Queensland Judgments
Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment

Young v Beukita Warrior Pty Ltd[2017] QCAT 31

Young v Beukita Warrior Pty Ltd[2017] QCAT 31

CITATION:

Young & Anor v Beukita Warrior Pty Ltd [2017] QCAT 31

PARTIES:

Donna Young

Mikayla Young

(Applicants)

v

Beukita Warrior Pty Ltd

(Respondent)

APPLICATION NUMBER:

RSL049-15

MATTER TYPE:

Retail shop leases matters

HEARING DATE:

17 and 18 November 2016

HEARD AT:

Cairns

DECISION OF:

Member Deane, Presiding Member

Member McBryde

Member Thorpe

DELIVERED ON:

30 January 2017

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. The Notice of Dispute is dismissed.

CATCHWORDS:

LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OTHER MATTERS – Retail shop lease dispute – whether assignee entitled to compensation for false or misleading statement or representation in a disclosure statement by assignor

Retail Shop Leases Act 1994 (Qld), s 21, s 22, s 22B, s 22C, s 43A, s 44, Schedule

Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82

APPEARANCES:

 

APPLICANTS:

Donna Young

Mikayla Young

RESPONDENT:

Beukita Warrior Pty Ltd

REPRESENTATIVES:

 

APPLICANTS:

represented by Donna Young

RESPONDENT:

represented by Melissa Pyne, director

REASONS FOR DECISION

  1. [1]
    Donna and Mikayla Young purchased a hairdressing salon business in Cairns from Beukita Warrior in November 2014.  Ms Donna Young has been a qualified hairdresser for many years.  Prior to purchasing the business, she has worked in salons at various times but not continuously and had conducted her own mobile hairdressing business.  Miss Mikayla Young, her daughter, has beauty therapy qualifications.  The Youngs planned to supplement the hairdressing business by extending the beauty services offered.  Neither of the Youngs have previously owned a business of the nature and size of the business purchased.
  2. [2]
    They took an assignment of a retail shop lease for the premises in which the business operated at the Raintrees Shopping Centre.  The assignment took place on 27 November 2014.  The lease was to expire on 31 August 2016.  Prior to and since the sale, Beukita Warrior operated another salon at Yorkey’s Knob, which is approximately 20 km from the Raintrees salon. The Yorkey’s Knob salon had been operating for approximately 16 months prior to the sale.[1]  Both salons traded under the same business name.  At all relevant times, the Youngs were aware of the existence of the other salon. 
  3. [3]
    After the sale and assignment, Ms Donna Young worked in the salon full time.  Miss Young remained in other employment while working in the salon on Thursday evenings and weekends.  They planned that in time, as the business grew, she would spend more time working in the salon.
  4. [4]
    Ms Pyne is the director of Beukita Warrior.  She is not a hairdresser. Her evidence was, and we accept, that her role is ‘business support’ and that she does not have much direct contact with the clients.  Her life partner, Mr Kaleas, is a hairdresser and worked in the salons on a day to day basis.  He worked full time at the Raintrees salon until the Yorkey’s Knob salon commenced operation.  For a period of time prior to the sale, he worked one day per week at Raintrees on a Thursday, which is an extended trading hours day and worked at the Yorkey’s Knob salon for the balance of the week.
  1. [5]
    The Youngs’ business failed a few months after the sale and assignment.  The lessor re-entered the premises and forfeited the lease on 2 April 2015 for failure to pay rent due on 1 March 2015 under the lease. 
  2. [6]
    The Youngs commenced proceedings against the lessor and Beukita Warrior by filing a Notice of Dispute in the Tribunal on 26 May 2015 seeking to be released from the lease within 6 months of taking the assignment of the lease due to a defective disclosure statement and seeking compensation. 
  3. [7]
    By direction dated 25 February 2016, the lessor was removed as a respondent.
  4. [8]
    At the commencement of the final oral hearing, even though the lessor was no longer a party, the Youngs sought an order that they are released from obligations under the lease to the lessor by virtue of section 22 of the Retail Shop Leases Act 1994 (Qld) (the Act). The Youngs were unable to assist the Tribunal as to how we were in a position to make an order that adversely affected the rights of the lessor when the lessor was no longer a party.
  5. [9]
    They contend that if the disclosure statement is ‘defective[2] because it is false or misleading that they have a right to terminate the lease within 6 months after they entered into the lease. 
  6. [10]
    Beukita Warrior contends that the Youngs did not give notice to the lessor or it within 6 months and that commencing these proceedings is not ‘notice’ for the purposes of the Act.
  7. [11]
    The final oral hearing focussed on Beukita Warrior’s disclosure statement. Even if Beukita Warrior’s disclosure statement was ‘defective’, we are not satisfied that any right to terminate arises in these circumstances.  It is, therefore, not necessary to decide whether commencing the proceedings constitutes sufficient notice. 
  8. [12]
    Section 22(3) of the Act provides for a right to terminate if the disclosure statement given by the lessor under section 22(1) is defective.[3]  The Youngs rely upon Beukita Warrior’s disclosure statement being ‘defective’ not the lessor’s disclosure statement. 
  9. [13]
    In any event, section 22 does not apply to an assignment under a retail shop lease.[4]  Section 22C of the Act specifically deals with the lessor’s and a prospective assignee’s disclosure obligations.  It does not provide for a similar right to terminate the lease where a disclosure statement is ‘defective’. 

