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Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Trade Practices - Misleading and deceptive conduct - applicant induced to enter into agreement by misleading and deceptive conduct - recission of settlement agreement - use of similar fact evidence.Trade Practices Act 1974 s.52.
Trade Practices - Misleading or deceptive conduct - Applicants induced to enter into leasing agreement by misleading conduct - Shopping centre managers represented to tenants that they intended to provide adequate cleaning services, air-conditioning system, promotion of centre and suitable tenants for international food hall - Purported recission of agreement - Concurrent litigation - Whether representations were "misleading" within meaning of s. 52 - Trade Practices Act 1974 (Cth), s. 52. On 30th January, 1979, the applicants entered into a lease (the original agreement) with the respondent company and in October 1979 they took possession of two basement shops in the Centrepoint Mall shopping centre in Melbourne. On 27th November, 1979, the applicants leased a third shop in the basement which had been planned as an international food hall containing some twenty shops.
However, business did not prosper in the basement and during 1980 the applicants and other tenants accumulated large arrears of rent and made numerous complaints concerning alleged breaches of the original agreement to the various managers engaged by the respondent company.
The tenants' complaints mainly concerned the unsatisfactory air-conditioning system, the inadequate cleaning service and the large number of vacant shops in the basement. Following consequent litigation in the Supreme Court of Victoria and a conversation on 5th November, 1980 relating to the tenants' complaints, during which two managers of the respondent company gave certain assurances to one of the applicants, a preliminary document of agreement (the preliminary agreement) was executed on 17th November, 1980, by the parties. The preliminary agreement contained cl. (f) which provided: "Each side agrees to promote the interests of the centre in accordance with the lease with the other lessees and the public." Subsequently an agreement (the supplementary agreement) was entered into on 22nd December, 1980, whereby the parties released each other from all claims, costs and demands connected with the litigation and the terms of rental were adjusted.
On 20th July, 1981, the applicants purported to rescind the supplementary agreement, which they alleged that they had been induced to enter as a result of the misleading or deceptive conduct of the managers of the respondent company, contrary to s. 52 of the Trade Practices Act 1974, and the applicants sought relief accordingly.
Held: (1) The managers of the respondent company represented to the
applicants that it intended to use its best endeavours (a) to
find suitable
tenants to pay the best rent reasonably obtainable in the circumstances and
(b) to ensure a good tenant mix in the
basement in accordance with the concept
of a basement international food hall.
(2) The managers of the respondent company represented to the applicants
that it intended (a) to upgrade the cleaning services provided
by the
respondent in the basement to provide a reasonably adequate service for the
purposes of the use of the basement for trading
in as a food hall, and (b) to
make the air-conditioning system of the basement satisfactory for the basement
to be used as a food
hall, as soon as reasonably possible.
(3) The managers of the respondent company represented to the applicants
that it intended to promote the interests of the Centrepoint
Mall shopping
centre in association with the other tenants and to the advantage of members
of the public.
(4) At the relevant time of making such representations the managers of the
respondent company did not have the above-mentioned
intentions.
(5) The making of each of the above representations was conduct engaged in
by managers of the respondent company which was "misleading"
within the
meaning of s. 52 of the Trade Practices Act 1974.
(6) Each item of misleading conduct engaged in by the managers of the
respondent company was conduct which induced the applicants
to enter into the
supplementary agreement of 22nd December, 1980.
Mister Figgins Pty. Ltd. v. Centrepoint Freeholds Pty. Ltd. (1981) 36 ALR 23, referred to.
HEARING
Melbourne, 1981, October 9; 1982, March 9-11; May 7. 7:5:1982 C.L. Pannam Q.C. and C.J. Canavan, for the respondent company.
Cur. adv. vult.J.D. WHITEHEADSolicitors for the applicants: Aleck Sacks & Son.
Solicitors for the respondent company: Madden Butler Elder & Graham.
ORDER
1. That the respondent represented to the applicants that:(a) the respondent intended to use its best endeavours forthwith to find suitable tenants for the basement vacancies at Centrepoint Mall and to let such vacant shops to them at the best rent reasonably obtainable in the circumstances;
(b) that the respondent intended to use its best endeavours to ensure a good
tenant mix in the basement in accordance with the concept
of a basement
international food hall;
(c) that the respondent intended to upgrade the cleaning services provided by
the respondent in the basement to provide a service
reasonably adequate for
the purposes of the use of the basement for trading in as a food hall;
(d) that the respondent intended to make the air conditioning system of the
basement satisfactory for the basement for use as a food
hall as soon as
reasonably possible;
(e) that the respondent intended to promote the interests of Centrepoint Mall in association with the other tenants and to the advantage of members of the public;
2. At the relevant time the respondent did not have the intention described in paras. 1(a) - (e) above.
3. The making of each of the representations was conduct engaged in by the respondent and was misleading within the meaning of s.52 of the Trade Practices Act 1974;
4. That each item of misleading conduct referred to in para. 3 above was
conduct which induced the applicants to enter into the
agreement of 22
December 1980.
And the Court orders, that as to the other issues in this case the application is adjourned to a date to be fixed. Orders accordingly.
DECISION
On 30 January 1979 the applicants Ross Cohen and Francis Cohen entered into a lease with the respondent, Centrepoint Freeholds Pty. Ltd. in respect of two shops called B.O.4 and B.O.5 in the basement of a shopping centre being developed in the heart of Melbourne's Central shopping area in Bourke Street. The Centre was named Centrepoint Mall. It comprised multiple floors of
retail shops and a basement. It provided a walk through from
Bourke Street to
Little Collins Street. It opened in October 1979 and the applicants took
possession of shops B.O.4 and B.O.5. So
far as the basement was concerned the
original concept was that there should be a food hall providing some twenty
shops selling various
national varieties. On 28 November 1979 the applicants
acquired by assignment from another tenant the lease of a shop in the basement
known as B.20. They acquired this shop because the original tenant planned to
conduct business of the same nature as that carried
on by the applicants in
one of their shops.
