BC9102701
Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242
254 ALR 273
Henville v Walker [2001] HCA 52
206 CLR 459
Heskell v Continental Express [1950] 1 All ER 1033
Kuligowski v Metrobus [2004] HCA 34
284 ALR 413
PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446
R v Carroll
Source
Original judgment source is linked above.
Catchwords
BC9102701
Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242254 ALR 273
Henville v Walker [2001] HCA 52206 CLR 459
Heskell v Continental Express [1950] 1 All ER 1033
Kuligowski v Metrobus [2004] HCA 34284 ALR 413
PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446
R v CarrollCarroll v the Queen [2010] NSWCCA 55
Judgment (5 paragraphs)
[1]
The Applicant's claim for the loss of the value of its business
At the merits hearing before the Appeal Panel, the Applicant advanced an additional claim for $250,000 representing the value of the business that it carried on in the Shop. This sum was the amount that a firm called City Beach had been prepared to pay for the business during 2006, on condition that the Respondent would agree to a lower rent. In the alternative, the Applicant claimed $100,000, being the amount that another firm, Rip Curl, had offered for the goodwill of the business during 2007.
In the Principal decision at [257], we gave the following reasons for rejecting any such claim by the Applicant:-
257 The Applicant's claim for damages within the second category - the loss of the value of its business - could only be sustained if the evidence showed that a decline in the profitability of the business brought about by the Respondent's unconscionable conduct was of a sufficient scale to cause the business to fail completely. But as we have just said, the evidence was insufficient to support any finding at all as to the amount of lost profit. It follows that there can be no award of damages based on the value of the business.
We have again determined that the evidence in this case was insufficient to support any finding as to the amount of lost profits.
At the remitter hearing, Mr Fernon submitted, however, that for reasons outlined below the Respondent should have been charging a reduced rent for the Shop at the time of City Beach's offer and that accordingly the amount of $250,000 that this firm was prepared to pay for the Applicant's business should be awarded to the Applicant.
We have given consideration to the evidence on which Mr Fernon based his assertion that City Beach would have bought the Applicant's business at the Shop for $250,000 if the Respondent had been prepared to reduce the rent. It takes the form of a transcript of a telephone conversation on 31 October 2006 between Ms Mimis-Weeks and a representative of City Beach. As far as can be ascertained from this transcript, City Beach's position was that it would only have gone ahead with this purchase if the Respondent granted a reduction of at least $200,000. This would have represented about 40% of the rent then paid by the Applicant.
For reasons given below, we consider that at this time the Applicant had legitimate grounds for asserting that the rent was excessive and that the Respondent should have agreed to a reduced amount. But we do not think that it had grounds for claiming a reduction of the substantial scale required by City Beach. Accordingly, we do not accept Mr Fernon's submission that because the Respondent refused to countenance any reduction of the rent payable under the Lease it should be held responsible for City Beach's decision not to purchase the business.
We take account also of Mr Angyal's opposing submission on this matter. He relied on evidence in an affidavit sworn by Mr Papagiannis, Westfield's General Manager of Leasing, to the effect that within a short period after the Applicant's departure from the Shop on 27 June 2007, the Respondent entered into two leases (one of shop 415; the other of shops 416-417) whose combined rent exceeded by a significant margin the rent that the Applicant had been paying. It followed, Mr Angyal argued, that a sale to City Beach would never have occurred and the fact that this firm offered $250,000 did not assist the Applicant's claim.
In oral submissions at the remitter hearing, Mr Fernon argued that even if we concluded that the evidence was insufficient to support an award of damages for lost profits, we should still find that the evident decline in the Applicant's trade at the Shop - in particular, from 2004 onwards - was sufficient to justify awarding compensation for the loss of the value of the business.
We are not persuaded by this argument, for the following reasons. We have found that the evidence in this case did not show that the Respondent's unconscionable conduct had an 'immediate and continuing impact' on the trade conducted in the Shop. In consequence, the onus remained on the Applicant to demonstrate the extent to which this conduct contributed to the decline in trade. There was no adequate evidence on this question. It is accordingly not open to the Applicant to argue that this contribution was sufficient to justify holding the Respondent liable for the ultimate failure of the business.
[2]
Total refund of rent
In the appeal proceedings, the Applicant sought to have set aside the RLD's order, made in the Respondent's cross claim, that it should pay arrears of rent and damages for lost rent to the Respondent, assessed at $327,533.85 plus interest. In the Principal decision at [258], we declined to set aside this order, stating that 'we see no warrant for an order totally relieving the Applicant for its liability for rent'.
We also dismissed a lesser claim by the Applicant that we should make an award in its favour representing the value of rent and outgoings for the six-month period between 1 September 2006 and 28 February 2007. The earlier of these two dates is the date on which the Applicant gave a written notice to the Respondent seeking removal of the three kiosks and a refund of 10% of the rent since October 2002. The reason why the claim covered rent over a period of six months (rather than some other period) was not clear to us.
In the remitter proceedings, Mr Fernon argued that since on a review of the evidence we should find the requisite connection between the Respondent's unconscionable conduct and the Applicant's loss of profits, we should also find that the Applicant should not have been held liable to pay rent to the Respondent. Accordingly, we should set aside the RLD's order for the payment of such rent or, in the alternative, should include the amount of this rent in the damages awarded to the Applicant.
In addition to opposing the claim that this 'requisite connection' was established by the evidence, Mr Angyal pointed out that in the CA decision at [188], the Court of Appeal had expressly stated that the orders of the RLD in favour of the Respondent remained on foot.
On both of these grounds advanced by Mr Angyal, we reject the Applicant's claim that it should be relieved wholly from its liability for rent. We also remain unpersuaded that it should have relief for the six-month period between 1 September 2006 and 28 February 2007. As we indicated in the Principal decision at [258], we do not understand the basis for this claim.
[3]
Partial relief of liability for rent
Our ruling in the Principal decision. In this decision, having held that the Applicant's claim for damages for lost profits was unsustainable, we went on to rule that it should instead receive a sum by way of partial relief from its liability for rent under the Lease. The following extracts from the relevant part of our decision (at [259 - 278]) sufficiently explain our reasoning:-
260 An important reason for [our ruling] is that a significant component of the conduct of the Respondent that we have held to be unconscionable was its refusal to grant continuing rent relief to the Applicant, despite the Applicant's concerns, conveyed on numerous occasions commencing as early as August 2002, about the adverse consequences of contravention of the 2002 Height Restrictions…
262 Our finding of unconscionable conduct against the Respondent was… dependent on proof of a continuing course of conduct, extending beyond the approval of contraventions of the 2002 Height Restrictions so as to include also the Respondent's refusal to acknowledge that contravention had occurred, its reliance on a greatly liberalised version of the Restrictions that it issued in 2005 and, as we have just pointed out, its refusal of rent relief…
265 The questions remaining are (a) what amount or proportion of the rent payable should be the subject of abatement and (b) over what period should the abatement occur.
266 With regard to the first of these questions, we derive guidance from the fact that as at March 2002, when negotiations for the Lease were in train, the current minimum rent paid by the Applicant for Shops 415 and 416 was $229,200 per annum and the current minimum rent for Shop 417, being then payable by the tenant preceding the Applicant, was $169,900. The evidence for this is contained in an internal document of the Respondent, headed 'Business Case Recommendation' and dated 13 March 2002. The total of these two amounts is $399,100.
267 In the same document, it was noted that the minimum rent being proposed for the Lease being negotiated for all three Shops was $427,500. This was in fact the amount ultimately agreed on, with provision for annual increases calculated by reference to the CPI and for an additional percentage rent based on turnover.
268 In this document, it was also noted that the 'Surplus to Current Rent' that would then be generated would be $28,500. This represents 7% of the rent being obtained by the Respondent under the two earlier leases and 6.7% of the rent due under the Lease…
270 It is legitimate, in our opinion, to treat the 'surplus' amount of $28,500 within the rental figure of $427,500 stipulated in the Lease as reflecting, at least to some degree, the additional value of the site occupied by the Premises by virtue of its 'premium quality'. This value was diminished by the interference to sightlines caused by the erection, over the ensuing period of about 30 months, of the three kiosks about which the Applicant complained…
273 The Respondent chose… to reject the Applicant's requests for rent relief on account of this interference. This rejection constituted, as we have said, one of the grounds for our finding of unconscionable conduct. If the Respondent had been prepared to, in effect, surrender to the Applicant a significant segment of the 'surplus' annual rent of $28,500 that it had secured by entering into the Lease, we would, as we have said, have been reluctant to make this finding.
274 In determining what annual amount of rent foregone would have been sufficient for this purpose, we receive no specific guidance from the evidence or from legal principle. We must simply abide by a well-known pronouncement (to which Mr Fernon referred us) contained in the judgment of Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83. [This was to the effect that when, in assessing damages, 'precise evidence is not available' the court must 'do the best it can'.]
276 Doing 'the best we can', we conclude that an offer by the Respondent to 'surrender' 50% of this annual minimum rent 'surplus' of $28,500 - i.e., $14,250 - during the period after the Boost Juice kiosk was constructed would have been sufficient to ward off any finding of unconscionable conduct and is accordingly appropriate for present purposes…
278 The amount to which the Applicant should be entitled, with respect to the loss occasioned by the Respondent's refusal to grant rent relief, is… $14,250 x 5.3333: i.e., $76,000. The Applicant should also receive interest on this sum.
[4]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
[5]
Amendments
12 February 2015 - Changed MNC status
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 12 February 2015
Parties
Applicant/Plaintiff:
Spuds Surf Chatswood Pty Ltd
Respondent/Defendant:
PT Ltd
Legislation Cited (1)
Trade Practices Act 1974(Cth)
Cases Cited (23)
reasons for decision
Introduction
This decision is made in proceedings that were remitted to the Appeal Panel of the Administrative Decisions Tribunal ('the ADT') by an order of the Court of Appeal made on 18 December 2013.
The litigation of which these remitted proceedings form part has a long history. It commenced in the Retail Leases Division of the ADT ('the RLD') as long ago as 31 August 2006. The principal parties throughout have been Spuds Surf Chatswood Pty Ltd ('the Applicant') and PT Ltd ('the Respondent'). At one stage of the proceedings, the Registrar of Retail Tenancy Disputes participated as an Intervener.
The dispute between the principal parties derives from a lease ('the Lease') of premises ('the Shop') comprising shops 415, 416 and 417 on Level 4 of a shopping centre ('the Centre') known as Westfield Chatswood or Westfield Shoppingtown, Chatswood. The Respondent, which belongs to the group of companies known as Westfield, was the lessor. The Applicant was the lessee. The permitted use included the retail sale of surf and snow clothing, surf boards, wet suits and other apparel.
It has been common ground throughout that the Lease was governed by the Retail Leases Act 1994 ('the RL Act') and that the ADT accordingly had jurisdiction to hear and determine the proceedings.
The terms of the Lease were set out in a memorandum, but this memorandum was never executed by both parties. It provided for a commencement date of 10 August 2002, though it was held during the proceedings that because the Applicant took possession on or about 3 July 2002 the Lease actually commenced on that date, pursuant to section 8 of the RL Act. The termination date was stated to be 9 August 2008, though in fact the Applicant vacated the Shop on 26 June 2007.