Is compensation payable by Beukita Warrior?

  1. [14]
    The Youngs seek reasonable compensation under section 43A of the Act for loss and damage suffered because of a false or misleading statement or representation in the disclosure statement given by Beukita Warrior under section 22B(1) of the Act. 
  2. [15]
    The Act provides that if the parties cannot agree on the amount of compensation payable the amount is to be decided by way of dispute resolution.[5]  ‘Dispute resolution process’ is defined to include a hearing by the Tribunal of a retail tenancy dispute.[6]
  3. [16]
    An assignor is required to give a prospective assignee a disclosure statement before asking the lessor to consent to the assignment.[7]
  4. [17]
    The Youngs claim $51,691 for various expenses incurred as a consequence of entering into the contract to purchase the business and taking an assignment of the lease.[8]  The Youngs produced a number of documents to assist to substantiate amounts claimed.
  5. [18]
    They also sought relief from their obligations to pay the amounts claimed by the lessor totalling $57,349.20.[9]  In the Youngs’ statement of 20 March 2016, they ask the Tribunal to order Ms Pyne to pay certain amounts claimed by the lessor.[10]
  6. [19]
    In Beukita Warrior’s application for miscellaneous matters filed 13 July 2016 seeking to have the Notice of Dispute dismissed, it claimed that a claim for compensation under section 43A of the Act is dependent upon the Youngs giving written notice to the lessor within 6 months after entering into the lease.  The issue of whether giving notice was relevant to the section 43A claim was not decided and left for determination at the final oral hearing because the submissions were not clear.  Beukita Warrior did not elaborate on the point when asked if it wished to do so at the final oral hearing. 
  7. [20]
    We find that a claim for compensation under section 43A of the Act is not dependent upon the giving of notice under section 22 of the Act.  Section 43A of the Act makes no reference to section 22 of the Act.  It refers only to sections 22A, 22B and 22C of the Act.
  8. [21]
    The Notice of Dispute and other documents filed by the Youngs appeared to include claims against Beukita Warrior under the business sale contract.  At the final oral hearing, the Youngs only sought orders under section 43A of the Act.[11]  We do not make any findings in respect of any other possible claims.
  9. [22]
    The Youngs are the applicants in these proceedings and bear the onus of establishing their entitlement to compensation on the balance of probabilities.  They are required to establish that:
    1. a)
      the disclosure statement contained a false or misleading statement or representation; and
    2. b)
      the loss claimed was suffered because of the false or misleading statement or representation.
  10. [23]
    Other than pointing to the words of the Act, the Youngs did not refer the Tribunal to any legal authority to assist to support their claims.
  11. [24]
    The Act does not define what constitutes a false or misleading statement or representation.  We find that it is necessary to establish that the disclosure statement, as distinct from any other oral or written statement made by or on behalf of Beukita Warrior, which may have given rise to a cause of action under the business sale contract or other legislation,[12] contained a statement or representation that:
    1. a)
      was in fact untrue; or
    2. b)
      would reasonably lead to a belief that a state of affairs existed when it did not exist. The latter involves an objective rather than a subjective test.
  12. [25]
    We accept that the statements and representations in the disclosure statement must be considered in light of the whole of the information provided by Beukita Warrior to the Youngs. Our finding is made having regard to the ordinary meaning of the terms in the Act and by drawing on the lines of authority in relation to the interpretation of the now repealed section 52 of the Trade Practices Act 1974 (Cth) (TPA).[13]
  13. [26]
    We acknowledge that there are differences between section 43A of the Act and section 52 of the TPA.  The TPA provision prohibited a corporation from engaging in conduct that was misleading or deceptive, or likely to mislead or deceive.  It did not provide that a person must not make a false or misleading statement or representation.  Section 52 was broader in its scope than section 43A because it dealt with conduct rather than just statements or representations.

