Loading...
Queensland Judgments

beta

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment
  • {solid} Appeal Determined (QCA)

ACN 070 037 599 Pty Ltd v Larvik Pty Ltd

 

[2008] QSC 95

 

SUPREME COURT OF QUEENSLAND 

 

CITATION:

ACN 070 037 599 Pty Ltd & Anor v Larvik Pty Ltd & Anor [2008] QSC 95

PARTIES:

ACN 070 037 599 PTY LTD
(first plaintiff)
SUSAN McEWEN
(second plaintiff)
v
LARVIK PTY LTD (ACN 010 185 350)
(first defendant)
RONALD MALCOLM STAMFORD
(second defendant)

FILE NO:

BS4550/04

DIVISION:

Trial Division

PROCEEDING:

Civil proceeding

DELIVERED ON:

20 May 2008

DELIVERED AT:

Brisbane 

HEARING DATE:

25, 26, 27, 28 March 2008; written submissions 9 April 2008

JUDGE:

Skoien AJ

ORDER:

Reasons delivered; adjourned for argument on quantum of damages

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – DELAY AND PROVISIONS AS TO TIME – where plaintiff company entered licence agreement in reliance on representations that a long term lease would be granted – where deed of agreement contained best endeavours clause – meaning of best endeavours – use of expert evidence to demonstrate unreasonable delay in obtaining lease – whether best endeavours obligation was discharged by engaging apparently competent solicitors

TRADE AND COMMERCE – TRADE PRACTICES AND RELATED MATTERS – CONSUMER PROTECTION – MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT – CHARACTER AND ATTRIBUTES OF CONDUCT – REPRESENTATIONS – where defendant made representations that a head lease would be obtained and a sub-lease granted to the plaintiff – whether representations amounted to misleading and deceptive conduct – whether the defendant had reasonable grounds for making the representations – where representations were made to a company director prior to their appointment – whether representations must be made to the company or its agent

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER RULES OF COURT – PLEADING – STATEMENT OF CLAIM – where plaintiff amended the statement of claim to include representations – where defendants argued that the amended statement of claim raised a new cause of action outside the limitation period – whether the amended statement of claim introduced a new cause of action – whether inclusion of a new cause of action was permissible

Body Corporate and Community Management Act 1997

Building Units and Group Titles Act 1980

Trade Practices Act 1974 (Cth), s 51A, s 52, s 75B, s 85, s 87

Uniform Civil Procedure Rules 1999, r 376

Allonnor Pty Ltd v Doran [1998] QCA 372, considered

Borsato v Campbell [2006] QSC 191, applied

Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, cited

Central Sawmilling No. 1 Pty Ltd v State of Queensland [2003] QCA 311, considered

Re Henry William Charleson and Australian Autogas Conversions (SA) Pty Ltd v Mobil Oil Australia Ltd [1987] FCA 234, distinguished

Egan v Geraghty [1994] QCA 008, followed

Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40-994, cited

Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546, considered

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, considered

Interline Hydrocarbon Inc. v Brenzil Pty Ltd [2006] 2 Qd R 454, cited

Kabwand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950, cited

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, considered

March v E & MH Stramare Pty Ltd (1991) 171 CLR 506, cited

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, cited

Ramsay v McElroy [2004] 1 Qd R 667, cited

Sykes v Reserve Bank of Australia (1998) 88 FCR 511, considered

Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 2 TPR 48, cited

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, cited

COUNSEL:

Mr AS Mellick with him Ms SM McNeil for the plaintiffs

Mr GW Diehm with him Mr A Luchich for the defendants

SOLICITORS:

Sykes Pearson Miller Solicitors for the plaintiffs

Macdonnells Law for the defendants

  1. SKOIEN AJ: The claim of the first plaintiff (“ACN”) is against the first defendant (“Larvik”) for $76,854.14 damages for breach of contract. ACN also claims against Larvik and the second defendant (Mr Stamford) $235,239 damages pursuant to s 82 and/or s 87 of the Trade Practices Act 1974 of the Commonwealth (“TPA”). There are also claims for interest on damages and for costs. A claim made by the second plaintiff (Mrs McEwen) against both defendants was abandoned.

Index

a.Background [2] – [9]

b.Alleged representations [10] – [19]

c.Deed of agreement [20] – [21]

d.Alleged breach of Deed of Agreement [22] – [26]

e.TPA claim [27] – [28]

f.Preliminary points [29] – [42]

g.Negotiations – the evidence [43] – [59]

h.Time needed to register leases – expert evidence [60] – [68]

i.Activity of BME to register leases [69] – [84]

j.Whose “best endeavours” [85] – [93]

k.Breach of agreement – causation [94] – [98]

l.TPA claim – the evidence [99] – [104]

m.Misleading or deceptive conduct? [105] – [115]

n.Mr Stamford’s TPA liability [116] – [117]

o.Damages [118] – [130]

p.Quantum of damages [131] – [132]

Background

  1. The action concerns a building which contains a cinema and shops on Sunshine Beach Road, Noosa Junction (“the building”). The forecourt of the building, at material times, has had on it an area on which a kiosk stood (“the kiosk area”).
  1. The building was initially registered under the Building Units and Group Titles Act 1980 (“BUTA”). The lot owners at material times have been Larvik, (of which Mr Stamford is a director) and two others, called, for convenience, Mr Minchin and Mr Brinkley. On the coming into force of the Body Corporate and Community Management Act 1997 (“BCCMA”), which replaced BUTA, the three owners constituted the body corporate for the “Scheme’ established by BCCMA. The building forecourt comprised part of the common property under the Scheme.
  1. Up to 6 November 2000 Larvik had the right under the body corporate by-laws to the exclusive use of the kiosk area for the purpose of maintaining the kiosk on that area for retail purposes. However from 6 November 2000, for reasons related to the provisions of BCCMA which need not be explored, that right was lost.
  1. In 1993 Larvik built the kiosk on the kiosk area and thereafter licensed various successive licensees to operate small retail businesses there. As at May 2000 the licence was held by Mr and Mrs Barber who ran a gift shop.
  1. In 1997 Larvik’s solicitor, Mr Egan of Butler McDermott and Egan (“BME”) told Mr Stamford that a change in the legislation had rendered the exclusive use/license scheme over the kiosk area impermissible. He advised either the purchase from the body corporate by Larvik of the kiosk area as a new lot or the lease of the kiosk area from the body corporate so that thereafter the kiosk could be operated by a retailer either under a lease or a sub-lease from Larvik. Mr Stamford opted for the lease/sub-lease arrangement and Mr Egan was instructed to proceed to give effect to that.
  1. In early 2000 Mrs McEwan began to investigate the possibility of opening in the Noosa area a franchise ice cream business conducted under the name “Cold Rock Ice Creamery”. She entered into that franchise agreement on 4 February 2000 and having decided that the kiosk area was the most desirable site, she negotiated with Mr Stamford to obtain it.
  1. Following those negotiations, on 3 May 2000 ACN (a company of which Mrs McEwan had become the director) entered into a contract to purchase the Barber business for $15,000, to be settled on 17 May 2000.
  1. ACN completed that contract on 17 May 2000, began to alter and fit-out the kiosk on 18 May, commenced to pay Larvik rent for the kiosk, paid the balance of the franchise fee of $20,000 on 19 May, completed the fit-out on 10 June and caused the kiosk to open for business on 11 June 2000.

Alleged representations

  1. It is alleged by ACN that in a phone conversation in mid February 2000, Mrs McEwen informed Mr Stamford that:-             
  1. she would need to undertake major alterations to the kiosk to allow it to be used for a Cold Rock Ice Creamery;
  1. she knew that the present tenure of the owners ran for a further three years;
  1. because of the nature of the alterations required, she would need a longer term lease over the kiosk if she purchased the Barber business.

and it is alleged that Mr Stamford informed her that there would be no problem with granting a longer term lease.

