence and, indeed, the outcome of the cross-examination of Jenkinson on these issues, was a matter of some significance in my assessment of his credibility. It did not stand alone because, on other matters, too, I was less than satisfied about his reliability. For the moment, however, I will discuss those aspects of the evidence arising out of cross-examination on the plaintiffs' financial accounts and which, I considered, substantially discredited him.

With respect to Exhibit D11 and the cash transactions for the year ending 1998, as I have already noted, he admitted that some $28,985 of cash receipts was not banked. That acknowledgment, of itself, does not discredit him and, indeed, I should say at this stage that I had no regard whatsoever to his refusal to answer numerous questions going to the accuracy of taxation returns filed by the trust. Rather, it was the evidence Jenkinson gave in seeking to explain the failure to bank those moneys which I found to be quite unsatisfactory. He commented (p.573): "As a general rule moneys are banked regardless of their denomination". It was then suggested to him that it was logical to expect to see bankings of cash at or about the time of receipt. His answer was less than direct (p.573):

"I would suggest to you that there are other alternatives, and one is that some of my bills are paid for by credit card and there may have been some cash banked to cover credit card."

Elsewhere, Jenkinson offered to show how cash moneys were so deployed, but apart from specific entries in the books which evidenced some such usage, and then of small amounts, no such evidence was forthcoming.

As cross-examination on each of the items in D11 proceeded, he was required by me to answer individual questions about whether cash sales received were banked. Once again, his answers were rarely direct and instead simply conceded that it did not "appear" that sums were banked, that he was "unable to find ... banking for those amounts" (p.608). He was given an extended time to check off the entries in D11 against his invoice book and, somewhat reluctantly, conceded that there did not appear to be corresponding bank records for cash moneys received.

The particular significance of this evidence is that Jenkinson elsewhere recognised that the financial accounts of the trust were prepared on the basis of the cash book, which in turn was prepared on the basis of banking records. It thus appeared from the cross-examination of Jenkinson that there was some $28,985 in cash receipts that did not find its way into the banking records and, inferentially, into the trust's financial accounts for the year ending 1998.

Whilst, as plaintiffs' counsel contended, the methodology adopted for calculation of loss was not based upon the trust's financial accounts but rather upon paid invoices, the failure or inability of Jenkinson to explain the non-banking of an amount of the size of $28,985 caused me to have grave reservations, not merely about the accounts for the year ending 1998, but with respect to the trust's accounts generally, about Jenkinson's credibility in particular and, squarely, about the reliability of the instructions provided by him to McPharlin and upon which McPharlin had relied in making his calculations.

Those reservations became more acute by the evidence which followed with respect to the plaintiffs' accounts in succeeding years.

With respect to the financial year ending 1999, the first financial year at Glen Osmond, the lack of correspondence between cash received and cash banked went in another direction, that is to say, the cash bankings exceeded cash sales (recorded in the invoice books) by some $21,451. McPharlin had, of course, relied upon the invoice books.

Jenkinson was attacked at length over this. He denied not recording cash sales and said that the additional cash sums banked were likely the result of his injecting personal cash moneys, substantially resulting from the sale of his personal tool collection, to "alleviate" the cash position of the business.

He was pressed at length on this matter and ultimately, and again reluctantly, seemed to concede that cash bankings did not readily match, in amount or timing, cash receipts. Once again, however, he sought to say that he could prove that the extra cash bankings comprised introduced funds. When confronted with the suggestion that there were already specific records, in those accounts, of "introduced" sums, he said that there were other unrecorded amounts introduced and that they had been "sloppy" (p.686) in not recording them. He referred, as well, to using cash receipts to make stock purchases and other expenditures, said that not all such transactions were recorded, that the books were incomplete and frequently there had been delays in entering such details. He did not think the cash book for 1999 was complete in this respect and (at p.701) he said "I reserve my rights regarding the other proposition which is did I run off to the pub with the money or something. I claim not to have done that, but that's a different matter."

In a separate challenge, he was referred to solicitors' correspondence which was tendered (D23) and wherein Young's solicitors had sought discovery of all documentation relating to introduced funds. In reply, his own solicitors had said, in a letter of 19 September 2002, inter alia, "these loans are journal entries and are evidenced only in the Financial Statements of the trust already discovered and there are no further documents that evidence same". It was suggested to Jenkinson that he had given such instructions to his solicitors and that the clear implication was that there were no introduced funds beyond those specifically referred to in the financial statements. He prevaricated on that, saying that was not his understanding of the situation (p.681) and "I haven't caught up with documentation over that period and that's sloppy of me and I guess what's happening here is he's asking for photocopies of records which have not yet been prepared" (p.686).

I thought that, overall, his explanations for non-banking or non-recording of cash received in the year ending 1999 bordered on the farcical. He variously said it was due to sloppy bookkeeping, then suggested the moneys might have been used to buy stock, then suggested that cash withdrawals from the till were always met with refund cheques, then he said there could have been time delays. He contended he had banked more than the papers showed, but he had just not banked it immediately. All this was in the face of his opinion, which he had urged upon Young, that Tottman was a competent and reliable bookkeeper, and of documents in which there were recorded specific sums for introduced funds, purchases and the like.

For the above reasons, my reservations about the reliability of Jenkinson's evidence, as to his accounts and generally, increased and they were confirmed by his evidence as to bankings in the 2000 year, where he appeared to acknowledge that he had not banked, at or about the time they were received, cash receipts totalling $9,770 (p.754).

The significance of those attacks on the accounts for the 1998, 1999 and 2000 years was as follows:

(1) For reasons which I have expressed, they damaged Jenkinson's general credibility and had serious implications for the reliability of the assumptions upon which McPharlin had proceeded.

(2) It was put to Jenkinson that the omission of some $21,000 worth of cash sales in records relied upon for the year ending 1999 and some $9,770 in the same records for the following year, was deliberately undertaken with a view to bolstering his claim in these proceedings. He denied that. Nonetheless, in the absence of other evidence, it can be assumed that at least some of that income was "retail" income and there can be no doubt that a failure to account for it does have the effect in McPharlin's figures of increasing the amount of the plaintiffs' claim in the action.

(3) If, indeed, there was a failure to bring into account takings of that order, that omission impacts upon the accuracy of the document Appendix 6, which otherwise purports to be an exhaustive list of retail sales in the financial year ending 2000 and which, of its nature, relies substantially on the accuracy of Jenkinson's instructions as to cost of goods sold.

I should add, on this topic, that even if I am wrong in my ruling as to the cross-examination and admissibility of documentation of Jenkinson relating to the year ending 1998, I should say that, quite independently of the evidence relating to that year, I formed a quite adverse view of his reliability as a result of cross-examination going to the accounts of the following two years, being years where, plainly, the challenged cross-examination and documentation was directly relevant to McPharlin's assumptions as to sale categorisation, monthly totals and cost of goods sold.

I have dealt with Jenkinson's evidence on these matters in some detail because my ruling and findings require that, but I should also say that there were numerous other aspects of his evidence where I found him to be prevaricating or unreliable. Some of these will arise as I discuss the issues, but I mention, in particular, his evidence as to what occurred at Dimoz restaurant, which was not supported by any of the others present, his evidence as to the joint venture and its nine-year term having been settled upon in 1994 as against his pleadings with respect to this, his evidence with respect to the discussions over the purchase of the Salvation Army shop on Magill Road, and his evidence with respect to trading activities he undertook after departing from 152 Magill, particularly in the e-bay market.

All of the above is not to say that I rejected Jenkinson's evidence overall, nor at all points where it conflicted with that of Young. Indeed, with respect to some matters, I preferred his evidence over that of Young, who I also found at times to be an unreliable historian.

Young's recollection of events was plainly faulty in a number of respects and has caused me to examine what he said very carefully. I simply do not accept his claim that, prior to early 1995, there had been no discussions about a joint venture and that out of the blue, as it were, he alerted Jenkinson to the Mahains property in early 1995 and that it was in consequence of this that Jenkinson proposed the joint venture. Against the background of Young's careful nature, their earlier discussions about the Salvation Army shop, Jenkinson's drawing of plans and liaison with Council over 152 Magill, and the unlikelihood that Young would alert a potential competitor to the availability of the next-door premises, that is highly improbable.

I reject for the same reasons, his claim that the first discussion or plan about expanding and renovating 152 Magill was when he decided upon it in October 1995. Comelli was instructed two months before that.

Further, as to their joint occupation of 152 Magill, it is plain, on any account, that they could not have both fitted into the space being used by Young as of March 1995 and, inevitably, the question of how the shop would be adjusted to accommodate their needs must have come under discussion well before August 1995. Young was then occupying 70 to 80 square metres of space. It is simply implausible that Jenkinson might have contemplated attempting to share that space and, indeed, it took Young until August of that year to free up 80 per cent of the available space at 152 Magill. Even then, it fell well short of the total 300 square metres of space which the parties ultimately shared. Young sought to explain this unlikelihood in terms that both businesses had agreed to reduce their stock, downsize their operations and target particular markets. That proposition had never been put to Jenkinson in evidence and again appeared to be some vain attempt at rationalising or explaining his otherwise untenable claim that Jenkinson had agreed to move promptly to 152 Magill. That position is further discredited by the fact that had that truly been in the parties' contemplation, one would have expected an agreement as to Jenkinson's rental contribution would have been concluded promptly in March 1995, yet that did not occur. It defies belief that, in this context, in the several meetings with Jenkinson related by Young to have occurred between January and March 1995, this question would not have been raised.

I am satisfied that in the first flush of excitement at having secured the Mahains lease, both Jenkinson and Young were indeed contemplating an early move of Jenkinson's entire operation to Magill Road and I am persuaded that such was discussed between them. In that context, Young was perhaps expecting he could quickly clear out his shop, but despite his best efforts, that still took several months. Jenkinson, too, grossly underestimated the time and effort required in moving his stock, plant and equipment. In the event, both moves were set back very substantially by the building works at 146B and 152 Magill, to which they each committed.

I had difficulty, too, with other aspects of Young's evidence.

His primary position was that the joint venture was terminable at will, but at page 1749, in discussing the lease on the workshop, he said the following:

"Q. Did it cause you any concern that the lease had been drafted on a three-by-three-by-three basis.

A. No it didn't. As far as I was concerned, I understood I was responsible for three years and if the joint venture proved a failure after three years, I could leave, I could end the lease."

Then at page 2040, in cross-examination, he was tested on that conflict. He was unable to offer any meaningful response to it.

Similarly, when challenged in cross-examination upon his claim that Jenkinson was to move into 152 Magill within a month of the commencement of the joint venture, his answers were prevaricating and quite unsatisfactory. He retreated to the position that Jenkinson had been "at liberty" to move to the Magill Road shop from the beginning, albeit that he had not required him to do that, nor to contribute towards its rent, and, indeed, his failure to since assert a claim for a rental contribution from March 1995 is itself significant.

His evidence as to the inaccessibility of Jenkinson's wood and furniture stock was also unconvincing. He complained that, by virtue of Jenkinson's failure to move to Magill Road in the time expected, he did not gain access to those materials, but he readily conceded that he might have gone to Belair Road and accessed them had he wanted and, indeed, it emerged that he had done this on a number of occasions. When challenged as to why he did not continue to pursue that method of accessing those materials, he responded with the unconvincing answer that he did not want to, because it would weaken his position.

Young's claim that his notation on the reverse side of page 49 of Exhibit D1, containing the words "by end of March", was a record of an agreement reached with Jenkinson to move to 152 Magill by that time is not credible, and for a number of reasons. In the first instance, the lease terms had only been negotiated with Mahains on 11 March and, even on Young's account, Jenkinson was not to join him for a month. Even then, it must have been apparent to Young that Mahains had to take steps to give notice to the existing tenant of the premises, Waites, albeit that the exact period of notice was not then appreciated. Further, the positioning of those words on the page opposite page 50 of that exhibit is more consistent, in meaning and time, with a note relating to discussions between Young and Mahains concerning the lease of the warehouse and the time of its availability (which, on other evidence, was later put back to April) and it is consistent, too, with the other adjacent notations clearly relating to discussions with Mahains over three-phase power, air-conditioning and a steel door. Further to that, it is inconceivable and unrealistic that Jenkinson might have agreed to move his entire retail premises, to the limited space at 152 Magill that Young could then offer him, within three weeks. Young's assertion that that note corroborates discussions he had with Jenkinson, in fact discredits him.

Generally, on Young's account, the delay in the availability of the workshop was due to the failure of Jenkinson to obtain the necessary consents and see that the works were carried out, yet, apart from the belated undertaking by Jenkinson, at Young's request in March 1997, to enquire about workshop approval, it is evident that the delay was as much attributable to Young as to Jenkinson. In the first place, Jenkinson's suggested and agreed contractor, Laidlaw, had perhaps let both parties down by building an inadequate structure and not gaining consent for it. He had then died. This was at the end of 1995 and Young had then informed Jenkinson (and this did not appear to be in dispute) that he was not prepared to spend any more moneys on the warehouse development. Young appeared to dispute his asserted reason for saying this, namely, that he had no funds, but on his own evidence and keeping in mind what he had spent on 152 Magill, that was plainly the case. In fact, he later paid for architects' and engineers' fees, but otherwise the continuing costs of the renovation were borne by Jenkinson.

At all events, Comelli was then asked by Young, in March 1996, to inspect Laidlaw's work, he saw problems with it and, in consequence, an engineer had been engaged to make recommendations for its correction and with respect to the staircase. On Comelli's account, which I accept, Young then asked him to enquire about requisite Council approvals. He did and informed Young that whilst only building approval was needed for the works to be carried out, if there was to be an application for formal approval for the premises to be used as a workshop, it would be a long and difficult one. In response, he says, Young told him not to proceed with that application (p.2286). I have no reason to doubt, and I accept, what Comelli said about this and find it was only later, in March 1997, that Young pressed Jenkinson to pursue that matter and Jenkinson agreed to do that.

Ultimately, building consent for the workshop was obtained in July 1997 and works were completed by the end of that year.

In that scenario, given Young's refusal/inability to contribute to those renovations, the history of Laidlaw's work, and Young's dealings with Comelli and with Jenkinson, there is simply no basis for Young blaming Jenkinson for the delay in completion of the workshop and, in consequence, Jenkinson's failure to move there. On Young's evidence, he complained of Jenkinson's delay in moving into the workshop, repeatedly, in the several meetings they had in the latter part of 1997. These things should be said about that:

(1) It is plain that Young, and to a lesser extent Jenkinson, were using the workshop for limited storage purposes in the meantime, anyway.

(2) It was clearly inappropriate and impractical for Jenkinson to move his stock, plant and equipment to the workshop until the agreed works had been completed and that was not until the end of 1997.

(3) Young's assertion that this was a constant item of complaint on the agenda of their meetings in mid to late-1997 was disputed by Jenkinson, it was not supported by McConchie, nor Tottman, nor his own witness Barker, and it achieved only very limited support from Damian. On all the evidence, I am not satisfied that Young did, indeed, raise a complaint of this nature at those meetings, nor, in the circumstances, would there have been any basis for him doing it. He may have been concerned to discuss the program for that move and that may well have been noted and discussed, but never then in the context that he was holding Jenkinson responsible for the delay.

(4) As I have already noted, Jenkinson was, in effect, being left to fund the work himself and it hardly behoves Young to complain about delay in those circumstances.

Overall, Young's criticisms of Jenkinson's conduct with respect to the completion of the workshop do him no credit.

Finally, there is a marked inconsistency between Young's claim that the tenancy was terminable at will and the contents of his own solicitors' letter to the plaintiffs' solicitors of 26 February 1998 (P22). In the latter, there is no mention whatsoever of such an option and, indeed, the claim to terminate there appears to be based upon Jenkinson's alleged breaches of agreement and misrepresentations.

Generally, I felt that Young sought to exaggerate his evidence in a self-serving way and that he sought to elevate to the status of contractual conditions or terms, what were no more than casual conversations he had with Jenkinson over planning and associated issues. I will touch upon those various matters as I deal with the factual conflicts in the case.

As I have already observed, for two men who had been conducting their own businesses over a number of years, they each demonstrated a quite remarkable lack of business sense or planning. Obviously, there was a broad consensus between them about the shared occupation of 152 Magill and 146B Magill, and about Young, in some manner, having access to Jenkinson's stock and plant, but as matters progressed, each must have realised there were no agreements about:

(1) the time it would take to have 152 Magill ready for joint occupation and just what Young would do to make it ready;

(2) what renovations would be carried out to the warehouse/workshop, how long they would take and who would pay for them;

(3) in the face of both lots of renovations, when Jenkinson would enter into occupation of either space;

(4) whether Young would contribute to the shop assistant's wage and, if so, on what terms;

(5) numerous other peripheral matters discussed in their late 1997 meetings.