Organization of the Respondent
The organization of the respondent in relation to the management of the Centre seems to have been as follows. A subsidiary company called Pacific Shopping Centres Pty. Ltd. was the managing company of the Centre. The directors of the respondent were Messrs Alter and Faiman. In substance they were the owners of the Centrepoint project. Pacific Shopping Centres Pty. Ltd. was a company associated with the interests of Mr. Alter. It employed a manager for the Centre who until August in 1981 was one Mr. Atkinson and, one Mr. Tallent as its Property Manager. In actual practice Mr. Tallent operated as an executive of the respondent with considerable authority. The two directors Messrs Alter and Faiman took detailed interest in the management of Centrepoint. All matters of significance had to be referred to them. Because Mr. Faiman was out of Australia for long periods Mr. Alter became dissatisfied. As a result one Mr. Targett was appointed to represent Mr. Faiman. Nevertheless it seems that decisions of significance would be made not by Mr. Alter and Mr. Targett but by Mr. Alter himself or by him and Mr. Faiman after they had been referred to Mr. Faiman whether he was in Australia or elsewhere.
On 12 October 1980 one Mr. Jablko was appointed leasing manager for
Centrepoint. His letter of appointment indicated that he was
leasing manager
for both Centrepoint and Forrest Hills, another project of the respondent. Mr.
Jablko's salary was $20,000 p.a. plus
car and commission. His appointment
specified that his first priorities were to arrange the leasing of vacant
areas at Centrepoint
and Forrest Hills. He was to work under the direction of
Mr. Tallent and to carry out liaison duties with existing tenants and onsite
management. His position was to be considered as a senior appointment
requiring full time attention.
Issues between the respondent and the applicants and other tenants
Excluding a Pancake Parlour which has remained occupied since 1979 there are 19 shops in the basement. At the beginning of 1980 all save two were let. Business in the basement did not prosper as had been hoped. By November 1980 there were eight shops vacant in the basement, by October 1981 two more shops had become empty and that was the position at the date of trial.
Early in 1980 it seems that the tenants were somewhat alarmed at the extent of their financial obligations particularly arising out of the provisions of the leases that they were to pay certain outgoings in addition to the specified rent. It is said that the proportion of outgoings payable by each tenant was unexpectedly high. The tenants were dissatisfied. They claimed that it had been represented to them by one Mr. Robertson, letting agent for the Centre, before they entered into their leases that the outgoings would be an amount constituting a much smaller proportion of the specified rent.
By the date of Mr. Jablko's appointment the applicants had accumulated large arrears of unpaid rent and business was not satisfactory and was deteriorating. Numerous complaints had been made by the applicants to Mr. Atkinson, to the effect that the air conditioning was unsatisfactory and did not provide a reasonable air supply or reasonable temperatures in the basement and that the basement was not kept clean. It was the landlord's obligation to provide air conditioning and also to keep all common areas clean. The respondent provided certain staff for cleaning operations.
There were by this time obvious gaps in the basement occupancy. These were a depressing influence in the basement. They constituted dark, dusty, empty spaces making the basement unattractive. They discouraged people from going into the basement and the absence of traders in them meant that they did not themselves generate traffic. In the latter part of 1980 there was much litigation and threatened litigation, by the tenants against the landlord. In addition the landlord had issued writs and County Court summonses against various tenants, including the applicants. In some cases it had obtained judgments against tenants, a number of which, it would seem, were at that stage largely unsatisfied.
In July 1980 the landlord took ejectment proceedings against the applicants. In August 1980 the applicants obtained an interim injunction of the Supreme Court of Victoria restraining the landlord from retaking possession of the shops. On 2 November 1980 the injunction was dissolved. Against this decision the applicants appealed to the Victorian Full Supreme Court. The appeal was dismissed with costs, on 19 December 1980.
In September 1980 the applicants had lodged the application in these proceedings in the Federal Court No. VG 113 of 1980. By the statement of claim it was alleged that they had entered into their leases with the respondent as a result of misleading and deceptive conduct on the part of the respondent, constituted by its brochures and also by an oral statement of Mr. Robertson.
On 22 December 1980 an agreement between the applicants and the respondent was entered into whereby the applicants and the respondent released each other from all claims, costs and demands made against each other in the litigation between them and agreed that the applicants should remain tenants of the three shops occupied by them on adjusted rental and they agreed upon other provisions concerning their relationship.
On 20 July 1981 the applicants purported to rescind the agreement of 22 December 1980 by letter stating:-
"We now claim on behalf of our clients, that your client at no time relevant
to the said Agreement, ever had the intention of performing
its obligations
pursuant to Clause 7 of the said Agreement and, further that your client's
actions and conduct were misleading by
entering into the said Agreement.
In consequence of the above, our clients hereby rescind the Supplementary Agreement."
The application in this Court No. 113 of 1980 being still on foot the respondent delivered a defence on 21 October 1981 raising the agreement of 22 December 1980 as a defence to the applicants' claim for relief. The applicants on 23 October 1981 filed a reply and cross-claim alleging that they were induced to enter into the agreement by misleading or deceptive conduct engaged in by the respondent contrary to s.52 of the Trade Practices Act 1974 and seeking relief accordingly.