  1. It is alleged that thus, Larvik represented to Mrs McEwan (“the first representations”) that if she purchased the kiosk business:
  1. it was able to grant to her a long term lease over the kiosk;
  1. it would grant to her a long term lease over the kiosk;
  1. it was able to do this, and would do so within:
  1. a matter of a few weeks;
  1. alternatively, a matter of a few months;
  1. alternatively, a short period of time following the purchase.
  1. The defendants deny that the conversation alleged in paragraph [10] occurred and therefore deny making the first representations.
  1. It is alleged that on 13 April 2000 Mrs McEwan met Mr Stamford (on behalf of Larvik) during which meeting:

“(a)Mrs McEwen informed Mr Stamford that:

  1. if she purchased the Barber business she intended to:
  1. use the kiosk to operate the Cold Rock business;
  2. spend a large amount of money renovating and fitting out the kiosk for this purpose;
  1. she intended to operate the Cold Rock business for a couple of years and then sell it in order to make a profit on the re-sale; and
  1. she wanted a long term lease of the kiosk with an initial term of 6 years and two options of 3 years;
  1. Mr Stamford informed Mrs McEwen that if she purchased the Barber business Larvik would grant a lease over the kiosk for an initial term of 6 years with two options of three years.”
  1. It is alleged (and denied by the defendants) that thus Larvik represented to ACN and Mrs McEwen (“the second representations”) that if they were to purchase the Barber business:

“(a)it was able to grant to her (sic) a long term lease over the kiosk;

(b)it would grant to her (sic) a long term lease over the kiosk’

(c)it was able to do this, and would do so, within:

  1. a matter of a few weeks;
  1. alternatively, a matter of a few months;
  1. alternatively, a short period of time following the purchase.”
  1. It is alleged (and denied by the defendants) that ACN purchased the Barber business in reliance on the first and/or the second representations.
  1. On or about 15 May 2000, Larvik, by its solicitors, wrote to the solicitors for ACN and Mrs McEwan in the following terms:

‘We refer to our recent telephone conversations and wish to confirm our clients understanding of the Agreement regarding the proposed Lease of the kiosk area is as follows:

  1. The Sub-Lease will be for an initial term of 6 years with annual CPI increases and with one Option of 3 years with a market review to occur in the 7th year and CPI reviews in the 8th and 9th year                           

  1. The effective commencement date of the Sub-Lease will be Thursday 18th May 2000.

  1. As your client is to undertake substantial alterations to the kiosk our client seeks a provision to be incorporated into the eventual Sub-Lease document that in the event your client was to vacate the premises as a result of a breach of the terms of the Sub-Lease or simply the Lease was to expire then at that stage your client would re-instate the kiosk to its original condition.

If you are agreeable to the abovementioned terms we would suggest that it be incorporated into a Deed of Agreement to be signed by our respective clients thereby enabling your client to take possession of the property as from the proposed settlement date with the Barbers on Thursday 18th May 2000 with the final Lease documentation to be signed once the restructuring of the Cine Centre has been completed.

  1. It is alleged (and admitted by the defendants) that on 17 May 2000 ACN and Mrs McEwan informed Larvik that ACN agreed to the terms set out Larvik’s letter if those terms were altered, inter alia, by including a further option to extend the term of the sub-lease by 3 years, and that on that date Larvik agreed to the extra option.
  1. It is alleged (and denied by the defendants) that thus Larvik represented to ACN (“the third representations”) that:
  1. within a few weeks;
  1. alternatively within a few months;
  1. alternatively with a short period of time following the purchase of the Barber business

it would grant a sub-lease of the kiosk area to ACN for a term of 6 years with 2 options of 3 years each.

  1. It is alleged that in reliance upon the first and/or the second and/or the third representations (that reliance being denied by the defendants) ACN:
  1. completed the purchase contract on 17 May 2000;
  1. proceeded with the purchase of the franchise agreement on 18 and 19 May 2000;
  1. commenced the fit-out of the kiosk on 18 May 2000;
  1. commenced to pay Larvik rent for the kiosk;
  1. completed the fit-out of the kiosk on 10 June 2000;
  1. caused the Cold Rock business to begin trading on 11 June 2000.

Deed of agreement

  1. It is alleged that on or about 18 August 2000, in reliance upon the first and/or second and/or third representations, (that reliance being denied) ACN entered into a Deed of Agreement with Larvik.
  1. The Deed of Agreement relevantly provided:

“…

  1. ACN hereby covenants that it will pay to Larvik the sum of $1,136.80 per calendar month as and from 17 May 2000 and monthly thereafter by way of rent.

  1. ACN acknowledges that Larvik is in the process of obtaining a Lease from the Body Corporate for Noosa Cine Centre of the area presently being licensed to ACN. Larvik agrees to use its best endeavours to have this Lease finalised as soon as possible and pending finalisation the terms and conditions of occupation of the Licensed Area are more particularly detailed in paragraph 5 hereof.
  1. ACN agrees that upon receiving written notice from Larvik that ACN will then enter into a sub-lease of the kiosk area in the following terms inter alia:

(a)for an initial term of 6 years commencing as from 17 May 2000;

(b)two option periods of 3 years each;”

Alleged breach of Deed of Agreement

  1. It is alleged (the defendants denying) that:
  1. between 17 May 2000 and June 2002; and
  1. between late November 2002 and September 2003;

Larvik took no steps or alternatively no reasonable steps to advance the process of granting a sub-lease of the kiosk area to ACN and thus it is alleged that Larvik, in breach of the Deed of Agreement, did not use its best endeavours to have the grant of a sub-lease to ACN finalised as soon as possible.

  1. It is alleged (the defendants denying) that if Larvik had used its best endeavours to have the grant of a sub-lease to ACN finalised, that sub-lease (for a period of 6 years with 2 options of 3 years each) would have been granted by, at the latest June 2002.
  1. It is alleged that on 16 September 2003:
  1. Larvik had still not granted that (or any) sub-lease to ACN; and
  1. ACN terminated the Deed of Agreement.
  1. The case for ACN is that contrary to clause 4 of the Deed of Agreement Larvik did not “use its best endeavours to have (the head lease) finalised as soon as possible”. It is alleged that this breach was a continuing breach and justified the termination of the Deed of Agreement by ACN on 16 September 2003.
  1. The case for Larvik is that it discharged its contractual obligation by engaging apparently competent solicitors and had no reason to apprehend that those solicitors were not carrying out the work in a timely fashion. Finally, Larvik says that even if its solicitors did not act diligently, it is not liable to ACN.

TPA claim

  1. ACN relies on the first and/or second and/or third representations to allege that within the times alleged therein Larvik represented that it would obtain its own head lease and grant a sub-lease to ACN for 6+3+3 years. It alleges that the representations contravened s 52 of the TPA, that ACN acted on them and as a result suffered damage, giving rise to a damages claim under s 82 and/or s 87 which apply when s 52 is contravened.
  1. Larvik’s defence is that it had reasonable grounds for making any representations as to a sub-lease, they being representations as to future intention. Furthermore Larvik alleges that any such representations did not operate to lead ACN to enter into the Barber contract or the franchise agreement or to enter into the license to occupy the kiosk.

Preliminary points

  1. ACN originally pleaded only the second and the third representations as being misleading and deceptive, in breach of s 52 of the TPA. The first representations were added by amendment, made without the leave of the Court, by ACN filing an amended statement of claim on 30 August 2006. An application by ACN for such leave was made to Mackenzie J on 19 June 2007 on which date His Honour declined to give leave at that stage and adjourned the application to the trial judge for determination. The matter was raised again before me.
  1. The argument concerns the first representations which were alleged to have been made in mid February 2000. That is clearly more than 6 years before the amendment was made on 30 August 2006. So if it raises a new cause of action it offends the six year limitation period set down by s 82(2) of the TPA and ACN’s attempt to plead it would fall to be considered under rule 376 of the Uniform Civil Procedure Rules (“UCPR”). That the rule applies to actions of this type brought under the TPA has been accepted. See Ramsay v McElroy [2004] 1 Qd R 667; Interline Hydrocarbon Inc. v Brenzil Pty Ltd [2006] 2 Qd R 454. Rule 376 relevantly, says:

376Amendment after limitation period

  1. This rule applies in relation to an application, in a proceeding, for leave to make an amendment mentioned in this rule if a relevant period of limitation, current at the date the proceeding was started, has ended.

….

  1. The court may give leave to make an amendment to include a new cause of action only if—

(a) the court considers it appropriate; and

(b) the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment.”