Plainly, at later stages in their relationship, each party formed a view about what were the relevant terms and conditions and those views were, to a greater or lesser extent, reflected in documents they tendered by way of diary notes, minutes, agenda notes and the like, but essentially these reflected little more than the attitude of the maker of the document to what were the terms of the venture. They offered little by way of corroboration and, indeed, on occasions during the trial, I wondered whether there was ever a consensus reached about any of the contractual conditions contended for by either of them. I thought each party, in giving evidence, sought to reconstruct events in a light favourable to his cause and I thus had limited confidence in much of what I was told.

Amidst that level of scepticism, however, there are the undoubted facts that Young did renovate and extend 152 Magill and that the parties did come together there between December 1996 and mid-1998, that they each took some part in the preparation for occupation of the warehouse/workshop and they did reach some agreement about the payment of Tottman's wages.

In those circumstances, I am satisfied that there was concluded between them a joint venture agreement with respect to the occupation and use of the shop and the workshop, but, for reasons which will emerge, I am far from satisfied that many of the terms of that agreement alleged by each were in fact agreed upon.

At this point, I propose to discuss the evidence relating to the principal areas of contention on liability and to make findings as to them and associated matters.

. did the Retail and Commercial Leases Act apply;

. the extension and improvement of the shop at 152 Magill;

. the improvements to the warehouse/workshop at 146B Magill;

5. Discussion of legal principles in relation to breach of contract.

6. The defendant's claim to have lawfully terminated the joint venture.

7. The plaintiffs' claim to have lawfully terminated the joint venture.

8. The defendant's reliance on pre-contractual conduct.

There is a marked difference as to the respective positions of the parties, not merely as to the terms of the venture, but as to when it began. It is useful to look at the latter question first.

As I have noted, it was common ground that, whether the joint venture arose from one agreement or a number of successive agreements, it involved equal sharing of the retail space and of the adjacent workshop. In one sense, the time when consensus was reached is thus of marginal relevance, but in another sense, the competing claims of the parties as to the origins of the venture had important implications in terms of credibility.

On the plaintiffs' case as pleaded, there were, in fact, three successive agreements which constituted the joint venture. The first of them was concluded between May and November 1994, when they say the parties agreed to jointly occupy the retail space at 152 Magill, which would be extended and refurbished "for high quality retail purposes" and that that venture would continue for a term of nine years from March 1995. The original pleading as to this had been that these terms were concluded in November 1994, but it was then amended at the commencement of trial to plead that it was concluded between those times.

The second agreement pleaded was in March 1995, when they agreed to lease 146B Magill to use it as a workshop and warehouse facility for a period of three years, with two further three-year options, to seek Council permission for that use and to fit it out as a workshop.

The third alleged agreement was reached in November 1996, when they agreed they would jointly engage Tottman to act as a salesperson in the shop and a keeper of sales records.

In his evidence, Jenkinson described the first agreement in quite different terms and I will come to that in a moment.

For his part, Young pleaded that the joint venture was agreed upon in March 1995, that it was in terms that he and Jenkinson would, from April 1995, share the retail premises at 152 Magill for an undetermined period and lease for three years the premises at 146B Magill, to be used as a workshop and warehouse. For that purpose Jenkinson would seek Council approval. Later in that year, he pleaded, they agreed upon renovation/extension works for the retail shop and workshop and he agreed to contribute to Tottman's wage. Although his pleadings did not deal with the precise timing of all of these matters, they alleged it was further agreed that:

(1) Jenkinson would move his entire Belair Road operation to Magill Road within a month of March 1995;

(2) he (Young) could continue to do restoration work at 152 Magill;

(3) Jenkinson would sell stock to him and his son Damian at a 10 per cent discount;

(4) Jenkinson would make his machinery available to them both (and teach Damian woodworking skills) for a sharpening cost of $10 per week;

(5) each of them would contribute 50 per cent of the time to their joint retail efforts;

(6) they would promote and sell each other's products equally;

(7) they would retain their full commissions on their respective consignment items;

(8) Jenkinson would bring his alarm system, air-conditioning and fan systems to Magill Road;

(9) Jenkinson would pay rental for using 152 Magill at $250 per week; and

(10) the joint venture was terminable by either party at will.

By and large, Young adhered to that position at trial, but that is not to say his claims were borne out by the evidence.

In considering just when some form of joint venture began, the following observations as to the conflicts between the plaintiffs' pleadings and Jenkinson's evidence are pertinent:

(1) At trial, Jenkinson departed somewhat from his pleading with respect to the first alleged agreement. He said that that agreement was reached in May 1994 and that the nine-year term was then agreed upon to commence not (as pleaded) in March 1995, but "once the shop was ready". He did not proffer a meaningful explanation for this departure, perhaps not surprisingly, as there was no obvious logic in a plan to begin the claimed nine-year venture in ten months' time. Pertinently, March 1995 was the time when the lease was secured, but as of May 1994 the parties were not to know that. It appeared to me that the plaintiffs' pleading on this matter revealed an attempt to reconstruct.

(2) The plaintiffs' pleading about the parties' agreement to jointly occupy the retail space contained no allegation that this was to be dependent upon the parties obtaining proximate workshop space, whereas, in evidence, Jenkinson said it had always been so subject. Even so, on his account, the nine-year period was to commence from the time when the shop was "ready", not from such time as a proximate workshop space was located. Putting aside those apparent inconsistencies, a commencement from the time the shop became ready is at least consistent with his inability, during cross-examination, to identify any specific steps taken by him between 1994 and early 1995 to locate workshop/warehouse space.

(3) He was tested in cross-examination on why a period of nine years was settled upon and said it was because "We wanted a longstanding relationship that was going to reflect our retailing ambitions and our other agreed propositions for the venture" (p.267). He wanted "long term security" (p.268) and the parties just happened upon nine years as "an appropriate and useful length of time for our ambitions" (p.268). It was, he said "the sort of term you see in real estate" (p.268), albeit that he was then quite unaware of the provisions of the Retail and Commercial Leases Act. I thought these explanations were feeble and unconvincing.

It is pertinent, then, to note that in February 1998 when Young told him to leave the shop, he did not assert he had a nine-year right of occupancy - indeed, his only contention was (after speaking to Mahains) that he was entitled to a statutory five-year lease.

Having regard to those observations and conflicts, and to Jenkinson's general demeanour, I must say I had no confidence in the plaintiffs' claim that a nine-year, or indeed any, joint venture term with respect to the shop was agreed upon in May 1994. Further, common sense suggests that the parties would not likely have resolved upon such a commitment at that time when there remained outstanding questions of:

(2) obtaining suitable proximate workshop premises with concurrent rights of occupation; and

Having said that, I must say, too, that I simply do not accept Young's evidence that the first discussion he had with Jenkinson, about sharing the retail space at 152 Magill, took place following his disclosure to Jenkinson in January 1995 that Mahains was intending to sell his next-door premises. I am not persuaded about this, for a number of reasons:

. by all accounts, he and Jenkinson had met regularly over several years, he was well aware of Jenkinson's problems with Belair Road and the likelihood he might have to relocate and, in light of his ongoing dealings with Jenkinson, he was obviously, at an early stage, alive to the advantages (which he said he thought about only later) of having Jenkinson's stock, plant and equipment nearby;

. to the extent that Jenkinson claims (as his evidence and pleadings necessarily imply) that there was discussion during 1994 concerning joint occupation of Young's retail premises (albeit I am not satisfied on the evidence that there was any agreement then reached), that makes good sense in the context of what happened before and after January 1995 and I find it likely there were such discussions;

. in that respect, I accept Jenkinson's evidence and find that during 1994, he had, himself, prepared some sketch drawings of possible renovations to Young's premises so as to accommodate them both, and had, indeed, had discussions with Kensington and Norwood Council about his proposals. It does not necessarily flow from this that Young was alive to that fact (and, of course, he denied any knowledge of it), but I find it highly improbable he would have ventured upon the task without some discussions with Young. His conduct in doing this (which I accept happened) is consistent with there having been some discussion between the men about the possibility of merging their retail outlets in some manner;

. against that background, it is entirely consistent that when Young learned that Mahains was offering to sell space next door to 152 Magill, he promptly alerted Jenkinson to that fact;

. it is inherently improbable, as I find, that a man as careful and deliberate as Young would, in a very short space of time, commit himself to the idea of joint occupation of his shop and the lease of substantial adjoining premises.

I am thus satisfied and find that Jenkinson and Young did, during 1994, discuss sharing the premises at 152 Magill and that in that context they agreed upon the need for proximate workshop space, but that the need for them to secure that space inhibited the making of any formal agreement and ensured that their discussions remained at no more than that until about March 1995, when the Mahains property became available. At that time, the prospect of their securing access, whether by sale or lease, to the Mahains premises enlivened their discussions about a joint venture and led to the conclusion of an agreement. The idea of sharing the retail space did not, as Young contended, simply arise out of a suggestion made by Jenkinson in the context of their discussions about the workshop in early 1995.

In short, I reject Jenkinson's claim that there was any agreement for a joint venture concluded prior to March 1995, but, equally, I reject Young's claim that the proposal they share his retail space was only ventured upon by Jenkinson in the context of the Mahains property. I am satisfied the parties had, for some considerable time before March 1995, been discussing how they might, in the interests of efficiency and mutual support, bring their separate businesses under the same roof without entering into a partnership. It was, then, as a result of the Mahains property coming on the market, first for sale and then for lease, that the parties were put in a position where they considered they could negotiate and agree on the terms of a joint venture to share Young's retail space and the adjoining rear or workshop part of Mahains' property. Further, I am satisfied that, once the lease was secured, they agreed to do just that. In that respect I am satisfied and find that the parties regarded the lease as having been secured, by a verbal agreement, and that it was to commence on 27 April 1995 with a three-year term and two subsequent rights of renewal, each for three years. It is, of course, a matter of fact that the lease was not executed until 8 October 1996 and that this delay was occasioned, at least in part, by Mahains' concern over Council approval for works undertaken in the workshop, but in reality, it is plain that the parties each regarded themselves as entitled to enter upon and occupy the leased premises from 27 April 1995, and they plainly did so and paid rental.

Such a conclusion is consistent not only with the common sense of the matter, but with Young's general contention as to the formation of the joint venture and, in a perverse way, to Jenkinson's contention in his evidence (as opposed to his pleadings) that the 1994 "agreement" was conditional upon suitable workshop space becoming available.

I should here make some observations about another topic which became an issue during the trial and which was unusually contentious. It related to Young's claim that in October 1994, Jenkinson had expressed an interest in joining with him, Damian and Damian's proposed business associate in purchasing a building at 158 Magill Road, to be used by the two younger men as a café. On Young's account, the property was at that time on the market and under-valued, he saw its purchase as a good business opportunity and Jenkinson was also interested in it. At all events, he said, shortly before the date of the auction, Jenkinson withdrew his support for the purchase and the matter did not go ahead.

Those discussions were described by Jenkinson in a completely different context. On his account, Young approached him about their purchasing those premises jointly, with a view to both men using them as the workshop which would service the joint retail premises. He had no recollection of others being mentioned or involved in the purchase, nor about using them to establish a café.

In cross-examination, he was pressed about this and said he could not recall much of the detail of their discussions. When it was put to him that Damian and another were to operate it as a café, he said that that matter rang a bell, but it was not a matter material to his relationship with Young and he did not have a good memory of the meeting: "I never seriously considered a proposal like that sufficient to stay in my memory" (p.312). He did not "recall considering it as a café. That may have occurred, I don't recall that".

Elsewhere, there was the evidence of Damian to the effect that he was, indeed, at that time looking at a way of securing those same premises to operate as a café, with his father's assistance, albeit that he did not claim to have had any direct contact with Jenkinson about it.

It is not necessary for me to make formal findings about what exactly occurred about those premises, other than to say that I am satisfied that they were only ever considered by Young in the context of an investment purchase where his son might establish a café. Jenkinson did not strongly deny that such a proposal had been put to him, preferring to say that he would have not entertained it seriously, but also contending that the premises were suggested as a workshop. I do not accept his evidence as to this, albeit that I do not consider he deliberately sought to mislead. It appeared to me his recollection of just what transpired in connection with that property was flawed and, as with other parts of his evidence, he had sought to reconstruct events in a light consistent with his case.

The incident of itself has no direct relevance in the matter, but, indirectly, it is consistent with what I have already found to have existed during 1994, namely, a level of discussion between Jenkinson and Young concerning business opportunities of mutual benefit. It runs contrary to Young's suggestion that Jenkinson's proposal about sharing the retail space at 152 Magill arose, in January 1995, out of the blue, as it were.

For their own part, the plaintiffs contended that the contracting parties were Jenkinson, on behalf of the second plaintiff (whether disclosed or not), and Young.

Young contended, however, that he was never aware of the existence of the trustee and, indeed, only came to learn of it after December 1996, when he received a cheque from that entity. Even then, he was not told that it claimed to be the other party to the venture.

I am not minded to attach any significance to that issue, nor, indeed, make any precise findings as to the extent of Young's awareness of the existence or role of the trustee at any particular time. It is enough to say that I accept Jenkinson's evidence that he entered into whatever venture I find was concluded between the parties, on behalf of the second plaintiff, the trustee of the trust.

Whether or not that agency was disclosed to Young is immaterial and the second plaintiff may sue, c.f. Teheran-Europe Co. Ltd v S T Belton (Tractors) Ltd (1968) 2 QB 545 at 552 per Lord Denning MR:

"It is a well-established rule of English law that an undisclosed principal can sue and be sued upon a contract, even though his name and even his existence is undisclosed, save in those cases where the terms of the contract expressly or impliedly confine it to the parties to it."

See also Mooney v Williams [1905] HCA 34; (1905) 3 CLR 1 and Cheshire & Fifoot's "Law of Contract" (7th Aust. ed, Seddon & Ellinghaus, Butterworths 1997) para. 7.36.

3. What was agreed upon with respect to the joint venture?

The question then becomes one of what were the conditions, terms or warranties of the joint venture agreement concluded at about the time the lease was secured, namely, March 1995.

On Jenkinson's account, Young committed himself in May 1994 to a nine-year joint venture commencing when the shop was ready or, as pleaded, from March 1995. I have already rejected that claim. Jenkinson did not seek to say that there was some other or further discussion about that period during 1995 and, indeed, on the plaintiffs' case, the next time it was mentioned was at Young's birthday celebration in December 1995. For his part, Young denied there was ever any term fixed for the duration of the joint venture and contended that it was to be one of indefinite duration, but terminable at the option of either party. In that respect, he relied upon remarks allegedly made by Jenkinson to him at a visit Jenkinson made to Magill Road on 13 March 1995.

I will therefore examine the evidence relating to the events of 13 March 1995 and to the celebration dinner of December 1995 to see whether it assists in resolving the conflict.

As to the claimed meeting of 13 March 1995, Jenkinson had no particular recollection of this day, but did not deny the possibility that he might have met with Young at about that time to discuss matters. Even so, he did not accept Young's evidence with respect to certain critical matters said to have occurred then and which I will now touch upon. Young said:

. Jenkinson spontaneously arrived at 152 Magill at 2.00 or 2.30 p.m. on Monday, 13 March. He (Young) said he was in the workroom. His son Damian and Damian's friend Byfield were working at the rear of the premises on their own projects. Damian was helping him work on a trunk and Byfield was making his own study desk.

. When Jenkinson arrived, they briefly had a conversation inside and then walked to the rear of the premises to where Damian was and involved him in the conversation. Byfield was working close by, some three metres away. Young took Jenkinson there, he said, because he wanted him to inform Damian that Damian could use his machinery and could buy wood from him.

. Young then spoke of the three-way conversation in which Jenkinson assured him that he and Damian could use his machinery and access his wood stocks, that they would be expected to pay sharpening costs for machinery use, that Jenkinson would supply him with stock if he needed it and would sell him furniture. The conversation, according to Young, continued in this way (p.1532):

"Then I also said 'And we'll share the retail space 50 per cent?'. Mr Jenkinson said 'Yes'. Then I said 'And we'll share the amount of time of looking after the retail space on a 50 per cent basis?' and Mr Jenkinson said 'Yes'. I also mentioned 'And I'll continue working at the rear of my shop if I want to?'. Mr Jenkinson said 'Yes'. The last thing I said was 'And if it doesn't suit us, we'll each go our own way?' and Mr Jenkinson said 'Yes'."