In this situation both parties requested that the Court deal separately at this stage with the issues arising under the cross claim. This I proceeded to do. The case sought to be made by the applicants is stated in the cross claim in the following terms:-
"3. In order to induce the applicants to make and enter into the agreements
the respondent represented to the applicants and in consideration
of their so
doing warranted that -
(a) the respondent would take the steps necessary to lease the vacant shops at
the basement at the Centrepoint Mall to good tenants
so as to create an
international food centre in the basement as originally promised and
advertised by the respondent;
(b) the respondent would take the steps necessary to ensure that there would
be a good tenant mix of tenants in the basement at the
Centrepoint Mall
without any duplication of services offered by the tenants;
(c) one Jablko was an expert leasing manager and was specifically employed by
the respondent for the purposes of inter alia, achieving
the matters described
in sub-paragraphs (a) and (b) hereof;
(d) the cleaning staff at the Centrepoint Mall would work for such hours as
were necessary in the basement to ensure that a high standard
of hygiene and
cleanliness was maintained in the basement at the Centrepoint Mall;
(e) the airconditioning system in the basement would be rectified so that
effective airconditioning of the basement would occur without
delay;
(f) the respondent intended to and would use its best endeavours to promote
the interests of the Centrepoint Mall in association with
the other tenants
and to the advantage of members of the public;
(g) the respondent intended to and had the capacity and ability to achieve and carry into effect each of the representations described in sub-paragraphs (a), (b), (c), (d) and (e) hereof."
As the evidence emerged it appeared that the representations and warranties, if made as alleged, were made at a conversation held on 5 November 1980 between Mr. Cohen, Mr. Targett and Mr. Jablko. What occurred at the subsequent conversations on 10 and 17 November is relevant but the critical meeting was that of 5 November.
Mr. Cohen, Mr. Targett and Mr. Jablko all gave evidence. The issue depends on a finding as to what was said at the conversation, the context in which it was said, what the words said conveyed and were reasonably calculated to convey to Mr. Cohen and whether what was conveyed was misleading or deceptive, and if so, whether Mr. Cohen was induced by what was conveyed to him to enter into the agreement of 22 December 1980.
In relation to the assessment of the evidence of what took place on 5 November 1980 it is important to have in mind the circumstances in which the meeting of that date took place.
Business in the Centre was not at the level anticipated and after the first few months of operation fell away seriously. Tenants failed and left the Centre. Those remaining complained about a number of matters including inefficient airconditioning and failure of the landlord to keep the premises clean. A substantial number of tenants had ceased to pay their rent. Several had issued proceedings in the Federal Court claiming relief in respect of alleged misrepresentations of Mr. Robertson and there was litigation on foot instigated by the respondent to recover rent. In the latter part of 1980 the relationship between tenants and landlord was described as being a state of war. And it was a war in which the landlord's top management, including the directors, had maintained an inflexible attitude and remained inaccessible to the tenants. That inaccessibility was itself a cause of resentment. The poor performance of the air conditioning equipment, inadequate cleanliness and vacant shops had made trading difficult, particularly in the basement. It was of course known to all concerned that the situation which emerged in 1980 was very different from that envisaged by the landlord and the tenants when the leases were entered into and the Centre was opened. So far as the basement was concerned, the concept allegedly originally presented by the respondent to prospective tenants, namely, a food hall where all the shops would be occupied and offering foods of different national varieties, attractively presented, had not been achieved.
Mr. Cohen had spent many thousands of dollars setting up his three shops in the basement but had not had custom adequate to sustain him in meeting his obligations, increased as they were by the unexpectedly high charge for outgoings.
At the latter part of 1980 he had very large liabilities for arrears of rent
and in respect of obligations to contribute to the
Tenants' Association. He
was engaged in litigation with the landlord both in the Supreme Court and the
Federal Court. On 2 November
1980 the action in the Supreme Court was decided
against him. An order for costs of an unspecified but large amount stood
against
him and he was in danger of eviction. His only hope for relief was by
way of appeal in the Full Court of the Supreme Court of Victoria
or in his
Federal Court action. As to this latter he said his solicitors had advised him
that his case was "of some strength". It
was shortly before this that Mr.
Jablko made his presence known and informed Mr. Cohen that he had been
appointed leasing manager
for the Centre. He began to drop in for a chat and
take an interest in the tenants and their problems. He had quickly realised
that
his task of letting the vacant shops in the Centre was a particularly
difficult one while the atmosphere of hostility, recrimination
and the
remoteness of the directors continued.
The Respondent's Peace Campaign
As a result of a conversation with Mr. Yaghmoor, another tenant of the basement, Mr. Jablko took up with the directors the proposal that the respondent take the initiative in instituting peace negotiations. This proposal was accepted. In due course Mr. Targett was appointed to head the negotiations on behalf of the respondent. The objective was to change the whole atmosphere of the Centre, repair its bad reputation, achieve a situation in which tenants were paying their rent and improve the prospects of obtaining new tenants everywhere in the Centre. It was obviously important to the respondent that the negotiations should succeed. A lengthy process was contemplated. For what were called "obvious reasons" management chose Mr. Cohen as the first tenant to be approached.
When the respondent decided to institute a campaign of seeking to settle by negotiation all the various actions in the Federal Court and all the other Courts and all the threatened actions and disputes existing between some twenty tenants and itself it had made a distinct change of attitude. Theretofore the respondent at its higher management remained inflexible, unwilling to concede any point. The campaign was aimed not only at settling new terms about rents and outgoings but at establishing a genuine feeling of satisfaction in the minds of the tenants. If that could be achieved the whole atmosphere of the Centre would change, tenants could expect to do better business, the landlord could expect to receive payment of rent and the vacancies in the building could more easily be filled.