What documents constituted the disclosure statement?

  1. [27]
    During the hearing, Beukita Warrior conceded that all of the following documents were intended by it to form the disclosure statement, although they were not actually attached to the document titled Assignor disclosure statement dated 24 November 2014, which required details of sales history and trading performance to be attached:[14]
    1. a)
      Adjusted Trading, Profit and Loss Statement for the Years ended 30 June 2011, 2012 and 2013;[15]
    2. b)
      Trading Summary from 1 July 2013 to 30 June 2014;[16]
    3. c)
      Trading Summary from 1 July 2014 to 23 August 2014.[17]
  2. [28]
    The Adjusted Trading, Profit and Loss Statement for the Years ended 30 June 2011, 2012 and 2013 contained both income and expense information.  The Trading Summaries relate to sales income.[18]  The evidence is, and we accept, that the Trading Summaries were supplied to the Youngs in September 2014 because Beukita Warrior had not prepared a profit and loss statement for 2014.  When a profit and loss statement was prepared it was on a combined basis as it operated two salons during the period since 1 July 2013. The Trading Summaries provided information only in relation the salon business to be sold.

What was the false or misleading statement or representation in the disclosure statement relied upon?

  1. [29]
    The Youngs did not clearly particularise the statement(s) or representation(s) in the disclosure statement relied upon or the respects in which they were said to be either false or misleading. Their case was formulated in a number of different ways and developed over time.
  2. [30]
    The Notice of Dispute states that the ‘business was misrepresented’ [19] and that the explanation for the drop in sales figures is that the clients were ‘coerced’ to follow Mr Kaleas to the other salon or they ‘were not given a true representation of the figures and clientele on the two Trading Summaries’.[20]
  3. [31]
    In response to a direction made on 10 May 2016 to identify the false or misleading statement or representation, the Youngs filed a document dated 30 May 2016.[21]  That document contends that Beukita Warrior had done either or both of the following:
    1. a)
      directly contacted the clients during and after the sale process with the purpose of encouraging them to leave the Raintrees salon and to go to the Yorkey’s Knob salon on a regular basis in breach of the business sale contract ‘and other representations that she gave to us of the sale of the Raintrees business to us’.
    2. b)
      ‘Melissa Pyne falsified the figures on the Trading Summaries for the periods 1st July 2013 to 30th June 2014 and 1st July 2014 to 23rd August 2014, and possibly the Profit and Loss statement for the years ended 30th June 2011, 2012 and 2013.’
  4. [32]
    The Youngs contend that the break down of employees’ sales and takings was deliberately omitted from the Trading Summaries, which form part of the disclosure statement and that this was a misleading representation.[22]
  5. [33]
    The Youngs’ evidence[23] was that ‘according to the figures and representations given to us by Melissa Pyne we bought a business that was capable of sustaining itself.  If the figures and representations had shown otherwise, Mikayla and myself would have (sic) course not bought the Raintrees Enigma Hair and Beauty salon business.’
  6. [34]
    During the final oral hearing the Youngs’ claims were articulated, as we understand them, as follows:
    1. a)
      the disclosure statement represented that the business was a fully operational business capable of supporting itself because the clientele base was sufficient to cover expenses and the business was performing well. In this regard, they point to the business having achieved an increase in sales in the 2014 financial year from that achieved in the 2013 financial year.[24] They also point to the sales figures in Exhibit 6 Attachment H as giving the impression that the salon’s sales figures had further improved increasing, on their calculation, from an average of $730 per business day in 2014 to an average of $885.96 per business day. We note that Attachment H showed trading figures for quite a short period i.e. 1 July 2014 to 23 August 2014, which the Youngs claim was 46 business days. Trading figures for such a limited period would not factor in seasonality of trading and would not in our view, objectively, represent that this was a representative or sustainable increase.
    2. b)
      the above representation was false or misleading because:
      1. i)
        the business they bought could not support itself because sales in the week of settlement and thereafter were in the order of $2,000 per week less than the average sales in the weeks prior to settlement.
      2. ii)
        Ms Pyne, the director of Beukita Warrior, prior to the sale formed an intention to take clients from the business to Beukita Warrior’s other salon such that Beukita Warrior knew that the business as represented by the trading figures provided was not the business being sold.
      3. iii)
        as a consequence of the above intention, that prior to or after settlement:
        1. (1)
          Ms Pyne or Mr Kaleas, ‘coerced’ the salon’s clients to follow Mr Kaleas to Beukita Warrior’s other salon.
        2. (2)
          Ms Pyne or Mr Kaleas, directly contacted the salon’s clients so that they could follow Mr Kaleas to Beukita Warrior’s other salon.
        3. (3)
          Ms Pyne authorised Mr Kaleas to contact the salon’s clients.
    3. c)
      the disclosure statement contained a false or misleading statement or representation because there were differences between the sales figures in the Trading Summaries and the emails setting out sales figures provided by Beukita Warrior to the lessor.[25]
    4. d)
      the Trading Summaries[26] were not a true representation of the figures so they were misleading. In particular, because they did not show the individual employees’ contribution to sales they did not show that the one day per week, which Mr Kaleas worked, provided the majority of the weekly takings.
  7. [35]
    Beukita Warrior denies that the disclosure statement contained a false or misleading statement or representation and contends that the business failed for numerous reasons for which it was not responsible including:
    1. a)
      the Youngs were inexperienced in running a business of the nature and size purchased;
    2. b)
      the Youngs had insufficient working capital to adequately fund the business;
    3. c)
      shortly before the sale another hair salon, Blondies, opened in the shopping centre.
  8. [36]
    It is not necessary for us to decide what factors lead to the failure of the business.  The factors outlined by Beukita Warrior are likely to have contributed to the failure.
  9. [37]
    As stated earlier in these reasons, the Youngs admitted that they had not previously owned and run a business of the nature and size purchased.  There is some evidence of the Youngs’ lack of experience in owning and running a retail business of the nature and size of the business purchased, in that their retail plan[27] anticipated that the annual turnover would increase to $339,038 in year 1, $374,267 in year 2 and $395,577 in year 3.  The forecast increase in the first year was more than a 50% increase on the sales achieved in 2014 according to the trading summary provided.  Whilst their full business plan was not in evidence before us, the retail plan appears to be very ambitious for business people who had not owned a retail business of this nature and size even if they had plans to extend the beauty services offered.
  10. [38]
    The Youngs conceded that they did not have much in the way of working capital and that more working capital would have been better.  The evidence was that:
    1. a)
      they borrowed from the bank $41,280, which was more than the total purchase price and the price of the stock ;
    2. b)
      they borrowed an additional $10,000 through vendor finance; and
    3. c)
      apart from the money they had allocated to set up the extended beauty services they had less than the equivalent of one month’s rent in reserve as a contingency to fund unexpected expenditure or offset any decrease in income.
  11. [39]
    Ms Donna Young acknowledged in her oral evidence that they did not have the ‘ideal amount of working capital but they had some’.
  12. [40]
    On the evidence before us, we are not satisfied, on the balance of probabilities, that the disclosure statement contained a false or misleading statement or representation as claimed. 