. Young said that Damian did not appear to say anything during that conversation but their collective mood was excited and positive. Jenkinson left soon afterwards.

Jenkinson was cross-examined about this. He could not specifically remember the occasion, but agreed it was possible there had then been discussion at about that time concerning payment for machine-sharpening. He was asked whether there was some discussion then about what would happen if their "partnership" failed. He said he had no recollection of any such discussion, nor about an escape clause if the agreement failed. He did not recall that kind of discussion, although he conceded it may have occurred. At a later point he said it did not. He did not accept that the lease with Mahains was constructed in three by three-year periods to provide Young with the opportunity to depart from the venture if it was not working out. He said he had not contemplated what would happen if there were a major dispute with Young during the venture. He had no memory of meeting Damian or Byfield on that occasion and barely recollected Byfield at all.

Damian gave evidence about the same matter (and about other issues, as well, but I will deal with them elsewhere). I should say at this point that I was quite impressed by his demeanour and frankness. He spoke with appropriate composure and confidence about matters he claimed to remember and candidly disclaimed knowledge of numerous matters which obviously might have assisted his father's cause. He was cross-examined at some considerable length over the assistance he had provided to his father in the preparation of the case and, again, was quite frank about that. He described that assistance as being directed to the examination and recording on computer of figures extracted from the plaintiffs' books with a view to discrediting the plaintiffs' evidence over financial matters (I have already discussed that evidence). He had a measure of expertise in the use of computers, something neither his father, nor his father's partner, Ms Barker, had. He was forthright in saying that he was aware of the general issue between his father and Jenkinson, and that he had discussed the conflicts between them, even before his father had terminated the arrangement. He spoke separately of attending a number of the meetings that later took place between the parties and, again, spoke with a measure of independence, frankness and sincerity, which was to his credit. He said that he had not independently recorded or discussed with Young his own recollection of the events which he recounted as having taken place at the rear of 152 Magill on 13 March 1995. He said, however, that his recollection of events was clear.

All in all, I had no reservation whatsoever in accepting all of what he said about this.

He described how he and Byfield were working at the rear of the premises when Jenkinson arrived there and went inside. He later came out the back with Young and they engaged him in a conversation. Byfield was working a few metres away from where they stood. During the course of that conversation, his father asked Jenkinson whether he (Damian) would be able to use Jenkinson's machinery and access his wood stores. Jenkinson replied in the affirmative. His father said to Jenkinson "We will work together and not disadvantage each other?" (p.2126), or words to that effect, to which Jenkinson agreed.

Jenkinson then agreed that the defendant could buy stock from him and then "Mr Young said 'If it doesn't work out, we can both go our separate ways?' to which Mr Jenkinson replied 'Yes'" (p.2126).

Richard Byfield ("Byfield") was called and he, too, recalled the occasion, albeit not the date, in 1995 when he and Damian were working at the rear of the premises and he was making a computer desk. They were about three metres away from each other. He remembered Jenkinson arriving at the premises and going inside, and then Jenkinson and Young coming outside and having a discussion with Damian. He was not called into that discussion and continued with his work. He was not trying to listen, he said, but the conversation went on for five to ten minutes and he heard some things, although he could not remember many of them.

He remembered mention of a warehouse and storage, but the thing he specifically remembered was that near the end of the conversation, the defendant said these words: "If it doesn't work out, then we'll just go our separate ways" and Jenkinson said he agreed with that. He said he particularly remembered those words because they raised his curiosity somewhat.

In cross-examination, he was briefly tested as to the circumstances in which he had been brought to court. He said he had been contacted by Damian in November 2002 and asked if he could remember the conversation that had taken place on that occasion. He had told Damian that he could not remember much, but he was later asked to provide a statement to the defendant's counsel and afterwards requested to give evidence in the matter.

As with Damian, Byfield impressed me as a dispassionate and fair-minded witness who sought to give a true account of things. He had a measure of independence from the proceedings that most other witnesses did not. I had no hesitation in accepting him as a reliable historian.

Having regard, then, to the evidence of Jenkinson, Young, Damian and Byfield and my general observations as to the creditworthiness of each, I am satisfied that there was, indeed, a conversation between Jenkinson and the defendant at the rear of the premises at 152 Magill on 13 March 1995, and that its contents were much as described in evidence by Young, Damian and Byfield.

It does not, however, follow from this finding that I am thus satisfied that the joint venture between the parties was agreed upon as being terminable by either of them at will. There are other matters which impact on that and which I will shortly address.

I turn then to the events of late 1995 and to the dinner which took place at Dimoz restaurant at Goodwood at that time. It was common ground that present at the dinner were Jenkinson, Young, Jenkinson's wife McConchie, and Barker. It was not in dispute, either, that Young's 49th birthday was on or about that date.

On Jenkinson's account, the purpose of the dinner was to celebrate both Young's birthday and the joint venture. In the course of the dinner, Jenkinson said, it was stated (he did not say by whom) that "We were looking forward to a nine year association because that would take us both close to retirement, and fulfil our long-term ambitions" (p.137). A toast was proposed to the venture, he believed by McConchie, and he thought her words were "Here's to nine years of a successful relationship" (p.137).

On Young's account, the sole purpose of the dinner was to celebrate his birthday. It had been suggested by his partner, Barker, and they decided to invite Jenkinson and McConchie along. He denied absolutely that there was any toast to a nine-year relationship or venture. He did recall having a conversation with McConchie during the evening, in the course of which she said that moving Jenkinson's business was a huge task because of the size of his stock and plant, and that she hoped he understood how big it was.

It was put to him that he replied that he was not looking to a short-term return because the nine-year relationship would take him towards retirement. He denied saying that or anything like that, adding that he did not have any retirement plans then.

McConchie gave evidence about this matter, as well. She said the occasion was to celebrate Young's birthday. She said nothing about any toast. She said that at the dinner "everyone was very positive and excited", but she was concerned about the task that confronted Jenkinson in moving his stock and plant and the logistics of it, and she expressed that to Young. She said that in response, Young said he was not bothered because he understood Jenkinson and they had done a lot of business together, that he was excited because of Jenkinson's "plans, his energy, his enthusiasm" (p.1330) and "he knew that there was a commitment to a long term relationship, and that he was not looking to short term return because saw (sic) that this nine year relationship that they were going into took him towards retirement, and that he was more interested in developing his assets, his long term assets ..." (p.1330). She said they had a lengthy discussion about the matter.

She was tested on that account of things in cross-examination, but adhered to her memory of it. She herself thought the nine-year figure was unusual, but then conjectured that it related to the available length of the warehouse lease, which she then knew about. She acknowledged she had discussed the case with her husband and was aware of the significance of the nine-year period in the case.

I formed a generally favourable impression of McConchie as a witness. I thought she did her best to be dispassionate and did not attempt to mislead. That said, it was apparent that she was very concerned for her estranged husband's position in the matter and it impacted directly upon her own interests, because there remained outstanding between them a matrimonial property settlement issue and the outcome of these proceedings in financial terms is a factor in it. Otherwise in her evidence, she commented upon the inability of either her husband or Young to properly communicate and resolve their differences and spoke of the assistance that she, and for that matter Barker, offered to them to help resolve the differences that emerged in and out of meetings in the latter part of 1997.

Barker also gave evidence about that evening. She said there was no toast made at the dinner, nor was there any discussion there about the joint venture or its duration. She was challenged at some length in cross-examination about this. She said her memory of the evening was that it was one of group conversation with no "bilateral conversations", that is to say, conversations involving only two people. It was not that sort of evening, but she did recall a time when she and McConchie had a talk outside the premises afterwards. She did not discount the possibility that there had been bilateral conversations, however, but had no recollection of overhearing any. It was a noisy restaurant.

She heard no talk about the move from Belair Road to Magill Road being a big undertaking, nor Young saying anything about developing the property and building up assets. She agreed it was possible there was discussion between parties present to which she was not privy, but she did not hear any such.

She was tackled at length by counsel on what were called "bilateral conversations" and the capacity of others to hear them. She responded impressively, being as solicitous about the use of terminology as was cross-examining counsel.

I found her, too, to be an impressive witness, generally and with respect to these matters, and I have confidence that she sought to give an honest account of her recollection of the events of that evening.

Generally then, I had confidence in the evidence McConchie and Barker, but I had less confidence in the accounts of that evening provided by Jenkinson, in particular, and Young.

Jenkinson's claim that the purpose of the evening was in part to celebrate the joint venture and that there was actually a toast proposed by McConchie to that end, was not only unsupported by the evidence of other witnesses, but it was demonstrative of an inclination, which he displayed throughout the trial, to reconstruct or offer a version of events which he thought would best suit his cause. It demonstrated a level of dissembling which did him no credit at all.

Otherwise, I find there was a two-way conversation between Young and McConchie (each confirmed that), but that Barker did not hear it. That does not discredit her as she was prepared to concede that a conversation might have taken place which she did not see or hear.

McConchie's account is that she raised with Young the size of the task and Young himself acknowledged that there was a discussion about that. The only difference between them was that he denied McConchie's claim that he responded to the effect that he was not in the venture for short-term benefit and that he was looking to a nine-year relationship. On that topic, I prefer and accept the evidence of McConchie and I am indeed persuaded, notwithstanding his denials, that Young said that or something like that to her. His denials do him no particular credit, but in the light of what I apprehend that conversation to have been about, there is a likely explanation for his denial which I do not find particularly damaging to his cause. Put another way, I am not persuaded that what he said to McConchie amounted to some form of acknowledgement by him that the agreed term of the joint venture was one of nine years.

The above discussion about the events of 13 March 1995 and the dinner, along with the other evidence in the case, then assists me in finding whether, indeed, there was an agreement between Jenkinson and Young as to the term of the joint venture.

I have previously discussed and rejected Jenkinson's evidence to the effect that it was agreed in 1994 that the joint venture would extend for a period of nine years. Otherwise, I have accepted the evidence of Young, Damian and Byfield that at the meeting of 13 March, Jenkinson and Young agreed that if the joint venture did not work out, they could each walk away from it, but I have observed that the terms of that discussion did not necessarily imply an option in either party to terminate at will.

On all the evidence, I am satisfied and find that at no time did Jenkinson and Young agree upon a joint venture that was to be of a duration of nine years, and I so find for the following reasons:

(1) because of my findings already made about the conversation of 13 March 1995, a finding inconsistent with the contention there was to be a nine-year term;

(2) because I have rejected Jenkinson's claims of an agreement of any kind being reached in 1994 and, more particularly, the complete unlikelihood of the parties agreeing in that year to commence a nine-year venture either as of March the following year or when a workshop/warehouse became available. No satisfactory explanation was proffered by Jenkinson for his pleading or evidence as to this matter, the agreed term of the joint venture was not suggested by him to have been concluded at any later time, and of particular relevance is that he did not assert its existence when Young repudiated the joint venture in February 1998. The allegation was first made in his solicitors' letter of 20 February 1998 (P21) and, even then, on the footing, as I apprehend it, not that there was an agreement for a nine-year joint venture, but that it was for three years, with Jenkinson having options himself to renew the shop lease;

(3) further, I consider it unlikely, even allowing for their apparent naiveté, that either of the parties would likely have committed themselves to such a lengthy term, particularly in circumstances where, as later events showed, many aspects of their relationship then remained to be determined, e.g. Jenkinson's plain intention to employ an assistant, the renovation and rental for the shop, the non-availability, in the early stages, of a proximate workshop/warehouse and, later, the way in which that building, once found, was to be exploited;

(4) I am satisfied and find that the potential for the parties to remain in a nine-year relationship arose and was appreciated by them no earlier than the time when the April 1995 lease of the workshop (P6) was negotiated and secured by Young, being as it was for three years with two rights of renewal, each of three years. Even so, it is significant that that lease only bound Young and (inferentially by their relationship) Jenkinson for three years. The remaining three-year extensions were at their option. That lease provided both parties with the opportunity to exploit what was termed the "synergy" of having the adjoining retail and workshop premises operating together for a period of up to nine years if they so opted. I am persuaded that each of the parties, in the face of those negotiated terms, saw the opportunity to take advantage of that synergy for that period, but I am not persuaded, and indeed reject, the suggestion that they agreed, whether in 1995 or any other time, that that would, indeed, be the period for which each was bound to the joint venture;

(5) it is against the background of the expectations or perceived opportunities outlined in paragraph 3 and not in the context of some joint agreement upon a fixed term, that I am persuaded Young had (with McConchie) the conversation she related at the December 1995 dinner. I am persuaded that at that time, Young himself anticipated that the venture would last for as long as nine years, was committed to making it work, thought that it would likely take him towards retirement and that it represented a valuable long-term investment, and he said as much to McConchie. In using the language he reportedly did (and I note, in any event, that McConchie did not purport to give a verbatim account of what was said), I do not regard him as thereby confirming the existence of a prior agreement to remain in the joint venture for nine years - the conversation is equally capable of reflecting his anticipation, and indeed optimism, that because of their ability to retain the workshop for nine years, he expected the joint venture would last as long as that and that he was committed to see that it would. That falls short of confirming to McConchie that he and Jenkinson had literally agreed upon a nine-year venture;

(6) the strong likelihood is that, having in March 1995 achieved the opportunity to use the workshop for nine years (assuming renewals were successfully negotiated), both parties, having unbounded, albeit sadly misplaced, confidence in the continuation of their relationship, simply believed that their entire venture would carry on for that period.

As I have already noted, both Jenkinson and Young displayed throughout the life of this venture, a remarkable lack of business maturity which was manifest not merely in the absence of any written agreement as to the terms of their venture, but in their failure, at the very outset of the venture, to settle, even orally, upon numerous terms which were of considerable importance to its functioning. The matters I have touched upon were not resolved even by the time I have found the joint venture was agreed upon, namely, March 1995, and, as later events demonstrated, they gave rise to tensions and delays which led, seemingly inevitably, to the failure of the enterprise.

In the context of that measure of sloppiness and business immaturity, I do not find it surprising and indeed I am satisfied that, apart from recognising that they were each bound to a three-year venture by virtue of the initial period of the lease, neither of them otherwise specifically addressed or raised with the other the question of the duration of their joint venture.

Having found that, however, and notwithstanding the language used in the conversation of 13 March 1995, I do not regard its terms as amounting to an agreement that either party could, at any time after then, terminate the joint venture at will. The conversation occurred at a time when Young had, in his name alone, agreed to enter into a lease over 146B Magill, which bound him for at least three years. It was common ground that he entered into it on behalf of both of them and that the primary purpose in securing those premises was to enable Jenkinson to move his workshop, stock, plant and equipment there, and to also provide the extra workshop and storage space the defendant needed as a result of the expansion of his shop to accommodate them both.

If Young's contention as to the effect of his conversation with Jenkinson on 13 March were accepted at face value, Jenkinson might, on a whim, have walked away from the retail premises and the workshop any time after 27 April 1995, leaving Young with up to a three-year lease liability and, later, the unrecompensed cost of renovating 152 Magill. I am persuaded Young never contemplated that and, indeed, he conceded as much (p.1749):

"Q. Did it cause you any concern that the lease had been drafted on a three-by-three-by-three basis.

A. No, it didn't. As far as I was concerned, I understood I was responsible for three years and if the joint venture proved a failure after three years, I could leave, I could end the lease."

"Q. Do you remember telling his Honour that you considered you were responsible for three years.

Q. If the joint venture proved a failure after three years, you could leave.

Q. That's quite a different thing from the arrangement being terminable at the option of either party, isn't it.

A. I was trapped into the warehouse for the agreement, the lease, for three years. There was nothing I could do about it. As for the agreement, Mr Jenkinson was free to leave if it did not work out. I was free to leave the warehouse after three years."

Just as plainly, I am satisfied Jenkinson would never have contemplated moving his entire operation to Magill Road in circumstances where Young was the owner of the retail premises and the lessee of the workshop and might, again on a whim, turn him out.

Whilst I am not persuaded that the parties specifically discussed and agreed upon a fixed term for the joint venture, all the likelihoods point to the fact that both of them intended that, by virtue of the terms of the lease and the steps that each had to take in connection with the proposed sharing of space, the joint venture would be for at least the initial three-year period of the lease. I find they regarded that term as binding them to a minimum period and justifying the disturbances to their respective operations which would flow from the establishment of the joint venture.