  1. Does the allegation of the first representation raise a new cause of action? I was helpfully referred to a passage in the judgment of McMurdo J in Borsato v Campbell [2006] QSC 191 at [8]:

“The term ‘cause of action’ was defined in Cooke v Gill as being ‘every fact which is material to be proved to entitle the plaintiff to succeed’, a definition which many judgments have employed in the context of this rule or its equivalent: see e.g. Allonnor Pty Ltd v Doran [1998] QCA 372 at [3] per McPherson JA. But it has not been applied literally, for otherwise any new fact to be added to a plaintiff’s case would be treated as raising a new cause of action which required leave in the context of a rule such as r 376(4). So in Allonnor Pty Ltd v Doran for example, there is an indication of what the Court of Appeal in Thomas v State of Queensland [2001] QCA 336 at [19] subsequently endorsed as a “fairly broad brush comparison between the nature of the original claim and that to which it is sought to be amended”. The dividing line is between the addition of facts which involve a new cause of action and those which are simply further particulars of the cause already claimed, and its location involves a question of degree which can be argued, one way or the other, by the level of abstraction at which a plaintiff’s case is described. Some illustrative guidance is provided by Allonnor Pty Ltd v Doran, Thomas v State of Queensland and another judgment of the Court of Appeal, Central Sawmilling No. 1 Pty Ltd & Ors v State of Queensland [2003] QCA 311.”

  1. For the moment I put aside another preliminary point raised by the defence which relates to the fact that when the first representations were alleged to have been made to Mrs McEwan she had no relationship with ACN nor did she tell Mr Stamford that she was acting on behalf of any entity other than herself. I will first deal with the agreement under rule 376 unburdened by those complications.
  1. The first question is whether the amendment of 30 August 2006 raised a new cause of action.
  1. In the statement of claim as it was before the amendment, the second and third representations were pleaded to found an allegation under s 52 of the TPA as being misleading and deceptive. By the amendment the first representations were added as separately, alternatively cumulatively, constituting misleading and deceptive conduct. It is the fact of course that the wording of the first and second representations is identical other than that the first are alleged to have been made solely to Mrs McEwan while the second are alleged to have been made to her and to ACN.
  1. Section 52(1) is:

“(1)A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive, or is likely to mislead or deceive.”

Adapting those words to the circumstances, the original statement of claim alleged that a corporation (Larvik) in trade or commerce (which is admitted) engaged in conduct (made the second representations) which were misleading or deceptive. At paragraph 36 of the statement of claim ACN alleged that those representations led to it entering into the Cold Rock business in the kiosk and damage allegedly resulting was then claimed under ss 82, 87. The first representations relate to the same corporation (Larvik), to the same trade or commerce and they allege the same conduct (the first representations, are in the same terms as the second representations), causing the same action by ACN and resulting in the same financial loss. The only variation is to allege that the first representations were made on another occasion. It is difficult to see that a new cause of action is raised by that. The facts in Allonor were perhaps more in favour of a finding of a new cause of action than here, in that two separate work incidents in one day each injured the plaintiff. However McPherson JA at [6] expressly doubted, and Williams J at [14] seems to doubt, that a new cause of action was raised. By contrast in Central Sawmilling Pty Ltd v State of Queensland [2003] QCA 311 the amendment raised an entirely new contract between the parties.

  1. If there is indeed here a new cause of action raised by the amendment, I am of the opinion that rule 376(4) permits the amendment. The new cause of action arises out of virtually identical facts as those previously pleaded. The alleged consequent damage is identical. The defendants do not allege that the first representations put them at some disadvantage, for example because of the loss of relevant documents, the disappearance of witnesses, or some such thing. They simply deny that the alleged conversation constituting the first representations occurred. In those circumstances it would be appropriate to give leave to make the amendment and I therefore do so.
  1. The next objection to the amendment relates to the fact that when the first representations were allegedly made Mrs McEwen had no relationship with ACN (then a shelf company called Gerone Pty Ltd). She was not a director nor shareholder, nor had she been formally appointed its agent. Mrs McEwen was appointed a director on 26 March 2000 and Gerone changed its name to ACN on 6 April 2000.
  1. The claim for damages by ACN, based on s 52, is made under s 82 and/or s 87 of the TPA. The former permits recovery of damages by a person (ACN) which has suffered loss or damage by conduct done by another person (here, allegedly, Larvik and Mr Stamford) in contravention of s 52. Section 87 (without going into detail) authorises similar relief.
  1. The question raised is whether the identity of the person to whom the misrepresentation (the impugned conduct under s 52) is made, matters. In my opinion it does not, because it is the nature of Larvik’s conduct which is of critical importance; was it misleading or deceptive or likely to be misleading or deceptive? If so, ACN must prove that it acted on the misrepresentation and that it suffered damage by the conduct of Larvik which is in breach of s 52. See Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. See also Kabouand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950. So causation is necessarily raised (Wardley, at 525, per Mason CJ).
  1. An essential step in proving causation is the path by which ACN became aware of the impugned conduct. Here the case for ACN is simply that when it purchased and operated the ice creamery and when it signed the Deed of Agreement it did so because of oral misrepresentations made twice to Mrs McEwen, once before she became a director of ACN and once after she obtained that appointment. A representation to a corporation can only have an effect on the corporation if it has an effect on the mind of the human entity who makes the decisions of the corporation.
  1. There is no actual evidence when, if at all, Mrs McEwen expressly informed Mr Stamford (and Larvik) that the arrangement they had negotiated and agreed upon was to be taken up formally by ACN rather than by her personally. But by executing the Deed of Agreement on 18 August 2000 Larvik obviously accepted that fact. It is implicit that the Deed of Agreement was executed by ACN and by Larvik, on the basis of the McEwen – Stamford negotiations.
  1. The first and second representations are alleged to have been made a mere 2 months apart. In that period of 2 months, if the evidence of Mrs McEwen is accepted, the McEwen – Stamford negotiations continued. The second representations, being in the same terms as the first representations and made or soon afterwards (or so it is alleged) must be taken to repeat and to revive the first representations. And it is the fact that the Deed of Agreement gives effect to an alleged undertaking by Mr Stamford for Larvik to give a sub-lease. These considerations distinguish the decision in Re Henry William Charleson and Australian Autogas Conversions (SA) Pty Ltd v Mobil Oil Australia Ltd [1987] FCA 234. So I rule that evidence of the first representations is relevant and admissible.

Negotiations - the evidence

  1. The undisputed background leading up to contractual relations between the parties is set out in paras [2]-[9]. In para [7] I refer to the negotiations between Mrs McEwen and Mr Stamford. There is a dispute about when those negotiations began.
  1. Mrs McEwen says that in January 2000 she was active in her search for a suitable site for the Cold Rock business. She approached a real estate agent, Mr Clemich who introduced her to the current licensees of the kiosk, Mr and Mrs Barber, for whom he was acting in the sale of their kiosk business. Mr Clemich said he contacted Mr Stamford who said that in principle he saw no likely difficulties in an ice creamery becoming the occupier of the kiosk. Mr Clemich said he passed that on to Mrs McEwen and suggested that she investigate such details as the likelihood of Council approval and any necessary alterations to the kiosk. He also suggested that she discuss details, for example the lease she was seeking, with Mr Stamford. His view was that it was pointless pursuing the Barber contract unless these essential matters were decided, at least in principle. This evidence seems to me to be likely to be true and I see no reason to reject it.
  1. Mrs McEwen said that she did actively pursue those matters. That involved, among other things, telephoning Mr Stamford in February 2000 to introduce herself, telling him what she was seeking and endeavouring to ensure that she was not wasting her time. In fact, she said she spoke to him on several occasions before they met face to face on 13 April 2000 at her house. Mr Stamford, aided by reference to his diary, denied any contact with Mrs McEwen before 13 April. It is ACN’s case that during the first phone call the first representations were made.
  1. I accept the evidence of Mrs McEwen of the initial phone conversation and its contents, that is, the first representations. She was an experienced business woman and it accords with common sense that she would want to explore the likelihood of all concerned (Mr Stamford and the Council) agreeing in principle to her acquisition of the kiosk and her operation of the ice creamery before she expended money, time and effort on details. It is easy to accept that she used the term “lease” and insisted on the importance of a long term lease because that continued to be her attitude all through the negotiations and the documentation as reflected in her correspondence and ultimately in the Deed of Agreement. Mr Clemich said she told him she wanted a lease.
  1. Mr Stamford largely relied on the absence of any entry in his diary in denying that the conversation occurred. But he conceded that he did not diarise everything. He may well have considered Mrs McEwen’s call as being simply a vague “feeling out” by a possible tenant of the kiosk, an interest which might or might not be pursued. Furthermore, he had already spoken with Mr Clemich, and might well have thought that anything important or concrete would come from him, he being a real estate agent.
  1. I also accept Mrs McEwen’s evidence that in this conversation Mr Stamford said that there would be no difficulty in the granting of a longer term lease to her. Why would he not say that when the creation of a lease was precisely the course he had accepted to be the appropriate one in his discussions with his solicitor Mr Egan? See para [6]. His diary note to himself on 14 February 2000 reads:

“Body Corp. in not too distant future will head-lease to Larvik and Larvik will sub-lease to tenant.”