Just as the tenants themselves were in trouble, so in fact was the landlord. The claims based on the alleged misrepresentations of Mr. Robertson could not be regarded as trivial and rents were not being paid. One has no knowledge as to the state of solvency and viability of the whole complex but it is clear that there were quite a number of vacancies apart from those in the basement and the number in the basement was quite high. In addition to that the Centre had a bad reputation in the City of Melbourne and it was highly desirable from the respondent's point of view that that be cured.
It was inevitable that in the process of negotiation all the various complaints of the tenants concerning practical matters such as air conditioning, cleanliness and the vacant tenancies would be raised. These were real and were a threat to the survival of certain tenants. They had to be considered, and dealt with in some manner or other to induce at least some degree of satisfaction in the minds of the tenants. It was against this background Mr. Cohen was chosen as the first tenant to be approached in the campaign for settlement. It was known to the respondent that Mr. Cohen had made complaints about the air conditioning and the degree of cleanliness in the basement. The vacant shops were known to be a worry to all the tenants in the establishment.
In October 1980 when Mr. Cohen was approached he was in a very bad way financially and receptive to any proposition which would give him financial relief. Also he still had a degree of faith in the Centre and did desire to make a success of the businesses of his three shops. I think he had a real hope that if there were improvements in the practical problems mentioned above and he could get a real measure of financial relief he could succeed. He was therefore responsive to the landlord's approach and was encouraged to think that the attitude of remoteness and inflexibility had changed. But his practical complaints were soundly based. There can be no doubt that the basement had suffered a great deal because of breakdowns in air conditioning plant. There can be no doubt that the standard of cleanliness in the basement had been below standard and in particular the work of the staff responsible for keeping the tables and chairs clean had been inadequate. There can also be no doubt that the vacancies in the basement were a most serious factor preventing successful trading in Mr. Cohen's business.
When, therefore, the respondent approached Mr. Cohen with a view to a settlement of disputes between them it was not only the issues arising in his Federal Court action, from which it was possible for Mr. Targett to distance himself, which had to be settled, but also the issues arising out of his claims concerning these current practical disabilities from which Mr. Targett could not isolate himself. It was inevitable that Mr. Cohen would take up with the respondent his worries about the very real disabilities which were causing him financial loss and in fact seriously threatening the viability of his businesses. It could have been no surprise to Mr. Targett and Mr. Jablko that Mr. Cohen would emphasise the fact that it was not merely a matter of the amount of his liabilities in dollars that had to be dealt with but that some real and substantial change would have to occur in relation to these very real disabilities.
When Mr. Cohen says, as he does, that he pointed out to Mr. Targett and Mr. Jablko that it was pointless just to talk about dollars unless something was done about these very real practical matters he was emphasising the obvious. And there can be no doubt that Mr. Targett and Mr. Jablko realised that it would be contrary to the spirit of the negotiations and the chances of a successful outcome if Mr. Cohen had been left to think that he had to struggle on in the future with an inadequate air conditioning system, an unsatisfactory degree of cleanliness, eight vacant shops and the prospect of further vacancies in the basement. True it was that, subject to certain exeptions, Mr. Targett and Mr. Jablko did not intend to make any promises in the sense of making an agreement that the respondent would do anything specific about the disabilities, but those disabilities were too real and menacing to be left in limbo.
It is my belief that the situation was solved by explaining and describing the landlord's change of attitude. The landlord had ceased to be the remote and inflexible entity as of yore. It had become responsive to the troubles of the tenants. Had it not appointed the impartial and impressive Mr. Targett to negotiate and Mr. Jablko to seek tenants? And so it was that in the conversation with Mr. Cohen, Mr. Targett and Mr. Jablko expressed their recognition of the validity of his complaints. They could do nothing else. They were genuine complaints. But if Mr. Cohen could be satisfied that the landlord's attitude had changed and that attention would be given to these complaints and that there was an intention on the landlord's part to deal with them in a practical and responsive way perhaps that would be enough to get the negotiations successfully carried through.
So far as air conditioning was concerned Mr. Targett knew and recognized that the obligation was on the landlord to supply effective air conditioning. There should therefore have been no difficulty in him assuring Mr. Cohen that the attitude of the landlord was that the air conditioning could and would be fixed. And he confirmed this by saying that it was a matter in which he himself would take interest, he being an engineer.
So far as the cleaning was concerned the extent of the landlord's obligation in relation to that was subject to argument but it seemed likely and it was Mr. Targett's view that the landlord had to do something to improve its performance in this respect. It would have been reasonable therefore, to assure Mr. Cohen that the matter would be taken up in the new responsive spirit which the respondent had developed.
So far as the empty shops were concerned all parties knew that letting the shops in the basement in the existing circumstances, with the somewhat tarnished reputation of the Centre would be a difficult thing. But the whole approach to the matter by the appointment of Mr. Jablko and his recognition of the seriousness of the problem, the statement that the shops had to be let, that the landlord would do its best to let the shops, and that there were prospective tenants in mind was calculated to convey to Mr. Cohen that the attitude of the landlord to the matter of letting the shops was that there was an intention on the part of the respondent to fill the vacant shops as a matter of priority. If, having regard to the critical nature of the problems as stated by Mr. Cohen, and recognized by Mr. Targett and Mr. Jablko the response by Mr. Jablko was to have any meaning then there was at least an implied statement that the attitude of the respondent was that the problem was urgent and it would use its best endeavours to solve it promptly. In the context, what was said amounted, in my opinion, to an assurance that the attitude of the respondent was that it intended to treat the solution of that problem as a matter of urgency. It implied, I consider, that notwithstanding the difficulties in letting the shops in the basement, the landlord would accept suitable tenants on the best terms available. Mr. Cohen, trying to sum up the substance of what he was told by Mr. Targett and Mr. Jablko, adopted the language of promises. To his mind, when Mr. Targett and Mr. Jablko spoke, expressly or impliedly of the landlord's current attitudes and intention to co-operate in the solution of the disabilities of which he complained, and for which he blamed the respondent, his intellectual and verbal equipment caused him to describe what he was told as promises.