I am further persuaded that it was in the context of the assumption they were thus bound for at least three years, that the conversation of 13 March took place, that is to say, that it was then agreed that after three years, either party would be at liberty to terminate the arrangement. Of course, the conversation did not recite this, but the evidence and the probabilities point to that implication.

I am satisfied and find that the parties then discussed the timing of Jenkinson's move from Belair Road, but did not settle on a fixed date and simply planned that it would take place as soon as Young could clear out his retailing areas. This was somewhat naively expected to take several weeks. In the event, the parties subsequently agreed upon renovations/extensions to both the shop and workshop premises, which set back substantially the timing of that move and ultimately led to their falling out.

- did the Retail and Commercial Leases Act 1995, as amended, apply?

By way of alternative plea, the plaintiffs contended that that part of the joint venture whereby it was agreed that they would share with the defendant the occupancy of the shop premises at 152 Magill, constituted a "retail shop lease" within the meaning of the Retail and Commercial Leases Act and that, by virtue of the plaintiffs' entry into joint occupation of those premises on 5 December 1996 and pursuant to section 17(1) of that Act, there came into existence a retail shop lease for a fixed term of five years from that date.

The relevant parts of the legislation are as follows.

The original enactment was entitled the Retail Shop Leases Act 1995 and it came into operation on 30 June 1995. After a series of amendments, it later became known as the Retail and Commercial Leases Act. For reasons which will emerge, the provisions to which I will refer have application to the circumstances of this case.

Section 3 of the Act contains the following relevant definitions:

"'lessee' means the person who has the right to occupy a retail shop under a retail shop lease, and includes -

(i) at which goods are sold to the public by retail; or

(ii) at which services are provided to the public, or to which the public is invited to negotiate for the supply of services; or

(b) business premises classified by regulation as premises to which this Act applies,

but does not include business premises of a class excluded by regulation from the ambit of this definition;

'retail shop lease' or 'lease' means an agreement under which a person grants or agrees to grant to another person for value a right to occupy a retail shop for carrying on a business -

(a) whether or not the right is a right of exclusive occupation; and

(b) whether the agreement is express or implied; and

(c) whether the agreement is oral or in writing, or partly oral and partly in writing."

"6. For the purposes of this Act, a retail shop lease is taken to have been entered into when -

(b) a person enters into possession of the retail shop as lessee under the lease; or

(c) a person begins to pay rent as lessee under the lease or proposed lease (but not if the payment is an advanced payment of rent made to secure the premises),

"12. (1) Before a retail shop lease is entered into or renewed, the lessee must be given a disclose statement for the lease.

(2) A disclosure statement is a written document stating or containing -

(l) whether any right to renew or extend the term of the lease is given by the lease and, if so, the nature of the right; and

(m) the legal consequences of breach of a term of the lease (including the consequences of early termination of the lease by the lessee); and

(n) a warning that oral representations made by the lessor or the lessor's agent on which the lessee has relied should be reduced to writing and signed by or on behalf of the lessor before the lessee enters into the lease; and

(o) a warning that the lessee should obtain independent legal and financial advice before entering into the lease.

(5) If a disclosure statement is not given as required by subsection (1), or contains information that at the time it is given is materially false or misleading, the Magistrates Court may, on application of the lessee, make one or more of the following orders as may be appropriate in the circumstances of the case -

(a) an order avoiding the lease in whole or in part;

(c) an order requiring the lessor to repay money paid by the lessee;

(d) an order requiring the lessor to pay compensation to the lessee;

(e) an order dealing with incidental or ancillary matters.

(6) However, an order cannot be made under subsection (5) on the ground that a disclosure statement is incomplete or contains information that is materially false or misleading if -

(a) the lessor has acted honestly and reasonably and ought reasonably to be excused; and

(b) the lessee has not been substantially prejudiced.

"17.(1) The term for which a retail shop lease is entered into must be at least five years.

(2) If a lease is entered into in contravention of this section, the lease remains valid but the term of the lease is extended to bring the term (or the aggregate term) to five years.

(3) This section does not apply to a lease if -

(a) the lease is a short-term lease (ie a lease entered into a fixed term of six months or less); or

That section was repealed in 1997, but a new section, 20B, was then substituted for it which, for present purposes, has the same effect.

Section 68 of the Act enables a Magistrate, on an application, to -

"(j) do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease."

Section 69 of the Act then provides that if, in a proceeding before the Magistrates Court, a monetary claim exceeds $40,000, that Court must refer the proceeding into the District Court and the District Court will have the powers conferred by the Act. In fact, the proceedings in this matter were instituted in the Magistrates Court and, as I apprehend it, were removed into this court pursuant to that section of the Act.

By his Defence in the action, Young, for reasons which did not emerge, contended the premises were not occupied by either plaintiff, that there was no retail shop lease or that, in the alternative, there was a short-term lease within the meaning of section 17(3)(a) of the Act which ended on 6 March 1998, being one month after a notice of termination was served upon Jenkinson, or that, in the further alternative, possession of the premises was granted to the plaintiffs as from 7 March 1995, notwithstanding that Jenkinson did not actually move his stock there until December of the following year. In those latter circumstances, it was pleaded, the lease commenced before the operation of the Act, which only came into force on 30 June 1995. Finally, by way of a further alternative, Young sought relief by way of an exemption from a five-year term pursuant to section 68(2)(e), (j) and section 77(2) of the Act. The latter section enables a court to exempt a person from any of the provisions of the Act in relation to a particular retail shop lease.

The plaintiffs' argument as to the existence of a retail shop lease was a simple one. They said that that part of the joint venture by which the defendant agreed to share his retail premises with Jenkinson was an "agreement" under which the defendant granted or agreed to grant to Jenkinson "for value a right to occupy a retail shop", albeit that it was not an exclusive right and the agreement was not in writing.

On the basis of what I have found as to the agreement between the parties, I am bound to conclude that it then conformed with that definition of a retail shop lease, albeit that the agreement was concluded prior to the commencement of the Act. I am satisfied it can properly be said to have been implied in that agreement that Jenkinson would provide "value" to Young in the form of a reasonable rental sum for sharing the shop.

I have already found that the parties did not in March 1995 settle upon a fixed date for Jenkinson to move to 152 Magill and, indeed, the evidence disclosed that even by 30 June 1995 (and before additional building works were decided upon), Young had not completed the work of preparing the premises for joint occupation. Otherwise, Jenkinson was still engaged in selling the McKechnie antique collection and could not attend to the move, anyway. I find that Young accepted that the move would not take place by then.

I expressly reject that Jenkinson agreed to or did enter into possession of 152 Magill prior to 30 June 1995, nor, indeed, prior to 5 December 1996.

As the agreement to grant to Jenkinson the right to occupy remained executory (there was not in existence any signed lease) as of the commencement of the Act, section 6 deems the lease to have been "entered into" either when possession was entered into or rental was paid. Neither of these events occurred until after 30 June 1995, so the effect of section 6 is to make the agreement subject to the Act. Section 17 then applies, so that whatever of the intentions of the parties, the agreement to share occupancy of 152 Magill must be deemed to have created a retail shop lease for a period of five years from the date of Jenkinson's occupancy, namely, 5 December 1996.

Against that finding, plainly there was a failure by Young to provide a disclosure statement as required by section 12 of the Act. I have considered the consequences of that failure in terms of subsection (5) of that section.

Given the particular circumstances of this matter, I cannot regard most of those matters of disclosure as material in the circumstances obtaining here, particularly given the parties' proposed joint occupation of the premises, their common business interests and the like. The only matters the non-disclosure of which might arguably have been relevant are those set out in paragraphs 12(2)(d), (l) and (o).

In the circumstances as I have found them to be, the parties had purported to agree to share the wholesale and the retail premises for a period of at least three years. Notionally, however, Young could not, effectively, have provided, under section 12(2)(d), notice of a term of less than five years (i.e. by nominating a three-year period, he would plainly have offended the Act). Put another way, had he apprehended the need to comply with that disclosure requirement and, indeed, section 12(2)(e), it is doubtful, as I find it, that he (and perhaps even Jenkinson) would have committed to the shop lease.

Otherwise, I am not persuaded Jenkinson would have conducted himself in any other way had Young given him the warnings provided for in subsections 12(2)(n) and (o). Neither of them, even in the serious circumstances which they respectively apprehended, seemed interested in obtaining advice of any kind. Both had business experience and I am not satisfied either would have been influenced by such warnings.

In any event, I am persuaded that if there was any breach of section 12, its consequences would not differ in any material way from the consequences of any wrongful termination of the lease period fixed by section 17. The general powers of the court under section 68 of the Act come into play in either case.

I have thus found that the parties purported to enter into a joint venture whereby, inter alia, Jenkinson would occupy the retail shop for a period of three years from April 1995 and that thereafter the arrangement would be terminable at will. I have then found that, by virtue of section 17(1) of the Retail and Commercial Leases Act, they in fact concluded a retail shop lease whereby Jenkinson became entitled to occupy the shop for a period of five years from 5 December 1996.

The questions for determination thus become whether the defendant was entitled, as he claims he was, to have terminated the joint venture and hence, by implication, that retail shop lease, in February 1998 or whether he should be exempted from a five-year term by virtue of sections 68(2)(e) and 77(2) of the Act. Before discussing these matters, I should make some findings about the delays which occurred in the joint occupancy of both 152 and 146B Magill.

- the extension and improvement of the shop at 152 Magill

I have already found that although the parties had not entered into any agreement about the matter, they had discussed during 1994 the sharing of the retail space at 152 Magill. I am further satisfied and find (and in this respect I prefer the evidence of Jenkinson over that of Young) that, in the context of those discussions, it was then contemplated that the available retail area in those premises would have to be maximised and possibly extended and refurbished. Jenkinson plainly spent some time designing and planning just such an extension, whether with or without input from Young, and it is consistent with that, that some months after the joint venture commenced in March 1995, Young instructed the architect Comelli to prepare plans for that extension and renovation and Comelli was given Jenkinson's sketches and materials.

I reject Young's claim as unrealistic and contradicted by all that occurred after March 1995, that the two parties simply contemplated sharing the retail space at 152 Magill (available as of March 1995) and contracting their businesses to fit into it - that space was then fully occupied by Young's own business and Jenkinson needed at least a similar amount of space.

Despite their previous discussions about the use of retail space and the possibility of refurbishing it, I am satisfied that as of March 1995, the agreement for the joint venture contemplated no more than a maximisation of the available retail space within the shop. Any extension or refurbishment was necessarily a matter for Young to decide upon and it was only later in that year that he made the decision to extend and renovate. It was in that context there were discussions with Jenkinson about his taking an interest in the premises or advancing moneys to Young to enable the works to proceed. In the event, Young chose to finance the renovations himself.

Even so, it is plain both parties had unrealistic expectations about the amount of time it would take to complete them and, indeed, the premises were not ready for occupation until Jenkinson moved there in December 1996, some 21 months after the commencement of the venture.

Young feebly sought to suggest that Jenkinson had promised to move his retail operation to Magill Road within a few months of March 1995, but Jenkinson rejected that and I here prefer Jenkinson's version of events. I am satisfied such a move was indeed discussed, perhaps even contemplated, but never agreed upon. In the first place, there was not, then, sufficient retail space available to accommodate both businesses. Secondly, both men knew and expected that the available retail space within the premises would have to be maximised and that would take time. In the meantime, both knew it was not feasible for Jenkinson to move across, Young did not insist upon it and, indeed, was fully occupied making his own preparations to free up space. Thirdly, once Young decided to go beyond clearing space and opted to undertake building works, it was quite unrealistic to expect that Jenkinson might move before those works were completed. Young knew that, chose to proceed with the works and, I am persuaded, never expected or called upon Jenkinson to move there until they were completed. Fourthly, there is no suggestion made by Young that he made any attempt to agree a rental contribution with Jenkinson or make any demand for rent at any time prior to November 1996 - an unlikely scenario if his position is that Jenkinson agreed to move there as of March/April 1995. Further to that, Young did not seek in the reconciliation document (P1) any rent prior to December 1996 and has not pursued his counterclaim where such a claim was foreshadowed.

Having found against Young's contention with respect to the time at which it was agreed Jenkinson would move in to share the retail premises, it must follow that Young cannot complain of any delayed entry by Jenkinson to the retail premises. Any delay was due to the time it took him (Young) to complete the extensions and renovations. Nor should Young complain about that, because it is obvious that, putting to one side disputes which arose as to renovation and use of the workshop, the parties were over the relevant period in communication and generally agreed upon the steps that were being taken to refurbish the shop, albeit that they were being undertaken at Young's expense.

- the improvements to the warehouse/workshop at 146B Magill

In retrospect, it can be said that delays in the preparation of the workshop for its planned uses and their financial consequences for the parties were the primary cause of the failure of the whole venture.

It is clear, on all the evidence, that neither party had an opportunity to consider the proper adaptation of the workshop until after January 1995, when it became available for purchase and, later, for lease. By the time the lease began, the parties had negotiated successfully with Mahains for the installation of three-phase power, skylights, a toilet and so on, but it was only after then that they sought to agree with him and amongst themselves upon how it might be developed and used.

It was Jenkinson's idea to install a mezzanine and it is plain that Young saw the sense of and agreed to that. It was likewise with the spray booth and I am satisfied that at the time Jenkinson's builder, Laidlaw, commenced work on these installations, both parties supported what was to be done. They knew there would be some delays, but expected works would be completed by the end of 1995 and that they could soon move into joint occupation. Problems soon arose, however. In the first place, there was Laidlaw's illness and death. Then there was the realisation that his mezzanine structure was inadequate and unapproved, and this led to the engagement of Comelli and an engineer to rectify the problems and obtain building consents. There is no basis for criticising the conduct of either party to this point. The selection of Laidlaw as builder might have been an unfortunate one, but it hardly reflects on Jenkinson.

There was then Young's announcement at the end of 1995 that he could not afford to contribute further moneys to the workshop development, albeit that he still wanted it to proceed. In fact, he later paid some architectural and associated fees.

There were disputes on the evidence as to just who was responsible for requiring that there be Council approval for the building works to be undertaken within the warehouse, but in a sense that question is immaterial because it is obvious that such consent was required in any event. In his pleading, Jenkinson suggests that obtaining approval was a term of the joint venture with respect to that property concluded in March 1995, but that can never have been so because, on all the evidence, the mezzanine was not then contemplated and, further, they, along with Jenkinson's selected builder, Laidlaw, appeared to then be quite oblivious to this need. Elsewhere, Young said Mahains had raised building consent as a precondition for signing the lease and that this had delayed its execution, but it was not clear when Mahains did this. Otherwise, he said he told Jenkinson that Comelli was obtaining it. There was then the evidence of Comelli that it was needed, in any event.

Given that both parties had committed to the construction of the mezzanine and that Council consent was in fact needed and also required by Mahains, there can be no basis for Young complaining about any delays occasioned by obtaining it or, indeed, carrying out consequential works. In reality, the delays, directly attributable to the involvement of Laidlaw, his failure to obtain consent, his inadequate works and the consequential need for architectural, engineering and building intervention, meant that the availability of the premises was set back two years, from December 1995 to December 1997.

These delays were not assisted by the inability of the parties to agree upon how the work area would be disposed and who would use what part of it, and the plain fact that both were stretched financially and unable to readily fund the works to be carried out. In addition, they were, in mid to late-1997, having disputes and meetings over various issues, including the operations of the retail premises and the workshop.

Although considerable time was occupied at trial discussing the rights and wrongs of their respective positions in those disputes, I do not find it necessary to make specific findings about most of them. It is plain, on all the evidence, that the parties were getting on progressively badly as time went on, that each had expended a great deal more money on various aspects of the venture than he had intended, that Young's funds were largely exhausted, that they could not agree upon certain aspects of the operation of the retail premises and, more importantly, the appropriate disposition of the workshop, and that their retail operations were not improving as a result of their joinder. Young undoubtedly remained anxious for Jenkinson to move his workshop and storage premises from Belair Road, but Jenkinson was understandably reluctant to do that until the workshop renovations were completed and proper preparations had been made for and agreements concluded with Young over the installation of his machinery.

At all events, the workshop did not become ready for their full occupation and use until January 1998. There can be no doubt that each of them had used it for limited storage purposes in the meantime, but by then the first period of the lease was due to expire in some three months' time. By then, too, there had been twelve months of joint occupation of the retail premises and, from Young's perspective, apart from having a "co-tenant" in his retail operations, he had not yet enjoyed the benefits he had anticipated, that is to say, proximate access to Jenkinson's stock, plant and equipment. By that time, too, the parties were even more ill-disposed towards each other.