At the time when this occurred, the rent due under the Lease was substantially in arrears. In the litigation that ensued, the Respondent's principal claims were for payment of these arrears and for damages representing rent that would have been payable up to the termination date.
The principal claims urged by the Applicant were that in contravention of guidelines on height promulgated by the Respondent amongst tenants in the Centre, the Respondent permitted the erection of three kiosks - the Boost Juice kiosk, the Telechoice kiosk and the Love Salad kiosk - close to the Shop and thereby obstructed sightlines to the Shop from a major walkway in the Centre. As a result, according to the Applicant, its sales at the Shop decreased substantially and its losses were so severe that eventually its business in the Shop failed.
An important matter relied on by the Respondent in seeking to rebut these claims was that the time of commencement of the Lease another kiosk - the B-Zone kiosk - was located near the frontage of the Shop. The Respondent maintained that any obstruction to sightlines caused by the three kiosks about which the Applicant complained was no greater, and indeed possibly less, than the obstruction caused by the B-Zone kiosk.
The litigation has given rise to a number of decisions, both final and interlocutory. It is useful at the outset to list the six decisions of primary importance, together with shorthand names for them, as many references will be made to them:-
1. The substantive decision of the RLD: Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2), PT Ltd v Spuds Surf Chatswood Pty Ltd [2011] NSWADT 152 - 'the RLD decision'
A second decision of the RLD: Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3), PT Ltd v Spuds Surf Chatswood Pty Ltd (No 2) [2011] NSWADT 186, determining questions of interest and costs - 'the supplementary RLD decision'
The first decision of the Appeal Panel of the ADT, granting leave for an appeal filed by the Applicant to extend to the merits: Spuds Surf Chatswood Pty Ltd v PT Ltd (RLD) [2012] NSWADTAP 2 - 'the Leave decision'
The Appeal Panel's second decision, determining this appeal on the merits: Spuds Surf Chatswood Pty Ltd v PT Ltd (No 2) (RLD) [2012] NSWADTAP 35 - 'the Principal decision'
The Appeal Panel's third decision, determining questions of interest and costs: Spuds Surf Chatswood Pty Ltd v PT Ltd (No 3) (RLD) [2013] NSWADTAP 11 - 'the supplementary appeal decision'
The Court of Appeal's decision, allowing an appeal by the Respondent and a cross-appeal by the Applicant, both in part, and remitting part of the proceedings to the Appeal Panel: PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 - 'the CA decision'.
Within the CA decision, all references will be to the judgment of Sackville AJA, with whom McColl and Leeming JJA expressed their agreement.
Scope of remitted hearing
The terms of the Court of Appeal's order remitting the proceedings (CA decision, [195]) were as follows:-
(5) Remit the proceedings to the Appeal Panel to assess the damages (if any) to be awarded to Spuds by reason of PT's unconscionable conduct, consistently with this Judgment.
Relying in particular on the words 'if any', Mr Angyal argued that these terms were broad enough to require us to re-determine the question of causation. He acknowledged that the Court of Appeal had referred (at [174]) to our conclusion (Principal decision, [221]) that 'the conduct of the Respondent that we have held to be unconscionable did cause the Applicant to sustain some measure of economic loss…' But he maintained that the question of causation fell nonetheless within the scope of the remitted proceedings, on account of the following additional observations by the Court (at [175], [177], [178] and [179]):-
175 But in the section of its reasons dealing with damages, the Appeal Panel found (at [246]) that Spuds' assertion of a substantial overall decline in the profitability of its business on account of the kiosks was "not backed up at all by financial data". On the contrary, there appeared to be "no correlation in time between the erection of a kiosk and a decline in turnover"…
177… the Appeal Panel made no finding that any particular, quantifiable diminution in gross revenue was caused by PT's unconscionable conduct.
178 … there must at least be a finding that the unconscionable conduct is a cause of a quantifiable loss sustained by the lessee. No such finding - or anything close to it - has been made in the present case.
179… further findings of fact are required before any damages award can be made. Those findings must be made by the Appeal Panel itself on remitter.
Mr Angyal placed particular emphasis on the Court's use of the phrases 'caused by' and 'a cause of' in paragraphs [177] and [178] respectively.
In response, Mr Fernon cited a number of authorities to the effect that a court or tribunal to which proceedings have been remitted must not stray outside the boundaries set by the order for remitter. For present purposes, it is sufficient to quote the following statement of principle appearing in one of these cases, R v Carroll; Carroll v the Queen [2010] NSWCCA 55; 77 NSWLR 45 at [28]:-
It is undoubted that the scope of the authority of a court to which a matter is remitted… is confined by the terms of the remitted and that such court can make no order nor undertake any task inconsistent with the remitter order…
The primary ground on which Mr Fernon contested Mr Angyal's argument on this question was that the Court of Appeal had dismissed PT's appeal on the issue of causation and had framed a remitter order that made no mention of this issue. He relied on the following statements by Sackville AJA at [157], [191] and [193]:-
157… I therefore do not accept PT's submission that the Appeal Panel erred in law in finding that PT's unconscionable conduct caused Spuds to sustain some loss.
191 PT's appeal succeeds only to the extent that the Appeal Panel's award of damages must be set aside. PT's appeal, insofar as it challenges the Appeal Panel's finding on unconscionability, must be dismissed.
193 For the reasons that have been given, the unfortunate consequence of the Appeal Panel's departure from procedural fairness in the assessment of damages is that the matter must be remitted to the Appeal Panel for damages to be reassessed (see ADT Act, s 120(2)). It will be a matter for the Appeal Panel to determine whether any evidence should be received on this question.
Issue estoppel
The Respondent's submissions. Mr Angyal's argument based on the principles of issue estoppel was framed in the following manner.
In the Principal decision at [226], we made the following ruling with regard to the question whether the Respondent's unconscionable conduct caused any loss to the Applicant:-
… the question of causation (as distinct from quantification of damages) may be answered by determining whether, on the balance of probabilities, there was any material difference at all, adverse to the Applicant, between:
(a) The pecuniary impact (if any) on its business of the obstruction to sight lines (if any) caused by the blade sign on the Boost Juice kiosk and the components of the Telechoice and Love Salad kiosks that infringed the 2002 Height Restrictions; and
(b) The pecuniary impact (if any) on its business of the obstruction to sight lines (if any) that was caused by the sign suspended above the B-Zone kiosk.
Before the Court of Appeal, the Respondent claimed that this formulation, which we will call 'the criterion of loss', was erroneous in law. The Court rejected this claim (CA decision, [155]) for the following reasons: (a) we had found, as a matter of fact, that if the Respondent had not engaged in unconscionable conduct, the B-Zone kiosk, or a structure very similar to it, would have remained in place; and (b) an appeal to the Court of Appeal on this question of fact was not available to the Respondent.
According to Mr Angyal, this 'criterion of loss' was the same criterion as the RLD at first instance had applied when dismissing the Applicant's claim for damages under section 34 of the RL Act. It had held (RLD decision, [221]) that a comparison should be made 'between the extent of any relevant obstruction by the B-Zone kiosk and any relevant obstruction by the Boost Juice kiosk'. It observed that such an assessment was 'pertinent to determine whether… there were involved inhibitions or alterations "to a substantial extent", "significant disruption" and "significant adverse effect" as alleged by the Applicant'. At [225(d)], it stated: 'There was not caused to Surf City by any or all of those facilities any significant inhibition, alteration, disruption or adverse effect, of the order prescribed by s34(1), or at all.'
In the Leave decision at [260], following a lengthy discussion, we dismissed both (a) the Applicant's appeal against the RLD's dismissal of its claim under section 34 and (b) its application for the appeal to extend to the merits of the section 34 claim. With regard to the latter ruling, we stated (at [255 - 256]):-
255… we should not exercise this discretion in favour of the Applicant unless we believe that, following the 'rehearing' required under section 115 of the ADT Act, we would be likely to reach a decision conferring distinctly greater benefit on the Applicant than the Tribunal's decision dismissing its claim under section 34.
256 On this matter, our opinion is that such a decision would be unlikely…
The Court of Appeal's ruling that a 'quantifiable loss' had to be proved
In the foregoing discussion of the scope of the remitted proceedings, we referred to a distinction drawn in the CA decision between our rulings that (a) the Respondent's unconscionable conduct 'did cause the Applicant to sustain some measure of economic loss' and (b) 'the Applicant's assertion of a substantial overall decline in the profitability of its by its business is not backed up at all by financial data showing that the erection of any of them had an immediate, or briefly delayed, negative effect on its turnover' (see the Principal decision at [221] and [246]).
The Court of Appeal dismissed the Respondent's appeal against the former ruling, on the ground that it had not been shown to be erroneous in law. The Court described the effect of the latter ruling as follows (CA decision, [177]):
177… the Appeal Panel made no finding that any particular, quantifiable diminution in gross revenue was caused by PT's unconscionable conduct. In other words, it made no finding that there was a prima facie causal connection between PT's contravention of s 62B(1) of the RL Act and a quantifiable loss sustained by Spuds.
It is evident from these passages that the Court saw no incompatibility between these two rulings. It took the view that a party claiming damages might well establish that the conduct complained of caused it to sustain 'some measure' of economic loss, but might be denied an award of damages because it failed to establish that this conduct was a cause of 'quantifiable' loss.
The reason why the distinction between 'some measure of loss' and 'quantifiable loss' is of prime importance in the present context appears from a section of the Court of Appeal's judgment (paragraphs [160] to [179]) headed 'Spuds' Onus Argument'.
This argument of the Applicant was not advanced at the hearings before the RLD or the Appeal Panel. At [160] to [172], the Court outlined it and discussed the two cases on which it was principally based:-
160 Although Spuds put its damages claim in various ways, the key submission for present purposes was that it had lost gross profits because of the diminution in the volume of its trade caused by PT's unconscionable conduct. Thus, so Spuds argued, it was entitled to damages under s 62B(8) assessed by reference to its lost profits.
161 Mr Fernon submitted that once Spuds proved a causal link between its losses and PT's unconscionable conduct (which he says it did) the onus was on PT to prove the extent to which the losses were attributable to other causes. It was for PT to prove, for example, that any losses sustained by Spuds were in truth attributable to Spuds' own business decision in April 2004 to discontinue stocking two well-known brands of surf wear, rather than to any unconscionable conduct on the part of PT.
162 According to Mr Fernon, the Appeal Panel found that some of Spuds' lost profits were attributable to PT's unconscionable conduct. Since PT had not established what proportion of Spuds' lost profits could be attributed to factors other than PT's own unconscionable conduct, Spuds was entitled to be compensated for the whole of its losses. Mr Fernon further contended that on any view the amount of lost profits assessed in this way must have exceeded the RLD's jurisdictional limit of $400,000.
163 Mr Fernon principally relied on Henville v Walker [2001] HCA 52; 206 CLR 459. In that case developers relied on misleading advice from a real estate agent concerning the demand for "quality" units when deciding to undertake a particular project. However, the developers also prepared a feasibility study which seriously underestimated the costs of the project. If either the demand for units or the costs of the project had been estimated accurately, the project would not have proceeded. The developers sued the agent for misleading or deceptive conduct in contravention of s 52 of the TP Act [the Trade Practices Act 1974 (Cth)] and claimed pursuant to s 82 of the TP Act the entirety of their losses on the project.