I am not aware of any particular reason for that note but I consider it to be interesting that it was made at about the time Mrs McEwen said she spoke to him about a lease. As to his agreement to the longer term, that is supported by the terms of the Deed of Agreement.

  1. The meeting on 13 April 2000 is important because that is when Mrs McEwen said that they agreed on the actual longer term, a “6+3+3” lease and Mr Stamford told her he would get his people onto it straight away. Defence counsel submit that she would not think he was going to have the solicitors prepare a sub-lease before she had formally agreed to occupy the kiosk. That is so, but it could well have been a statement that he would get them onto the head-lease straight away, that being essential to Larvik’s ability to lease the kiosk to anyone. Mr Stamford concedes that the 6+3+3 term was discussed. He said she had to convince him that the business was a “worthwhile prospect” because she said she wanted to carry out substantial alterations to the kiosk. She must have succeeded in that because he accepts that he agreed to the 6+3+3 term. The question remains whether it was expressly agreed that it was to be achieved by a lease or a licence. Mr Samford was reluctant to accept that a lease, as opposed to a licence, was an essential term.
  1. Mrs McEwen was adamant throughout her evidence that she asked for and was promised a lease. She referred to “a lease” in her evidence of the discussions of February and 13 April 2000. She saw in a letter from BME to her solicitor dated 15 May 2000 a reference to a Deed of Agreement and immediately complained that a lease was not being offered. The complaint does not seem to have been passed on to BME by her then solicitors, but that may not have been considered necessary by them. The BME letter refers to the preparation of a sub-lease. The Deed of Agreement is clearly put forward as a stop-gap. She said she (ACN) executed the Deed of Agreement which offered a licence pending the preparation of a lease because she had no practical choice. She said she continued to ask Mr Stamford about the progress of the lease, even after she had closed down the ice creamery on 10 June 2001.
  1. Mrs McEwen clearly believed that it was more valuable to ACN to hold a lease than a licence. Events were to prove her right when she tried to re-sell the kiosk, a matter to which I will return.
  1. The attitude Mr Stamford expressed to the lease or licence issue was strange. It was difficult to tell whether he paid much attention to the description of the occupancy (to use a neutral word). He used the terms “lease” and “licence” interchangeably. See T219/50-222/20. Ultimately I think he did not believe that the distinction was of any consequence, that it did not matter whether ACN got a licence or a lease. In his mind the kiosk had always been occupied by licensees, who traded and sold their businesses, all without any apparent hindrance or difficulty.
  1. I accept that ACN, through Mrs McEwen, at all times sought a lease, that it was important to her and that she would not have continued with negotiations with Larvik for the occupancy of the kiosk had she known that the relationship was to be anything but lessor/lessee. It was critical to her decision to enter into an agreement to occupy the kiosk. Counsel for the defence submitted that I should place significance on the fact that neither of the two Barber contracts makes any reference to the importance of ACN getting a lease. I accept that Mrs McEwen regarded that as unimportant “formalities”, as she said in cross-examination, to secure her possession of the kiosk. I expect she would have known that she could get no more than the Barbers had to sell. Importantly, the lease had been offered to her by Mr Stamford.
  1. It is interesting that Mr Stamford said he had to be convinced by Mrs McEwen that her scheme was “a worthwhile project”. While he went on to refer the relevance of that to the proposed alterations for the kiosk, he also said he was also considering the economic prospects of the proposed business. He said he was concerned about security of rent knowing the kiosk was to be altered so as to be purpose built for an ice creamery. In effect he wanted to be satisfied that it would not be a white elephant standing in the forecourt of the building in which he had the major interest. He said he would not have agreed to ACN’s occupancy if that had been said because, he said, such trading success would not be possible in that period. But if he was satisfied that the business would be successful enough for him to allow it to operate in the kiosk which was to be altered substantially, how could he conclude that within a couple of years it would not have had a profitable re-sale value? What did he know of the profitability of such a business? This could be an example of a tendency to contradict Mrs McEwen’s evidence on instinct rather than on recollection. In the light of that I do not accept his evidence that she did not tell him of her plan to build up the business and sell it at a profit in “a couple of years”. I find that she did.
  1. Mr Stamford denied that he gave any estimate to Mrs McEwen of the time it would take to obtain a lease and sub-lease. At T202/30-55:

“At the time that you had this conversation with her, what belief did you have about your ability to give Mrs McEwen a term of occupancy of this kiosk of the length that she was asking for?—I had no problem in giving a six plus three plus three under a licence. No problem whatsoever.

Yes?-- And I believed firmly in my mind that there was no reason that we wouldn’t get the lease, the head lease, and the sublease through. There was no reason that it would not occur because it was all quite legal procedure. What I didn’t know was how long it might take, and I never, ever intimated how long it would take because I didn’t know, and I wouldn’t be silly enough to make a statement.

Even if the head lease didn’t issue for sometime, what was your belief about your ability to give her the term that she was asking for under the form of agreement that you’d had in the past?-- Under the licence?

Yes?-- I – there was no problem in me doing that. I could give her whatever I wanted.

All right?-- Or whatever she wanted, or whatever we agreed upon.”

  1. I prefer Mrs McEwen’s evidence that the expressed attitude of Mr Stamford was that it could be attended to “forthwith” that he would “get his people onto it … straight away”. In evidence-in-chief he said that after a phone call from Mr Baker (a solicitor with BME) he noted in his diary of 14/2/00:

“Body Corp in not too distant future will have a head lease to Larvik and Larvik will sub-lease to the tenant.”

If that was his legal advice in mid February, it is quite believable that 2 months later he would have given Mrs McEwen to understand that there would be little delay in producing her required lease.

  1. Thus, while neither the first representation nor the second representation set a date for the availability of the lease/sub-lease Mr Stamford represented that there would be no notable delay. In my opinion Mrs McEwen could reasonably accept the representations as giving an expectation that the lease would be executed within “a matter of a few months” or alternatively within a short time after the purchase of the Barber business.
  1. Then came the letter of 15 May 2000 from BME, cited in para [16]. It did not expressly state when the sub-lease would be ready for execution but it suggested a commencement date for the sub-lease of 18 May 2000 and suggested, pending the execution of the “final lease documentation”, that the Deed of Agreement be signed to permit ACN to take possession of the kiosk on 18 May. Implicit in that is a suggestion that the lease would be ready for execution very close to 18 May. Again I am of the opinion that Mrs McEwen could reasonably accept that as a further representation (the third) in the same terms as those I have set out in para [57].
  1. Thus the first, second and third representations could reasonably bear the meanings attributed to them in the statement of claim. In my opinion that was the meaning they would in reality carry to a reasonable audience. And I find that ACN, through Mrs McEwen, accepted them as bearing that meaning.

Time needed to register leases – expert evidence

  1. I was referred by counsel for the defendants to a useful statement of what constitutes expert evidence by Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 743-5:

“In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of “specialised knowledge”; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be “wholly or substantially based on the witness’s expert knowledge”; so far as the opinion is based on facts “observed” by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on “assumed” or “accepted” facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is “wholly or substantially based”, applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ’s characterisation of the evidence in HG v R (at 428 [41]) on “a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise.”

