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Cairns Shelfco No 16 Pty Ltd v Armanel Pty Ltd

 

[2004] QCA 473

 

SUPREME COURT OF QUEENSLAND

  

CITATION:

Cairns Shelfco No 16 P/L v Armanel P/L & Ors [2004] QCA 473

PARTIES:

CAIRNS SHELFCO NO 16 PTY LTD ACN 010 327 312
(plaintiff/first respondent)
v
ARMANEL PTY LTD ACN 010 779 665
(first defendant/first appellant)
COOLCOURT PTY LTD ACN 062 445 541
(second defendant/second appellant)
IGNAZIO SCIACCA and RHONDA SCIACCA
(third defendants/third appellants)
PETER STRANGMAN
(fourth defendant by counterclaim/second respondent)

FILE NO/S:

Appeal No 4537 of 2004
SC No 3632 of 2000

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

6 December 2004

DELIVERED AT:

Brisbane

HEARING DATE:

1 September 2004

JUDGES:

McMurdo P and Williams and Jerrard JJA
Separate reasons for judgment of each member of the Court, each concurring as to the order made

ORDER:

Appeal dismissed with costs

CATCHWORDS:

TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – CONSUMER PROTECTION – MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT – CHARACTER AND ATTRIBUTES OF CONDUCT – REPRESENTATIONS – AS TO FUTURE MATTERS – where appellants subleased retail shop premises from first respondent – where appellants’ fashion clothing business not profitable – where first respondent claimed for arrears of rent and other charges payable under sublease – where appellants alleged that second respondent as representative of first respondent made misrepresentations as to potential trading performance and other matters that induced them to enter into the sublease – where learned trial judge found that representations alleged were not made by second respondent and no misrepresentations were made that caused loss sustained by appellants – whether alleged representations were made – whether second respondent had reasonable grounds for making representations – whether representations were misleading or deceptive

Trade Practices Act 1974 (Cth), s 51A

Medlin v State Government Insurance Commission (1995) 182 CLR 1, cited

Ricochet Pty Ltd v Equity Trustees Executors and Agency Co Ltd (1993) 41 FCR 229, cited

COUNSEL:

P A Keane QC, with M A Jonsson, for the appellants

R G Bain QC, with M K Conrick, for the respondents

SOLICITORS:

MacDonnells for the appellants

Praeger Batt for the respondents

  1. McMURDO P:  I agree that the appeal should be dismissed with costs for the reasons given by Williams JA.
  1. WILLIAMS JA:  At trial the first respondent, Cairns Shelfco No 16 Pty Ltd, obtained judgment against the first, second, and third appellants in the sum of $647,800.92 with interest.  The counter-claim of the appellants against the first and second respondents was dismissed.  The court is now concerned with an appeal against those orders.
  1. The first respondent is the head lessee of a two-level retail centre containing approximately 85 speciality shops in Cairns known as The Pier Marketplace. By sub-lease dated 1 February 1997, but executed in April 1997, the first respondent leased to the first and second appellants the shop premises referred to as C2 for a term of six years; the third appellants guaranteed the obligations of the sub-lessees thereunder. It was understood by all parties that the shop premises would be used for the retail sale of a range of fashion clothing produced by United Colours of Benetton.
  1. Trading commenced on 23 March 1997 but the operation was not profitable and the first and second appellants vacated the premises early in 2000. By the date of trial arrears of rent and other charges payable pursuant to the sub-lease totalled $647,800.92 and by the statement of claim the first respondent sought to recover that sum. The calculation of that amount was not disputed.
  1. The appellants counterclaimed against the first and second respondents alleging misrepresentations made by the second respondent (Strangman) induced the first and second appellants to enter into the sub-lease. Relief pursuant to the provisions of the Trade Practices Act 1974 was sought; essentially the appellants sought relief from payment of the rent and other charges under the sub-lease and additional damages totalling $206,282.16.  Again the calculation of the appellants’ alleged losses was not in dispute. 
  1. As the learned trial judge observed in her reasons for judgment, it was “common ground that the resolution of the central issue is dependant on the acceptance or otherwise of Mr Strangman and Mr Sciacca about their pre-contractual conversations.” The learned judge “preferred the evidence of Mr Strangman to that of Mr Sciacca, and, where relevant Mrs Sciacca.” But the matter was not decided solely on that credibility issue. Careful reasons were given for arriving at the conclusion outlined above.
  1. There is no doubt that from the outset the appellants’ business was not profitable. Findings made by the learned trial judge attributed that to the conduct of Benetton, rather than to any representation made by the respondents. The following findings of fact recorded in the reasons for judgment indicate that:
  1. “Mr Miller [retail management consultant acting for Benetton] confirmed to [Mr Sciacca] that Benetton was keen to open in Cairns and Brisbane, that he had looked at other sites and that Benetton had decided on The Pier Marketplace”;
  1. “Mr and Mrs Sciacca were aware that they would have no input into the selection of the first opening order for the store”;
  1. “The selections of clothes made by Benetton were quite inappropriate for Cairns or, probably, any store”;
  1. “The opening order contained a total of 1,187 unisex and women’s jeans – requiring sales of 120 per month.  Mr Sciacca wrote ‘this is absolutely an impossible expectation’”;
  1. “In summary Mr Sciacca said that 33 per cent of their expenditure on adult stock had been on only two lines which would not be big selling items in Cairns and this had reduced the availability of lines that would sell well in the Cairns area”;
  1. “Mr Sciacca noted, trenchantly, that they had received no hot weather menswear and that the stock purchased for them was ‘unsaleable in the Tropics’”;
  1. “Mr Sciacca summarised “It has now become clear to us that we do not have a proper range of saleable stock to see us through the next few months, let alone until the Flash stock’”;
  1. “[The third appellants] were introduced to the retail clothing business through Tony Miller and were not put on the right track to start off with”;
  1. “Mr and Mrs Sciacca noted that they were suspicious that a fair percentage of their opening stock had been ‘dumped’ on them without any serious attempt to appreciate customer needs”;
  1. “In a letter dated 2 July 1998 Mr Sciacca told Mr Menarin and Mr Azzolare [managers of Benetton in Hong Kong] that it was ‘with great regret and with some considerable anger on our part’ that [the appellants] were closing the Benetton store in Cairns and placed ‘the blame of this on Benetton Far East’”;
  1. “In a further letter of 3 July 1998, Mr Sciacca ... wrote “I repeat again that the only reason our store is trading at about one third of the Esprit store in the Centre is because of the stock that you have, for whatever reason, or whosever fault, imposed upon us.’”;
  1. “... the conclusion, strenuously articulated by Mr and Mrs Sciacca in their correspondence with Benetton, that Benetton had completely failed to research the Australian market and its significant geographical and demographical differences”;
  1. A letter Mr Sciacca wrote to Benetton on 14 October 1998 stated: “Benetton cannot yet offer us enough product to immediately compete with Esprit and JAG in price or market need except with some limited cheaper Indian stock which will come over the next 12 months.”;
  1. “Benetton Far East continued to provide Mr and Mrs Sciacca with inappropriate stock”;
  1. “[I]f there had been timely and suitable merchandise for sale in The Pier Marketplace together with a proper assessment of the Australian market as had been represented by Benetton had occurred there would have been no want of customers to the shop”;
  1. The exasperation of Mrs Sciacca with Benetton is highlighted by her letter to the Far East office saying:

“I am sick of being treated like an idiot by these people in Italy who continue to attempt to take advantage of retailers to dump their leftover crap on them – and at full price! ... Well they can stuff their bathers up their fuzzy Benetton jumpers because I do not want 89 pair of one size/one style of bathers plus 94 pair of the other with no M or L at all.  I can assure you I am not keeping them.”

  1. One of the principal submissions made by senior counsel for the appellants was that the learned trial judge erred in concluding, having made the finding that Benetton’s conduct in supplying inappropriate stock was the primary cause of the loss or damage sustained by the appellants, that it therefore followed that any representation made by the second respondent which induced entry into the lease was thereby excluded as being a cause (in the sense of materially contributing to) that loss and damage. It was submitted, adopting language from Ricochet Pty Ltd v Equity Trustees Executors and Agency Co Ltd (1993) 41 FCR 229 at 235, that it was sufficient to establish liability in the respondents if the representations made by or on behalf of the respondents made some “non-trivial contribution” to the decision of the appellants to enter into the lease and guarantee. 
  1. That may be accepted but it is nevertheless necessary for a finding to be made that relevant representations were made and were false. After carefully analysing the evidence the learned trial judge concluded that no misleading representations were made. She dealt with a number of alleged specific representations to which reference will have to be made subsequently, but it is relevant to note that at this stage the following findings:

“[88] ... I was not persuaded by Mr Sciacca (or Mrs Sciacca) that the specific representations pleaded in the most recent form of the counter-claim alleged to be misleading were made by Mr Strangman, subject to some further comment.  I accept Mr Strangman’s evidence as to the limits of what he told Mr and Mrs Sciacca or one of them. ... The figures about turnover were correct as Mr Norling’s report and the monthly management reports demonstrate.”