Did the disclosure statement contain a false or misleading statement or representation that the business was a fully operational business capable of supporting itself?

  1. [41]
    We are not satisfied that, objectively, the disclosure statement made such a representation. 
  2. [42]
    On balance, we consider that the disclosure statement taken as a whole, in light of all of the information provided by Beukita Warrior, represented that the business, as operated by Beukita Warrior, was capable of supporting itself during the periods to which the trading figures related. We are not satisfied that the disclosure statement made any representation as to the ongoing or future capacity of the business to be ‘self-sustaining’.
  3. [43]
    There was no express statement or representation as contended for by the Youngs in the disclosure statement.  The claimed representations are derived from the Youngs’ subjective interpretation of the information.  
  4. [44]
    Objectively, past performance is not a reliable indicator of future performance particularly when you are informed, that circumstances have and will change.
  5. [45]
    The Youngs primary focus was on a misrepresentation of the income generated by the business.  The Youngs contend that:
    1. a)
      the sales income for the week before they bought the business was $4,346 and that the sales figures for the five weeks leading up to the change of ownership were similar sums.
    2. b)
      the sales income for the week they took over the business on the Thursday was $2,622, being a difference of $1,724.
    3. c)
      the Thursday sales income for the week before they bought the business was $1,762 and that the sales income figures for Thursdays for the five weeks leading up to the change of ownership were similar sums.
    4. d)
      the Thursday sales income for the week they took over the business was $704, a difference of over $1,000.
    5. e)
      subsequent to taking over the business it did not generate the level of sales income as represented by the figures provided by Beukita Warrior.
  6. [46]
    Many of the facts are not in dispute.  The Youngs responded to an advertisement in the newspaper on 6 September 2014.  The advertised price was $38,000.[28]  The Youngs agreed to pay the price as advertised i.e. the purchase price under the business sale contract was $38,000.[29]  The Youngs point to their buying goodwill (or a clientele base), which was quantified by them at $8,000[30] having regard to the estimated value of $30,000 of the various plant and equipment, including the Shortcuts point of sale database, which was sold as part of the business.[31]  Ms Pyne’s evidence was that the database was valued at about $13,000 - $15,000. 
  7. [47]
    Ms Donna Young’s evidence was that:
    1. a)
      they wanted to purchase a business with a client base rather than set up their own salon because they had insufficient clients to support a ‘new’ business although she had some clients from her mobile hairdressing business.
    2. b)
      in or about July 2014 she had approached Ms Pyne about a ‘rent a chair’ opportunity at the Yorkey’s Knob salon and acknowledged that at that time she had an insufficient client base of her own to pay the amount being sought for that opportunity.
  8. [48]
    The Youngs paid an additional $2,000 for stock. There were some minor negotiated adjustments at settlement.[32] The business sale contract also provided that Beukita Warrior would pay the rent for the month of December in the amount of $3,058 and that it would not be adjusted at settlement in accordance with the standard conditions.
  9. [49]
    The business sale contract expressly provided that the registered business name under which Beukita Warrior had traded at Raintrees was not being transferred as part of the sale.   Beukita Warrior continued to trade under that name at Yorkey’s Knob. The Youngs traded under a different name.
  10. [50]
    The business sale contract expressly provided that 2 full time hairdressers would continue to work in the business and that one of them, Ms Bala, had recently commenced.[33]
  11. [51]
    The Youngs paid the purchase price through taking out loans from the bank and financiers and obtained a $10,000 interest free 12 month loan from Beukita Warrior, which was secured by a registrable personal property security over the salon’s plant and equipment. The evidence is that since settlement the Youngs paid $3,315 to Beukita Warrior in respect of this loan.
  12. [52]
    The documents before us do indicate that the sales made at the Raintrees salon significantly declined from November 2014 onward.  We accept that the figures show that there was a downturn in income before settlement of the sale.  The evidence is that Beukita Warrior’s sales for 1 – 26 November 2014 were only $9,447.95 excl GST.