164 By majority (McHugh, Gummow and Hayne JJ; Gleeson CJ and Gaudron J dissenting), the High Court upheld the developers' claim. McHugh J (with whom Gummow J agreed) pointed out (at [144]) that one fundamental purpose of the TP Act was to protect consumers from being induced to enter into transactions by false or misleading conduct. Thus an award of damages made under s 82 of the TP Act had to compensate the claimant for the loss suffered in consequence of altering his or her position on the inducement of the false representation.
165 On that basis, his Honour held (at [146]) that the Full Court of the Supreme Court of Western Australia had erred in concluding that, because there were concurrent causes of the developers' losses, their claim had to fail. McHugh J added this observation (at [148]):
Arguably, once a plaintiff demonstrates that a breach of duty has occurred that is closely followed by damage, a prima facie causal connection will be established. It is then for the defendant to show that the plaintiff should not recover damages. In the words of Dixon CJ in Watts v Rake [[1960] HCA 58; 108 CLR 158, at 160], it is the defendant who must disentangle, so far as possible, the various contributing factors.
166 Hayne J (with whom Gummow J also agreed) reached the same conclusion:
160 First, it is necessary to identify the loss sustained by the [developers]. The loss which the [developers] suffered is a single sum. It is the amount by which their expenditures exceeded their receipts. ... Further, the whole of that loss was brought about by the decision to proceed with the project, a decision which was ... made in reliance upon the wrong estimates of both costs and likely receipts. ...
161 Both the estimate of likely receipts and the estimate of likely expenditures were wrong. That does not mean, however, that, in this case, attention can be confined to one side of the profit and loss account in determining what loss and damage was caused by the respondents' misleading and deceptive conduct. The question presented by the statute is what loss was suffered by the [developers] that was caused by the relevant contravention?
162 The conclusion that the [developers] suffered loss requires comparison between the position in which the [developers] found themselves after the project was finished, and the position in which they would have been if, instead of relying on what they were told by the respondents, they had not undertaken the project. ...
163 Secondly, seldom, if ever, will contravening conduct be the sole cause of a person suffering loss. ... What the Act directs attention to is whether the contravening conduct was a cause. It does not require, or permit, the attribution of some qualification such as "solely" or "principally" to the word "by".
167 As Mr Fernon acknowledged in argument, the facts of Henville v Walker were different to the present case. The starting point for the majority of the High Court was that the agent's misleading conduct was a cause of the developers' entire loss on the project: that is, but for the misleading conduct the developers would not have undertaken the ill-fated development. The fact that there were other circumstances inducing the developers to undertake the project was not to the point. By contrast, the present is not a "no transaction" case. Spuds does not say (at least not now) that PT's unconscionable conduct induced it to enter into the Lease. It says that PT's conduct was a cause of its loss of gross profits and that it is for PT to "disentangle" any other factors that may have contributed to the loss.
168 Mr Fernon submitted that although the facts in Henville v Walker were different, the principle was nonetheless apposite to this case. He relied on the carefully reasoned judgment of Jagot J in Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242; 254 ALR 273.
169 The issue in Haviv was the quantum of damages to be awarded to a franchisee (Haviv) for the franchisor's breach of contract in permitting a second franchisee to operate within Haviv's exclusive territory. Jagot J applied the principle that:
while the plaintiff has the onus of showing loss caused by the breach, "if the loss in question is the apparent or likely result of the breach, the onus shifts to the contract-breaker to prove that it was not" [Cheshire and Fifoot's Law of Contract, (9th Aust ed, 2008), at [23.34]]
170 Jagot J assessed damages by comparing the net profits Haviv in fact earned from its store (when it had to compete with the second franchisee's business) with the hypothetical net profits it would have earned had the franchisor not breached the contract (Scenario 1). Her Honour accepted Haviv's submission that its hypothetical net profits for the relevant period could be ascertained by reference to a benchmark derived from the performance during that period of several exclusive franchisees whose outlets were comparable to Haviv's. On this basis, her Honour found (at [45]) that under Scenario 1 there had been an immediate decrease in sales revenue (and thus of the potential for net profits) following the opening of the second franchisee's store (emphasis in the original). The decrease continued thereafter.
171 The franchisor identified several factors which it said had contributed to the decline in sales revenue. One of these, the opening of a modern retail complex at Rhodes (near Haviv's store), probably had the effect of attracting some customers away from Haviv. However, there was no evidence as to the magnitude of the likely impact on Haviv's revenue (at [42]). In her Honour's view, the onus was on the franchisor to disentangle the extent to which the opening of the Rhodes complex contributed to Haviv's loss of revenue (at [46]):
These circumstances ... show a breach of contract "closely followed by damage", thus indicative of a "prima facie causal connection" between the breach and damage: see the observations of Kirby J in Chappel [Chappel v Hart [1998] HCA 55; 195 CLR 232] at [93]. A "practical commonsense" approach to the question of damage indicates that the Rhodes store was a material cause of loss of net profits from [Haviv's] store after November 2004. I also accept Haviv's submissions that, as Haviv had proved a prima facie causal connection between the breach and the loss, it was a matter for [the franchisor] as the party in breach to "disentangle" any contribution to Haviv's loss caused by the Rhodes shopping centre: Henville at [148]; see also Amann Aviation at 94. [The franchisor] did not do so. When this is considered with the proper function of the discount rate ... it is apparent that the state of the evidence does not disclose any fundamental gap in or undermine Haviv's case for damages. No allowance need or should be made for any potential contribution of the Rhodes shopping centre because [the franchisor] has not proven any such effect and, in any event, that is part of the function of the application of a discount rate. (Emphasis added in the CA decision)
172 The critical element in Jagot J's reasoning was the finding that the opening of the second franchisee's store had an immediate and continuing impact on Haviv's gross profits (emphasis in the CA decision). Thus there was a prima facie causal connection between the franchisor's breach of contract and the loss sustained by Haviv. (I leave to one side the role played by the discount rate in the case)…
Principles governing the assessment of damages for unconscionable conduct
The parties' submissions. The starting-point of Mr Fernon's argument on this matter was the proposition that in assessing damages for unconscionable conduct under section 72AA of the RL Act, we should apply principles similar to those governing tort claims and should accordingly calculate the loss of gross profits sustained by the Applicant's business at the Shop on account of the Respondent' unconscionable conduct. He referred to paragraph [262] of the ADT's decision in Sarker v World Best Holdings Ltd [2008] NSWADT 75, which is in the following terms:-
262 Mr Ashhurst [counsel for the applicant] submitted that any damages awarded under this provision should be assessed on principles similar to those governing tort claims. The damages should be designed to place the injured party in the position in which he or she would have been but for the offending conduct. He described the approach to be adopted as 'restitutionary'. Mr Angyal [counsel for the respondent] did not dispute these general propositions.
Subsection (1) of section 72AA, being the relevant part of this section for present purposes, states:-
72AA Powers of Tribunal relating to unconscionable conduct claims
(1) In proceedings for an unconscionable conduct claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate:
(a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,
(b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings.
On this footing, Mr Fernon argued, the following statement by the Court of Appeal in Council of the Municipality of Shellharbour v Ezzi [1991] NSWCA 63; BC9102701 at p 12 was applicable:-
However the existence of a concurrent cause does not relieve the tortfeasor from responsibility for loss. It is well settled, as Devlin J said in Heskell v Continental Express [1950] 1 All ER 1033 at 1047:
"Where the wrong is a tort it is clearly settled that the wrongdoer cannot excuse himself by pointing to another cause. It is enough that the tort should be a cause and it is unnecessary to evaluate competing causes and ascertain which of them is dominant."
Mr Fernon argued that this general rule applied also to claims for damages for breach of contract. He cited the following statement of principle by Glass JA in Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 357:-
In my opinion, the above cases do not establish the proposition that a plaintiff in an action for breach of contract must prove that the breach of contract was the real and efficient or dominant cause of the loss which he suffered. In the law of tort it is well-established that it is sufficient that the wrongful act or omission is a material cause of the plaintiff's injury or damage. In principle the same rule must apply in the law of contract unless the terms of the contract require the sole or dominant cause to be determined.
Our conclusions on the question of 'quantifiable loss'
Our preliminary observations regarding the Sales Figures. The parties' competing submissions on this part of the evidence demonstrate the crucial importance, for the Applicant's case on assessment of damages, of Mr Fernon's submission that during the period of about six weeks between the commencement of trading in the Shop (15 August 2002 or thereabouts) and the end of the third quarter of 2002, the turnover of the business must have increased by 32-34% in comparison with its turnover in the equivalent period of 2001. Mr Fernon arrived at this rate of 32-34% by doubling the rate of increase (16-17%) discernible by comparing the Sales Figures for the whole of the relevant quarter (the third) in 2001 and 2002. The assumptions underlying his submission are (i) that during the first half of this quarter in 2002 (i.e., between 1 July and mid-August), there was no increase in the Shop's turnover and (ii) that all of the increase in turnover for the quarter as a whole should therefore be attributed to the trade conducted in the second half of the quarter (mid-August to 30 September).
In our opinion, these assumptions constitute a fragile foundation for two crucial propositions advanced by the Applicant. These were (a) that the rate of increase in sales that should have occurred in the fourth quarter of 2002 and the first two quarters of 2003 (when compared with their equivalents during 2001 and 2002 respectively) was as high as 32-34% and (b) the failure of the business at the Shop to achieve this rate of increase was attributable to the installation of the Boost Juice kiosk.
As Mr Angyal's competing argument illustrates, if one assumes that the enlargement of the Premises would have increased the Sales Figures by only 20% (this being the highest rate suggested by Mr Standley and a rate near the lower end of the range suggested by Mr Terrill), a very different outcome emerges. This is that the installation of the Boost Juice kiosk in place of the B-Zone kiosk brought about an increase in the Applicant's sales, not a decline.
This is not to say that we agree with Mr Angyal's claim that the rate of 20% should be accepted. We refer to this claim here for the purpose of demonstrating that acceptance of Mr Fernon's figure of 32-34%, or at least a figure exceeding 26% by a significant margin, is essential if his argument that the installation of the Boost Juice kiosk had an immediate negative impact on the Shop's turnover is to be accepted.
Our view of the competing submissions regarding the significance of Mr Mimis's memorandum of 12 November 2002 is that Mr Fernon's submission is to be preferred. It may well be, as he argued, that the rate of increase achieved during the period following installation of the Boost Juice kiosk was in fact less than 26%. But there is no way of estimating this lower rate.
The Court of Appeal set aside our order implementing this conclusion on the ground that the parties had not had an opportunity to make submissions on the approach that we had adopted to determining an amount to be awarded to the Applicant. It did not indicate whether it considered this approach to be appropriate in the circumstances of the case.
We have given careful consideration to the question whether the making an order granting partial relief from liability for rent would fall within the terms of the Court's order remitting these proceedings to us. This particular question was not addressed in the parties' submissions.
The remitter order was in the following terms: 'Remit the proceedings to the Appeal Panel to assess the damages (if any) to be awarded to Spuds by reason of PT's unconscionable conduct, consistently with this Judgment.'
In the ensuing discussion, we express the opinion that an order for partial relief of the Applicant's liability for rent would be an order by way of restitution and we draw attention to important distinctions between orders designed to effect restitution and awards of compensatory damages. It may therefore be thought that any such order made against the Respondent would fall outside the scope of the remitter.