There is simply no good evidence suggesting it and I am not disposed to find that either one of Jenkinson or Young was responsible for the delay in the completion of renovation works at the workshop. It ill behoves Young to criticise Jenkinson over this when he had ceased to contribute to the development after December 1995.

I should then return to the provisions of the Retail and Commercial Leases Act. Having made the above findings about delays in the joint occupation of shop and workshop, I am not persuaded that Young had any proper basis for terminating the joint venture at the time or for the reasons he advanced: Jenkinson had not then breached, either actually or prospectively, the joint venture terms. Further, I am not persuaded there was then in evidence any proper basis for a court to relieve Young of his obligation to make his shop available to Jenkinson for the statutory lease period.

The plaintiffs pleaded that in about November 1996, as the third part of the joint venture (in addition to earlier agreements about the shop and workshop), the parties agreed "to engage a salesperson" to sell and maintain records.

There was then this passage in Jenkinson's examination, at page 89:

"Q. Prior to and including January 1995 did you agree with Mr Young to spend equal time on sales with you to be at liberty to employ someone to sell on your behalf.

A. We agreed that the sales person would equally promote stock.

Q. What had you agreed about a sales person prior to that time.

A. We'd agreed that we needed one because both of us would be in the workshop or whatever. We wanted someone who would promote the stock, who would keep our books, who would present well to the public. We wanted a professional selling."

Later in his evidence, Jenkinson referred to some contemporaneous notes he had made on 20 November 1996 and the following exchange took place (p.123):

"Q. Broadly, what was the topic of that discussion.

A. The page to which you refer, refers to a scheme I was trying to develop with Mr Young, whereby once the new shop was up and running and his figures were better than previous, I would take a commission, if you like, on the increase per month as a way of paying the shop assistant. Mr Young was low on funds and said that he didn't know quite how he was going to be able to pay the joint shop assistant's wage at this stage. And I was just simply trying to help him with a performance based remuneration package."

In the event, said Jenkinson, Young did not agree to that and after discussing other methods, they settled upon an arrangement that Young would not contribute to Tottman's wage for three months, but thereafter would pay $150 per week towards her wage.

Young gave quite a different account of events, saying nothing had been discussed between them about the employment of a shop assistant until late November 1996, when Jenkinson peremptorily brought her to the shop and introduced her as their shop assistant. He was stunned, but ultimately agreed to contribute to her wage as he did not want charity. He said that their original discussions about the joint venture had been on the basis that each would personally contribute equal time to the retailing enterprise, but because of the stance taken by Jenkinson over the appointment of Tottman, he gave in on that issue.

On this conflict, I generally preferred the evidence of Young over that of Jenkinson, and for a number of reasons. In the first place, Jenkinson's evidence conflicted with his pleading as to the time at which agreement was reached over the employment of a sales assistant. Secondly, there is a measure of consistency between Jenkinson's pleading and Young's own evidence that the issue came to the fore on or just prior to the shop opening, albeit that they were not agreed on how or precisely when it arose. Nevertheless, I am satisfied that, Tottman having recently become available for employment in late 1996, Jenkinson sought to introduce her into the business as a sales assistant and Young resisted that. So much is apparent even from Jenkinson's evidence. His account of these difficulties is consistent with a scenario whereby he was trying to persuade Young to engage Tottman and it is inconsistent with his claim that the matter of engaging a shop assistant had been agreed between them in January 1995. Generally, this issue reflected poorly on Jenkinson's credit.

At all events, I am satisfied and find that the agreement to employ Tottman or any person in the shop was first discussed and concluded in November or December 1996 and it became part of the joint venture. I will later discuss its significance.

On the basis of my above discussions and findings, I am satisfied and find that:

(1) in about March 1995 the parties agreed to share equally the premises at 152 Magill for the purposes of their retailing activities and that Young would prepare his premises for this by expanding them to maximum retail capacity. It was implied in this agreement that Jenkinson would pay to Young a reasonable sum for rental and that their shared occupancy would not begin until Young had had a reasonable opportunity to prepare his shop;

(2) at the same time, the parties agreed that Young would lease and they would share equally, for use as a workshop and warehouse, the adjoining premises at 146B Magill and that they would contribute equally to the rental;

(3) that Jenkinson would bring to the warehouse from Belair Road his stock, plant and equipment, in particular his stores of furniture and items requiring repair, wood and architectural fittings, and that Young and his son would be able to access these on favourable terms (which were not then settled upon) and shown how to use the machines on payment of a sharpening fee of $10 per week. I am not satisfied that any fixed date for that move was settled upon, but I am satisfied it was agreed that it would be as soon as possible, albeit, impliedly, no earlier than the time at which the retail premises were made ready for occupation, nor the time when the warehouse was itself ready for occupation;

(4) it was agreed the joint venture would commence from the date of the lease, namely 27 April 1995, and would continue for a period of three years, and after that period be terminable at will;

(5) I have, of course, elsewhere concluded that by these arrangements, the parties in fact became statutorily bound to a joint venture with respect to the retail premises for a period of five years from December 1996 and it must then be implied from the nature of the joint venture, that this statutory period for the occupation of the retail premises necessarily committed them to a similar period of occupation in respect of the warehouse/workshop, a period which it was open to them to achieve by renewing the lease;

(6) that the parties would work together cooperatively and share customers equally;

(7) that in these dealings, the first plaintiff was acting on behalf of an undisclosed principal, the second plaintiff.

Further, I am satisfied that at later stages these agreements were added to or varied, by mutual consent, in the following ways:

(8) during 1995 it was agreed that Young would, at his own expense, expand, refurbish and renovate the shop in a mutually agreed manner and that Jenkinson would not move into it until that was completed;

(9) in the same year and continuing into 1996, it was agreed that the parties would carry out substantial improvements to the workshop, including the installation of a mezzanine and spray booth, that Council consent would be sought for these and that Jenkinson would not move his stock, plant and equipment to the workshop until these were complete;

(10) in November or December 1996, it was agreed Tottman would be employed in the shop and that Young would contribute towards her wages;

(11) at about the same time, it was agreed that Jenkinson's shop rental contribution would be $250 per week;

(12) although I consider these matters have only marginal relevance, I am also satisfied that Jenkinson agreed to seek Council approval for workshop use (I am further satisfied he attempted this, but in all the circumstances reasonably abandoned his pursuit of the matter) and to install his alarm system and facsimile machine - albeit that these were destined not to be moved until he completely vacated Belair Road;

(13) at a time which was not clearly defined, the parties agreed that each would retain full commission on his own consignment items, however sold. I am satisfied that in breach of this provision, Jenkinson took a part-commission in his sale of the Khai Liew desk. I should say here, however, that I am not persuaded that this particular term was a condition of the joint venture or could be characterised or treated in breach as an "intermediate term" (see discussion below), the latter because I am not persuaded that a breach of it would likely give rise to sufficiently serious consequences as to have the same effect as a breach of conditions.

There was some dispute between the parties as to exactly what Young said to Jenkinson on 7 February 1998, whether he swore or not, and whether Jenkinson then or later uttered a threat about using Mr McGill. I do not find it necessary to make any precise findings about these matters - plainly, by any measure, their discussions were heated. It is enough to say that it is common ground that Young then told Jenkinson to leave the shop. Jenkinson said that Young told him he wanted his freedom, that he was going broke and was being dragged down. Young did not appear to seriously challenge that account, although he did not advance it.

It is of significance, however, that Young did not then say to Jenkinson anything to the effect that Jenkinson had misrepresented matters to him prior to the joint venture agreement or that Jenkinson had breached the joint venture agreement or that he (Young) was entitled to terminate at will, without needing a reason to do so. Further, in a later discussion with McConchie, he proffered no good reason or at least no legal excuse for terminating. Likewise, as I have noted, Jenkinson did not then challenge Young and assert there was a nine-year agreement.

This has some significance in light of the correspondence that followed. There was some correspondence of a without-prejudice nature, but on 20 February 1998, Jenkinson's solicitors wrote to Young (P21), asserting that their client was entitled to a lease over the shop for periods with renewal options seemingly identical to those contained in the workshop lease or, alternatively, that Jenkinson had a Retail Shop Lease. Whilst arguably having the same effect in terms of duration, this allegation nevertheless differed from the plaintiffs' claims, in pleadings and evidence, that there was a specific agreement for a nine-year joint venture term.

In his solicitors' letter of reply of 26 February 1998 (P22), Young denied the allegation about a lease term over the shop and asserted that Jenkinson had misrepresented matters to him concerning the move to Magill Road and had breached their agreement relating to the timing of it. He claimed to be entitled to rescind and asserted he had rights to relief under the "Misrepresentation Act 1971 and the Fair Trading Act 1987...". That letter made no mention of a right to terminate at will.

Subsequently, Young sent a notice dated 6 April 1998 (P23), terminating the tenancy over 152 Magill one month hence and "rescinding all legal relations". It did not allege a basis for termination.

By letter dated 10 June 1998 (P25), Jenkinson said he elected to terminate the joint venture and Retail Shop Lease because of Young's repudiation of them and his continuing refusal to honour the joint venture. He asserted Young had restricted his ability to trade properly at 152 Magill, had bricked up the wall between the warehouse and those premises, had refused to share the cost of Tottman and had misused the shop space.

During part of this period and up to 26 April 1998, Young had remained liable as lessee under the Mahains lease, but he had no interest in renewing after that time. For his own part, Jenkinson wished to continue to occupy the workshop and hence, by agreement between the parties, Young's option to renew was effectively negotiated with Mahains and exercised in Jenkinson's name. Jenkinson thereafter became the lessee of the premises for a period of three years, with one or more options to renew for the same period.

On 13 July 1998, Jenkinson left the shop and moved his retail operation to Glen Osmond.

There were various disputes at trial as to events that occurred in that period between 7 February and 13 July 1998, and I will deal with them in turn:

(1) I have already mentioned the dispute as to precisely the terms upon which Young purported to terminate the relationship on 7 February 1998 and have not found it necessary to make findings about precisely what was said by either.

(2) There was a dispute at trial as to the circumstances in which the door opening between the shop and the workshop was bricked up by Young. There can be no doubt that the ability of Jenkinson to move freely between the workshop and the shop would have remained useful to him in the period between the end of the first lease period (26 April 1998) and his ultimate departure from the shop on 13 July 1998, but having said that, it is plain that the parties agreed upon Jenkinson taking over the lease in his own name and on his own account from 27 April. Further, I accept the evidence of Young that Mahains required him to brick up that doorway on the termination of his (Young's) lease (Mahains gave a similar direction to Jenkinson - P20) and that he properly complied with that request as close as reasonably possible to that date. Such a requirement was Mahains' right, it is immaterial who did it and I do not accept Jenkinson can properly complain about its implementation by Young.

(3) There was then evidence given by Tottman as to the conduct of Young in the shop in the period between February and July 1998. She spoke of things done by him which, it was asserted, impacted upon the profitability of the retail business of Jenkinson after that time, of him leaving items around the shop in an untidy manner, moving furniture and using machinery when she was seeing customers and so on. She also spoke of his poor attitude to her in that time. Her claims were denied by Young and were not supported by Damian, in so far as he spent time at the premises over that time. Notwithstanding Young's denials as to this, I am satisfied that there was some measure of untidiness in the shop, but it was likely more related to the necessity for Young to move his effects from the workshop than to any attempt by him to diminish the presentation of what was, after all, still their joint premises and destined to be Young's in the end. Plainly, by then, their relationship was a "cool" one. I am not persuaded, however, that even if the several acts occurred as contended by Tottman, it was established on her or Jenkinson's evidence that any of them were of such a nature or seriousness as to directly impact upon the profitability of the plaintiffs' trading during that period. Sales for March 1998 were, in fact, significantly higher than they had been for some months.

(4) Jenkinson contended that, in the period after March, Young restricted the area that he could occupy in the shop premises. Young denied that and I was not persuaded on all the evidence that such occurred. I note that in the Magistrates Court proceedings in this matter on 21 May 1998, specific orders were made relating to division of the shop premises and there is no correspondence or other application suggesting that either party breached the terms of that order. Likewise, notwithstanding Jenkinson's claim that Young disrupted the conduct of his part of the business at 152 Magill, I note that both parties were injuncted in that respect by the order of 21 May 1998 and I further note that no applications were made alleging any breach of the terms of that order. That order also released Young from the obligation to contribute towards Tottman's wages.

5. Discussion of legal principles relating to breach of contract

Discussion of legal principles relating to termination of contract is frequently clouded by differences in terminology and I have been greatly assisted in approaching this by the definitions and discussion of principles set out in "The Laws of Australia - Vol. 7 - Contract" (Ed. JLR Davis, Nicholas C Seddon, Paul Vout, Lawbook Co.).

I respectfully adopt the terminology proffered by those authors and, indeed, their interpretation of authority, and it offers a clear path of reasoning.

Having thus set out what I find to have been the terms of the agreement for the joint venture and having made findings as to breach, it is necessary that I decide whether any such breaches were of "conditions", that is to say, "essential contractual terms", or of "warranties" (or terms "collateral to the main purpose of the contract") or of "intermediate terms", the breach of which might in the particular circumstances have given rise to a right to terminate.

In using the expression "intermediate term", I have drawn upon the discussion in "The Laws of Australia" (supra) and, in particular, the terminology adopted in Ankar Pty Ltd v National Westminster Finance (Aust) Ltd [1987] HCA 15; (1987) 162 CLR 549 at 562, which in turn followed Hongkong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7; (1962) 2 QB 26.

I use the term "repudiation" to refer to a promisor's unwillingness or inability to comply with a condition of a contract, demonstrated prior to the time the performance is due. It marries with the notion of acceptance of repudiation or termination of the contract by the promisee consequent upon repudiation.

In "The Laws of Australia" (supra) at paragraph 7.6.10:

"... prospective breach occurs when a promisor repudiates its obligations under a contract and the promisee responds by terminating the contract." (Foran v Wight [1989] HCA 51; (1989) 168 CLR 385)

"Repudiation, which can also be regarded as prospective non-performance of a condition, is a precursor to a prospective breach, but is not itself a breach until the promisee 'accepts' the promisor's unwillingness or inability to perform by electing to terminate the contract. It gives rise to a right on the part of the promisee to terminate the contract, but not to sue for damages. The parties remain bound until the promisee terminates the contract prior to the time for performance, thereby perfecting the cause of action for prospective breach. Unwillingness or inability to perform manifest after the time for performance will constitute an actual breach."

"... words or conduct are construed objectively when determining a promisor's intention or position, so that where a promisor's behaviour would lead a reasonable person in the position of the promisee to infer that the promisor is unwilling or unable to perform the contract or a condition of it, a right to terminate will exist." (Loughridge v Lavery [1969] VicRp 112; [1969] VR 912)

"An express refusal to perform the contract as a whole or a condition thereof will usually constitute prospective non-performance amounting to repudiation" (Psaltis v Schultz [1948] HCA 31; (1948) 76 CLR 547; Loughridge v Lavery, supra).

Finally, at 7.6.57, a promisee must elect to terminate the contract for repudiation in order to found a cause of action (Foran v Wight, supra).

It is trite that a breach of a condition by a promisor enables a promisee to terminate a contract.

The question of what is an intermediate term is somewhat more complex. In Hongkong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd (supra), the court noted (at 64):

"... the question to be answered is, does the breach of the stipulation go so much to the root of the contract that it makes further commercial performance of the contract impossible, or in other words is the whole contract frustrated [by the conduct of the promisor]? If yea, the innocent party may treat the contract as at an end. If nay, his claim sounds in damages only."

Again, at 7.6.102 of "The Laws of Australia" (supra):

"In determining whether a breach of an intermediate term is sufficiently serious to give rise to a right to terminate, there are four relevant considerations. These are:

(3) the foreseeable consequences of the breach; and

(4) the effect of considerations (1)-(3) upon the contract as a whole.

Thus the breach must go to the root of the contract, depriving the promisee of substantially the whole intended benefit of the contract, or be 'fundamental' in character, whilst the consequences of that breach, actual or foreseeable, must be, as a matter of fact, found to result in an outcome substantially different from that intended by the parties."

"Whilst a promisee must elect to terminate, in order to convert the repudiation into a prospective breach and found a cause of action, such acceptance of the repudiation relates to the potential for a claim in damages and cannot logically impact on the existence of the right to terminate itself ..."