“[96] I accept that Mr Strangman made available some of the gross turnover figures for the fashion retailers to Mr and Mrs Sciacca particularly those trading in and around Governor’s Way to assist them.  From his perspective they were his friends.  There were other possible tenants for the proposed Benetton store.  As I have said, those figures were generally consistent with the recorded figures.  Observations about Esprit and Country Road were not representations and it was not misleading to say that he could see no reason why an international fashion label could not achieve as well as the average of the fashion shops in the centre in that position.”

  1. It is important for present purposes to note the issues raised by the Amended Notice of Appeal. Therein two findings made by the learned trial judge are set out and it is alleged that such were representations as to a future matter within the meaning of s 51A of the Trade Practices Act and it ought to have been found that those representations were misleading or deceptive.  The findings so particularised were the following:
  1. That ‘Based on the average reported sales from all fashion tenants of $7,000.00 per sq metre per annum, in any discussions about turnover with Mr Sciacca Mr Strangman said that a successful retailer of an internationally known label should be able to achieve at least equal to the average being achieved in the Centre.’ (at paragraph 51 of the Reasons); and
  1. That ‘It may be accepted that Mr and Mrs Sciacca relied upon the general accuracy of the figures as to gross turnover provided by Mr Strangman in helping with [sic] them with their financial modelling’ (at paragraph 97 of the Reasons)”
  1. It is said that the learned trial judge erred in holding that representation (i) was not misleading or deceptive when she did not expressly find that the second respondent had reasonable grounds for making that representation. The appellants positively assert that the second respondent did not have reasonable grounds for making that representation. Further it is said that the learned trial judge wrongly concluded that the representations particularised were not misleading and deceptive because she disregarded the evidence as to the propensity of walk-by customers to turn around on Governor’s Way before they reached the subject premises and disregarded the evidence as to the poor trading performance of Inc Trading Co and Brian Rochford in the premises immediately across Governor’s Way from the subject premises.
  1. It should be noted immediately that the representation set out in paragraph (i) does not accord with any representation pleaded in any version of the defence counterclaim. It was never part of the appellants’ case at first instance that they were induced to enter into the sub-lease by a misrepresentation that “a successful retailer of an internationally known label should be able to achieve at least equal to the average being achieved [by other fashion retailers in Governor’s Way]” or by a misrepresentation along those lines. In the Second Further Amended Defence and Counterclaim the closest one finds to the representation set out in paragraph (i) above is the representation pleaded in paragraph 15(b)(ii). It is therein alleged that on 30 December 1996 the second respondent represented to Mr Sciacca that:

“(A)The Benetton store would achieve a lot more than $5,000.00 per sq. metre;

(B)The Defendants would do $7,000 per sq. metre;

(C)The Defendants would achieve a gross turnover in excess of $1 million per annum.

(D)The Benetton store would be very competitive with Esprit.”

  1. That is the only occasion in the pleading in which a representation is pleaded referring to the figure of $7,000.00.
  1. Further, it should also be noted that a representation in the precise terms of paragraph (i) is not adverted to in the oral evidence of the Sciaccas.
  1. The appellants base the wording of paragraph (i) on what was said by the learned trial judge in paragraph [51] of the reasons. That paragraph deals with a meeting on 30 December 1996 between the second respondent and Mr Sciacca. The last sentence in that paragraph of the reasons is in terms of paragraph (i) set out above.
  1. Interestingly, a finding in similar terms is made in paragraph [22] of the reasons where her Honour was dealing with a meeting between the second respondent and Mr and Mrs Sciacca on 1 November 1996. The last sentence of that paragraph is in the following terms:

“Mr Strangman said that he may have told Mr Sciacca that the average of sales from all fashion tenants in the centre was $7,000 per sq metre per annum and that a successful international fashion retailer should be able to achieve sales at least equal to the average being achieved by the fashion retailers in the complex.”