  1. Actual expert evidence was placed before me by Mr Derrick, a partner in Deacons, Solicitors, in the form of a report, exhibit 22 and in oral evidence. His practice and experience in property law matters of the type under review here are extensive. The facts on which he based his opinion were the correspondence and other communications between the parties (which was tendered) and documentation which had been prepared by interested parties.
  1. To that material he applied his practical experience. He set out the steps necessary to be taken to achieve the necessary registration in the Department of Natural Resources (“DNR”) of the head lease (and consequently the less difficult sub-lease). He set out the periods of time which he considered would be taken by reasonably practical experienced lawyers to take the component steps. At T138-140 he explained the way in which a solicitor, of reasonable practical skill would attend to different essential steps simultaneously rather than consecutively and ensure that the process is kept rolling along. These are things of which I have no knowledge and which I could not discover by legal research and therefore facts on which I could not rule without expert evidence.
  1. Counsel for the defence accepted that the matters to which I have just referred are the subject of expert evidence. They did, however, quite properly object to his giving evidence which swore to the issues or otherwise dealt with matters not properly of expertise.
  1. While it is not a matter of expert evidence, Mr Derrick in chapter 4 of his report helpfully collected and listed what had already been achieved by May 2000 towards the execution of the head lease. It is based on the undisputed documentation. Then in chapter 5 he summarised what remained to be done after 17 May 2000 to bring about the preparation, execution, lodgement and registration by the DNR of the head lease and consequently the relatively very simple settling of terms of the sub-lease, its execution and lodgement for registration. I do not understand this to be contentious.
  1. Nor is there any particular contention about Mr Derrick’s opinion that the necessary steps leading to registration should conservatively have been achieved within 6-10 months of the sealing by the Council of the plan SP111607 which delineated the area of the kiosk. BME received advice of that sealing on 20 June 2000, so Mr Derrick’s opinion allowed up to the end of April 2001. Mr Clark, it should be noted, accepted a period of 6 months for that so his conclusion date for those steps was the end of December 2000, much earlier than Mr Derrick’s opinion. The details of Mr Derrick’s time frame are set out in chapter 6 of exhibit 22. I prefer the evidence of Mr Derrick on the point.
  1. Chapter 7 of exhibit 22 which contains Mr Derrick’s assessment of whether Larvik took reasonable steps to achieve finalisation of the lease and sub-lease swears to the issue. I have not relied on that chapter. However, as I have said, I do pay attention to his written and oral evidence of the value, where possible, of attending to different necessary steps at the same time, rather than consecutively.
  1. In the upshot I accept Mr Derrick’s evidence of the date on which the head lease and sub-lease could have been achieved by reasonably practised and practical solicitors. His registration date of the end of April 2001 is some 14 months before the date alleged in the statement of claim for that event (June 2002) by the exercise of best endeavours. It is 29 months before ACN terminated the Deed of Agreement in September 2003. It is 39 months before the registration of the head lease actually occurred in July 2004.
  1. That still leaves open the possibility of the occurrence of unusual events which extended the times estimated by Mr Derrick, and this I took to be relied on in the submissions of counsel for the defence. However one would have to say immediately that the three time over-runs I have referred to seem to indicate an extraordinary delay. Indeed it is very tempting to say that, even if nothing had been done before August 2000 which would have provided a start, not being able within about 4 years to register a lease (the parties concerned, while exhibiting some differences of opinion, not displaying any irrationality or hostile intransigence) is in itself persuasive evidence of inertia on the part of BME. Taking 4 years to do it suggests periods of hibernation. I will now turn to a discussion of what Mr Clark actually did.

Activity of BME to register leases

  1. The critical period is from the date of the Deed of Agreement (18/8/00) to the date alleged in the statement of claim as the date by which the sub-lease should have been ready for execution (June 2002). It is also useful to look at what had been achieved before 18/8/00 to create the necessary head lease to Larvik. It may show a pattern of activity or inactivity. It is accepted in the submissions for the defendants that the period is relevant and quite a lot of the evidence related to it.
  1. As I have said it was originally Mr Egan of BME who advised Larvik to proceed to obtain a head lease of the kiosk area. Documentation within exhibit 23, vol 2 demonstrates that Mr Egan acted properly and efficiently. He:

(a)within the space of a few days (10/2/99-13/2/99) discussed with Mr Brinkley (the solicitor for the body corporate) the effect of the legislative changes;

(b)within a few weeks he had obtained from Clayton Utz, solicitors, expert advice on the effect of the legislative changes;

(c)between 8/4/99 and 27/5/99 he had obtained from Mr Brinkley a draft head lease for the kiosk area and obtained instructions from Larvik on its terms;

(d)was aware that on 4 August 1999 Mr Brinkley submitted the draft lease to the Noosa Shire Council for its consent and on 20 December 1999 followed that up with further documents including a letter of consent by Larvik.

  1. Thereafter the matter, so far as Larvik was concerned, seems to have gone into limbo until it was re-agitated after the agreement in May 2000 to give a sub-lease to ACN. It was taken up by Mr Clark of BME, Mr Egan having left the firm at the end of 1999. Mr Clark took over the carriage of the matter on 7 March 2000. Some work on the matter was also briefly performed by another solicitor, Mr Baker.
  1. I cannot understand how, when BME became actively involved in the Larvik/ACN documentation for the occupation of the kiosk and the question of a sub-lease (and therefore a head lease) arose, Mr Stamford did not tell Mr Clark that he had given instructions to Mr Egan about a head lease in 1999. One possibility is that Mr Stamford, being of the opinion that occupation by ACN under a licence was perfectly satisfactory, did not think there was any real urgency about the lease.
  1. When a solicitor in a firm which has been acting for a client takes over the affairs of that client from a former solicitor it must surely be expected that the new solicitor will make a point of becoming familiar with the client’s current matters. So Mr Clark, when he wrote his first letter in this matter (on 7 March 2000) about plan SP111607, ought to have found out why that plan was of interest. Indeed his letter actually referred to a Brinkley fax of 17 February 2000 and that fax expressly related that plan to “the draft CMS and leases which were lodged with the Council on August 4, 1999”. That should have led Mr Clark to go back to August 1999. That would have required him to get hold of Mr Egan’s file, which had been archived. But it was not suggested that that would have caused any particular difficulty. A search of that file would have revealed the history of the matter. It may have contained a copy of the draft lease which had gone to the Council. If it did not, he should have got one. He would have been able, surely, to get one from Mr Brinkley, or the Council, or perhaps Mr Stamford. He then should have approached Mr Stamford to see if Larvik’s instructions on the terms of the lease remained unchanged, or whether the draft ought to be amended.
  1. So, by the end of March 2000, Mr Clark should have been fully au fait with the current attitude to the draft lease of the interested parties (the Council, the body corporate and Larvik). If those attitudes had changed he could forthwith have set about negotiating a new draft. There would thus have been a good chance that the terms of the head-lease would have been agreed by 17 May 2000 (when ACN and Larvik agreed on the preparation of a sub-lease by exchange of letters) or by 18 August 2000 (when the Deed of Agreement, which contemplated the urgent preparation of the head lease and the sub-lease, was executed). At the very least the parties would have been very much closer to having those leases ready to execute than in fact they were. Instead, despite the correspondence referring to a draft lease, or to SP111607 which was connected with that document, Mr Clark did nothing to get a copy of it until 16 January 2001. Indeed he said in re-examination that he did not even know until 2 November 2000 that a draft lease had been prepared.
  1. Regrettably, Mr Clark’s conduct in relation to the head lease (and the sub-lease) did not move speedily, even after he became aware that ACN required a lease as soon as possible which he obviously did at least by 18 August 2000, (indeed by 15 May 2000 when BME wrote to ACN’s solicitor). The only steps taken by him towards finalisation of the necessary head-lease in 2000 were first, consideration of a checklist of matters to be attended to which were sent by Mr Brinkley to him on 9 September 2000 and second, to attend a meeting on 2 November 2000 (almost 2 months later) with Mr Brinkley, Mr Stamford, and Mr Hope (the retained surveyor). At that meeting it was agreed to hold off finalising the head lease until registration of plan SP11607 and the new Community Management Scheme. No acceptable explanation or justification for that extraordinary agreement was advanced before me.
  1. Ultimately a period of 2 years 3 months from January 2001 to April 2003 elapsed before agreement was reached on the terms of the head lease. Mr Clark accepted in cross-examination that during that time he never turned his mind to the best endeavours clause (indeed it never seems to have exercised his mind). That is despite the clear terms of the Deed of Agreement, the fact that he knew that the right of ACN to its sub-lease depended on his actions and also despite the fact that his client, Larvik in November 2000 had lost its special right of exclusive possession of the kiosk space and presumably would have wanted that right to be re-instated by registration of the head lease at an early date.
  1. On 20 January 2001 Mr Brinkley forwarded to BME a further draft lease. On 15 February 2001 Mr Clark responded raising 20 points, one of which, No 14, related to the possible need to re-instate the kiosk in the future. All other points were quickly resolved but clause 14 remained in contention and was debated by the solicitors in a desultory fashion. Correspondence was exchanged but nothing indicating urgency occurred until 30 July 2002 when BME suggested to Mr Brinkley that an independent solicitor be retained to resolve clause 14. Then on 21 August 2002 BME wrote to Mr Brinkley advising, it seems for the first time, that there was a reason for urgency, namely the interests of ACN. Ultimately, on 23 September 2002 Mr Brinkley handed over his file to new solicitors, Cartwrights Tebbett and Oswald and the parties agreed to accept Mr Cartwright’s decision on the point. That was 19 months after the dispute arose in February 2001. Mr Cartwright’s decision was made in November 2002.
  1. Parties can, and do, disagree on the terms of a contract under negotiation. But in such a case when agreement cannot be reached by negotiation, it would be reasonable to go to some form of dispute resolution process. The solicitors could have considered using the arbitration procedure laid down in BCCMA (a point of some debate before me which I do not propose to decide). However when one point only is in issue that could probably be more conveniently done by referral to an umpire, as it finally was. If there were reasons for urgency one would expect that to be attended to urgently. But here it did not occur for 19 months. Given that Larvik had agreed to a best endeavours clause it is truly remarkable that Mr Clark did not seek promptly to resolve the dispute. He conceded in evidence that he did not turn his mind to the possibility of dispute resolution, until presumably 30 July 2002 when he wrote to Mr Brinkley about it.
  1. Despite the resolution of point 14 in November 2002 Mr Clark did not draft the sub-lease until March 2003 (4 months later). The head lease was not finally agreed until April 2003, a final delay of 3 weeks occurring because of a minor amendment put forward by Mr Clark which Mr Cartwright rejected, justifiably in my opinion. At this time, as Mr Clark was aware, ACN’s contracts to sell the kiosk business were falling over. The lease was finally lodged for registration on 20 February 2004. After further delay related to plan SP1110607 registration of the leases in the DNR finally occurred on 23 July 2004.
  1. Without here setting out at length the detailed evidence on the time taken for each step up to the ultimate lodgement of the head lease it cannot be denied that a reading of that evidence reveals a very leisurely pace during Mr Clark’s stewardship. Quite apart from large gaps in the progress there were very many smaller delays. Reference to the chronology prepared by the defendants’ solicitors (which I have accepted as exhibit 34) and the plaintiff’s chronology, exhibit 4, shows many delays of a week to a few weeks. A solicitor working on best endeavours may be excused one or two such delays, but the presence of many argues against the exercise of those endeavours. Where the delays were by people other than Mr Clark, there is little, if any, evidence of attempts to hurry those people up.
  1. What is required in order to amount to “best endeavours”? I think it is sufficient to refer to a passage in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, where Gibbs CJ said:

“The meaning of terms of this kind has been considered in a number of cases, but it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. On the one hand, an express promise by an agent to use his best endeavours to obtain orders for another and to influence business on his behalf necessarily includes an obligation not to hinder or prevent the fulfilment of its purpose: Shepherd v Felt and Textiles Australia Ltd (1931) 45 CLR 359 at 378. On the other hand, an obligation to use ‘best endeavours’ does not require the person who undertakes the obligation to go beyond the bounds of reason; he is required to do all he reasonably can in the circumstances to achieve the contractual object, but no more: Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451 at 452; Terrell v Mabie Todd & Co Ltd (1952) RPC 234 at 237. (footnote omitted)

  1. The context here would in my view be provided not just by the words of the Deed of Agreement but the background matrix of facts. In particular, as early as 1997 BME had advised, and been instructed to bring about, a lease/sub-lease arrangement. Of course Mr Stamford knew that and Mr Clark should have been personally aware of it. All of them knew that very soon Larvik would lose its by-law conferred exclusive use right over the kiosk area and until the lease was in place would have no clear and easily enforceable right to grant any form of occupancy of the kiosk area to ACN. Indeed such a right was, to say the least, problematical and if challenged would probably have depended on arguments based on equity or estoppel. So best endeavours was a vital clause for both ACN and Larvik.
  1. The argument for the defence included the submission that Mr Clark’s efforts were materially frustrated by opposition or lack of co-operation or delay on the part of others. The others are of course Mr Brinkley, the Body Corporate, the Council and perhaps the surveyor. On the evidence I cannot really assign any blame to them. But I can safely reach some conclusions about Mr Clark’s attention to the matter. First, there were many periods when he apparently did nothing, some amounting to months, others weeks. Second, I see no evidence that he tried to impart a sense of urgency to the people with whom he was dealing until 21 August 2002 when he told Mr Brinkley. I would expect that Mr Brinkley would have been sympathetic to Larvik’s contractual need to hurry things along. At least I have no evidence that he would not have been sympathetic. I see no evidence that the Council was advised of the urgency of the matter. Whether the Council would have been co-operative I cannot say for certain (long experience in the Planning and Environment jurisdiction has taught me that Councils are usually co-operative) but the point is that this Council’s co-operation was not sought.
  1. I am satisfied that BME did not “use its best endeavours to have this lease finalised as soon as possible”. I would make that finding on the evidence of Mr Derrick alone; alternatively I would make that finding on the evidence of the activity (or lack of activity) of BME.

Whose “best endeavours”?

  1. The Deed of Agreement speaks of Larvik using its best endeavours. I have found that Larvik’s solicitors, BME, did not use its best endeavours. Is BME’s conduct taken to be the conduct of Larvik? ACN obviously submits that it is. Larvik submits that it is not, that Larvik’s obligation under the Deed of Agreement was no more than an obligation to engage apparently competent solicitors (BME) that it did so and did not at any time have reason to believe that BME was not acting competently.
  1. There are authorities which lean either way. But the one authority which is directly in point and which I consider binds me is Egan v Geraghty (1994) QCA 008. In Egan the respondent, a named but not duly appointed executrix of a will had signed a contract to sell land owned by the estate. The necessary application for probate was expected to be contested so the contract was made subject to her obtaining the grant. A term of the contract was that she was to use her “best endeavours” to obtain the grant.
  1. The respondent put forward two arguments to support her claim that she had used her best endeavours. The first was that her endeavours were limited to all she could reasonably do in the circumstances. That submission was upheld by the court. The second was that she had satisfied that requirement by retaining apparently competent lawyers and was not responsible for delays or errors by them which caused the failure to obtain probate within the time allotted by the contract.
  1. As to the second argument, Fitzgerald P said (at p4 of his judgment):

“However, so far as the second part of the submission is concerned, the better view is that, as between the appellant and the respondent, she is responsible for the conduct of her lawyers.” (authority omitted) “She would have breached her obligation to use her best endeavours if those representing her failed to prosecute the probate action diligently.”

  1. Pincus JA, although he said it was not a question which was strictly necessary for him to decide ( he held that the respondent had personally failed to comply with her obligation) said that he was:

“respectfully inclined to agree with the view expressed by the President that the respondent was, under the contract, responsible for the conduct of her lawyers.” (and he referred to authority for that opinion)

and that persuades me to accept his opinion on the point as being more than obiter dicta.

  1. Williams J, after referring to the judgment of the President said:

“I would arrive at a similar conclusion, but in addition to the matters referred to in those reasons there are other facts which have affected my reasoning.”

and he also held that the respondent personally had failed to use her best endeavours. However the introductory remarks in the quotation above can only be taken as a statement that he would be prepared to base his conclusion on the same basis as the President’s judgment.

  1. On the authority of Egan I hold that Larvik did not use its best endeavours. However I would reach the same conclusion irrespective of Egan. Despite Mr Stamford’s evidence of his frequent contact with Mr Clark, Mr Clark’s evidence, which I accept on the point, is that at material times Mr Stamford was not “jumping up and down” to get the matter bought to finality. The evidence persuades me that no pressure was being exerted on BME by Mr Stamford. In fact it is impossible to find that Mr Stamford was exhibiting anything other than mild interest in the progress towards the obtaining of the head lease and sub lease. That is probably because, as I have said, he did not consider that ACN was in any way disadvantaged by the fact that it held a licence rather than a sub-lease. I find that that was his belief.
  1. That was an extraordinary belief for an experienced businessman to hold. He knew that ACN wanted a lease, not a licence, and he had caused Larvik to promise ACN a lease “as soon as possible”. Any reasonable contractor in his position would have been active to see that a contractual promise was being honoured. There is another quite extraordinary aspect of the matter. On 6 November 2000 Larvik lost its exclusive use right over the kiosk area. He must have known that that was going to happen well before that date. He must also have known that until Larvik obtained the head lease of the kiosk area, Larvik’s right to grant ACN any use at all of the kiosk was not an obvious one. As I have said that right was, to say the least, problematical and, if challenged would probably depend upon arguments based on such concepts as equity or estoppel. In those circumstances his laissez-faire approach was indicative of a complete lack of concern.
  1. Thus I find that irrespective of BME’s performance, Larvik itself did not use its best endeavours.