"Subject to the terms of the contract and any relevant statutory requirements, a promisee's words or conduct must unequivocally evince an election to terminate the contract in order to be effective. The following actions may all qualify as unequivocal words or conduct amounting to an election to terminate:

(1) an unequivocal statement that the contract is terminated, at an end or rescinded;

(2) a refusal to accept the promisor's performance;

(3) conduct which precludes the promisee from performing its own obligations; and

(4) the filing and service of pleadings asserting, requesting a declaration of, or claiming damages for, termination."

In sequence, I will consider whether any of Jenkinson's conduct prior to 7 February 1998 amounted to a breach or prospective breach of any condition, warranty or intermediate term of the joint venture such as to enable Young to terminate such as he purported to do; if not, whether Young's conduct on or after 7 February 1998 was of such a character as to entitle Jenkinson to terminate.

6. The defendant's claim to have lawfully terminated the joint venture

I have previously rejected the defendant's claim that the agreement for the joint venture was terminable at will from 26 April 1995, but I have found it was intended and agreed that it would be terminable at the option of either party on or after the expiration of the first period of the workshop lease on 26 April 1998. Even so, I have found that notwithstanding that agreement, the parties became bound under a retail shop lease for a period of five years from the date of entry, namely, 5 December 1996. That statutory lease was not terminable at will before the expiration of that time.

It becomes necessary then to consider the other bases upon which the defendant claims he became entitled to terminate the joint venture. His position on this has fluctuated. In the conversation of 7 February 1998, on either account, he did not purport to rely upon alleged pre-contractual misrepresentations or breaches by Jenkinson of any term or condition of the joint venture. It was only later that these allegations surfaced, along with the claim that he could, in any event, terminate at will.

Whilst the letter P22 referred directly or indirectly to misrepresentation or misleading conduct, it did not squarely assert a breach of a condition or intermediate term of the joint venture, nor did the Notice of Rescission P23.

It is only in the Defence at paragraph 12 that Young sought to rely upon specific, alleged breaches of contractual terms. These are pleaded in paragraph 12 of the Further Amended Defence and, according to paragraph 5 of that Defence, they constituted the basis of his purported termination of the joint venture.

(1) Paragraph 12.1 pleads a general allegation that the first plaintiff preferred his own interests over those of the defendant during the period of the joint venture. That is a general plea and, except to the extent that I deal with it in these reasons, I do not propose to deal with it in any general way other than to say that there was insufficient evidence upon which I could make any finding to that effect.

(2) As to paragraph 12.2, there is no doubt that the first plaintiff did not move his retail premises until December 1996, but as I have already found, this conduct did not constitute a breach of the joint venture by him and, indeed, I am satisfied that the defendant acquiesced in it. The defendant complains that he repeatedly requested the first plaintiff to move across earlier than that, but I am satisfied on the evidence that that did not occur and I find that both parties agreed to defer the move until these works were complete.

(3) As to the complaint that Jenkinson did not obtain consents to the use of 146B as a machine workshop and failed to share those premises equally with the defendant, that ground was not made out. In the first place, there was no evidence in support of the defence claim that Jenkinson undertook a contractual obligation to obtain Council consent to use 146B as a workshop. All the evidence pointed to the conclusion, as I find it, that the works undertaken with respect to 146B did not form part of the original joint venture agreement, but were in fact resolved upon later.

Further, I am satisfied and find that the question of Council approval of any kind was not considered by either of the parties in the first instance when Laidlaw undertook his building works and that it only became an issue later, when Comelli was instructed. He, then, was the one who undertook to obtain building approval and advised that workshop approval would be difficult to get. It was after those events that Jenkinson did undertake to procure that particular consent and I find that he approached the Council about it, but in the light of what he was told, decided against pursuing the application. I am not persuaded that his decision was an unreasonable one, given the past use of the premises and the information he had received from the Council, nor am I persuaded that his undertaking the task of obtaining that consent was any more than a voluntary undertaking on his part. It was no part of the joint venture agreement; indeed, there was every reason why Young as lessee should have sought it, rather than Jenkinson.

Even if some undertaking by Jenkinson to obtain that consent could be construed as having been incorporated into the joint venture, I am not persuaded it ever became a condition or intermediate term of the joint venture, the breach of which would have entitled Young to repudiate.

As to the claim that Jenkinson failed to equally share the workshop premises with him, the evidence did not sustain it. It disclosed that the parties were, at relevant times, both using part of it and otherwise negotiating, and indeed arguing, about who would finally occupy which part of the premises. The fact that they could not reach a satisfactory conclusion about that issue does not imply, nor do I find, that Jenkinson was thus in breach.

(4) As to paragraph 12.4, there can be no doubt that prior to the defendant's repudiation, Jenkinson had not transferred his wood to the premises of 146B, but in all the events which transpired relating to the building works at the workshop (for which neither party should be held in breach), I am not persuaded that it ever became available for full occupation by both parties until January 1998 and I would not be disposed to find that a delay in moving between then and February 1998 constituted a breach.

For this ground to succeed would need proof that Jenkinson was responsible for all the delays in having the premises at 146B Magill ready to receive his machinery and stock of wood, and the evidence simply does not sustain that. It is not enough for Young to demonstrate that Jenkinson would not go along with what he wanted or, indeed, that Jenkinson wanted to do things with which he disagreed. The plain fact of the matter is that the parties had never settled upon an adequate and realistic timetable or financial budget for the completion of works in the warehouse and the transfer of Jenkinson's materials there, and their attempts to do that in the several months prior to February 1998 simply failed. I am not persuaded that Jenkinson was, in any manner and certainly in no fundamental manner, in breach of a term of the joint venture in failing to transfer his wood to 146B Magill prior to February 1998.

(5) A similar allegation (paragraph 12.5) is made with respect to Jenkinson's transfer of his machinery to Magill Road, and I make the same findings and reach the same conclusion with respect to that. It is further said that Jenkinson did not train Damian in the use of the machinery but, of course, that assumes the machinery should have been in place prior to February 1998 and I have found against that.

(6) The same observations apply with respect to the allegations in paragraph 12.6 of the Defence concerning Jenkinson's stocks of wood.

(7) Paragraph 12.7 concerns Jenkinson's alleged failure to offer or sell furniture to Young at a discounted rate. Young's evidence as to this was sparse, unconvincing and inconclusive. In essence, he complained that he could not freely access Jenkinson's furniture because it was not on site, albeit he conceded he might have gone to Belair had he wanted any particular pieces. This complaint was not made out and, in any event, I would never have been persuaded it was a condition or intermediate term in the agreement between them.

(8) In paragraph 12.8, Young complains that Jenkinson's and Tottman's conduct in the shop was such as to deny him equal access to manufacturing and restoration work which came in the door. The evidence as to this topic was inconclusive, as well. It became apparent that the two men were making different products and Young's attempt to compare the sales performance of each was unpersuasive. Tottman, herself, denied there was any favouritism given to either party and I found her to be generally reliable and truthful. This ground was not made out.

(9) Paragraph 12.9 contains a similar complaint relating to equal promotion of furniture sales. It was again denied by Tottman. There was no independent corroborating evidence of Young's complaint and I was not persuaded, in any event, that I should prefer his evidence to that over Tottman's denial. This ground was not made out.

(10) Paragraph 12.10 relates to the incident referred to as the "Khai Liew desk sale" in January 1998. Khai Liew was an antique dealer who had placed a desk with Young for sale by consignment. For reasons which were never satisfactorily explained, Tottman sold the desk and then split the $800 commission on its sale equally between Jenkinson and Young. Young was rightfully aggrieved about this, as I have found. It appears to have been a petty act on the part of Jenkinson, but, plainly, became the last straw in their relationship because they quarrelled about the matter and, within a short time, Young purported to terminate the joint venture.

Whilst I am persuaded that Jenkinson breached their agreement in taking 50 per cent of the commission, I am not persuaded that the agreement as to consignment stock was a condition of the original joint venture, nor that it was or became an intermediate term, the breach of which entitled Young to terminate. It appears to have been a matter discussed and agreed upon at a point some considerable time after the joint venture commenced and, at best, it was a mere warranty.

(11) As to paragraph 12.11, Young complains of Jenkinson's conduct in improperly accessing Young's private financial records. The background to that was that, on Young's account, he had agreed that Tottman might examine his books for the periods relevant to the performance of his retail business in the time since the joint venture had commenced, with a view to demonstrating that her services would be valuable to both men. So much was not in issue, but Young's complaint was that Tottman, in accessing his books, went back further than that period, that she prepared an analysis of this and left the details in a desk at the premises when she departed.

There was, indeed, some merit in Young's complaint about this matter and I found it difficult to see how the financial information for the years 1994 and 1995 were in any measure relevant to Tottman's engagement. Nevertheless, even putting Young's complaint at its highest, I am not persuaded that Tottman's conduct, even if attributable to Jenkinson, in any manner constituted a breach of any condition or intermediate term of the joint venture. At best, it was a relatively minor breach of trust or confidence, given that Tottman was offered access to other financial information, anyway.

(12) In paragraph 12.12 is a complaint that Jenkinson failed to install an alarm system and fax at the retail premises, as he had promised to do. The evidence on this matter was fairly limited and, indeed, I find it unnecessary to make a finding as to just what did occur, because even putting Young's complaint at its highest, I am not persuaded that it was a condition or intermediate term of the joint venture that Jenkinson supply and install those items such that any breach could ever have justified Young's termination of the contract.

It follows from my above review that I was not persuaded that, by any of the alleged conduct, Jenkinson breached any condition or intermediate term of the joint venture such as to justify Young's purported termination of the joint venture which I have found existed between the parties. He may have breached certain warranties, but no more.

I pause here to observe that the defendant has not sought to plead a right to rescind under the Misrepresentation Act, nor would such a plea have succeeded, given my findings as to what became the terms of the joint venture (Misrepresentation Act 1972 (SA), section 6).

It follows from the above that Young's repudiation of the joint venture by his conduct on and after 7 February 1998 constituted an express refusal to perform the contract as a whole (Psaltis v Schultz, supra) and was not justifiable at law.

7. The plaintiffs' claim to have lawfully terminated the joint venture

The result of poor business practice and inept planning on both sides was inordinate delay, over-expenditure and dissension and, whilst Young may have been completely frustrated about that, nothing of what had occurred as I have found, justified his conduct in telling Jenkinson to leave the shop and failing to participate in a workshop lease renewal for at least two years (see P22). Having done that, however, he left Jenkinson with little option but to negotiate for that renewal himself. Plainly, Jenkinson needed such workshop space for the purposes of carrying on his business.

I am satisfied that it was a condition of the joint venture that Jenkinson would be entitled to joint occupation of the shop and workshop during the period of the joint venture, which the parties agreed would be at least three years, and which became extended by statute to one of five years. I find that Young's conduct evinced an intention to breach that condition, it was a prospective breach. Further, I am satisfied that, in the context of what had occurred between the men and in the unusual circumstance of his otherwise being obliged to operate and trade from the same undivided shop floor, it was reasonable of Jenkinson to ultimately accept Young's repudiation and move out of the shop. I am satisfied and find he was lawfully entitled to do that; refer Loughridge v Lavery [1969] VicRp 112; [1969] VR 912 (923 to 924) and Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401. A promisee may terminate a contract for prospective non-performance where the promisor plainly indicates that the contract will not be performed as and when expected - that is precisely what happened.

If I am wrong in considering that Young's conduct was a prospective breach, then I would likely find it was an actual breach of a condition of the joint venture and the same consequences would flow.

8. The defendant's claimed reliance on pre-contractual conduct

As I have noted, Young contended that the matters listed in paragraphs 11.1 to 11.20 of his Defence constituted misrepresentations by Jenkinson within the meaning of the Fair Trading Act and the Misrepresentation Act which, as I interpret his pleading, induced him to enter into the joint venture agreement in April 1995 and, in the event, suffer loss.

For reasons already expressed, I am not satisfied that any of those matters constituted misrepresentations or amounted to deceptive or misleading conduct. Many of them, to the extent that they were agreed, post-dated the commencement of the joint venture agreement, anyway, a number, as I have found, were not proven and a number became terms of the joint venture. The defendant has not satisfied me that any of the matters amounted to misrepresentations, nor that, if they were such, they induced or caused him to enter into the joint venture or that he suffered any resulting loss. The true cause of those losses on which the defendant ultimately based his counterclaim was his unlawful repudiation of the joint venture.

For the above reasons, it must follow that the defendant's counterclaim must fail and should be dismissed.

It follows from my above findings that, notwithstanding what I have found to have been the intention of the parties to enter into a joint venture to share both the retail and workshop premises for a period of three years from April 1995 and to thereafter continue in their association at will, at law there came into existence a retail shop lease which commenced on 5 December 1996 and was destined to continue until 5 December 2001.

It follows, as well, and I find that Young wrongfully repudiated that lease on 7 February 1998, that he wrongfully failed to renew the workshop lease to secure at the least a joint occupation of those premises until 5 December 2001, that he thereby repudiated their joint venture, that that repudiation was properly accepted by Jenkinson on 10 June 1998 and that, in the circumstances, the plaintiffs are entitled to recover from Young the amount of their damages resulting from his unlawful breach.

As I have noted, there was tendered a document P1 which purported to be a reconciliation (albeit, on either account, not a final one) between Jenkinson and Young of moneys respectively owed by one to the other as at 4 July 1998. With one significant exception, neither party sought to take issue with the contents of that document and, amongst other things, it summarised the claims Jenkinson had against Young for goods and services, Tottman's wages, extra funds spent on the workshop and items purchased by Young, on the one hand, and, on the other, unpaid rent and goods and services due by Jenkinson to Young. The net reconciliation of that document suggested that Jenkinson was indebted to Young in the sum of $1,845. Jenkinson argued, however, that a proper credit for the air-conditioner (Annexure 4 to P1) was not the $1,800 shown in the document, but $2,800, hence that the net adjustment figure in P1 should be reduced by $1,000. The evidence as to this was slim: Young said $1,800 was the figure agreed at the time of the reconciliation as the value of the air-conditioner and it is so recorded in Annexure 4 to P1. Jenkinson did not at that time make any claim for wasted installation costs and had he done so, he (Young) would not have purchased the unit. Jenkinson said simply that there should be added to that sum an amount of $1,000 which he spent having the air-conditioner installed at the shop: he produced no evidence of that expenditure and did not purport to say he had raised this matter at the time P1 was prepared.

On this conflict I prefer the evidence of Young, supported as it is by P1. It appears that Jenkinson has only lately raised the question of a further adjustment and I am satisfied he earlier agreed to the $1,845 adjustment in Young's favour - which on the evidence was later reduced by $30.

Accordingly, there will be a credit to Young of $1,815.

On the basis of my findings, the counterclaim cannot succeed and the substantive issue is the damages to which the plaintiffs are entitled in consequence of Young's wrongful repudiation of the joint venture.

As a result of Young's repudiation, Jenkinson, of course, retained sole use of the workshop, but otherwise was obliged to move his retailing activities to another location. His largely uncontested evidence was that the most suitable alternative accommodation he was able to find was on Glen Osmond Road, and he moved there in July 1998. There was other evidence at trial, including evidence from Young himself, suggesting that Magill Road was a superior antique retail precinct and, on Jenkinson's account, he suffered loss and damage in terms of diminished retail trading there, the incurring of relocation expenses, the costs consequent upon no longer having an immediately proximate workshop and additional rental and overhead costs.

I will deal then with the plaintiffs' formulated damages claim which was developed under these headings as per the McPharlin reports:

. lost contribution to outgoings at Glen Osmond

As to the this head, it is convenient that I divide it into two periods, namely, that period prior to Jenkinson's move away from 152 Magill, and the period following that.

The plaintiffs contend that within that period and whether from February or April 1998, the defendant carried on a course of conduct which adversely affected the sales environment in the premises at 152 Magill and led to a decline in their retail trading performance over that time.