  1. Given the preference that the learned trial judge had for the evidence of the second respondent it is instructive to note what he said in his statement which was admitted into evidence. During the meeting with Mr and Mrs Sciacca on 1 November 1996 he made the following reference to the trading position of other fashion tenancies in the complex; paragraph 30 of his statement is as follows:

“Due to our relationship I recall I was trying to give the Sciaccas as much information as I possibly could about the trading performance of the complex and in particular the trading performance of the Governors Way fashion tenancies.  I recall saying to them the information I was giving to them was confidential and I was only making it available to them because of our relationship.  I gave them an insight into the trading performance of all of Governors Way fashion tenancies which included the following tenancies:

Country Road 307m2 $5,500 per square metre per annum
Musfeldt 58m2 $9,300 per square metre per annum
Riccis Shoes 225m2 $6,900 per square metre per annum
Pellini 30m2 $10,000 per square metre per annum
Jag 150m2 $4,500 per square metre per annum
Manifest 72m2 $6,500 per square metre per annum
Arden Collection 76m2 $5,300 per square metre per annum
Canterbury 76m2 $7,500 per square metre per annum
Shed 6 76m2 $7,000 per square metre per annum
Esprit 173m2 $7,500 per square metre per annum
Oroton 51m2 $8,500 per square metre per annum”
  1. If it be significant, the average across those 11 tenancies is approximately $7,100.00 per square metre per annum.
  1. Later in paragraph 57 of his statement the second respondent (speaking generally of his discussions with the Sciaccas) said:

“At no time during any discussions did Mr Miller express concerns about the necessity to have a return of at least $5000m2.  I did not represent to Toby [Sciacca] that the Benetton store would achieve a lot more than $5,000 per m2 per annum.  With the benefit of average reported sales from all Fashion Tenants, which was at the rate of $7,000 per m2 per annum. I did agree with Toby Sciacca that a successful international retailer should be able to achieve sales of at least equal to the average being achieved in the complex.”

  1. It will be noted that in paragraph 30 of his statement the second respondent refers to fashion tenancies in Governor’s Way whereas in paragraph 57 thereof the reference is to “all Fashion Tenants”. It would appear that the learned trial judge adopted the language of the second passage in making the finding quoted above. In the light of that regard must also be had to the only passage in the oral evidence of the second respondent where the figure of $7,000.00 per square metre appears. In the course of cross-examination of the second respondent with respect to the meeting on 30 December 1996 the following exchange occurred:

“I suggest that you went on to make a definite statement to the effect that the Sciaccas at the – meaning at the Benetton store would achieve figures in excess of $1 million per annum.  Do you have any recollection of that one way or another? -- I didn’t – don’t recall making a statement like that.  It’s – the circumstances at the time were there were approximately 12 fashion retailers trading in the Governor’s Way area ranging from 40 square metres to something like 400 square metres achieving gross sales of around $7,000 a square metre.  Logically, the conclusion to draw at that stage was that all things being equal with an international brand name tenancy they should be able to do those sorts of figures.  I don’t think I was trying to – I wasn’t guaranteeing that they would do anything of the kind, but I didn’t disagree that those were the sorts of trading figures that might be achieved.

See, I suggest to you you then went onto say unequivocally to Mr Sciacca at this time that ... the Sciaccas, would do $7,000 per square metre? -- I don’t recall saying that.  I see in Tony Miller’s letter he says that the scenario in number 3, $7,000 per square metre, is not unrealistic.  If we were talking about this letter at that meeting I don’t think anyone was disagreeing with that. 

You went further, I suggest, and you very positively and unequivocally said that they would do $7,000 per square metre? -- I think that would have been silly of me to do that.  That’s not right.  That’s not correct.”