  13. [53]
    The Youngs suggest that Beukita Warrior had commenced its communications with its clients to encourage them to attend the other salon.  There is no actual evidence of this.  There is some evidence that sales at the Yorkey’s Knob salon increased from about the time of the sale[34] but not by a significant amount and certainly not as much as sales reduced at Raintrees.
  14. [54]
    The Youngs have attempted to calculate gross sales at Yorkey’s Knob salon.  They have deducted from sales information in Beukita Warrior’s Business Activity Statements (BAS) the sales information in the documents provided to the lessor in respect of sales at Raintrees.  The Youngs point to an increase in gross sales at the Yorkey’s Knob salon from about November 2014 as evidence of clients being contacted and encouraged to change salons. 
  15. [55]
    The Youngs produced some graphs depicting the sales of the Raintrees salon and their derived estimated sales for Yorkey’s Knob salon.  The Youngs’ sales figures, from 27 November to 31 December 2014 were derived from their hand written ledger document.
  16. [56]
    Beukita Warrior contends that the sales figures contained in emails between Beukita Warrior and the lessor[35] are not sufficiently accurate to be able to accurately determine sales at Yorkey’s Knob because the figures were not audited or certified figures. 
  17. [57]
    Beukita Warrior points to the reduction in sales as being larger than that attributable to Mr Kaleas ceasing to work in the salon and ‘taking all his clients’.  Ms Pyne submits, and we accept, that the trading summaries show that if this had occurred then sales would have decreased by no more than approximately $990, including sale of products.
  18. [58]
    The trading summaries for Thursdays leading up to the sale[36] show Mr Kaleas’ contribution including product sales as:
    1. a)
      23 October 2014  $990.85
    2. b)
      30 October 2014  $840.91
    3. c)
      6 November 2014  $484.09
    4. d)
      13 November 2014  $432.64
    5. e)
      20 November 2014  $747.26
  19. [59]
    The reduction in sales experienced at the Raintrees salon was of a greater order of magnitude.
  20. [60]
    The Youngs did not obtain a report from an expert such as a forensic accountant.  The analysis performed by the Youngs does not seek to take into account seasonal or other factors that influence trading patterns.  The evidence is, and we accept, that:
    1. a)
      They wanted to purchase a business with a client base rather than set up their own salon because they had insufficient clients to support a ‘new’ business although she had some clients from her mobile hairdressing business.
    2. b)
      Trading summaries for the latter part of 2014 show that Mr Kaleas worked in the Raintrees salon on Thursdays, which is a day where the salon trades for extended hours compared to other days of the week so that it is not surprising that takings on such a day may be a significant contributor to weekly takings.
    3. c)
      Mr Kaleas worked in the Raintrees salon for more than one day per week at other times.[37]
  21. [61]
    We accept Ms Pyne’s evidence that it was not her intention to encourage many clients to follow Mr Kaleas to the other salon to ‘sabotage’ the business.
  22. [62]
    Beukita Warrior contends, and we accept, that it was not in its interests for the Youngs’ business to fail, in particular within the first 12 months while they were required to make the weekly repayment of $192.31 for the loan given that the plant and equipment securing the loan would be of greater value in the premises than if they were to be removed and sold.  There is some evidence that after the lessor took possession Beukita Warrior advertised the plant and equipment for sale at $5,000.[38] 
  23. [63]
    Ms Pyne’s evidence was that:
    1. a)
      she was able to use some of the equipment at the other salon;
    2. b)
      she otherwise recovered little due to the cost of removal and damage to items caused by removal e.g. the basins cracked when they were being removed and other items e.g. the stations and mirrors couldn’t be removed;
    3. c)
      she estimated that Beukita Warrior was still owed about $5,000 of the $10,000 loan;
    4. d)
      Beukita Warrior had not pursued the Youngs for the outstanding balance due to the cost of doing so and the slim likelihood of recovery given the apparent financial position of the Youngs.
  24. [64]
    There is limited evidence in relation to someone contacting the salon’s clients seeking they use Beukita Warrior’s Yorkey’s Knob salon or follow Mr Kaleas to the Yorkey’s Knob salon.  There is no evidence from any client that they were directly contacted and certainly no evidence that they were ‘coerced’.
  25. [65]