We note however that in its decision (at [85] and on two occasions in [158]), the Court of Appeal used the term 'damages' to describe our order in the Principal decision granting partial relief from liability to pay rent. The Court said nothing to suggest that the making of an order of this nature would fall outside the terms of the remitter. We accordingly interpret the phrase 'assess the damages (if any)' in the remitter order as one intended to leave scope for this form of relief.
The Applicant's submissions. Mr Fernon agreed that, as an alternative to assessing damages by reference to lost profits, it was appropriate to make an award based on the rent reduction that the Respondent should have granted.
He claimed, however, that the amount of our award was unduly low. His principal arguments were as follows.
First, the annual amount of $14,250 that we determined as an appropriate abatement of rent was only 3.5% of the initial rental ($427,500). It took no account of the 'destruction of the premium nature of the Shop caused by the Kiosks or their detrimental effect to the gross profits of the business'.
Secondly, although the base annual rent of $1,723 per square metre paid by the Applicant for shops 415 and 416 (before the Lease commenced) increased by only 3.3% (to $1,781) when the Premises expanded to include shop 417, the new rent must be taken to have included a larger premium for the prime location of shop 417. The reason for this, according to Mr Fernon, was that normally the rental rate per square metre diminishes when the size of a retail shop is increased. This was acknowledged during cross-examination by Mr Stevens, a leasing manager employed by the Respondent.
Mr Stevens' answers on this topic were given when he was asked about discussions between the parties during 2005 regarding a possible downsizing of the Shop. His answers included assent to the proposition that the rental per square metre that the Respondent was then proposing for a lease of significantly smaller premises to the Applicant was 12.8% higher than the rental that the Applicant was then paying for the Shop.
Relying on this evidence from Mr Stevens and on evidence that the rental paid by the tenant who took over part of the Shop (shops 416 and 417) following the Applicant's departure was set at about the same rate as the Applicant had been paying, Mr Fernon argued that the 'premium' that the Applicant paid to enlarge the Premises during August 2002 should be taken to have been at least 16%. He reached this figure by adding the increase of 12.8% per square metre sought by the Respondent during the negotiations for downsizing the Shop to the increase of 3.3% that the Applicant in fact paid when the Premises were enlarged.
Thirdly, Mr Fernon submitted that we erred in assessing the rental premium for the prime position of shop 417 by reference only to the additional amount ($28,500 per annum) paid by the Applicant in 2002 over and above what the previous tenant had paid. This approach, he maintained, took no account of the premium already paid by this tenant for the prime location.
Fourthly, he said, we erred in failing to take account of the CPI increases in the rent during the period from the commencement of the Lease in July 2002 until 2006-2007. A similar increase in the value of the premium location should have been taken into account.
Fifthly, he submitted that we erred through not considering the effect of the Respondent's refusal to provide rent relief on the overall viability of the Applicant's business and its capacity to continue trading. If an appropriate level of rent relief had been granted, this business might have survived.
Sixth and finally, Mr Fernon referred to evidence from Mr Stevens that when negotiating a renewed lease in 2006 to a tenant in the Centre, the Respondent had agreed to a reduction of nearly 50% of the rent paid under the original lease, which commenced in 1999. Mr Stevens agreed that a major reason for the reduction was that the traffic flow near the tenant's shop had diminished significantly. On this basis, Mr Fernon claimed that an amount reflecting a 50% reduction in the rent paid by the Applicant should be awarded.
Mr Fernon also made submissions based on the rentals obtained by the Respondent when re-letting the three shops that the Applicant had occupied. It is sufficient for us to indicate that in our opinion neither these submissions nor the opposing submissions advanced by Mr Angyal are of any value in this context. The amounts of the rents for these three shops agreed on in leases granted to other parties during 2007 have little or no relevance to the amount that could be regarded as a fair rent chargeable to the Applicant for premises comprising the three shops following the erection of the three kiosks between November 2002 and February 2005.
The Respondent's submissions. Mr Angyal's primary contentions were along the following lines: (a) the only way in which one might quantify any rent relief to be granted must involve assessment of the impact of the erection of the three kiosks on the Applicant's business in the Shop; (b) the evidence regarding the losses allegedly suffered by the Applicant was insufficient to enable this assessment to be conducted; (c) it followed that no rent relief could be granted.
Mr Angyal argued also that there was no evidence to support the proposition that if appropriate rental relief had been granted, the Applicant's business would have survived. Instead, Mr Bell had expressed the opinion that the Applicant's decision to move into the Shop put it into a position where the sales that it generated were insufficient from the outset to enable it to pay the increased rental.
In reply to Mr Fernon's submission based on the Respondent's grant of rent relief to another tenant on the ground of reduced pedestrian traffic, Mr Angyal maintained that this one instance did not establish that there existed a general practice of granting relief in these circumstances.
Finally, Mr Angyal disputed the general proposition that rental rates per square metre higher for small shops than for larger ones. In this context, he made three submissions: (a) in order to establish the proposition, it was not enough merely to point to the evidence of one witness (Mr Stevens) and to a rate proposed during negotiations for one new lease; (b) Mr Stevens described the proposition as a 'rule of thumb' only, adding that 'it depends on the nature of the retailer'; and (c) at the time when the Premises were enlarged, the rent per square metre ($1,723) paid by the Applicant for shops 415 and 416 (whose combined area was 133 square metres) was higher, not lower, than the rent ($1,588) paid by the then tenant of shop 417 (the area of which was only 107 square metres).
Discussion of general principles. We will commence our discussion with some observations about the general principles that support the making of orders by way of rent relief under the RL Act on the ground of a lessor's unconscionable conduct. This is not a topic that the parties addressed to any material extent, even though they had the opportunity to do so.
In our opinion, the proposition that such orders may be made receives strong support from the wording of section 72AA(1) of this Act. This subsection (with emphasis added by us) is in the following terms:-
72AA Powers of Tribunal relating to unconscionable conduct claims
(1) In proceedings for an unconscionable conduct claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate:
(a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,
(b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings.
The italicised phrases convey the clear message that orders for the payment of unliquidated compensatory damages - such as an award of damages calculated by reference to lost profits - are not the only kind of remedy permitted by the subsection. For this reason, dicta describing how damages should be assessed under section 72AA (such as the dictum in Sarker v World Best Holdings Ltd [2008] NSWADT 75 at [262], on which Mr Fernon relied) should not be interpreted as implying that common law damages are the only remedy available to a successful applicant.
The notion of unconscionable conduct is a creature of equity. To a significant extent, equitable remedies are concerned with ensuring that parties whose past conduct has been found to breach equitable principles are not permitted to retain any money or property that they have acquired by virtue of this conduct. To a significant extent also, the law of restitution is concerned with providing remedies against unjust enrichment.
In the light of these considerations, the relief granted under section 72AA may, in our opinion, take the form of an order requiring a lessor to repay to the lessee some or all of any money (including instalments of rent) that the lessor has received from the lessee, when the grounds for the order are or include a finding that the lessor acted unconscionably in requiring this money to be paid.
An order of this nature does not seek to ensure that the lessee receives compensation, in the sense in which that term describes the purpose of common law damages. Its focus is instead on the extent to which the lessor has been enriched, at the expense of the lessee, by conduct that has been held unconscionable. Such an order may be for a sum falling well short of what, according to the lessee, would amount to compensation for losses caused by the lessor's unconscionable conduct.
By virtue of this reasoning, we reject Mr Angyal's contention that the only means whereby we might quantify any rent relief to be granted in the present proceedings must involve assessment of the impact of the erection of the three kiosks on the profitability of the Applicant's business in the Shop.
We also reject Mr Fernon's submission that in determining an amount to be awarded by way of rent relief, we should give consideration to the effect of the Respondent's refusal to provide such relief on the overall viability of the Applicant's business and its capacity to continue trading. To do this, in our opinion, would involve assessing whether, and if so to what extent, this aspect of the Respondent's unconscionable conduct had adversely affected the profitability of the Applicant's business at the Shop. But that is a question relating to which we have held, for reasons explained above at some length, that the evidence is insufficient.
As indicated above at [223], Mr Fernon's submissions on this matter went to the lengths of claiming that if rent relief on a sufficient scale had been granted, this business 'might have survived'. The evidence does not, however, permit a finding about this proposition. Significantly, the testimony of Mr Bell (as Mr Angyal pointed out) included an opinion that the Applicant's decision to move into the Shop put it into a position where the sales that it generated were insufficient from the outset to enable it to pay the increased rental.
It appears to us that an order along the lines that we have described is entirely appropriate when the Tribunal (as in this case) is satisfied that a lessor's unconscionable conduct has caused the lessee to suffer loss, but the evidence does not provide an adequate basis for quantifying this loss.
How the amount to be awarded should be determined. We turn now to the determination of an appropriate amount to be awarded by way of relief from liability for rent.
As shown in the extracts from Principal decision quoted above at [209], our approach in that decision was to award, for each year of the relevant period, an amount that we believed to be a fair proportion (50%) of the 'Surplus to Current Rent' ($28,500) that the Respondent acquired through substituting the Lease of the Shop to the Applicant for the earlier leases of shops 415 and 416 (to the Applicant) and shop 417 (to another tenant).
We do not accept Mr Fernon's submission that the 'premium' paid by the Applicant for the prime location of the Shop should be assessed at a figure as high as 16%. Equally, we are not impressed by his claim, based on the circumstances of a lease granted to another tenant at the Centre, that a rent reduction at the even higher rate of 50% is warranted. In both of these instances, the evidentiary base is distinctly tenuous.
We attach some weight, however, to Mr Stevens' 'rule of thumb' that generally speaking the rental per square metre for larger premises in a shopping centre will be lower than the rental for smaller premises. This suggests that rental relief at only 3.3% - being the rate of increase per square metre charged to the Applicant by virtue of the expansion of the Premises - would be insufficient.
Having given careful consideration to this question, we remain of the opinion that the general approach adopted in the Principal decision is appropriate. A significant factor in its favour is that its starting point is the 'surplus' amount of rent that the Respondent acquired through entering into the Lease. Its adoption implements the principle that the Respondent, by virtue of engaging in unconscionable conduct that impacted adversely on the benefits acquired by the Applicant under the Lease, should not be permitted to retain the whole of this surplus amount.
In maintaining this approach, we reject one submission by Mr Fernon that relates specifically to it. We are not persuaded that we should take account of any 'premium' paid by the prior tenant of shop 417 for its 'prime location'. Our principal reasons is that, as Mr Angyal noted, the rent per square metre paid by this tenant was lower than the rent paid by the Applicant for two shops (415 and 416) that were not in a 'prime location'.
We agree with Mr Fernon, however, that in the Principal decision we erred in failing to take account of the CPI increases in the rent during the period of the Lease. In re-determining the amount of rent relief to be awarded, we will remedy this defect.
Our calculations. Our starting point in determining an amount to be awarded is the 'Surplus to Current Rent' ($28,500) that the Respondent acquired through entering into the Lease of the Shop. The annual rent then payable by the Applicant (i.e., the initial base rent) was $427,500. Accordingly, the 'annual surplus rent' (as we will now call it) represented one-fifteenth (6.666%) of the base rent.