Breach of agreement - causation

  1. The defence has submitted that ACN has not shown on the balance of probabilities that even if Larvick or BME had behaved more actively the head lease would have been finalised by 2002. The submission is based on delays allegedly caused by Mr Brinkley.
  1. I cannot accept that submission. I have set out at some length my conclusions on the lack of urgency displayed by BME. I have indicated my surprise that registration had not occurred by June 2002 (the date which is relied on in the statement of claim, which is some 14 months after Mr Derrick’s estimate and some 18 months after Mr Clark’s own estimate). Each of those leaves a very comfortable period within which to overcome any intransigence shown by Mr Brinkley, which might have taken the form of a round table conference, the engagement of an umpire, other alternative dispute resolution or, if necessary, urgent curial proceedings. On balance I am satisfied that any disagreement on a point (which Larvik was not prepared to give way on) would not have prevented reasonably efficient solicitors using best endeavours from registering the lease by June 2002.
  1. In Egan, the President at p. 29 of his judgment, in considering the relevant authorities remarked that finding a reasonable time period to get something done involved “substantially a matter of impression” with which I respectfully agree. Pincus JA having referred to a lengthy delay, reached the “objective conclusion” that the action was not being pursued by best endeavours. Thus it is an exercise to which an answer cannot be given with the exactitude of a day, a week, even a month. But the periods under consideration here do not come anywhere remotely close to giving rise to that degree of exactitude.
  1. Fitzgerald P, at p 4 of his judgment in Egan examined authority and said (at pp 4-5):

“However, these cases do not authoritatively establish that it must be shown that the respondent’s breach was the sole cause of her failure to obtain probate by the agreed date. Rather, a “but for” test should be adopted. Would probate have been obtained by 1 June 1989 “but for” the respondent’s omission to use her best endeavours to do so; or in other words, if she had used her best endeavours, is it more probable than not that probate would have been obtained by that date.”

  1. Applying that, the registration of the leases would probably have been obtained by June 2002 but for the omission of BME and/or Larvik to use best endeavours. If they or either of them had used best endeavours it is more probable than not that the lease arrangements would have been in place by June 2002. The loss sustained because of the delay is therefore recoverable by ACN from Larvik, as to which, see post.

TPA claim – the evidence

  1. In my view the evidence of Mrs McEwan, which I accept, demonstrates this sequence of events. She wanted to set up a Cold Rock Ice Creamery in the Noosa area. She had on 4 February 2000 entered into the franchise agreement but was still casting about for a site. She decided that the kiosk area was the best place for the business. She was told by Larvik in February and April 2000 that she could have the kiosk area on a 6+3+3 lease. She decided to trade under the corporate name of ACN. Thereafter, her thoughts and actions were the thoughts and actions of ACN. On 3 May 2000 she contracted again to buy the Barber business at the kiosk and settled it on 17 May 2000. The kiosk opened for business on 11 June 2000.
  1. I have accepted that the first, second and third representations were made to Mrs McEwen and were reasonably understood by her to mean that the leases would be executed within a matter of a few months or alternatively within a short time after the purchase of the Barber business which occurred on 17 May 2000. I have accepted that she was promised a lease, rather than a licence. Did she rely on the representations? I have decided that a lease, rather than a licence was critical to her intentions; she was induced to enter into occupancy of the kiosk because of her belief that ACN would soon get a head-lease, then quickly give her a sub-lease, and because she quite understandably felt committed to the project.
  1. On or soon after 15 May 2000 she received a copy of the letter of that date and “was not happy” to see that, rather than a lease, she was to enter into a Deed of Agreement. She immediately had her solicitors reply on 17 May 2000 saying:

“We look forward to receiving the Deed of Agreement and regular advices concerning preparation of the sub-lease.”

  1. She said she (that is, ACN,) proceeded with the Deed of Agreement because she had no choice. She had gone so far into the venture, having spent some $140,000. In the context of the representations I have found, the progress she had made and the expense she had incurred toward setting up the ice creamery, that has the ring of truth and I accept what she said.
  1. It is not to the point that the Barber contract was for the assignment from them to ACN of the “existing lease” which was in fact a licence. She could only buy what the Barbers had to sell, their licence. The lease was to be a new creation which she expected soon to appear.
  1. I am satisfied that she signed the Deed of Agreement and entered into occupancy of the kiosk, induced by the representations about the imminent availability of a lease.

Misleading or deceptive conduct?

  1. The defence submits that the representations were not misleading or deceptive. Misleading or deceptive conduct generally consists of misrepresentations (Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546.) Were all three representations misrepresentations or putting it another way, were those representations likely to mislead or deceive? This is an objective question. See Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40-994 at p 50, 950. Conduct which induces or is likely to induce error is misleading or deceptive; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198.  Such an error can be the obvious one, such as an assumption that an express representation is credible; Taco Co of Australia Ltd v Taco Bell Pty Ltd (1982) 2 TPR 48.  Thus the conduct in breach of s 52 may be directed, as here, to an identified individual; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592.
  1. These representations were likely to induce error, the error being that the creation of a lease was so imminent as to be expected within, at most, a few months (say 3 or 4) or a short period of time following the completion of the Barber contract. That period would reasonably lead her to expect ACN’s lease, for execution by ACN, by mid August to mid September. In fact, as the evidence of Mr Derrick established the availability of the lease could not at best be expected until the end of April 2001, more than 11 months after the completion of the Barber contract.
  1. Thus there was a serious factual misrepresentation made by Mr Stamford, that is, by Larvik. It actually led Mrs McEwen (i.e. ACN) to sign the Deed of Agreement and enter into occupation of the kiosk. Would she have done so if she had been given the realistic estimate of time, 11 months? That is impossible to say (she never turned her mind to it) and in any event it is irrelevant. I am concerned with what was misrepresented, what expectation was roused by it, whether that induced the Deed of Agreement, not what might have been the case if a different representation had been made.
  1. Of course the representations were as to future conduct, what Larvik would do in the future to create the leases. Section 51A of the TPA says:-

51AInterpretation

(1)For the purpose of this Division where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2)For the purpose of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

(3)Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.”

  1. I can avoid the controversy about the interpretation of subsection (2) because, without putting any evidential onus on Larvik I am satisfied on the balance of probabilities that Larvik (Mr Stamford) had no reasonable grounds for making the representations.
  1. First, as I have found, Mr Stamford was indifferent to a lease as opposed to a licence. Second, as I have found, he did not personally urge, or even encourage, BME to act expeditiously. Third and very importantly, his evidence was that he did not actually know how long it would take to get the lease in place and he did not obtain any up to date estimate from BME at the time of the representations. He simply did not know how long the process would take. At T 202/30-50 he said:

“At the time that you had this conversation with her, what belief did you have about your ability to give Mrs McEwen a term of occupancy of this kiosk of the length that she was asking for?-- I had no problem in giving a six plus three plus three under a licence. No problem whatsoever.

Yes?-- And I believed firmly in my mind that there was no reason that we wouldn’t get the lease, the head lease, and the sublease through. There was no reason that it would not occur because it was all quite legal procedure. What I didn’t know was how long it might take, and I never, ever intimated how long it would take because I didn’t know, and I wouldn’t be silly enough to make a statement.

Even if the head lease didn’t issue for sometime, what was your belief about your ability to give her the term that she was asking for under the form of agreement that you’d had in the past?-- Under the licence?

Yes?-- I – there was no problem in me doing that. I could give her whatever I wanted.

All right?-- Or whatever she wanted, or whatever we agreed upon.”

This passage serves also as another indication of his lack of distinguishing a lease from a licence.

  1. At T 225/50-60:

“HIS HONOUR: Well, that is the point I’m making really, that in any sort of development of land, steps like that have to be taken. There are government concurrence agencies and there’s notification to the public, depending on the type of development that is being sought. But you would expect, even quite a complicated matter, to be done within a year, wouldn’t you?-- Well, your Honour, I would certainly have expected and hoped that it would have been done within a couple of years anyway, and it had already started in 1999. So, that would take it through to 2001.”

I observe that it does not seem that he knew what progress had been made in 1999 so how could he estimate “a couple of years” and “2001”?