In the total situation Mr. Cohen was not seeking assurances of an
unreasonable nature. So far as air conditioning was concerned
he was merely
asking that that to which he was entitled under the lease be provided. So far
as cleaning was concerned he was seeking
what he considered he was similarly
entitled to and in substance that to which Mr. Targett believed he was
entitled. So far as tenants
in the basement were concerned he was asking that
the respondent take steps, which Mr. Targett himself considered to be proper
for
the respondent to take, namely to fill the basement shops with suitable
tenants at the best rents then obtainable so as to promote
so far as possible
the prompt achievement of the original food hall concept.
Negotiations relative to the applicants' disabilities
Relevant passages in the evidence of the Mr. Cohen on what was said about
the disabilities were as follows:-
MR. HAMPEL - Who was responding, which one of them was responding about the
air conditioning at that stage? --- Mr. Targett was interested
in my criticism
and he conveyed to me that he had some engineering ability, some experience in
that area, and that he would look
into that more or less immediately. He could
handle that area and felt that it was an obvious area for him for the
basement.
Did he say anything about his views as to whether the aim could or could not
be achieved? --- He did not seem to doubt that that could
be fulfilled almost
immediately.
Was there any reference to other people in relation to air conditioning? ---
He mentioned that he believed that the organization had
some trouble with
contractors, loosely, but that they were going to rectify the problems they
had been having with contractors.
. . .
Anything else about air conditioning that comes to mind as far as either what
you said to them was concerned or what they said to
you? --- I had complaints
from my staff.
You said to them, did you? --- Yes and I had had complaints from clients and I
know of clients who did not come back.
What did they say about that? --- What did Mr. Jablko or Mr. Targett say about
that? --- They could understand that situation.
Before lunch you were telling the court about the meeting at South Melbourne
and your were up to the stage of the air conditioning
having been discussed
and I was going to take you to the next topic which you had already mentioned
as one of the topics, namely
the cleaning. What was said by you about that and
what was the response of either or both ---? --- I put my position to both of
them,
Mr. Jablko and Mr. Target, that implicit in the success of the food
centre was cleanliness. They both responded with, well, this
will be a natural
undertaking by us and that they agreed that it was a necessary ingredient of a
successful food centre.
Was there any reference to the past state of cleanliness by you? --- I
referred to what I had been going through for the last period
of time in
trying to establish my business down there.
Yes? --- Mr. Jablko was aware of it, he had been down into the shop and had
observed what I was on about, and Mr. Targett confirmed
that it was natural
for them as landlords in their interest as much as our interest that for this
retail development to succeed they
had to do their best endeavours to make
this a successful food centre.
In the context of the talk about cleanliness was anything said about the state
of those shops by you? --- Yes.
What was said? --- I stated that first of all the shops vacant, unsuccessful
from a business point of view, was one thing, but just
them being vacant there
was causing an enormous amount of dust to gather and this was very
unsatisfactory for a food centre and suggested
that at least it should be
thoroughly cleaned or screened off or some idea to come up to block them from
public view.
Were there any other matters that were pointed out by him in relation to the
cleanliness aspect? That is, other than what you have
already mentioned? ---
The common areas, the tables and floors were mentioned and I suggested that at
least there should be an extension
of hours for the cleaning staff of the
company involved. They agreed with that logical point.
Was there any reference made by you in your discussions about what had
happened as a result of the cleanliness problem in the past?
--- Cleanliness
in the food centre ---
You have said that, anything about what has happened in the past? --- My
business has suffered, other people's business suffered in
this area.
Did they say, either of them, about those various aspects that you complained
about, cleanliness, the shops and so on? What was their
response so far as you
can remember what Mr. Targett and Mr. Jablko said? --- They were both on the
same wavelength.
Can you tell us what they said? --- They said it was obvious they had to
upgrade cleanliness and upgrade the various aspects in the
food centre for the
benefit of my business, other people's business and the centre as a whole.
Did you take it anything was going to be done about it? --- They were emphatic
that this had to be done and they could see no obstacles
in their way for it
not to be done.
Was anything said by either of them to contradict your propositions that the
place was, as you said, not properly cleaned? --- No.
We will go on to the question of the vacant shops. Would you again tell his
Honour what was said about the existing vacant shops?
--- I discussed with
them in the meeting with Mr. Jablko and Mr. Targett that the original plan for
the basement we were led to believe
was fully tenanted basement of good food
operators giving across-the-board selection of international style foods. To
me and to them,
this was a critical issue for the basement to be a viable food
centre and a successful one. The mix of the tenants was the crux of
the
matter. Mr. Targett mentioned that Mr. Jablko had been appointed, not so long
ago, as their leasing manager amongst other duties
and then Mr. Jablko
mentioned to me that he had agreed with what I had said and that this was
going to be a specific task of his
to fulfill the initial undertaking of the
landlords. Now, the majority of the poor food traders had departed and there
were many
vacant food premises there and he had specific food operators in
mind to fill these vacant shops to complement the food traders with
what was
left. And, I was impressed with his authoritativeness in this area and felt
that he obviously knew what he was talking about
and that impressed me because
they had convinced me earlier that the airconditioning they could control
successfully, and they were
in charge - they were in no concern whatsoever
about the cleanliness aspect and once having convinced that they had good
future prospects
and plans for the tenant mix, it was very, very important to
me.