During the period of the Lease, the base rent rose from $427,500 (in 2002-2003) to $526,104 (in 2007-2008). (The latter amount is one of two figures given in Mr Fernon's submissions for the rent during the final year of the Lease. On our reading of the evidence, it is the correct figure.) We do not know what the base rent was in each of the intervening years. We consider, however, that Mr Fernon's submission regarding CPI increases will be taken sufficiently into account if we base our recalculation of an annual surplus rent figure covering the whole six-year term of the Lease on an amount midway between the initial base rent and the final base rent. That amount is $476,802.
Recalculated in this way, the figure for annual surplus rent becomes one-fifteenth (6.666%) of $476,802: i.e., $31,786.
In the Principal decision, we stated (at [276]):
276 Doing 'the best we can' we conclude 'an offer by the Respondent to 'surrender' 50% of this annual minimum rent 'surplus' of $28,500 - i.e., $14,250 - during the period after the Boost Juice kiosk was constructed would have been sufficient to ward off any finding of unconscionable conduct and is accordingly appropriate for present purposes.
As mentioned above, Mr Fernon submitted that the amount of rent relief that we ultimately determined through assessing it as 50% of the annual rent surplus was clearly inadequate, being only 3.333% of the initial rental.
On reconsideration, we agree with this submission. It must be acknowledged that the proportion of the annual rent surplus that should, according to our reasoning, be refunded to the Applicant must inevitably depend on value judgment rather than on precise calculations conducted in accordance with detailed legal principles. We have ourselves expressed the opinion (at [243]) that rent relief at 3.3% would be insufficient.
Our conclusion is that the amount of the relief should be 80%, not 50%, of the adjusted annual rent surplus. In deciding on this higher percentage, we rely in particular on an aspect of the Respondent's unconscionable conduct to which in the Principal decision we attached insufficient weight. This is that during the later years of the Lease the Respondent refused to grant any abatement of rent even though it knew that the Applicant's business in the Shop was in difficulties and realised - or should have realised - that the conduct in relation to the kiosks that we have characterised as unconscionable may well (we put it no higher) have contributed materially to these difficulties. The ongoing nature of the Respondent's unconscionable conduct calls, we believe, for a surrender by it of a higher proportion of the annual rent surplus than we initially determined.
One further amendment should be made to the approach taken in the Principal decision. In that decision at [277 - 278], we held that the period over which rent relief was should be granted was 5 years and 4 months, from 2 July 2002 to 1 November 2007. We pointed out in the same passage that this was the period covered by the Respondent's cross claim for unpaid rent and outgoings (we should have mentioned that the claim also included damages for lost rent).
We recognise now (though the matter was not addressed in the submissions) that the correct period is five years only, from the time in November 2002 when the Boost Juice kiosk was erected until 1 November 2007. The Applicant has no grounds for claiming rent relief for any earlier period.
On the footing, therefore, that the Applicant should receive rent relief calculated as 80% of the annual rent surplus over five years, the principal amount to be awarded is $31,786 x 0.8 x 5. This produces a total of $127,143.47, to which interest should be added.
In calculating interest, we will employ the methodology, and to some degree the phraseology, that we used in the Principal decision at [279 - 282].
As noted near the commencement of these reasons, the orders made in the RLD decision included orders upholding the Respondent's cross application and requiring the Applicant to pay $327,633.55 on account of unpaid rent and outgoings and lost rent, together with interest, to the Respondent.
In the supplementary RLD decision, the RLD held that the amount of interest to be paid by the Applicant to the Respondent, being pre-judgment interest from 23 April 2008 to 3 August 2011, was $92,811.46. Accordingly, the total amount ordered by the RLD was $420,455.01.
The amount of interest payable by the Respondent to the Applicant under the order that we are making should therefore be $127,143.47 x 92,811.46 divided by 327,533.55. The resulting figure for interest is $36,027.98, and the total amount to be paid under our order is $163,171.46.
The orders to be made. We understand that at the time of the remitter hearing the Applicant had not paid any part of the total amount of $420,455.01 that the RLD ordered it to pay, by virtue of upholding the Respondent's cross application. Assuming that this is still the case, our decision, by virtue of upholding the Applicant's application, that the amount of $163,171.46 should be paid by the Respondent to the Applicant permits a set-off of the Respondent's lesser liability against the Applicant's greater liability. The net amount to be paid by the Applicant to the Respondent is $257,283.55.
But for this set off, the RLD's orders requiring $420,455.01 to be paid to the Respondent would transgress the upper limit of $400,000 for orders made by the ADT under the RL Act. This upper limit is imposed in the following terms by section 73(1) of this Act, which states:-
73 Monetary limit on Tribunal's jurisdiction
(1) The Tribunal has no jurisdiction to make an order or orders in respect of a particular retail tenancy claim or an unconscionable conduct claim if the total of:
(a) the amount or amounts (if any) of money to be paid, and
(b) the amount or amounts (if any) of money to be declared not to be due or owing, and
(c) the value or values (if any) of the work to be done or the services to be performed,
under or by virtue of the order or orders would exceed $400,000 or such other amount as may be prescribed by the regulations, whether on a balance of account or after set-off or otherwise.
As the Court of Appeal observed (CA decision, [188]), if in these remitter proceedings we decided that the Applicant should not be awarded any amount under section 72AA(1), section 73(1) would require that the total amount that the RLD ordered it to pay to the Respondent would be reduced to $400,000. The Court also referred (at [187 - 190]) to the fact that in the supplementary appeal decision we had averted any application of section 73(1) by ruling that the award in the Applicant's favour made by us in the Principal decision could be set off against the RLD's award in favour of the Respondent. The Court did not state or imply that this ruling was incorrect. It did, however, indicate at [190] that in our decision in the remitter proceedings we should 'address any jurisdictional issues that arise'.
In the remitter proceedings, Mr Angyal submitted that a set off such as we have described was not permitted by section 73(1). The reason, he said, was that the use of the term 'particular' in the opening words of this subsection implied that the only liabilities that could be set off against each other were those arising within a single retail tenancy claim or unconscionable conduct claim. Because the judgment debt owed by the Applicant represented the outcome of a retail tenancy claim made by the Respondent, a judgment debt owed by the Respondent by virtue of the Applicant's success in a quite different claim - being in fact an unconscionable conduct claim - could not be set off against it.
We agree with Mr Fernon, however, that the term 'particular', as used in the subsection, does not have this effect. The wording of the subsection contains nothing to indicate that the only liabilities that may be set off against each other are liabilities arising within one 'particular' retail tenancy claim or unconscionable conduct claim. A setting off of opposing liabilities is frequently sought in proceedings (like the present proceedings) in which an application by one party prompts a cross application by the opposing party. More often than not, such proceedings call for the determination of more than one claim. To interpret section 73 in a manner that does not permit any set off of liabilities in these circumstances is to narrow its scope unduly.
The order that we make is for the payment of the amount of $257,283.55 by the Applicant to the Respondent. This order is made on the Respondent's cross claim for unpaid rent and associated matters. It reduces the total amount stipulated in the RLD's orders, against which the Applicant appealed (for confirmation that this was indeed the case, see the supplementary appeal decision at [29 - 38]). The reason for thus varying the RLD's orders is that we have determined that the Respondent is liable to pay a lesser amount to the Applicant on the ground of unconscionable conduct and that the two opposing debts should be set off against each other.
There remains the matter of the costs of the remitted proceedings. Our initial view on this matter is that since neither party has been wholly successful, there is likely to be no basis for a finding that it would be 'fair' under section 88(1A) of the ADT Act for a costs order to be made. But there may be circumstances of which we are unaware.
We accordingly direct as follows. Any application for an order for the costs of these remitter proceedings must be filed, with supporting submissions, within 28 days of the date of this decision. The opposing party is to file its submissions within a further 28 days. The application will then be decided 'on the papers', pursuant to section 76 of the ADT Act, unless the Appeal Panel determines that a hearing should take place.
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
Section 120(2) of the ADT Act, to which Mr Fernon referred in his submissions, provides that the orders that the Supreme Court may make in determining an appeal from an Appeal Panel of the Tribunal include 'an order remitting the case to be heard and decided again by the Appeal Panel… in accordance with the directions of the Supreme Court'.
Our conclusions on this matter are as follows. Contrary to Mr Angyal's claim, the question of 'causation', in the broad sense in which this term is often used in the context of tort or contract claims, is not before us for redetermination. This follows from the fact that our finding (in the Principal decision at [221]) that the Respondent's unconscionable conduct caused the Applicant to sustain 'some measure of economic loss' was the subject of an unsuccessful challenge in the appeal. We should not revisit the question whether the Respondent's unconscionable conduct caused any economic loss to the Applicant.
We also decided that the evidence relating to the quantification of this economic loss 'fell considerably short', as the Court of Appeal indicated at [177] and [178], of establishing that 'any particular, quantifiable diminution in gross revenue' or any 'quantifiable loss' resulted from PT's unconscionable conduct. We should therefore now determine (inter alia) whether the evidence before us is sufficient to permit the quantification of such loss. If the answer is no, we may, consistently with the terms of the remitter, decide that no award of damages for unconscionable conduct should be made to the Applicant.
The Court of Appeal (at [193]) left for our determination the question whether any fresh evidence should be admitted. The Applicant has not sought to adduce any such evidence. At the remitted hearing, Mr Angyal submitted that for this reason no damages could be awarded to the Applicant. In our judgment, however, the absence of any new evidence does not necessarily produce this outcome. As we indicated during the remitter hearing, it has remained open to the Applicant to demonstrate, by referring to aspects of the existing evidence and to the observations about it contained in the CA decision, that this evidence is sufficient after all to establish that the Respondent's unconscionable conduct was a cause of a quantifiable loss sustained by the Applicant and to support an award of damages for loss of profits.
In its appeal to the Court of Appeal, the Applicant did not challenge either of these rulings.
According to Mr Angyal, our rulings in relation to the Applicant's claim under section 34 created an issue estoppel. This arose because (a) we rejected the Applicant's arguments challenging the RLD's dismissal of its claim under section 34 and (b) the Applicant did not appeal against this rejection. The Applicant was therefore estopped from urging us now to decide, applying the same criterion of loss as the RLD had applied, that the Respondent's unconscionable conduct caused the Applicant to sustain economic loss. Accordingly, we could not make any award of damages against the Respondent in these remitter proceedings.
Mr Angyal took this line of argument one step further. He claimed that the ruling in the RLD decision, left undisturbed in the appeal proceedings, that the relevant conduct of the Respondent was 'insufficient to enliven section 34' (because any damage caused by it was 'insignificant') necessarily required a determination, by virtue of the principles of issue estoppel, that this same conduct could not be characterised as unconscionable conduct. He relied in this context on the following dictum of Spigelman CJ in Attorney General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; 35 NSWLR 557 at [121]:-
121… Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was "fair" or "just", it could transform commercial relationships in a manner which the Minister expressly stated was not the intention of the legislation. The principle of "unconscionability" would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises.
In answer to the proposition that the Respondent should have raised this question earlier, Mr Angyal pointed out that in its appeal to the Court of Appeal it had argued that our 'criterion of loss' was incorrect in law. It was only after the Court had rejected this ground of appeal that the existence of an issue estoppel became apparent.