    There is evidence that it is not unusual for clients to follow hairdressers when they move salons.  There is also evidence that Ms Donna Young provided details of the Yorkey’s Knob salon when clients would not agree to use the services of another hairdresser at the Raintrees salon and that their employees were instructed to do the same.[39]
  26. [66]
    Ms Bala, a hairdresser at the Raintrees salon, who commenced employment on 6 November 2014 gave evidence that:
    1. a)
      in the relatively short period she worked at the salon prior to the sale of the business the salon was very busy;
    2. b)
      on 25 November 2014 she recalls that there were many appointments booked in for both Mr Kaleas and the other hairdresser, Ashlee, on Thursday 27 November 2014 and that their day was ‘totally booked’;
    3. c)
      she had a day off on Wednesday 26 November 2014 and when she returned to work on Thursday 27 November 2014 there were few appointments in the records for that day and Mr Kaleas’ column was empty;
    4. d)
      most of Mr Kaleas’ regular clients, which she determined from looking at their histories in the records, did not return after the salon was sold;
    5. e)
      she did not see Ms Pyne or Mr Kaleas contacting any clients nor see either of them taking client details from the computer records;
    6. f)
      in her experience, some clients will follow their hairdresser when they move salons;
    7. g)
      she observed that Blondies salon, which had opened in the centre in October, was moderately busy but did not see any former clients at Blondies.
  • [67]
    Ms Bala’s evidence must be considered in light of the fact that she had only worked at the salon for approximately 3 weeks when the salon was sold and may not have been familiar with the appearance of all former clients.
  • [68]
    Ms Pyne’s evidence is, and we accept, that:
  1. a)
    she did not contact or authorise anyone to contact any clients booked in for Thursday 27 November 2014;
  2. b)
    Mr Kaleas may have contacted his clients, as a matter of courtesy, as was his usual practice when he was to be absent from the salon or unable to keep an appointment to advise he would no longer work at the Raintrees salon.
  • [69]
    We find on the balance of probabilities that Mr Kaleas contacted the clients booked in with him to advise that he would not be at the salon on 27 November.  We are not satisfied that this means that the disclosure statement contained a false or misleading statement or representation.
  • [70]
    The Youngs’ contention appears to be that the disclosure statement was a representation as to a future matter i.e. that the business will continue to be able to support itself despite any changes in circumstances.  We are not satisfied that, objectively, Beukita Warrior’s disclosure statement made any such representation.
  • [71]
    As previously stated in these reasons, the statements and representations in the disclosure statement must be considered in light of the whole of the information provided by Beukita Warrior to the Youngs.   We are not satisfied that there was a representation, that the circumstances of the business would remain unchanged from those prevailing at the time of the trading figures. 
  • [72]
    To the contrary, the evidence is that Beukita Warrior disclosed that Mr Kaleas would not be continuing to work in the business and that Beukita Warrior ensured that the Youngs were aware that the lessor had permitted a third hairdressing salon, Blondie’s, to open in the shopping centre from early October 2014.  The evidence is that gross sales reduced from shortly after the time that Blondie’s opened in the centre. 
  • [73]
    Objectively, the introduction of a third salon in the centre, would mean increased competition for ‘walk-ins’ and existing clients.
  • [74]
    Further, the terms of the business sale contract did not prohibit Beukita Warrior from contacting clients to encourage them to follow Mr Kaleas to the other salon.  The only restriction, and therefore protection of goodwill, was that Beukita Warrior was not able to operate a salon within a five kilometre radius for a period of two years.[40] 
  • [75]
    Ms Pyne suggested that a further possible reason for low turnover in November 2014 was that a new employee, Ms Bala, had started.  The evidence is, and we accept, that Ms Bala had moved to Cairns shortly before she commenced employment in the salon.  In those circumstances, she is unlikely to have had a client base or following of her own.  The evidence is that there had been changes to the employees working in the business.  The trading summaries for the period 20 – 26 October 2014 and 27 October – 2 November 2014 indicate that two other employees, who were not remaining in the business contributed to sales during that period.