McPharlin comments in his first report that there was in fact a significant decline in retail sales from February 1998 (the time when Young told Jenkinson to leave) and proceeds to calculate average monthly sales at Magill for a 12-month period preceding then in order to compare those figures (adjusted for gross profit) with the later performance of the business. Later, in his second report, he selects a 12-month period, but one ending in April 1998. In one sense, the second approach is more favourable to the defendant, but there are certain aspects of either approach which I do not accept and which have serious implications for his overall computation of loss:

(1) his assumption that Young in some manner caused the business to lose moneys (whether after February or April 1998) up to 13 July 1998 was not, as I have found, made out on the evidence. I am satisfied on the evidence that retail sales are not seasonal and, indeed, I note the observations of the defendant's expert Crase, which I accept, to the effect that monthly sales for the business have been "highly volatile" and there could be numerous unrelated reasons for the performance of the plaintiffs' business in that period. As I have observed, March 1998 (after Young gave notice) was the second highest grossing month in that year;

(2) Crase was critical of McPharlin's methodology in comparing a 12-month moving average of retail sales figures at Magill Road with a simple average of sales over a 53.5-month period at Glen Osmond between May 1998 and October 2002. I consider that a valid criticism. Crase's graphs and tables demonstrate the fallacy of not comparing like with like and any calculation of average retail trading figures over the relevant period at Magill Road will show the selectivity of simply choosing an arbitrary 12-month period within the 18 months Jenkinson was there. McPharlin at first chose a 12-month period ending February 1998, then a like period ending April 1998, and proceeded upon the assumption that thereafter, Young interfered with Jenkinson's sales at Magill Road. I have found against that assumption and consider the appropriate period for comparison of trading at Magill Road is the 18-month period beginning in January 1997 (all conceded December 1996 should not be brought into account) and ending on 30 June 1998;

(3) each McPharlin calculation proceeds on the assumption that all retail sales in the relevant period were faithfully recorded by Jenkinson and that his Appendix 6 gross profit calculations are based upon complete and accurate information supplied to him by Jenkinson. For reasons already touched upon, I have serious reservations about the reliability of these assumptions.

I have already discussed the methodology adopted by McPharlin in calculating this part of the asserted loss and have expressed my concern about the averaging processes adopted by him and about the accuracy of the source material on which he relied.

At the outset and given my findings as to the period of the joint venture, the outer limit of any asserted loss must be the time when it was, by statute, destined to terminate - on my findings, five years from 5 December 1996, i.e. 5 December 2001. I will assume that but for Young's wrongful termination, the parties would have renewed the Mahains lease until at least that date.

In his initial report, McPharlin made particular observations about the performance of the plaintiffs' business over the period 1994 to 2000, noting that total annual sales had ranged between a low of $232,000 (in 1998) and $377,000 (in 1996). Likewise, gross profits from sales had ranged between 21 per cent in 1998 and 35 per cent in 1997, 1999 and 2000, averaging out over the whole period at about 31 per cent. Business overheads had, he said, generally been of a fixed nature and not varying with turnover.

This latter comment did not appear to me to be quite borne out by the figures, which appeared to show that expenses had escalated between 1994 and 1998, and, indeed, between 1997 and 1998 had increased by some 18 per cent. They have fluctuated since, as has turnover. This is pertinent, not merely because of the questionableness of McPharlin's assumption as to their being "fixed", but because it became apparent, as the plaintiffs' damages case proceeded, that certain of the expenses after 1998 related to costs separately claimed as additional operating costs, e.g. commuting costs, additional rent, wages and the like. I will return to that question.

McPharlin noted that the figures for the financial year 1998 showed a reduction in sales and gross profit figures compared with previous years. What he could not say, because there were no separate retail sales figures available prior to then, was whether that reduction was more marked in the "retail" area or in "other sales". Otherwise, for those years there had always been a close correspondence between gross profits and total expenses, such that small net profits and, in one year, a loss had resulted: 1994 showed a loss of about $9,000; 1995, a profit of about $29,000; 1996, a profit of about $12,000; and 1997, a profit of about $5,000. In 1998 there was then a loss of nearly $65,000. This appeared to result from higher expenses (by some $17,000), lower total sales and lower gross profit rates.

McPharlin went on to observe that over none of that period had Jenkinson drawn wages, albeit that the modest profits had otherwise been distributed by the trustee. Neither he nor Crase sought to comment upon the general viability of the business, when set against that history, but on the basis of the limited balance sheet information provided, it does not appear to have been particularly successful at any point.

McPharlin then went on to make these assumptions:

(1) that Young's repudiation had the capacity to impact on the plaintiffs' retail sales, but not on his other sources of business income - this was not challenged by the defence;

(2) that throughout the claimed period of loss, the plaintiffs had used their best endeavours to generate retail sales - this was directly challenged by the defendant, who claimed that the plaintiffs had diverted their focus to other aspects of their business, in particular wholesale and e-bay sales. I will discuss this later;

(3) that the records before him properly distinguished between retail and other sales - the defence did not concede this and argued that McPharlin had been obliged to rely on instructions and records which were unreliable. I will deal with this later;

(4) that there has been a decline in retail sales since the plaintiffs left 152 Magill - the defence did not concede this, challenging the accuracy of the plaintiffs' records suggesting such and arguing that, even if it was so, it was attributable to the plaintiffs' focus on their other business activities;

(5) that that decline is attributable to Young's repudiation - that, too, was contested and is, of course, a causation issue for me;

(6) that retail sales would have remained at the same level had Jenkinson remained at 152 Magill - the defendant disputed this, too, saying the retail market was generally declining;

(7) that the rate of gross profit on retail sales in the year 2000 averaged 40 per cent and, in the absence of similar information for any other years, assumed this was a fair indicator of average rate of gross profit for all years under review - the defence disputed the accuracy and completeness of the 2000 figures and did not concede the fairness of the average. I will discuss this issue in a moment.

Based on those assumptions, he calculated losses as follows:

(a) average monthly retail sales at 152 Magill for the 12-month period to April 1998 - both inclusive - were $11,202;

(b) the monthly average of all retail sales obtained at 152 Magill and Glen Osmond variously between May 1998 and October 2002 was $5,396;

(c) accordingly, since April 1998, the trust had suffered a decline in retail sales of $5,806 per month;

(8) he applied the 40 per cent gross profit rate calculated for the year 2000 as a constant and applied it to lost retail sales of $5,806 per month to produce an average loss of gross profits per month of $2,322;

(9) he then projected that monthly loss over the assumed period of the joint venture of nine years from March 1995.

Before I deal with the above assumptions, it is convenient that I consider as well the McPharlin methodology.

I have already found that the proper period for calculating Jenkinson's retail trading experience at Magill Road is from January 1997 to June 1998. To that extent, I reject the first plank of McPharlin's approach and that part of the second plank which seeks to bring into account, as part of the loss period, the months of May and June 1998.

The question then arises as to whether and how a comparison with retail trading at Glen Osmond might then be made.

The defendant argued that it was inappropriate to compare the Magill Road period with trading experience over the entire 53 months of the asserted loss period at Glen Osmond because the likelihoods were that, in a volatile industry and over a lengthy period, other unpredictable market factors/contingencies would be destined to alter trading performance. Whilst that position has merit in the context of any attempt to assess losses over the balance of a nine-year joint venture, it has less force in the context of a loss period expiring in December 2001 and one for which there needs to be no future projection, as the period is closed. Having said that, however, I am mindful of the evidence as to a decline in antique retail sales activity and as to the plaintiffs' involvement in other areas of trading, and will comment on it in due course.

My adverse findings otherwise accepted, the plaintiffs' case would now be that their monthly retail trading loss is indicated by the difference between the monthly average achieved at Magill Road between January 1997 and July 1998, and the average achieved at Glen Osmond between July 1998 and December 2001.

That would not be a difficult calculation if one were to then rely simply on McPharlin's figures, but I will not yet attempt it because of the need to resolve:

(1) disputes as to the adjustments to be made to the shop sales figures proposed by McPharlin to take account of other sales - most of these were agreed;

(2) challenges to the proper calculation of the disputed rate of gross profit;

(4) the impact of my findings as to the reliability, anyway, of the 1998, 1999 and 2000 figures - in the sense that I have found that McPharlin's figures did not match actual receipts in those years.

263. By and large, the adjustments to retail figures arising from disputes as to whether a sale was wholesale or retail were agreed between the parties, save for the customer Ward. Crase provided alternative calculations based on whether or not Ward was retail.

264. Having considered the evidence, and in particular Jenkinson's concession at page 543, I am satisfied he was a wholesale customer and that, accordingly, the relevant retail sales figures should be reduced to reflect that.

265. The defence faintly argued that Hurlbutt was a retail customer in the sense that she came in off the street, but I accept Jenkinson's evidence to the effect she was referred there by a Sydney contact.

266. It follows that I can rely upon the Crase Appendix Q1 in D60 in any calculations.

267. As to McPharlin's assumption that the rate of growth profit applicable to his calculated monthly loss figure was 40 per cent, in calculating that figure he had relied upon the information reproduced in Appendix 6 to his second report, which purported to contain a full list of retail sales made by the trust during the financial year 1999/2000 and showed selling price, cost price and gross profit figures and percentages. Inherent in that calculation were three McPharlin assumptions, all of which were challenged by the defendant:

(1) that the list of sales for that year was a complete one

In that respect, I refer to my serious misgivings about Jenkinson's credibility, particularly relating to his financial records, and to my earlier specific findings about his records for that year. I do not accept that Appendix 6 is in fact a complete list of sales. The number and value of sales potentially unaccounted for in that year may not be large, but it still causes me serious misgivings about the reliability of Appendix 6 and the general applicability of the average rate of gross profit figure derived from it;

(2) that the cost prices of goods sold in that Appendix were accurate

That price was not in every instance the simple purchase price, in some cases it also included Jenkinson's estimate of the cost of renovation and repair works undertaken by him or his employee to particular items at the rate of $50 per hour, plus materials. That add-on to cost price was in each case a figure calculated by him and provided to McPharlin, who relied upon its accuracy.

For obvious reasons, the nature and cost of repair/renovation works on any particular item was not a matter capable of being tested by the defendant and it thus became apparent that an important aspect of Appendix 6 was a necessary reliance upon Jenkinson's estimations or calculations of these additional costs.

Having regard to my attitude to Jenkinson's credibility and the fact there was no independent evidence as to the necessity and reasonableness of the figures used, in particular his claims that these works, by whomever performed, were properly costed at $50 per hour, I have serious doubts about their reliability;

(3) that the exercise undertaken in Appendix 6 would fairly establish a representative gross profit rate for the purposes of calculating losses continuously from June 1998 onwards

That, too, was challenged by the defendant and the challenge needs some exploration. I note the following:

. the year 2000 was selected by the plaintiffs because it was a year for which Jenkinson prepared records of the cost of goods sold. No such information was apparently available for earlier periods;

. at trial, McPharlin amended his second opinion, saying that the gross profit margin generally applicable to retail sales in that year should have been 38 per cent, based on amended figures provided to him. What is interesting about that figure is it almost matches the gross profit margin for all sales in that same year (i.e. 37.6 per cent). Given there was that measure of correspondence for the only year for which both figures are available, a real question arises as to the relationship between the general or "all sales" gross profit margins established for the other years and the retail gross profit margins for those years. By way of example, in the year 1998, the gross profit margin for all trading was 21 per cent and it was close to that same figure in 2001. It was 31 per cent in 1995 and 29 per cent in 1996 and, indeed, McPharlin noted it averaged at 31 per cent between 1994 and 2000. If it can fluctuate as much as that as an all sales margin, I have grave reservations about accepting the proposition, implicit but unstated in McPharlin's report, that the 2000 rate can and should be applied in calculating asserted losses for all years from 1998 onwards. There is simply no evidence enabling me to conclude that and, indeed, the only available indicators point the other way.

McPharlin observed that the 1998 year was a poor one for sales and gross profit margins generally. He assumed that was a consequence of the first plaintiff's move from Belair Road to Magill Road, but did not suggest how the move likely affected gross profit margins;

. the other factor which remains an imponderable in the compilation of Appendix 6 is the extent to which, amongst the repair and renovation costs contained within it, there are claimed sums which also form part of the claim for dislocation expenses, that is to say, the costs of transporting stock to and from the workshop for the purposes of renovation. I suggested to McPharlin in the course of his evidence that there might be a measure of double counting in this respect, as such costs also appear in the expense columns for each year and were taken by him to be of a fixed nature. He appeared to allow that.

268. Given my above observations, in particular my findings as to incompleteness of sales information in Appendix 6, and in the lack of any other evidence from Jenkinson or McPharlin supporting the conclusions derived from that Appendix (that the average rate of gross profit for that year was 38 per cent and that this rate would be fairly applicable to 1998 and all the years following), I am simply not satisfied it has been shown that an average rate of gross profit of 38 per cent is a fair and accurate figure and should be applied over the period of the asserted loss. The most I can say in passing is to repeat that as the gross profit margin for retail sales in the year 2000 almost matched that of overall sales in the same year, it may well be those figures also generally correspond in the other years under review, or at the least fluctuate in the same way, that is to say, in the approximate range of 20 to 40 per cent.

269. Accordingly, I do not consider a rate of gross profit, for retail sales, of 38 per cent can be legitimately applied to the demonstrable difference between monthly retail sales figures at Magill as opposed to those at Glen Osmond, so as to prove the asserted loss. That is what the plaintiffs have sought to do.

270. I appreciate that they have, of necessity, had to adopt this approach because of the absence of average rate of gross profit figures for retail sales in other years, but, for the reasons expressed, I am not satisfied the approach is either justified on the evidence or reliable. I am thus left with evidence of average gross profit figures fluctuating over the years under review between 20 and 40 per cent.

- issue no. 3 - arguments as to causation and mitigation

271. At the outset, it is useful to reproduce the following figures from the second McPharlin report, updated Appendix 3:

272. Even allowing for the plaintiffs' understatement of the 1999 and 2000 total sales figures (whether it sounds in retail, other or mixed retail & other sales), the table discloses substantial increases in all sales in the two years after 1998 and then a fall in the 2001 year. There is a drop in retail sales between 1998 and 1999, a slight catch up in the year 2000 and then a considerable drop in the year 2001. The percentages reflect that.

273. Against the background of those figures is Jenkinson's own evidence about the general decline in business that he noticed towards the end of the year 2000 and how he "reacted" to that by focussing on the e-bay selling system from early 2001. That decline in business of which he spoke was discussed by him in a number of contexts. He observed that repair and renovation works were becoming less profitable and in less demand (pp 505 and 862), that people were more inclined to sell by auction (p.777), that the value of his wood stocks and machinery had diminished (p.506), that the supply of good antique stock had diminished and was becoming harder to find and he had stopped some advertising (pp 776 and 853), that he had sold off substantial quantities of his shop stock to Mrs Hurlbutt and to a winery and this had depleted his reserves, that he was having to change his buying patterns and he was now sourcing newer items (pp 506 to 508 and 853), that he was working at a more reduced level than before (p.514), that the mix of his business had changed and his stock levels had declined since 1999 (p.764). At p.775, he observed:

"... my position has been that we needed to keep going with the retail but because the retail was slow, I was forced to diversify, and what that has meant is that I have not only had to sell off possessions, but I've also had to, you know, drag myself into the next century and get a computer and start on-line selling where the margins are better."

"Q. It has happened to such an extent, in the late '90s, particularly since you have been at Glen Osmond, that you were forced to look at other ways to retail.

A. What I tend to do is make the best I can out of what I have got and - so along that line, I've looked at how I can maximise returns on what I've got, yes."

275. Later, in cross-examination (p.853), he acknowledged that antiques had become increasingly difficult "to source since the early 1980s but more particularly difficult in the last couple of years". He agreed he no longer had as many "top end" pieces in his shop as previously and that there were several factors which affected the amount of stock he could carry. One of them was funds and interstate travel. It was then put to him (p.853):

"Q. The next suggestion I will put to you - please let (sic) me if you need to see the schedules - is the emphasis that you have placed on Internet sales recorded in invoices from October 2000 has been a recent and very successful part of your business.

A. It depends - successful, but more I would characterise it as a bit of a life-saver as well.

Q. I think I might have said 2000, I meant 2001 in relation to Internet sales.

276. He did not think he had been prompted, in part, to involve himself in Internet sales because of the GST. He was not attracted to the idea that the introduction of the GST had a lasting impact. He thought there was a three-month rush before it and a three-month decline after it, and over six months the situation would have "been about even" (p.857). From about that time, there had been a decline in the retail position. It was a "trend" (p.858), but he did not purport to say how marked it was at any particular time thereafter. He had begun e-bay selling in about February 2001 to get cash flow because sales were down. It had not been a solution to the decline in sales between 2000 and 2001, but it had been a "help" (p.860).

277. Jenkinson's evidence as to the events which had transpired since his move to Glen Osmond Road was corroborated by that of Tottman, who agreed that it had become harder to sell antiques "over the last couple of years particularly" (p.1091). She did not think that had emanated from the GST. She had herself noticed a change in buying practices, probably related, she thought, to different house styles and a lesser demand for the elaborate Victorian items. She was aware that colonial cedar was hard to get. There had been an ongoing trend over four or five years to stock more Federation furniture, people were looking for smaller antiques and were decorating in a more minimalist way. She also thought that the demand for made-to-order furniture had declined over the last five years, but she could not comment about renovation because requests usually came directly to Jenkinson himself.