The authorities on issue estoppel that Mr Angyal cited included the following passage from the judgment of Barwick CJ in Ramsay v Pigram (1968) 118 CLR 271 at 276. It was cited with approval in the High Court's joint judgment in Kuligowski v Metrobus [2004] HCA 34; 220 CLR 363 at [40]:-
Long standing authorities, in my opinion, warrant the statement that, as a mechanism in the process of accumulating material for the determination of issues in a proceeding between parties, an estoppel is available to prevent the assertion in those proceedings of a matter of fact or of law in a sense contrary to that in which that precise matter has already been necessarily and directly decided by a competent tribunal in resolving rights or obligations between the same parties in the same respective interests or capacities, or between a privy of each, or between one of them and a privy of the other in each instance in the same interest or capacity. The issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case.
In support of the proposition that an issue estoppel can be created by a prior decision within the same proceedings, Mr Angyal relied on a further dictum of a majority in the High Court, in Bass v Permanent Trustee [1999] HCA 9; 198 CLR 334 at [57]:-
Once an issue is determined at the interlocutory stage, and the trial continues, the primary judge's hand is tied in respect of all matters of fact and law involved in that determination.
Responding to a contention by Mr Fernon that the doctrine of issue estoppel does not apply to proceedings in administrative tribunals, such as the ADT, Mr Angyal made two arguments: (a) that the issue estoppel arose by force of the Court of Appeal's decision in the proceedings; and (b) that in each of two relatively recent decisions, Benyameen v Wetherill Park Market Town Pty Ltd [2011] NSWADT 85 and Trowbridge v Morris [2011] NSWADT 207, the ADT had dismissed an application under the RL Act on the ground of issue estoppel or res judicata.
The Applicant's submissions. As just mentioned, Mr Fernon submitted that the doctrine of issue estoppel did not apply to administrative tribunals such as the ADT. The authorities that he cited in support of this proposition included the judgments of the Full Federal Court (relating in each instance to the Administrative Appeals Tribunal) in Commonwealth of Australia v Sciacca (1988) 78 ALR 279 and Blackman v Commissioner of Taxation (1993) 30 ALD 346. He acknowledged, however, that in the decision of the Victorian Court of Appeal in Morris v Riverwild Management Pty Ltd (CAN 070 089 860) [2011] VCSA 2011; 284 ALR 413 (relating to the Victorian Civil and Administrative Tribunal), Weinberg JA held as follows after reviewing relevant case law (at [58 - 81]):-
… the weight of recent authority suggests that issue estoppel can arise out of decisions made by administrative tribunals and, in particular, bodies such as VCAT.
Three further arguments advanced by Mr Fernon were as follows: (a) any consideration by us of the doctrine of issue estoppel would fall outside the scope of the remitter of these proceedings to us; (b) this question could not be raised for the first time at this late stage of the proceedings, since the Respondent had made no mention of it either in the earlier hearings before us or in the Court of Appeal; and (c) simply because the Applicant did not appeal to the Court against our rejection of its appeal against the RLD's dismissal of its section 34 claim, it did not follow that any issue estoppel would arise 'by force of the Court of Appeal's decision'.
Mr Fernon also adopted a contention that we had put to Mr Angyal during his oral submissions. We will outline this contention shortly.
Our conclusions. In our opinion, the Respondent's attempt to invoke the doctrine of issue estoppel in order in order to defeat the Applicant's claim for damages for unconscionable conduct must fail, for the following reasons.
First, we agree with Mr Fernon that this issue falls outside the scope of the terms under which these proceedings have been remitted to us.
Secondly, we agree with him that this argument could have been advanced, as an alternative submission, in the Court of Appeal and that because this was not done it should not be entertained now.
Thirdly, and most significantly, an important proposition underlying Mr Angyal's submissions is fallacious, for reasons that we suggested to him during the remitter hearing. This proposition is that the matters that we took into account in deciding not to disturb the RLD's finding that any economic loss caused to the Applicant was 'insignificant' and therefore insufficient to enliven section 34 of the RL Act are the same as we must now take into account in determining the amount of damages, if any, that should be awarded to the Applicant on the ground of unconscionable conduct. In the Leave decision, we made it clear that this was not the case. We did so in the course of explaining why we were prepared to extend the Applicant's appeal to the merits so far as its unconscionable conduct claim was concerned, but not in relation to its section 34 claim.
The relevant passages in the Leave decision are at [255], [256], [259], [260] and [310]:-
255… we are mindful that the course urged upon us by Mr Fernon involves the exercise of a discretion as to whether or not to grant leave for the appeal to extend to the merits… we should not exercise this discretion in favour of the Applicant unless we believe that, following the 'rehearing' required under section 115 of the ADT Act, we would be likely to reach a decision conferring distinctly greater benefit on the Applicant than the Tribunal's decision dismissing its claim under section 34.
256 On this matter, our opinion is that such a decision would be unlikely. This is not merely on account of the factors that we have just listed. An additional reason is that we have held that no compensation under section 34 for loss of trade attributable to the installation of the Telechoice and Love Salad kiosks and the ATM could be awarded for the period prior to 1 September 2006. For reasons that we will now spell out, this could well restrict any such compensation to a small sum.
259 Due… to the Applicant's failure to give written notice regarding the two later kiosks, as required under section 34, until 1 September 2006, the only period over which it could claim compensation under this section for losses resulting from the cumulative effect of all three kiosks would be the relatively short period of about ten months between this date and the date (26 June 2007) on which it vacated the Premises. It would be debarred from claiming compensation during what would appear to have been the period of its most substantial losses.
260 For the foregoing reasons, we accordingly determine as follows: (a) leave for this appeal to extend to the merits should not be granted by virtue of the matters raised in the Applicant's challenge to the Tribunal's rejection of its claim for compensation under section 34 of the RL Act; and (b) the appeal should be dismissed in so far as it is based on these matters.
310 It may be asked why we are minded to grant leave with respect to the Applicant's unconscionable conduct claim but not to its claim under section 34. The answer stems from two important distinctions between these claims. These are (a) that the unconscionable conduct claim, unlike the claim under section 34, is not affected by a requirement to prove that the matters complained of had a 'substantial' or a 'significant' effect on the Applicant's trade, and (b) that the restriction on damages resulting from the Applicant's failure to satisfy the notice requirement contained in section 34 does not apply to the unconscionable conduct claim.
What these passages demonstrate is that in these proceedings, the factual issues relevant to determining whether any damages should be awarded under section 34 of the RL Act were not precisely the same as were relevant to determining the same question under the section of the RL Act (section 62B) that imposes liability for unconscionable conduct claim. As explained at [310], there were important differences. This is enough of itself to dispose of the Respondent's argument that an issue estoppel arose.
We will not make a formal ruling on Mr Fernon's submission that the doctrine of issue estoppel could not apply at all in this case because an administrative tribunal (the ADT) is involved rather than a court. We will simply observe that since these proceedings do not involve the review of a reviewable decision by an administrator, but are concerned with a 'retail tenancy dispute' between private parties (as defined in section 63 of the RL Act), it seems likely, having regard particularly to Weinberg JA's discussion of the topic in Morris v Riverwild, that the doctrine is in fact applicable.
Finally, we are not persuaded by Mr Angyal's submission that the issue estoppel claimed by him 'arose by force of' the Court of Appeal's decision. If any issue estoppel arose at all, it was 'by force of' the decision of the RLD at first instance with regard to section 34.
In the next (being the final) sentence of paragraph [172], the Court of Appeal gave its reason for rejecting 'Spuds' Onus Argument'. It said: 'The Appeal Panel in this case made no comparable finding.'
In the first sentence of paragraph [177], the Court stated as follows:-
177 This case is unlike Haviv in that the Appeal Panel made no finding that any particular, quantifiable diminution in gross revenue was caused by PT's unconscionable conduct…
The Court thereby made it clear once again that in the absence of any finding that the Respondent's unconscionable conduct had an impact on the Applicant's revenue that could be described as 'immediate and continuing', the 'Onus Argument', based on the decision in Haviv must fail. In these circumstances, the Applicant could not maintain that the onus had shifted to the Respondent to 'disentangle' the contribution made to its losses by factors other than the Respondent's unconscionable conduct.
Also in paragraph [177], the Court of Appeal summarised as follows our findings, set out in the Principal decision at [241], on the evidence relating to the loss of profits allegedly suffered by the Applicant:-
What the Appeal Panel found (at [241]) was this:
the evidence of Spuds' financial performance after the Lease was granted fell considerably short of what was needed to quantify any loss of profits caused by PT's unconscionable conduct;
the evidence did not establish that the diminution in Spuds' profits was wholly caused by PT's conduct;
the evidence did not show that PT's conduct had no impact at all on Spuds' profits; and
the evidence did not establish what proportion of the decline in profits was attributable to PT's conduct. (Emphasis in the CA decision)
Against this background, the Court of Appeal stated as follows at [179]:-
179… Regrettably, further findings of fact are required before any damages award can be made. Those findings must be made by the Appeal Panel itself on remitter.
To support the proposition that the same rule applies to claims under section 82 of the Trade Practices Act 1974 (Cth), Mr Fernon cited the judgment of Brownie AJ in Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd [2004] NSWSC 943 at [793]. This paragraph is of limited use only, however, as it goes no further than to recite submissions made by one of the parties.
He also referred, as he had in the Court of Appeal, to the judgments of the High Court in Henville v Walker [2001] HCA 52; 206 CLR 459. He relied on the passages from the judgments of McHugh and Hayne JJ that were reproduced in the CA decision at [165 - 166] (see above at [75]). He also relied on the following passages in the judgment of Gaudron J at [59 - 60] and [66 - 68] (footnotes are omitted):-
59 There is nothing novel in the idea that, on occasions, loss or injury is the result of two or more events, neither of which is sufficient, of itself, to bring about that result. The events in question may be sequential or concurrent. March v Stramare (E & MH) Pty Ltd was a case involving an injury which resulted from the conjunction of two separate acts or events, the injury in question having resulted from the plaintiff, who was driving at excessive speed, running into a negligently parked vehicle.
60 For the purpose of the law of negligence, where two or more events combine to bring about the result in question, the issue of causation is resolved on the basis that an act is legally causative if it materially contributes to that result. The same is true for the tort of deceit. Thus, in Gould v Vaggelas, Wilson J observed in relation to a representation leading to a person entering into a contract:
"The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract."
68 Just as the relief available under s 82(1) is not to be confined by analogy either with the actions in tort or in contract, it should not be confined by imposing an unduly strict burden of proof on the claimant. As already indicated, s 82 provides for the recovery of loss or damage that a person suffers by contravening conduct. To require a claimant to prove which component of his or her loss or damage is referable to the contravening conduct would be to impose limitations on relief which the terms of that sub-section do not require.
69 At the very least, to require that a claimant under s 82(1) of the Act prove which component of his loss or damage is referable to contravening conduct would be to confine recoverable loss to that directly resulting from that conduct, and, thus, to impose a gloss on the words of the sub-section. At the other extreme, it would be to deny any remedy at all in those cases where loss results from two or more acts or events but the claimant is unable to identify the precise component or components of the loss referable to contravening conduct. That consequence is inconsistent with the concept of causation upon which s 82(1) is predicated, namely, that the contravening conduct should only have materially contributed to the loss or damage suffered.
70 It follows that, under s 82(1) of the Act, it is for the person whose contravening conduct materially contributed to the loss or damage to establish what component of that loss or damage is referable to some act or event other than his or her contravening conduct and not for the person who suffers loss or damage to establish the precise component or components referable to that conduct. The Full Court erred in holding otherwise.