When he said that he had specific or particular people food traders in mind,
did you say anything about those? --- I asked him because
obviously I was
interested to know.
What did you ask him? --- I asked him what specific traders or what names of
organisations did you have in mind, like McDonalds or
some organisation. He
said obviously he could not disclose any names to me.
Was there any more discussion about that at that stage as to these people or
their tenancies or whatever? --- It went on for quite
a while because
obviously it was a very ---
And about this particular topic, about these people that he could not disclose
the names of, was there anything else said by you or
him about that? --- Only
that he had experience in real estate and impressed me that he had a knowledge
of what he was talking about
to me and had me convinced.
You say there was talk about tenant mix. What was said about the tenant mix by
you and by them? --- They were interested to get future
food tenant operators
that would complement the existing tenants that were there to give an overall
atmosphere of what we originally
talked about in the early days of an
international gourmet food centre and this is really where we got involved and
mutually agreed
that what was important for me as a future tenant and what was
important for them as landlords/investors that I commented that this
was a $30
million odd development they had here and to the people that I have spoken to
in the industry in retail who had complexes
and shopping centres.
You pointed out to them about the $30 million investment or words to that
effect? --- There was a $30 million development and in my
experiences from
---
Before you go on, remember that this is conversation, is it, that you actually
had with them? That is what we are after. This is what
you pointed out to
them? --- Yes.
Go on? --- I suggested that every successful shopping complex whether in this
country or outside, had a successful food hall, a food
area and they agreed
that it was as much in their landlord's interest as in my interest that it was
important to get this basement
food centre off the ground for the benefit of
this $30 million odd retail development. It was critical.
Was there any reference to the attitude of the landlords by you? --- Was
there?
Yes, mention the attitude of the landlords? --- The only reference which I
made was that they had a development in the city in Flinders
Street which was
a retail development called Flinders Fair which had a food hall which failed.
I was conscious and was seeking assurances
that they were not going to let
this continue to slide as that one had.
What was the response to that comment?
HIS HONOUR: Continue to what? --- slide down. It was never arrested.
What did they say to that? --- they agreed with me that it was in their
landlord's interest that they arrest the slide and help to
get it going
again.
MR. HAMPEL: Was there anything else said about the question of filling in the
vacant premises? --- With new tenants?
Yes, or with anyone? --- They had in mind certain tenants to fill the vacant
shops.
Anything else beyond that? --- Only that they realised that it had to be
done.
What was Mr. Targett's demeanour during those conversations? How did he
impress you? --- He impressed me for his authoritativeness
and I felt that he
was a man who had full power to instigate or initiate or fulfill all the
promises that we spoke about.
HIS HONOUR: Whose promises? --- Mr. Jablko's and Mr. Targett's.
I do not think that he told us about any promises.
MR. HAMPEL: What promises are you referring to when you speak of promises? ---
I am talking about the promises made to me in my meeting
with Mr. Targett and
Mr. Jablko in relationship to settling our disagreements on the centre's
development problems and the financial
problems and I wanted their promises
and assurances that they would fulfill the problems that I had before I could
complete any financial
arrangements.
HIS HONOUR: It is a bit vague. You said you had promises, that you had
problems and they agreed you had problems. Did they say what
they were going
to do about it? --- Yes.
What were they going to do? --- They promised me faithfully that they would
rectify the air conditioning, for a start. They promised
faithfully that the
cleanliness, tidiness atmosphere of the basement would be fulfilled and
upgraded and upmarketed. They promised
faithfully that they would use their
best endeavours and they assured me they had certain tenants in mind to add to
the basement
to fulfill the vacant shops and also to complement the existing
tenants that were there. As far as I was concerned, these were emphatic
promises because it was critical to me that they promised these issues,
because it was no point me getting into a financial conversation
with them
unless they could promise faithfully that these areas would be done.
MR. HAMPEL: You have spoken of Mr. Targett's demeanor, what about Mr. Jablko,
how did he impress you? --- He impressed me that he
could do the job that he
said he was going to undertake. He presented his card to me, which was leading
manager, for Centrepoint,
and in conversations I had no reason to doubt that.
In relation to any of the matters that you have been speaking about, do either
of them say anything to the effect that these problems
either did not exist or
were not significant? --- No.
. . .
DR. PANNAM: You have told my learned friend in examination in chief and I have
asked you some questions and his Honour has asked you
some questions. Let me
ask you to tell his Honour what you allege Mr. Targett said about the air
conditioning. What promise did he
give to you about the air conditioning? ---
He informed me that he had engineering experience.
What promise did he make to you about the air conditioning?
HIS HONOUR: What did he say he would do? --- He said that he would come down
personally and check it.
DR. PANNAM: What other promises did he make to you about the air conditioning?
--- He promised me that with his engineering background
that it was a simple
matter and all he needed was time.
Did he tell you he had ever looked at the air conditioning system himself? ---
He led me to believe he had an awareness of it.
Did he tell you he had ever examined the air conditioning system himself? ---
I do not think he did but he did afterwards.
What other promises did he make to you about the air conditioning? --- He
assured me that it was going to be attended to as an explicit
condition for a
successful negotiation and he could see himself no difficulty.
What else did he say? Any other promise or was that it? --- I think that was
basically it.
. . .
What happened, Mr. Cohen, was this: you got a shock as a result of the Figgins
decision, did you not? --- No.
You realised you had made a mistake? --- No; I am sorry, I did not get a shock
because I was led to believe that something like that
could occur.
You had made up your mind not to fight Centrepoint, but to settle with them
back in December. You made a commercial judgment to settle
and not to fight?
--- I made a judgment.
A commercial judgment, was it? --- Not completely, no.