Did the disclosure statement contain a false or misleading statement or representation because there were differences between the sales figures in the trading summaries and the emails setting out sales figures provided by Beukita Warrior to the lessor?

  1. [76]
    We are not satisfied, on the balance of probabilities, that Beukita Warrior falsified these reports. There is no sufficient evidence before us upon which we can rely to find that the figures provided in the disclosure statement were not a fair representation of the income (and to the extent they were included expenses) for the periods to which they relate. 
  2. [77]
    The differences were set out in the Youngs’ statement dated 3 October 2016.[41]  In particular, the Youngs point to the overstatement of income in the Trading Summary[42] compared to the information in the documents provided to the lessor.[43]  The Trading Summary shows income about $11,700 (incl GST) more for the 12 months than the information provided to the lessor.  The differences are not very large when compared with the yearly sales of in the order of $190,000 - $220,000.
  3. [78]
    The Youngs point out that the sales figures for 2011, 2012 and 2013 in Exhibit 6 Attachment F are all less than the information in the documents provided to the lessor.  We note that Attachment F contains qualifications, including that the figures have been ‘adjusted’ and that the figures have not been ‘audited’.
  4. [79]
    The Youngs submit that the comparison between the sales figures in Exhibit 6 Attachment G for 2014 and those for 2013 as shown in Exhibit 6 Attachment F gives the impression that the sales figures greatly improved over that year whereas the information provided to the lessor indicates that there was a reduction in sales from 2013 to 2014 of $5,518.24.
  5. [80]
    Ms Pyne’s evidence was, and we accept, that:
    1. a)
      the trading summaries were ‘direct financial reports from the salon computer’ and that ‘the salon had several staff putting through client financial transactions which were recorded and checked on a daily basis’;[44]
    2. b)
      Beukita Warrior engaged a professional bookkeeper to prepare its BAS and that its profit and loss statements were prepared by a qualified accountant;
    3. c)
      the documents provided to the lessor in respect of sales at Raintrees do not contain ‘certified’ figures and that from time to time expenses were paid from income received but not put through the books so that the figures provided to the lessor might not be entirely accurate.
  6. [81]
    Whilst the trading figures show an increase in sales from financial year 2013 to 2014[45] they also show that sales had declined each year from 2011 until 2013.[46]  The evidence is that Beukita Warrior expended considerable sums with a business coach to improve the performance of both salons when it set up the Yorkey’s Knob salon.[47]  The sales figures in the disclosure statement are consistent with this evidence.
  7. [82]
    The sales figures provided to the lessor are not, by order of magnitude, so different to the figures disclosed in the disclosure statement to support a finding that on the balance of probabilities, the disclosure statement contained a false or misleading statement or representation.

Did the disclosure statement contain a false or misleading statement or representation because Beukita Warrior deliberately failed to provide Trading Summaries showing the individual employees’ contribution to sales?