  1. At T 226/20-50 he said:

“Yes. And that was – that makes a clear distinction between the lease and sublease on the one hand, and licence on the other against a background, as we’ve just agreed, of this process being in place if not for a year, at least for many months at that stage?-- Yes. But I still didn’t know – I still didn’t know how long it would take, and I never, ever told anybody how long it would take because I simply did not know.

No. But I’m asking you to agree that the note you made of your own expectation at that point was not too distant future?-- Well, that’s true. I’ve written that here, “Not too distant future”, but I suppose that’s open to interpretation “not too distant future”. What’s the not distant future in terms of a 200 year lease, head lease, not too distant future could be three years.

That’s certainly not what you meant when you made your note?-- Possibly not. I don’t know. It was just – it was just a reference to something that was in the process of happening at the time.

Yes?-- But I – the word “not too distant future” is open to broad interpretation because, as I say, it’s in context with a 200 year lease.

  1. At T 227-20-30 he said:

“And you were certainly able to say, in mid February 2000, that you could get your solicitors on to a lease because you’d made a note to yourself that the body corporate in the not too distant future will head lease to Larvik and Larvik will sublease to the tenant?-- Yes, because it was in train.

Yes?-- It was in the legal pipeline, but I’m just a layman. I’m not a legal expert so I didn’t know – I wouldn’t – I didn’t know how long it would take. I’m just – I had that letter from Tery again which said – and that letter was dated in 1999, I think it was September ‘99, which said the lease should come into fruition within six to nine months, or three to six months, I think he said.”

  1. I do not regard the final sentence of that as being a statement of his actual belief. It is far too vague. Rather, if he had held a genuine belief of 3 to 9 months as being needed based on what he was told by Mr Egan, a solicitor he obviously trusted, why did he not urge Mr Clark on when that period was heading towards expiry.
  1. Thus Larvik gets no protection under s 51A.

Mr Stamford’s TPA liability

  1. Section 75B of the TPA includes, in a contravention of Part V (which includes s 52), a person who “has aided, abetted, counselled or procured the contravention. Was Mr Stamford such a person in the events under review?
  1. It has not been submitted that he was not, nor could it be. He was the voice of Larvik in the negotiations with Mrs McEwen. He said the words amounting to the misrepresentations. It was his belief, if reasonable, which would have provided a defence.

Damages

  1. Did the conduct in breach of s 52 cause the damage? Causation is essentially a question of fact to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter: March v Stramare (1991) 171 CLR 506. There must be a relevant nexus between the conduct complained of and the loss or damage suffered. In Henjo Investments Pty Ltd v Collins Marrackville Pty Ltd (No 1) (1988) 39 FCR 546, Lockhart J said (at p 558 – 559):

“Recovery under s52 is founded by the applicant’s factual reliance upon the misleading or deceptive conduct of the respondent, although that conduct was not the only factor in the applicant’s decision … and also the applicant did not seek to verify the representations or did so inadequately and so failed to discover their falsity.”

  1. In Sykes v Reserve Bank of Australia (1998) 88 FCR 511, Heerey J said (at p 517):

“The present case is one alleging direct reliance by representees on statements by the representor. The Act does not in such circumstances erect any precondition that such reliance be “reasonable”. Any argument to the contrary would be inconsistent with the well established principle that contributory negligence is not available as a defence to a claim for damages based on a contravention of s 52.”

  1. It is inconceivable that ACN would have proceeded with arrangements that involved contemplated expenditure of $140,000.00 but for the assurances from Mr Stamford that a long term lease would in the near future be provided in respect of the kiosk.
  1. The inducements caused ACN to contract with Larvik and enter into occupation of the kiosk where it carried on the Cold Rock Ice Creamery, unsuccessfully as it turned out.
  1. ACN claims to have suffered loss under the Deed of Agreement based on outlays and expenses from July 2002, that is the date when it should have sold the kiosk business, up to the date when it finally quit the site.
  1. The quantum is largely agreed as claimed but Larvik contests the item, $38,500, based on the difference between the sale price in July 2002 and the sale price when the business was ultimately sold.
  1. In April 2002 Mr and Mrs Leon, a Dutch couple, entered Australia on visas obtained because of their available capital and business prospects. They formed a company called Maximi Pty Ltd and they contracted to buy from ACN the then vacant kiosk site for $60,000 to sell snack food. They spoke to Mr Stamford and talked about a lease. He said there would be no problem about that, that his lawyers were preparing one. Maximi’s contract with ACN was conditional on obtaining a lease (special condition 2(a)). However when the Leons found there was no lease available or imminent they terminated the contract because, as Mr Leon said:

“If there’s no lease in place its close to impossible to sell a business.”

  1. After that termination Maximi made it known to ACN that if a lease became available by mid July 2002 it would sign a new contract to purchase the kiosk. When this did not happen they bought a business elsewhere on the Sunshine Coast which prospered and which then later sold at a good profit.
  1. Maximi was offered, but was not prepared to accept, a licence with a “best endeavours” clause for the obtaining of a lease, which is what ACN had been offered in May 2000. Mr Leon was adamant in his evidence that an arrangement like that was not good enough. He impressed me as being a very canny businessmen.
  1. The defence argument is that the availability of a lease was a matter of indifference to Mr Leon, that he was quite prepared to sign the contract to purchase the kiosk business knowing that ACN merely had a licence, content that it would quickly convert into a lease once Larvik had obtained its head lease. The submission is that the real reason for Maximi’s termination of the contract was a prohibition on selling soft drinks from the kiosk.
  1. I do not accept that submission. The first letter (exhibit 25) which Maximi’s solicitor (Matsinger) wrote to BME specifically referred to the lease condition of the contract. It also referred to two matters, one of which related to the sale of soft drinks. The response from BME (exhibit 26) expressed hope that the lease negotiations would be resolved “shortly”. Matsinger’s reply refers at its outset to the finalisation of the head lease and the consequent sub-lease. It also contains some negotiations about the licence but in the context that it was only an interim measure pending the lease. Then came the BME letter (exhibit 28) which gave ground a little on the soft drink issue but dealt again with the proposed term of the lease. Matsinger’s faxed response of 21 June 2002 (exhibit 29) again attempted to negotiate the soft drink issue. Then the same day Matsinger faxed this letter to ACN’s solicitor:

“Further to this afternoons telephone discussion I confirm my client’s instructions that pursuant to special condition 2(a) of the Contract our client formally terminates the agreement and requests the deposit be reimbursed to us.

Our client has asked us to advise you and your client that they are more than happy to enter into a new unconditional contract with your client on the same terms as were originally agreed once a head lease has been prepared which we have been advised should be in mid July. Please advise your client that our client has always and remains bona fide in its desire to acquire the business but the lease has obviously been the sticking point.”

  1. Contrary to the submissions of the defence, I do not regard that letter as saying anything but: “the contract has fallen over because Maximi cannot now get a lease; but should one materialise by mid May, we will resurrect the contract.” Nor do I see any reason to doubt Mr Leon’s evidence that the lease was critical to Maximi. He candidly said that the soft drink issue was important but “not more important than securing a lease, no” and expressed confidence that he could work around the soft drink issue. Why would Maximi advise a willingness to sign a new contract if a lease became available without mention of the right to sell soft drink if that latter term were the real issue?
  1. I find that Maximi would have completed the contract to purchase but for the lack of a lease. The loss thus suffered is recoverable from Larvik and Mr Stamford under the breach of contract claim.

Quantum of damages

  1. From what I was told at the hearing I understood that the matter of damages was agreed other than a matter of $21,500 which had to be added into one or the other of the claims (contract or TPA). Now the written submissions of the defence raise the question of duplication in certain claimed sums. More importantly, there is a submission that ACN (being successful on both claims) must elect which of them is to form the judgment. ACN has submitted, and I agree, that the parties should have an opportunity to read these reasons before these matters are finally agreed.
  1. I propose therefore to deliver these reasons and then to adjourn for further argument on damages.
Close

Editorial Notes

  • Published Case Name:

    ACN 070 037 599 Pty Ltd & McEwen v Larvik Pty Ltd & Anor

  • Shortened Case Name:

    ACN 070 037 599 Pty Ltd v Larvik Pty Ltd

  • MNC:

    [2008] QSC 95

  • Court:

    QSC

  • Judge(s):

    Skoien AJ

  • Date:

    20 May 2008

Litigation History

Event Citation or File Date Notes
Primary Judgment [2008] QSC 95 20 May 2008 -
Appeal Determined (QCA) [2008] QCA 416 19 Dec 2008 -

Appeal Status

{solid} Appeal Determined (QCA)