278. She said that Hurlbutt and e-bay had become significant export sales avenues. She remembered Hurlbutt's first visit to the shop, when she first appeared to be a retail customer, but it then emerged she was a dealer. Not all the sales that went to her came through the stock book because they were not all shop stock. She was then asked questions about the stock book, but on her account, its state in recent times could not be relied upon because it had not been entered up.

279. I have discussed those matters at some length because they touch squarely upon the validity of McPharlin's implicit assumption that antique retailing conditions generally, would have remained much the same over the several years following 1998 and that one can thus demonstrate a loss by comparing the plaintiffs' retail trading performance at Magill Road with that at Glen Osmond.

280. It is plain on all the evidence that the following events occurred after the defendant's breach:

(1) the plaintiffs had to move to premises regarded generally as less favourable to retail success - the evidence supported that;

(2) the resulting drop in retail sales has been compensated for in part by a substantial increase in gross profit margins at least in the two succeeding years;

(3) in those two years, there was a very substantial increase in the value of other sales from the business;

(4) by any measure, both retail and other sales then reduced in the 2001 financial year;

(5) at the same time, commencing from early 2001, there was a very significant increase in sales activity attributable to e-bay sales. The particulars relating to these did not emerge from any of the experts' reports, but Exhibit D31 showed that for the financial year ending 2002, they totalled $45,113.27.

281. Against that background and in the context of a business which is diversified (here the plaintiffs originally earned income from retailing, reproducing, repairing, restoring and wholesaling antique items) and has shown the capacity to further diversify (i.e. e-bay), it is, in my view, simplistic to assert that reductions in the income derived from one aspect of its operations (here, the retail aspect) can simply be aggregated over the balance of the period of the joint venture and assessed as wholly attributable to the defendant's breach. The position might be a different one if the business were more narrowly focussed in its activities, such as, for example, would be the case with a dry-cleaning shop, but here, even at the time of the breach, the second plaintiff demonstrated it could conduct its business in a variety of ways.

282. The plaintiffs countered that any benefits they achieved in terms of additional income from other business activities following the move from Magill Road had been destined to be obtained by them, anyway, wherever they were trading. They argued, in particular, that the income derived from e-bay sales was a new source, required less labour and would have been earned even had they remained at Magill Road - as such, it was irrelevant to the asserted loss. Likewise, Jenkinson said, he had been destined to make very large sales to Hurlbutt and Pepper Tree Winery, wherever his business was located.

(1) on his own evidence, Jenkinson acknowledged that problems of demand and supply were then affecting the retail market and that he was forced to look for, and found, other ways of earning income. Put another way, as events showed, the retail market was about to decline, anyway, and it cannot fairly be said that the relocation of his retail activities was the sole, or even necessarily the prime or effective, cause of the drop in his retail income;

(2) it is obvious, too, on his evidence, which I accept, that after he moved to Glen Osmond and the retail market declined, Jenkinson did indeed turn his attention and necessarily his available labour, to "other sales" and, for at least two years, was remarkably successful in lifting his overall income. I do not accept his claim that he could have contributed to that labour, anyway, and kept retail sales up to earlier levels (had they been available at Glen Osmond). By any measure, the Hurlbutt and Pepper Tree sales were large and voluminous transactions, and plainly required time and, as well, the sourcing of outside stock or otherwise the depletion of existing stock;

(3) then there is the question of e-bay selling, which, on Jenkinson's account, he undertook because he was "forced to diversify" (above).

That leads me to the legal issue which the plaintiffs' case barely touched upon, the duty to mitigate. I remind myself that the duty to mitigate is not an absolute one (Dunkirk Colliery Company v Lever (1878) 9 Ch.D. 20 (CA) at 25):

"What the Plaintiffs are entitled to is the full amount of the damage which they have really sustained by a breach of the contract; the person who has broken the contract not being exposed to additional cost by reason of the Plaintiffs not doing what they ought to have done as reasonable men, and the Plaintiffs not being under any obligation to do anything otherwise than in the ordinary course of business."

A plaintiff is not, however, subject to a duty in the ordinary sense, but:

"he cannot be said to have really incurred any loss which might have been avoided by his taking such steps as a reasonably prudent man in his position would have taken to avoid further loss to himself: and the best test is, what would such a man do to avoid such a further loss to himself, supposing that, from insolvency of the other party, or from some other reason, he could not get any damages." (Driver v War Service Homes Commissioner (1923) 44 ALT 130, approved in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130)

The plaintiff is not required to do something unreasonable or that might present a serious risk to his or her interests. There is no obligation to do anything other than in the ordinary course of business (British Westinghouse Electric and Manufacturing Company, Limited v Underground Electric Railways Company of London, Limited [1912] AC 673 at 689).

The plaintiff "does not have to show that he has fulfilled his duty; the onus is on the defendant to show that he has not, and to show the extent to which he has not done so" (TCN Channel 9, supra, at 158).

The defendant must show that all reasonable steps were not taken and show that what the plaintiff did do was not reasonable. The conduct of the innocent party is not to be judged by any strict standard (Banco de Portugal v Waterlow & Sons Ltd [1932] UKHL 1; [1932] AC 452 at 506).

"But when in the course of his business he (the plaintiff) has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act ... provided the course taken to protect himself by the plaintiff in such an action was one which a reasonable and prudent person might in the ordinary conduct of business promptly have taken, and in fact did take whether bound to or not, a jury or an arbitrator may properly look at the whole of the facts and ascertain the result in estimating the quantum of damage." (British Westinghouse Electric and Manufacturing Company, Limited v Underground Electric Railways Company of London, Limited, supra, at 689/90).

Here, it is plain in my opinion and I find that, in the ordinary course of their business, the plaintiffs have, in consequence of their forced move to Glen Osmond, done "what they ought to have done as reasonable men" and placed more focus upon aspects of their business other than retailing. These other activities have nevertheless been in the ordinary course of their business as, save for e-bay sales, they have always been parallel and associated activities to retailing and (even on the plaintiffs' figures, which I am satisfied are understated) they have achieved marked success in exploiting those areas, so much so that other sales increased by 57 per cent in 1999 and a further 20 per cent in the following year. They did, however, fall 13 per cent below the 1998 figures in the year 2001. There was then from early 2001 the marked success of the e-bay selling system, albeit that sales were not recorded until April 2001. As I have noted, they contributed $45,113 to 2002 earnings.

To the extent that the plaintiffs face the onus of proving that the defendant's breach caused the retail losses of which they complained, I am not satisfied they have discharged that onus. It is plain on all the evidence and I find that, since at least the time of the breach, the availability of stock and the demand for it in the antique retail area, along with the demand for repairs and renovations, have declined and further, that since that time, the plaintiffs have deliberately devoted more of their time than previously to other non-retail aspects of their business. To the extent that the defendant faces an onus of proving that these activities by the plaintiffs amounted to reasonable and appropriate mitigation on the part of the plaintiffs, I am satisfied that onus has been discharged.

Further, whether bound or not to mitigate, I am satisfied the plaintiffs have in fact averted any losses (and, indeed, increased overall income) in 1999 and 2000 and have otherwise suffered a small loss in 2001.

The substantial drop in income in the 2001 year was explained by Jenkinson in terms of a marked decline in workshop work and shop sales, but it is evident, too, from the figures, that all sales for the business fell away in this period. Indeed, shop sales remained at about the same proportion of all sales in that year, as they had in the previous two years. Against such an overall decline and having regard to the 1999 and 2000 figures, I am not satisfied that it is proper to attribute any of the 2001 loss to the defendant's breach, rather, it points to a general decline in activity over the entire business operation.

In summary, had I been minded to accept the plaintiffs' proffered trading figures for the years 1998-2001 (and I am obliged to say I cannot, as I am not satisfied I can rely on them) and had I taken the view that the claimed retail losses were caused by the defendant's proven breach (a matter about which I also remain unsatisfied, having regard to Young's and even Jenkinson's own evidence), I would nevertheless have found that the plaintiffs not only mitigated their asserted losses, but in fact covered them and actually improved the performance of their business after leaving Magill Road. As I have said, I am not persuaded this would have happened, anyway, had they stayed at Magill Road.

- issue no. 4 - the reliability of the 1998, 1999 and 2000 year figures

I have already found I cannot rely on the accuracy of these figures provided by the plaintiffs to McPharlin. The adjustments to them which emerged from the evidence may or may not be significant in retail terms, I cannot say, but they also impact on McPharlin's Appendix 6, and for these and other reasons mentioned, I have no confidence in the reliability or applicability of that appendix.

Summary of findings on post-June 1998 retail sales losses

All in all, I am not satisfied that the sales figures and cost of goods sold figures provided by the plaintiffs to McPharlin and relating to the period from July 1998 were reliable and, indeed, I am persuaded that the accounts provided by Jenkinson to McPharlin were deliberately false and calculated to enhance the asserted drop in retail income after April 1998 and to maximise the level of the plaintiffs' rate of gross profit. To the extent there could be any reliance placed on any adjusted income figures, I would still remain unpersuaded as to:

(3) the accuracy and applicability to other trading years of the rate of gross profit said to be established by Appendix 6.

Quite apart, then, from my findings as to causation and mitigation, I would remain unsatisfied that the plaintiffs have proved any loss under this head.

I am satisfied on the evidence that the plaintiffs expended approximately $29,562 in fitting out the Glen Osmond premises.

McPharlin assumed, for the purposes of his calculations, that this cost would not have been incurred but for the breach. That assumption was disputed by the defendant, who contended that the first plaintiff was destined to have to move and incur such costs at some time, anyway, once the joint venture ended.

The defendant's contention would have had less merit had I found that the joint venture was to be for a period of nine years. Young said it was his intention to retire after nine years and Jenkinson may well have done that, too, and would have had no need to re-establish himself. The argument has more force, however, where, as I find, the relationship was to endure for five years only. Had Young acted properly, he would have remained committed to the joint venture until 5 December 2001, whereupon he might, on my findings, have terminated the "shop lease", thus obliging Jenkinson, if he wished to continue his retail operations, to incur the cost of establishing alternative premises.

There is necessarily an element of conjecture as to what Jenkinson might have done had all this occurred, but on all that I heard, I am not disposed to find, as the plaintiffs contend, that he would never have sought to re-establish a business elsewhere and thus not incurred any relocation costs. Nevertheless, by his premature and wrongful termination of the joint venture, Young obliged the plaintiffs to incur those costs at an earlier time and in circumstances where there was at least some possibility that they might never have been incurred at all.

Doing the best I can, I consider it appropriate to award the plaintiffs a sum reflecting their premature expenditure of those moneys (that is, prior to 2001) and the prospect, which I regard as a slight one, that they might never have been incurred, had the venture lasted until December 2001. I assess that loss at $15,000.

I am satisfied on all the evidence that the plaintiffs are entitled to recover a loss of one half of the workshop rental of $208 a week from July 1998 until 5 December 2001, a period of 178.5 weeks, and thus a total loss of $18,564. I reject the defendant's argument that the plaintiffs have gained a benefit by now having exclusive use of the entire premises and that that should be offset. It was not made out on the facts and, given the nature and location of the premises and Jenkinson's considerable expenditure on their renovation, I am satisfied it was entirely reasonable for him to continue with their lease, whether or not he has since exploited the entire space.

I am persuaded on the evidence that the lost contribution to workshop outgoings is $34 per week and over 178.5 weeks that totals $6,069.

I am satisfied that Jenkinson took reasonable steps to secure comparable premises at a reasonable rental rate and I adopt the formulation proposed by McPharlin in paragraphs 5.45 to 5.48 of his first report, except, of course, for the relevant loss period. I reject the suggestion by the defendant that the plaintiffs must account for any marginal increase in the floor space of these premises. On that footing, I calculate rent loss at $50 per week from July 1998 to December 2001 (178.5 weeks) as $8,925, less a rent-free period of $3,900, and thus a net loss of $5,025.

Again, I accept and adopt the general approach to this claim set out in paragraphs 5.51 to 5.53 of the McPharlin report. Applying that weekly cost of $33 over the 178.5-week period results in a loss of $5,891.

I have some difficulty with this head of loss identified in the McPharlin reports, and for these reasons:

(1) the motor vehicle expenses column of the updated Appendix 3 does not indicate any increased cost in this expense - in fact, it has declined since 1998;

(2) to the extent that in his first report, McPharlin relies upon an Australian Tax Office motor vehicle allowance, I expect that allowance includes a provision for depreciation, a figure which would be incurred by the plaintiffs irrespective of the retail location;

(3) there is, in any event, a depreciation figure set out in updated Appendix 3;

(4) it should be remembered that one of McPharlin's assumptions was that operating expenses, whether at Magill Road or Glen Osmond, were of a relatively fixed nature. I have previously queried that in the context of Appendix 6, but having rejected the plaintiffs' lost sales argument, I am prepared to find that the separation of shop and workshop would likely have resulted in extra vehicle expenses. Perhaps their overall decline is symptomatic of the changes the plaintiffs have made in their business activities.

If that claim were allowed at $45 per week over 178.5 weeks, the resulting loss would be $8,033. Doing the best I can, and taking account of my above reservations, I will make some provision for that loss as of 4 December 2001 and will award a nominal sum of $4,500.

I am satisfied that the defendant agreed, albeit reluctantly, to contribute to the ongoing costs of Tottman's wages and that the plaintiffs were deprived of that contribution for the 178.5-week period. Some attempt was made to suggest that Tottman undertook other duties at Glen Osmond Road of advantage to the plaintiffs, but I am satisfied that this was part of the reasonable mitigation undertaken and that it was nevertheless reasonable of the plaintiffs to keep her employed at those premises during opening hours similar to those at Magill. Over 178.5 weeks, this loss calculates at $26,775.

Whilst I am satisfied that Jenkinson spent the hours asserted by him, namely, 264 hours, in relocating and establishing the Glen Osmond premises, I am not persuaded that he should be compensated for that lost time in toto, nor that the appropriate rate of compensation is $50 per hour, for these reasons:

(1) With respect to the lost time, as with the claim for relocation costs, it is probable, as I have found, that Jenkinson was always likely to have to spend a substantial amount of his own time at the end of the joint venture in December 2001 arranging a move and setting up new premises.

(2) The fact that Jenkinson pays subcontractors $50 per hour to repair and polish furniture, does not necessarily imply that he should recover that rate for the time he expended attending to the move or that he might not have procured removalists, sign writers, shopfitters, designers and so on for a lesser rate to do the work which he chose to do himself. I simply have no detail as to that.

In the end, it appears to me that the plaintiffs should be entitled to recover some damages for Jenkinson's labour, for much the same reasons as I allowed a claim for relocation expenses. I am not, however, persuaded that it is a figure capable of precise calculation in the manner proposed by McPharlin at paragraphs 5.67 to 5.69.

I am persuaded that any loss would be incurred by the trust and that it should be compensated for having Jenkinson expend that time to the detriment of its business at an earlier time than might otherwise have been expected. I also take account of the slight possibility that he might never have had to expend it, anyway. Doing the best I can, I will allow a sum of $5,000 under this head, a loss incurred in about July 1998.

I then summarise these assessments as follows.

. lost contribution to rent of workshop $18,564

. lost contribution to outgoings of workshop $6,069

. lost contribution to outgoings at Glen Osmond $5,891

I am satisfied the plaintiffs are entitled to simple interest on those various heads of damage in the range set out in McPharlin's second report at page 39, but the period over which it should be awarded varies for each of the separate heads.

- Relocation costs were awarded on the footing that the plaintiffs were destined to incur such costs, anyway, but they had to pay them out prematurely and there was some allowance for the possibility the joint venture would have continued indefinitely and they might never have been incurred.

On that footing, I think it appropriate to award the plaintiffs interest on $15,000 at 6 per cent from 4 December 2001, an amount of $2,015.

- Additional operating costs of all kinds were incurred over a period of time between July 1998 and December 2001. They total $66,824. I will allow interest on their total for half the period to December 2001 at 6.5 per cent and otherwise, since then, at 6 per cent, an overall total of $16,418.

- Time and effort of Jenkinson was incurred in about July 1998 and I will allow interest since then, which I calculate at 6.25 per cent, a total of $1,772.

There will be judgment for the plaintiffs for $105,214, inclusive of interest. The counterclaim is dismissed and I will hear the parties as to costs.