  1. [83]
    We are not satisfied, on the balance of probabilities, that Beukita Warrior deliberately omitted to provide trading summaries showing each employee’s individual contributions to sales. 
  2. [84]
    The Youngs point to the trading summaries at Exhibit 6 Attachment N, which set out each employee’s contribution to the sales made during the relevant period.  They note that the trading summaries that formed part of the disclosure statement did not contain a similar break down of each employee’s contribution.
  3. [85]
    Ms Pyne gave evidence, which we accept, that:
    1. a)
      the computer programme was able to generate many different reports.
    2. b)
      when she generated the report she did not deliberately select a report that did not show the employee’s individual contributions to sales.
  4. [86]
    The Youngs did not provide any evidence that the computer programme was capable of generating a trading summary showing the employee’s individual contributions to sales for a year or several months.  The trading summaries in evidence before us with employee’s individual contributions to sales are for shorter periods e.g. for a day or a week.
  1. [87]
    During the course of this proceeding, the Youngs submitted that Ms Pyne ‘tampered’ with a phone bill, which was required to be produced.  Ms Pyne produced the originals of the phone bills at the final oral hearing.  We viewed those documents.  Whilst there are some differences we are not satisfied that, the phone bill in question was ‘tampered with’.

Footnotes

[1] Exhibit 51, page 1.

[2] Retail Shop Leases Act 1994 (the Act), s 22(8).

[3] The Act, s 22(2)(b).

[4] The Act, s 21(2).

[5] The Act, s 44(1).

[6] The Act, Schedule.

[7] The Act, s 22B(1).

[8] Exhibit 25 sets out various amounts claimed.  This document also refers to a claim against the lessor for compensation for ‘neglect’ in processing the tenancy application.  As the lessor is no longer a party, we do not make any findings in respect of such a claim.

[9] The lessor set out its loss, subject to mitigation, to 31 August 2016 in Annexure F to its Response filed 30 October 2015 as $49,191.37.  The total payable to the lessor including GST was $57,349.20 from which the lessor deducted the proceeds of the Youngs’ bank guarantee in the sum of $8,157.83.

[10] Exhibit 8 at page 7.

[11] Apart from the order under section 22 of the Act.

[12] The Youngs referred to a representation in the advertisement ‘Start making money today’, see Exhibit 6, attachment D.  They referred to statements in an email including that ‘the salons are now performing extremely well’, see Exhibit 6, attachment J. They also referred to an oral statement by Mr Kaleas that ‘only diehards would continue to travel the distance to Yorkey’s Knob to specifically have Spiro do their hair’, see Notice of Dispute, Part C 3.

[13] Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82.

[14] Exhibit 6, attachment E.

[15] Exhibit 6, attachment F.

[16] Exhibit 6, attachment G.

[17] Exhibit 6, attachment H.

[18] Exhibit 6, attachment G and H.

[19] Part C 3.

[20] Ibid.

[21] Exhibit 11.

[22] Exhibit 12 at page 3.

[23] Exhibit 25 at page 2.

[24] Exhibit 6, attachments F and G.

[25] Exhibit 14.

[26] Exhibit 6, attachments G and H.

[27] Exhibit 57.

[28] Exhibit 6, attachment D.

[29] Exhibit 6, attachment C.

[30] Exhibit 57.

[31] Exhibit 50, attachment A, Schedule A.

[32] Exhibit 6, attachment K and Exhibit 32.

[33] 6 November 2014.

[34] Exhibit 51, page 2 - 3; Exhibit 58, attachment B.

[35] Exhibit 14.

[36] Exhibit 6, attachment N.

[37] Exhibit 6, attachment Q.  See trading summaries for 21 – 27 October 2013; 18-24 November 2013; 25 November – 1 December 2013; 9 - 15 December 2013; 13 – 19 January 2014; 20 – 26 January 2014 (There may be others but they are illegible).

[38] Exhibit 6, attachment D.

[39] Exhibit 8 at page 6.

[40] Exhibit 53, annexure A, clause 12 and Exhibit 6, attachment C, item W.

[41] Exhibit 13 at page 3.

[42] Exhibit 6, attachment G.

[43] Exhibit 14.

[44] Exhibit 53, page 3.

[45] $191,509 in 2013; $219,861.10 in 2014.

[46] $218,398 in 2011; $213,471 in 2012.

[47] Exhibit 6, attachment J.

Close

Editorial Notes

  • Published Case Name:

    Donna Young and Mikayla Young v Beukita Warrior Pty Ltd

  • Shortened Case Name:

    Young v Beukita Warrior Pty Ltd

  • MNC:

    [2017] QCAT 31

  • Court:

    QCAT

  • Judge(s):

    Member Deane, Member McBryde, Member Thorpe

  • Date:

    30 Jan 2017

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.