HIS HONOUR: A judgment in trade and commerce? --- I made a judgment, weighing
up the financial side of it, plus the very important
aspect of the commitment
that they made to me during the commercial assessment.
. . .
DR. PANNAM: What promises were made to you by Mr. Targett about tenants?
HIS HONOUR: Tenants or mix?
DR. PANNAM: About tenants and then the mix of any new tenants that came in?
--- Mr. Jablko informed me that he was specifically employed
for this area.
Mr. Targett did not talk about this area as much as Mr. Jablko. Mr. Jablko
assured me that he had good food operators,
the likes of one or two other
tenants that were in the basement at that time. He had some excellent food
operators in mind and I
asked him who they were but at that point in time he
was not prepared to any names.
What other promises did he make to you about tenants or tenant mix? --- He
promised me that they would be tenants of a complementary
nature to the
basement and would be of a non-conflicting nature to existing - the tenants
that were left.
What about cleanliness, what did he promise you about cleanliness? --- I think
I spoke with Mr. Jablko more than Mr. Targett on the
cleanliness.
At these meetings? --- Yes, and other meetings as well.
What promise did Mr. Jablko make to you about the cleanliness? --- Mr. Jablko
after observing many times himself with me in my shop
---
Mr. Cohen ---
HIS HONOUR: Let him answer.
DR. PANNAM: Your Honour, he ---
HIS HONOUR: That is fair enough. You go ahead? --- Mr. Jablko spent many hours
with me in my premises in Centrepoint and he agreed
with me that the place was
a disgrace and he would use his best endeavours to have it rectified
immediately
You were really asked about what promises he made to you and I think the
question related to the two meetings. What you have told
us, I understand,
does not relate to those two meetings --- That was the background.
The background. What did he say? --- When we went to South Melbourne, myself
and Mr. Jablko, we were well aware of the cleaning problems.
Mr. Targett had
not seen the dirt and filth down there so he had to rely on Mr. Jablko
informing him.
DR. PANNAM: What promises, I will take them one by one. I am only asking you
about these November meetings, be they two or three.
What promises did Mr.
Targett make to you about the cleanliness of the basement? --- They promised
me ---
Mr. Targett first. I will ask you about Mr. Jablko a minute. What promises did
Mr. Targett make to you about the cleanliness? ---
From my point of view they
both seemed to confirm each other and it was very hard for me at specific
times to differentiate whether
Mr. Targett gave his assurance or Mr. Jablko
but ---
Let us lump them together for the purposes of my question. What promises did
Mr. Jablko and/or Mr. Targett give in relation to cleanliness?
--- They
promised me that it was a simple matter to have made perfect.
Did they make any other promises about it? --- That basically was the finish.
It was a simple matter to make the cleaning perfect, is that right? --- Yes.
Any other promises made to you about Mr. Jablko about tenant or tenant mix?
--- it was broadly ---
I have asked you in open-ended questions all the promises that were made to
you about the sort of matters that you gave evidence-in-chief
about. Is there
anything that you want to add to those answers? --- Any other promises made to
you by Mr. Jablko or Mr. Targett about
cleanliness, air conditioning, tenants
or tenant mix? --- Anything you want to add? --- Possibly things I have
forgotten but that
is it basically.
Mr. Cohen says he was given the assurances he sought. Mr. Targett says he was not. He says that he gave an assurance, indeed a promise, that he would pass on to the directors or other relevant persons in the respondent's organization the complaints that Mr. Cohen had made concerning his practical disabilities but neither he nor Mr. Jablko did or said anything by way of further assurance or promise.
It is my opinion however that expressly or impliedly, Mr. Targett and Mr. Jablko between them, on 5 November 1980 gave assurances to Mr. Cohen that it was the intention of the respondent to attend promptly to the air conditioning and cleaning complaints and to take action to remedy them to the extent that the complaints were valid, and to use its best endeavours to let the vacant shops and let them on terms currently available to such suitable tenants as could be found.
According to the evidence of Mr. Targett, although Mr. Cohen explained that the Centre was declining and that he was trading at a loss and that he blamed the respondent for his current disabilities of inefficient air conditioning and cleaning and vacant shops and desired assurances that these disabilities would be dealt with satisfactorily by the respondent Mr. Targett was able to satisfy Mr. Cohen by a promise to pass on the complaints to the directors or other suitable officer of the respondent. Resolution of this issue depends upon an assessment of the creditibility of the witnesses and the general probabilities. Dealing first with the probabilities it is useful to look at Mr. Targett's evidence. He said that between 5 November and 10 November 1980 he spoke to Mr. Alter about the three matters about which Mr. Cohen complained. Mr. Targett said that Mr. Alter's reaction was that he considered there was nothing wrong with the air conditioning, that the cleaning of the basement would be improved, and, that so far as the vacant shops were concerned the respondent had appointed Mr. Jablko as leasing manager. According to Mr. Targett there was at a meeting between him and Mr. Jablko and Mr. Cohen on 10 November 1980 a recapitulation of Mr. Cohen's complaints. He said, however, that Mr. Cohen did not ask what Mr. Alter had said about them and that he, Mr. Targett did not tell Mr. Cohen anything that Mr. Alter had said. To my mind it is incredible that if all that the worried Mr. Cohen had obtained from the meeting of 5 November was a promise by Mr. Targett to pass on his complaints to Mr. Alter or other person concerned he did not ask what reaction there had been. He would have been most anxious to know what was likely to happen. Yet Mr. Targett says he did not ask. And Mr. Cohen does not suggest that he did.