Two passages in Jagot J's decision in Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242; 254 ALR 273 were also relied on in Mr Fernon's submissions. One of them, forming part of paragraph [46], was quoted in the CA decision at [171] and is reproduced above at [75]. The other passage, forming part of paragraph [27], is as follows:-
27 The following statements of principle are relevant to the issues which require resolution in the present case:…
(8) It has also been said that, while the plaintiff has the onus of showing loss caused by the breach, "if the loss in question is the apparent or likely result of the breach, the onus shifts to the contract-breaker to prove that it was not" (Seddon and Ellinghaus at [23.34] citing Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516). Further, in Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [148] McHugh J said (albeit in a trade practices context) "(a)rguably, once a plaintiff demonstrates that a breach of duty has occurred that is closely followed by damage, a prima facie causal connection will be established. It is then for the defendant to show that the plaintiff should not recover damages. In the words of Dixon CJ in Watts v Rake [1960] HCA 58; [(1960) 108 CLR 158 at 160], it is the defendant who must disentangle, so far as possible, the various contributing factors".
In addition, Mr Fernon cited a passage in the judgment of Kirby J in Shorey v PT Ltd [2003] HCA 27; 197 ALR 410. In this case, the plaintiff, having previously had surgery for a degenerative back condition, had a fall during 1988 in a shopping centre due to the negligence of the defendant company, which owned the centre. This caused her to suffer back pain. During 1989, her husband died. After 1990, she claimed that she could not walk, though the evidence did not disclose any physiological reason for this. The High Court held that the damages awarded to her should include an amount representing compensation for this 'conversion disorder'.
At [41 - 47], Kirby J said (footnotes are omitted):-
41 The search for a single cause: It is a basic principle of the law governing the recovery of damages that a claimant does not have to prove… that an impugned event was "the" cause, in the sense of the one and only cause. It is enough that the claimant shows that the event is "a" cause of the condition for which damages are claimed. The fact that the appellant had undergone a laminectomy and discectomy of her spine in 1986 (before the fall) that she was of an age where deterioration in the condition of her spine might be expected to some degree, and that she also suffered grief and a sense of guilt following the death of her husband from lung cancer in January 1989 (after the fall) did not rule out the consequences of the fall as "a" relevant cause in the subsequent disability. In a sense, the back operation (which was reported as successful, following which the appellant was pain free until the fall) and the death of her husband simply rendered the appellant more susceptible to the consequences of the fall.
42 Certainly, that was a view open to the primary judge. It is the one that he preferred to that urged by the respondents, namely that a pre-existing back disability was aggravated for a limited time or that any aggravation was well on the way to recovery when the death of the appellant's husband, with consequent grief and sense of guilt, precipitated the conversion disorder of which she complained. There is more than a hint in the reasoning of the majority in the Court of Appeal of a search for a single cause of the appellant's disability whereas the applicable law and the relevant facts contemplated that this was a case of multiple causes in which the fall and its outcomes could only be really understood in the context of events that happened before and after, rendering the appellant more susceptible to the kind of disability that in fact resulted.
43 Discerning the operation of multiple causes: Whereas it was for the appellant to prove her case, and although the burden remained upon her as plaintiff throughout the trial to establish that her condition of conversion disorder was caused by the fall, the appellant started with certain advantages in her endeavour to do this. The evidence supported the conclusion that she had made a good recovery from her back operation prior to the fall. The occurrence of the fall was clearly established. Its trauma was such as to produce injuries and disabilities. Malingering on the part of the appellant was ruled out. In this context, the appellant was entitled to invoke a principle of law and an evidentiary presumption that helped her to support the conclusion reached by the primary judge.
44 The principle of law is that a negligent defendant must take its victim as it finds her and must pay damages accordingly. It is not to the point to complain that the injury, in the form of the fall, was trivial in itself and that it would be unfair to burden the respondents with the obligation to bear costs consequent upon the fact that the appellant was peculiarly susceptible to developing bizarre symptoms inherent in a conversion disorder. If such symptoms were genuine and a consequence of the subject trauma, the apparent disproportion between cause and effect is not an exculpation for the negligent party. It does not render the damage "unforeseeable" or otherwise outside the scope of the damages that may be recovered. As Dixon CJ explained in Watts v Rake[35]:
"If the injury proves more serious in its incidents and its consequences because of the injured man's condition, that does nothing but increase the damages the defendant must pay. To sever the remaining leg of a one-legged man or put out the eye of a one-eyed man is to do a far more serious injury than it would have been had the injured man possessed two legs or two eyes. But for the seriousness of the injury the defendant must pay."
45 So here. The respondents must pay if the appellant's pre-accident operation and spinal condition and post-accident grief and sense of guilt rendered her specially susceptible to suffering an unusual psychiatric consequence (conversion disorder). It must do so as long as the accident triggered the appellant's condition and so long as its causative effects were still present as a factor to help explain the ongoing signs and symptoms.
46 So far as the evidentiary presumption is concerned, this is the presumptio hominis to which Dixon CJ referred in Watts. It stands in a plaintiff's favour and "any tribunal of fact should insist that the defendant should overcome [it]". The presumption was explained in these terms:
"If the disabilities of the plaintiff can be disentangled and one or more traced to causes in which the injuries he sustained through the accident play no part, it is the defendant who should be required to do the disentangling and to exclude the operation of the accident as a contributory cause. If it be the case that at some future date the plaintiff would in any event have reached his present pitiable state, the defendant should be called upon to prove that satisfactorily and moreover to show the period at the close of which it would have occurred."
47 The other judges in Watts agreed with Dixon CJ's approach. The principles so stated have been re-stated by the Court since then. They are settled doctrine. They were not contested in this appeal. Indeed, they represent no more than the application of common sense to decisional reasoning. If it be the case that these principles were not expressly relied on at trial or in the Court of Appeal, it matters not. They are simple rules, applicable to judicial reasoning, whether at first instance in a trial, or in a re-hearing on appeal when the issue concerns the effect on damages of multiple causes.
It was by virtue of these general principles that, according to Mr Fernon, we should re-examine the evidence and reach a conclusion contrary to our finding in the Principal decision. We should determine (a) that a 'quantifiable loss' of revenue of the Applicant's business at the Shop was occasioned by the Respondent's unconscionable conduct and (b) that the onus therefore shifted to the Respondent to 'disentangle' any contributions made by other factors to the Applicant's total losses of gross profits during the relevant period.
Mr Angyal's submissions did not, as we understand them, raise any dispute regarding these general principles. His argument was that the Applicant's evidence on damages fell short of proving a 'quantifiable loss' and that there was therefore no shift of onus to the Respondent to separate out its contribution to the Applicant's total losses from the contributions made by other factors.
Our observations. We agree that in any case where the Tribunal is minded to order under section 72AA(1)(a) of the RL Act that 'a party to the proceedings pay money to a person specified in the order… by way of… damages', the general principles of assessment of damages in cases of breach of contract are applicable. But section 72AA(1)(a) also provides for orders that a party to the proceedings should pay money 'by way of… restitution' or should 'refund any money paid by a specified person'. In our opinion, orders along these lines are governed by different principles. We deal below with our reasons for taking this view and the significance of these alternatives types of order for the present proceedings.
It appears to us from the foregoing authorities - notably the CA decision and the judgment of Jagot J in Haviv - that if on a review of the evidence in these proceedings we find that the Respondent's unconscionable conduct had an 'immediate and continuing impact' on the turnover of the Applicant's business at the Shop, the requirement of proving a 'quantifiable loss' will have been satisfied. Our principal reason for employing the phrase 'immediate and continuing impact' here is that this phrase, and others like it, were given emphasis in the CA decision (at [170] and [172]).
In such event, it will follow that the Respondent will bear the onus of 'disentangling' the contribution made to the Applicant's total losses of gross profits by causes other than its unconscionable conduct from the contribution made by this conduct.
It does not follow, however, that any onus lies on the Respondent with regard to the quantification of the Applicant's total loss of profits. If the Applicant fails to establish what these losses amounted to, the Respondents cannot be required to engage in the process of 'disentangling'.
We will now consider the question whether the Applicant's evidence on damages did in fact establish a 'quantifiable loss'.
Our observations regarding Mr Bell's evidence. An important contested issue relating to Mr Bell's evidence was whether or not, in expressing the opinions (at paragraphs 7.14 to 7.18 of his second report) that we quoted in the Principal decision, he took account of the enlargement of the Premises during August 2002.
There is no doubt that when preparing this report, Mr Bell had this factor in mind. As well as referring to it when exploring the 'breakeven factor' in section 8, he noted it as a relevant factor when setting out (in paragraph 7.10) the Sales Figures for the third and fourth quarters of 2002 and the extent to which the figures for the 2003 financial year exceeded those for the preceding year. He inserted the heading 'Spuds Chatswood increases store size August 2002' directly above this paragraph and commenced the paragraph with the words 'Following the increase in store size…"
We agree with Mr Fernon, however, that in the section of the report headed 'Summary' (paragraphs 7.14 to 7.18) from which we quoted above at [125], Mr Bell did not mention the enlargement of the Premises as a relevant factor. He likewise did not mention it in paragraph 7.14 as a reason for the 'sustained increase in turnover in the 2003 and 2004 financial years'. Furthermore, although it had been put to him during cross-examination at the RLD hearing that the rate of increase in the period immediately following the installation of the Boost Juice kiosk (26.7%) was significantly lower than the rate (32%) that apparently followed the enlargement of the Premises, he made no comment on this line of argument.
Our response, therefore, to the first of the four propositions advanced in the present context by Mr Angyal is that while Mr Bell did take account of the enlargement of the Premises in his second report, he did not do so when expressing his opinions on the different rates of increase in turnover occurring in the periods before and after the installation of the Boost Juice kiosk.
We are not persuaded by Mr Angyal's second and third propositions. We consider that Mr Fernon's challenges to Mr Bell's opinions at the RLD hearing and his reference to these challenges during the appeal hearing are sufficient to preclude any reliance by the Respondent on the rule in Browne v Dunn. Equally, we do not see why matters raised in the cross-examination of Mr Bell at the RLD hearing should be deemed irrelevant simply because the aim of this cross-examination was to obtain an acknowledgment that his evidence in chief at that hearing was flawed in a significant respect.
As to Mr Angyal's fourth proposition, we certainly would not characterise Mr Bell's testimony as 'powerful evidence' that the Respondent's unconscionable conduct did not cause any loss to the Applicant. Instead, Mr Bell, during cross-examination at the trial, made two statements that furnished some support to Mr Fernon's argument relating to the Sales Figures.
In the first place, he agreed (as indicated above at [119]) that since (a) the Sales Figure for the third quarter of 2002 was 16-17% higher than the figure for the third quarter of 2001 and (b) the enlargement of the Premises took place half way through the third quarter of 2002, it was reasonable, 'on the numbers', to assume that this event generated an increase of 32-34%.
Secondly, he made what may fairly be described as a grudging admission that the Sales Figures showed the Applicant's sales at the Shop to have fallen 'at or about times when kiosks had, in fact, been installed'. In the passage quoted above at [120], his response to this proposition was 'there's a time line that matches…'
Mr Fernon argued that this was testimony of considerable significance and should have been recognised as such in the Principal decision. We agree that it was testimony that we should have taken into account (while adding that in fact it was only briefly mentioned in Mr Fernon's submissions preceding that decision). But even after taking account of the fact that Mr Bell was an expert witness called by the Respondent, we do not agree that this testimony adds significant strength to the Applicant's case.