  1. It should be noted that in the last answer in that extract the second respondent denied informing the appellants “they would do $7,000 per square metre”. Mr Sciacca in his statement alleged that a representation in those precise terms was made, and such a representation was pleaded in paragraph 15(b)(ii) of the Second Further Amended Defence and Counterclaim. It is clear that the learned trial judge accepted the evidence of the second respondent and rejected the making of such a specific representation; so much follows from the first sentence of paragraph [88] of the reasons.
  1. Senior counsel for the respondents submitted that the last sentence in paragraph [22] of the reasons quoted above should not be read literally, it should be read in the light of the only evidence on the issue clearly accepted by the learned trial judge. Neither in paragraphs 30 and 57 of his statement, nor in his oral evidence, did the second respondent say he expressly communicated the figure of $7,000.00 per square metre to the Sciaccas. The only evidence is that he produced certain information as to the trading performance of fashion tenants in Governor’s Way and indicated that the appellants should be able to achieve at least equal to that average. Nowhere did the second respondent say he “may have told Mr Sciacca that the average of sales from all fashion tenants in the centre was $7,000 per sq metre per annum”. It seems to me that, if the documents as to trading by the fashion tenancies supported $7000.00 per square metre per annum, what her Honour was really finding was that as a result of the information provided by the second respondent his admitted statement that a “successful international fashion retailer should be able to achieve sales at least equal to the average being achieved by the fashion retailers in the complex” carried the implication that the appellants should be able to achieve trading in the range $7,000.00 per square metre per annum. Further, the critical passages in the evidence of the second respondent (paragraph 30 of his statement and the quoted passage from his cross-examination) clearly indicate that any representation as to trading performance he made was with respect to fashion tenancies in Governor’s Way. When the expression “all fashion tenants” was used it was clearly limited to such tenancies in Governor’s Way.
  1. As noted above the learned trial judge accepted that the second respondent made available “some of the gross turnover figures for the fashion retailers” to assist the Sciaccas in their evaluation of the proposed business. The oral evidence of the second respondent was that at the meeting on 1 November 1996 he had “the monthly report” in front of him and went through with the Sciaccas “the trade of all the retailers in Governor’s Way”. He also said under cross-examination that he turned the monthly report around on the table and showed the Sciaccas the schedule of gross sales. It seems clear from all the material that it was the September 1996 documents which the second defendant made available to the Sciaccas at that time. The pages in question are found at two places in the record; at pages 508-9 being part of Exhibit 9 and pages 591-2 being part of Exhibit 11. Though the figures in those documents do not appear to precisely equate with the amount per square metre included by the second respondent in his summary in paragraph 30 of his statement quoted above, the figures do clearly support an average of $7,000.00 per square metre per annum for the fashion tenancies itemised in that paragraph. It follows that if, contrary to what I have said above, there was a finding by the learned trial judge that the second respondent told Mr Sciacca that the average of sales from fashion tenants in Governor’s Way was $7,000.00 per square metre per annum, it was open to find that such representation was in fact correct.
  1. At the meeting on 1 November 1996 the letter from Miller to the second respondent of 30 October 1996 was discussed; a copy had already been forwarded to Mr Sciacca. That letter contained the statement that a “successful licensee must be able to demonstrate they have the managerial capacity to operate up to a A$1 million trading entity … .” At the time the area available for lease was about 150m2; ultimately the leased area was 147m2.  For some reason which the second respondent could not recall whilst giving evidence, he made a calculation on the back of an envelope, Exhibit 15, in the presence of the Sciaccas.  What the second respondent appears to have done there is divide $1 million by 145m2 giving the answer $6,900.00 per square metre.  It may well be that that was an exercise to demonstrate that the turnover required by Benetton, given the approximate size of the store, would require a turnover of about $6,900.00 per square metre per annum.  If that was in fact what was discussed, it makes it more relevant that at the time the trading figures for the fashion outlets in Governor’s Way demonstrated trading at approximately $7,000.00 per square metre per annum, and perhaps makes it more probable that some reference to $7,000.00 was made.  That possibility was discussed by the learned trial judge but in the overall context of the case it was not of critical importance.  It did not prevent her Honour from accepting in paragraph [24] of her reasons the second respondent’s evidence that he did not represent to the Sciaccas that they would gross an average of $6,900.00 per square metre if they took up the Benetton tenancy or $1 million in a very short time or any time.
  1. The learned judge at first instance considered the evidence with respect to the number of customers entering the complex and the question whether or not the location of C2 at the end of Governor’s Way meant that it was at a dead-end and not attractive to customers. Issues relevant to those questions were considered by the learned judge at first instance in paragraphs [28], [29], [30], [33], [34] and [35] of her reasons and it not necessary to analyse what is said therein. It is sufficient to say that it was open to the learned trial judge to conclude that there was no misrepresentation made with respect to the location of the shop and its possible impact on the number of potential customers passing by.
  1. Much was also made in the course of oral submissions about the trading position of Inc Clothing and Rochford. The evidence appears to establish that Inc Clothing was not a competitor in the fashion market and had been trading down for some time prior to closing in about July 1996. There was uncontroverted evidence that stock was not replaced because it was the intention of the proprietors to cease trading at about the time the store did. Rochford had another shop in the complex and took over the Inc Clothing shop in about August 1996 as a second store. In about September the manager of the Rochford store informed the second respondent that he was satisfied with the trading performance, though, at least on one view, it would appear the trading figures were low. The eventual closure of that Rochford store was because the company Australia-wide got into financial difficulty, rather than because of any particular problem with trading in the shop in Governor’s Way. There were reasons entitling the second respondent to distinguish the Inc Clothing/Rochford store from the other fashion tenancies in Governor’s Way. The learned judge at first instance dealt with the alleged misrepresentations with respect to Rochford in paragraphs [26] and [94] of her reasons, and I can see no reason to question the validity of the findings made.