Our reasons for coming to this view are as follows. Both of the statements by Mr Bell on which Mr Fernon relied were hedged about with qualifications. His agreement that it was 'reasonable' to assume that an increase of 32-34% in sales would have occurred on account of the enlargement of the Premises was stated to be 'on the numbers'. His acknowledgment that the Sales Figures fell 'at or about' the times when kiosks were installed went no further than agreeing that there was a 'time line that matches'. Furthermore, in making these distinctly guarded statements Mr Bell did not rely, or indeed claim to rely, on any specific expertise that he possessed.
Our observations on the figures relating to customer transactions, pedestrian traffic and Centre turnover. Mr Fernon's submissions on the first of these topics did not mention the following aspects of the Transactions Table: (a) the figure for the second quarter of 2003 showed an increase of 23.2% over the equivalent figure during 2002; and (b) the figures for the third and fourth quarters of 2003 and the first quarter of 2004 - being the three quarterly periods following the installation of the Telechoice kiosk - showed a small increase (0.4%), not a decrease such as occurred in the first of these periods.
We agree with Mr Fernon, however, that evidence of the trends in the number of customer transactions might be relevant in a case such as the present. This was in fact a point that we made in the Leave decision, at [324]. Although the requirement of proving a 'quantifiable loss' was expressed, in the CA decision, as applicable to losses of revenue, we consider that any compelling evidence of a sharp decline in the number of customer transactions should not be deemed irrelevant in this context.
We are less inclined to attribute significance to the figures on pedestrian traffic and Centre turnover. Our reason is that there was no evidence as to whether the number or size of the businesses (other than that of the Applicant) conducted in the Centre varied to any material extent during the relevant period. It is quite possible that the increases in pedestrian traffic and Centre turnover on which Mr Fernon relied were caused by substantial increases in the number and/or size of these businesses.
Our overall conclusions. Earlier in these reasons (at [93]), we stated that if we find, on a review of the evidence, that the Respondent's unconscionable conduct had an 'immediate and continuing impact' on the turnover of the Applicant's business at the Shop, the requirement of proving a 'quantifiable loss' will have been satisfied.
In a passage in Haviv Holdings Pty Limited v Howards Storage World Pty Ltd [2009] FCA 242; 254 ALR 273 that was not cited in either of the parties' submissions, Jagot J explained why in her opinion that requirement was satisfied on the facts before her. That passage is at paragraphs [44 - 45] of her judgment:-
44… In the period June to November 2004 the sales revenues from the Burwood store showed a 6% increase above the 2003 revenues for the same period. After the Rhodes store opened the sales revenues for December 2004 fell 11% compared to the same period in December 2003 and thereafter remained low (our emphasis). In contrast, the Rhodes store traded well and, within six weeks of opening, was the fourth ranked HSW store on the basis of average weekly sales.
45 It can readily be inferred that one of the primary purposes of the grant of an exclusive franchise territory is to regularise competition between HSW stores. Exclusivity of territory is a valuable right for a franchisee. Decrease in sales revenue (and thus the potential for net profits) is precisely the type of loss that would be expected from breach of the promise of an exclusive franchise territory. Such a decrease occurred in the present case immediately following the opening of the Rhodes store within Haviv's exclusive franchise territory (our emphasis)…
We agree with the proposition, to which Mr Fernon obtained Mr Bell's assent during cross-examination, that because the three offending kiosks were installed 'progressively over time', it is necessary to consider the Sales Figures 'cumulatively over a period of time' in order to assess their effect on the Applicant's business at the Shop.
Notwithstanding this, the requirement of demonstrating an 'immediate and continuing impact' on the Shop's turnover involves showing, in our opinion, that during the period immediately following the installation of each kiosk the Sales Figures were markedly lower than would have been expected, having regard to the figures for the equivalent period in the preceding year and to any other clearly important factors. This negative effect should be obvious in the manner exemplified in the passage just quoted from Haviv.
For reasons explained above, the validity of the Applicant's claim that a negative effect of this nature was evident following the installation of the Boost Juice kiosk in November 2002 depends entirely on acceptance of Mr Fernon's submission that the enlargement of the Premises in August 2002 must have generated an immediate increase in turnover (he suggested 32-34%) significantly exceeding the rate of 26% achieved in the quarterly period (i.e., the fourth quarter of 2002) during which this installation took place. But as we indicated earlier (see [139] above]), this submission is based on two assumptions that, given their importance in this case, must be regarded as questionable.
These assumptions are as follows: (i) during the first half of the third quarter of 2002 (i.e., between 1 July and mid-August), there was no increase in the Shop's turnover (as compared with the turnover in the equivalent period within 2001); and (ii) all of the increase in turnover for the quarter as a whole should be attributed to the trade conducted in the second half of the quarter (mid-August to 30 September).
Our attention was not drawn to any evidence tending to support either of these assumptions. It is distinctly possible that the Shop's turnover materially increased between 1 July and mid-August 2002 and that the rate of increase between mid-August and 30 September was therefore lower, to a significant extent, than the rate of 32-34% claimed by Mr Fernon.
No doubt, as Mr Bell observed, Mr Fernon's submission that an increase of 32% should be taken to have occurred during this period may be characterised as 'reasonable… on the numbers'. This follows from the fact that the rate of increase for the quarter as a whole was 16-17% and the enlargement of the Premises took place half way through the quarter. But that is as much as the evidence provided by the Applicant's financial statements permits.
The two other expert witnesses who testified on this particular matter did not materially assist the Applicant's cause. Mr Standley considered that an increase of only 15-20% was likely, adding that this was a 'conservative' estimate. While Mr Terrill believed that an increase as high as 50% was possible, he also said that if he were to 'err on the side of conservatism', he would suggest a rate as low as 15% or 20%.
The question whether the impact of the installation of the Boost Juice kiosk was 'continuing' as well as 'immediate' is also open to doubt because of an aspect of the Sales Figures for 2003 to which Mr Fernon referred only in passing. This is that the figure for the second quarter of this year - being the latest of the quarterly periods for which it is relevant to draw comparisons with a period preceding the enlargement of the Premises - showed an increase as high as 39.9%. When the figures for this quarter and its predecessor (where the rate of increase was 17.7%) are considered in conjunction, the rate drops to 28.8%. But this is not far below the rate of 32% which, according to Mr Fernon, would have been achieved if the Boost Juice kiosk had not been installed.
For similar reasons, we do not believe that the figures shown in the Transactions Table greatly assist the Applicant so far as the Boost Juice kiosk is concerned. As with the Sales Figures, we have difficulty with the proposition that the increase of 18.9% in the number of transactions occurring during the third quarter of 2002 was wholly attributable to the enlargement of the Premises halfway through this quarter, with the result that the rate of increase actually caused by the enlargement must be taken to have been 37.8%. The increase of 23.3% during the second quarter of 2003 weakens significantly the argument that the installation of this kiosk had a 'continuing' negative impact on the number of transactions.
We turn now to the question whether the installation of either of the two later kiosks (Telechoice and Love Salad) has been shown to have had an 'immediate and continuing impact' on the Shop's turnover. On this question, the only evidence brought to our attention for the first time in the course of the remitter proceedings comprises (a) some answers given by Mr Bell during cross-examination at the RLD hearing and (b) the Transactions Table.
This additional evidence is insufficient to cause us to alter the opinions that we expressed in our two previous decisions. These are sufficiently summarised in the following extracts from paragraph [257] of the Leave decision and paragraph [244] of the Principal decision:-
Leave decision at [257]… These [sales figures] show that the decline in the Applicant's takings which [Mr Fernon] claimed to be of great importance did not commence until the third quarter of 2004, more than 18 months after the Boost Juice kiosk was erected. On the basis of these figures, the erection of this kiosk alone would appear not to have had a significantly detrimental effect on the Applicant's trade. Instead, the downward trend in its sales did not commence until more than a year after installation of the Telechoice kiosk in May 2003. This trend became more pronounced after the installation of the Love Salad kiosk in February 2005.
Principal decision at [244] In paragraph 7 of an affidavit sworn for the purposes of the second appeal hearing, Mr Bell, who was one of the Respondent's expert witnesses, observed that what we called the commencement of 'the downward trend' in the Applicant's sales did not occur immediately after, or even within the period of a few months after, the erection of any of the three kiosks. He stated:-
7.16 My analysis… shows that there was no apparent detriment to sales following the opening of… the Telechoice [Kiosk]…
7.18 I refer to the decline in sales in the September 2004 and December 2004 quarters [i.e. the third and fourth quarters of 2004] and note that this decline began:
7.18.1 Approximately… 12 months after the opening of the Telechoice kiosk; and
7.18.2 Approximately 7 months prior to the opening of the Love Salad kiosk (which opened February 2005).
These particular statements within paragraph 7.18 of Mr Bell's second report were not questioned in the Applicant's submissions at the remitter hearing.
It follows from the foregoing discussion that the Applicant has failed to show that the Respondent's unconscionable conduct had an 'immediate and continuing impact' on the revenue generated by the Shop.
It further follows that the Applicant cannot maintain that the onus shifted to the Respondent to 'disentangle' the contribution made by its unconscionable conduct from the contribution made by other factors to the losses of gross profits sustained by the Applicant's business at the Shop.
In the Court of Appeal, the Applicant argued in its cross appeal (see CA decision at [91]) that since (a) the evidence mandated this shift of onus to the Respondent and (b) the Respondent has not adduced any evidence on this question of 'disentanglement', it was entitled to recover damages for the whole of its lost profits over the relevant period. As the amount of those damages would be at least $400,000, the Appeal Panel, it maintained, should have made an award of $400,000, being the maximum amount that it could award under section 73 of the RL Act.
We have, however, rejected the claim of a shift in the onus of proof. In consequence, the onus has remained on the Applicant to establish the amount of lost profits caused specifically by the Respondent's unconscionable conduct. In support of this, it is sufficient to quote the following passage from the High Court's judgment in Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 at 118:-
… a plaintiff bears the onus of establishing the extent of his loss or injury on the balance of probabilities. To satisfy the requirements of that rule, a plaintiff must, if he is to recover more than a nominal amount in such an action, affirmatively establish assessable damage, that is to say, loss or injury which is capable of being measured in monetary terms.
In the absence of evidence as to the extent to which the losses of gross profits allegedly suffered by the Applicant following installation of the Boost Juice kiosk were attributable to causes other than the Respondent's unconscionable conduct, we conclude that we are bound to dismiss the Applicant's contention that it is entitled to damages assessed by reference to these losses.
This conclusion renders it unnecessary for us to deal with an argument, advanced by Mr Angyal, that in the assessment of any damages to be awarded to the Applicant, due account should be taken of its failure to mitigate its losses by refusing or failing to take up offers made by the Respondent on two separate occasions (in December 2002 and August 2005) to permit it to move its signage to a location on the frontage of shop 417. The sightlines to this location, according to the Respondent, were not obstructed at all by the kiosks about which the Applicant complained.
In case our reasoning in the foregoing discussion is erroneous, we will now outline some further matters giving grounds, in our opinion, for rejecting the Applicant's claim for damages based on losses of gross profits.