  1. Much was made in the course of argument about the expression “subject to some further comment” found in paragraph [88] of the reasons for judgment. In my view what her Honour was saying was that the specific representations pleaded were not, on her findings, made by the second respondent, but some further comment was necessary with respect to representations, not pleaded, but made by the second respondent. They are matters dealt with at some length subsequently in the reasons for judgment.
  1. A reading of the material strongly supports the conclusion that all findings of fact made by the learned judge at first instance were clearly open on the evidence. Critically the learned trial judge was entitled to find, as she did, that the specific representations pleaded were not made by the second respondent. Further, on the whole of the evidence she was entitled to conclude she was not satisfied that there was any misrepresentation made by the second respondent on which the appellants relied and was a cause of the loss sustained by the appellants. It is therefore unnecessary to deal further with the appellants’ ground of appeal alleging judicial error with respect to causation.
  1. It follows that the appeal should be dismissed with costs to be assessed.
  1. JERRARD JA:  In this appeal I have had the advantage of reading the reasons for judgment of Williams JA and his proposed orders; I respectfully agree with those.  I add the following matters.
  1. The first and second appellants became licensees of Benetton SPA, permitting them to operate a retail store under the business name “The United Colours of Benetton”. It was for that purpose that those appellants entered into the lease of a shop C2, situated fronting and at the end of a passage called “Governor’s Way”. Mr Sciacca’s evidence was that international visitors to Cairns were familiar with and enthusiastic about the Benetton label. Mrs Sciacca made plain to Benetton she expected the clothes the appellants would stock and offer for sale would be: “lively, colourful, lightweight, fun and stylish. Casual day wear, resort wear, smart casual after hours attire for dining and for nightclubs, logo wear, some lightweight knits, possibly some swimwear. Linens, cottons and lightweight fabrics are popular – full synthetics are generally considered too hot. Nothing much in the way of winter lines…”.
  1. Paragraph [19] of the judgment under appeal reflects the significant fact that the license agreement the appellants entered into with Benetton gave that company the right to select the merchandise offered for sale. Exercise of that right produced the consequences, commercially fatal to the appellants, described by the findings quoted in paragraph [7] of the judgment of Williams JA. To those I add the following matters, about which the appellants complained in correspondence with Benetton, or which were found by the learned trial judge.
  • Benetton supplied the appellants with:
  • 150 dresses in four styles;
  • 422 pairs of women’s jackets, suitable for a cold climate;
  • no T-shirts;
  • a large quantity of winter children’s wear;
  • 181 one-piece bathers in one style with two colours (light and dark blue), and in two sizes, (S and XS);
  • a very bad mix of stock;
  • huge numbers of unsaleable items;
  • polyester trousers, unsuited to the Cairns climate.
  1. That conduct resulted in the further finding of the learned trial judge, at [100] of the reasons for judgment and challenged by the appellants, that the judge was not persuaded that any representations made by the second respondent, even if of the kind alleged by the appellants, caused their losses. The judge concluded from the evidence that overseas visitors knowing the Benetton label sought it out, but that there was nothing suitable for them to buy. The judge added that the correspondence from the third appellants made it clear that had there been timely and suitable merchandise for sale, together with a proper assessment of the Australian market, as had been represented by Benetton, then there would have been no want of customers to the appellants’ shop. The judge had earlier found that the selection of clothes by Benetton was quite inappropriate for Cairns, or, probably, any store. The learned judge’s findings of fact about the quality of the stock supplied, and its effect on the appellants’ trading, was completely unchallenged. To my mind they describe a shopping experience behind, and in the days of, the Iron Curtain.
  1. As Williams JA records, the evidence supported the proposition that at the times the second respondent spoke to the third appellants, the average reported sales from specialist fashion tenancies in the vicinity of the appellants’ shop was $7,000.00 per square metre per annum (m2/pa).  The documents the second respondent had, and which he made available to the third appellants in their discussions, showed on my calculations a moving average total (“MAT”) for each of the 11 stores listed in the second respondent’s paragraph 30, which average out at $7,353.00m2/pa in the July 1996 to September 1996 quarter, an average of those MATs for the prior 12 months of $7,345.00m2/pa; and a predicted yearly average MAT, for those 11 stores, if the September figure itself was thereafter maintained, of the same order.  The evidence of a Mr Norling, a management consultant specialising in retail and other allied areas relating to the property industry, and called by the appellants, showed in table 2.2 (at AR 1109 and 1110) that the speciality fashion stores in The Pier Marketplace generally, as at September 1996, showed MAT with an average of $6,815.00m2/pa; those for the 11 named in paragraph 30 of the second respondent’s affidavit showed an average MAT, on my calculations, of $6,820.00m2/pa.  Those 11 were situated in close proximity to the appellants’ store.  The second respondent’s evidence, accepted by the learned trial judge, was that he had told Mr Sciacca why the shop trading as Esprit was successfully conducted – the label was well known internationally, the clothing sold was suitable to the climate, lightweight, colourful, and affordable.  The second respondent and the third appellants accordingly showed a similar expectation of what a successful international fashion retailer would offer for sale in Cairns.
  1. It follows that, if he did, for the second respondent to speak to the appellants of $7,000.00m2/pa for a successful fashion retailer in that part of the complex was not misleading; and he had reasonable grounds for making that representation.  The latter point is supported by the opinion Mr Norling expressed in his report (at AR 1100), that:

“Again, putting the pending impact of Cairns Central to one side, all of the evidence suggests that, at the time of the alleged representations, a Benetton store at The Pier Marketplace should have been able to achieve productivity levels well in excess of $5,000/m2, and probably much closer to $7,000/m2, say in the range of $6,500/m2 to $7,000/m2.”

  1. In my respectful opinion the evidence described by the learned judge supported the disputed conclusion the judge reached at [100] as to causation, namely that the appellants’ losses were not caused by any representations the respondents had made, even if they were those pleaded. As a matter of common sense and experience[1] the appellants’ losses were caused solely by the entirely independent conduct of Benetton, in the un-saleability of what it supplied.  The representations about which the appellants complained at the trial are listed in paragraph [11] of the reasons for the judgment under appeal.  Those were largely as to future matters and events expected in and about The Pier Marketplace, and which could help attract potential customers to the area of the appellants’ intended shop; and also the representations pleaded in paragraph 15(b)(ii) of the second Amended Defence and Counter-Claim, described by Williams JA in [12] herein.  If every representation the respondents were alleged by the pleadings to have made, other than those pleaded in paragraph 15(b)(ii), were made, and had been entirely accurate, the evidence demonstrated that the appellants would have suffered the identical loss; it did not demonstrate any lack of reasonable grounds for the opinions represented in 15(b)(ii).
  1. I agree the appeal should be dismissed.

Footnotes

[1] Medlin v SGIC (1995) 182 CLR 1 at 6-7

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Editorial Notes

  • Published Case Name:

    Cairns Shelfco No 16 P/L v Armanel P/L & Ors

  • Shortened Case Name:

    Cairns Shelfco No 16 Pty Ltd v Armanel Pty Ltd

  • MNC:

    [2004] QCA 473

  • Court:

    QCA

  • Judge(s):

    McMurdo P, Williams JA, Jerrard JA

  • Date:

    06 Dec 2004

Litigation History

No Litigation History

Appeal Status

No Status