To my mind this is only explicable on the basis that Mr. Cohen had accepted the assurances received by him on 5 November. Mr. Cohen left the meeting on that day feeling satisfied that the respondent intended to attend to the matters of his complaints. As a result he sat down forthwith to work out, on that basis, what reductions he would seek in his rent and other obligations. At the meeting of 10 November he presented his proposals. Further talk, described as recapitulation, took place but assurances were not again sought. Mr. Cohen had accepted those of 5 November given by Mr. Targett who he said seemed authoritative and emphatic. Mr. Targett would have it that at best Mr. Cohen was left with the knowledge that his complaints were to be or had been passed on. But this was not likely to have quietened Mr. Cohen. He had much experience of his complaints being passed on to no avail. According to Mr. Targett, Mr. Cohen was left with no clue as to whether the respondent intended to heed or ignore his complaints. And yet Mr. Targett was moved to say in relation to clause (f) of the preliminary document of agreement of 17 November that he had devised that clause by way of expressing that Mr. Cohen was "now on the side of the landlord . . . So to me it was a matter of comfort that we had settled our differences and we had basically the same objectives.". But unless some assurances or undertakings on the matters of Mr. Cohen's complaints had been given and accepted it could not be said in any real way that the differences between Mr. Cohen and the respondent had been settled and it would be an erroneous assumption that he was then on the same side as the respondent. But if as Mr. Cohen says he had received and accepted the assurances as to the respondent's attitude and intentions then these expressions of Mr. Targett were well founded. Clause (f) was in the following terms:-
"(f) Each side agrees to promote the interests of the centre in accordance with the lease with the other lessees and the public."
It is to be noted that when Mr. Targett was asked to say what obligations he understood the respondent to be accepting under this clause the following passage ensued,
"HIS HONOUR: What did you have in mind that the lessor was to do that he had
not done before, if that was it? --- What I had in mind
in that was there had
been charges that the company had not maintained the air conditioning plant,
for example, and I believe the
lease in that record requires the company to
maintain the Centre and cleanliness as well. It has obligations to keep the
centre clean
and the common areas clean. It has certain obligations to provide
an air conditioning space. I had in mind that it was equally important
- it
was a matter of how to express the words of working together.
So far as the lessor was concerned, did this have anything to do with air
conditioning and cleaning? --- Not specifically, no.
Obviously it would not have to do with it specifically, but ---? --- It is my
drafting in a sort of - it was a handwritten document
that just flowed there,
and there were certain changes we made, I think, and it represents my
expression of the ---
It might do, but you must have had something in your mind as to what the lessor was undertaking to do. What was it? --- I had more in mind that the lessor would be more responsive, I think, to the - not the demands, but the reasonable requirements. I think what I was trying to express in that, looking at this from this point of view, was that they should be more responsive to the claims and the problems of the tenants."
To my mind all this strongly confirms what one would gather from the evidence,
namely that Mr. Cohen was given an assurance that the
attitude of the
respondent had changed. Remoteness and inflexibility had been replaced by a
disposition to be responsive to the claims
of the tenants. And here two of the
claims were identified, namely, airconditioning and cleaning. These words come
very close to
expressing the assurances that Mr. Cohen had been seeking,
namely that the landlord should respond to the disabilities under which
he was
suffering in the basement.
Similar negotiations with other tenants
That the assurances, said by Mr. Cohen to have been given to him by Mr. Targett, were given, may more readily be accepted if regard is had to the evidence of what was said to Mr. Yaghmoor and to a lesser extent what was said to Mr. Johnstone by Mr. Targett and Mr. Jablko. In negotiating with Mr. Yaghmoor Mr. Targett faced a similar situation and had the same objectives as with Mr. Cohen. The following passages of Mr. Yaghmoor's evidence are relevant:-
"MR. MERKEL: Prior to Mr. Jablko coming and discussing these things with you,
had anyone on behalf of the landlord made any approach
to you in relation to
these problems or the solution of them? --- No, nobody.
You mentioned you had a discussion for about 2 1/2 hours. Can you recall when
that was? --- The discussions, it would have been between
October and December
1980.
Did you discuss with them the problem of filling the vacancies in the
basement? --- That was one of the main problems, apart from
the other two, the
fact that we had now more empty shops than we had started with.
Can I stop you there. I want you to tell his Honour what you said to him in
substance about the vacant shops and what his response
to you was, again in
substance on that matter? --- I said to Mr. Jablko that the problem had to be
solved, we had to find people
to fill the vacancies that had come about. Mr.
Jablko said that - he firstly realised the problem was a major one for
survival in
the basement - and assured me he was very capable of being able to
find the right sort of people, the right sort of expert people
that could
complement the situation as it stood and could see no problems in finding new
tenants to fill the vacancies.
. . .
You mentioned you discussed duplication? --- Yes, I did.
Did you explain to him what was involved in that? What did you say to him
about that? --- I said, and I was very worried about it
because of our
specialisation and the fact that we needed somebody that would complement,
blend in with the food shops already existing
in the basement, and we did not
want people coming in that would compete either with each other or with the
existing tenants in the
basement.
What did he say in relation to that --- Mr. Jablko said that he had some leads
as to the people he could approach that would fill
the gaps and he could not
see any problem, but given that he was fresh on the job of solving these
problems and had a free hand to
be able to do deals and entice the right sort
of tenants to fill in the vacancies ---
Did he have any discussion with you about the topic of whether the centre was
going to improve in the future? --- He definitely showed
optimism for the
future.
. . .
Did you have any discussion about the air conditioning problem? --- Yes, I
mentioned to Mr. Jablko that the air conditioning was not
working effectively,
was not circulating air and there would be periods of time when it would not
work at all.
Did you say to them what effect that was having on your business? --- Oh yes.
What did you say? --- I said, our customers are starting to note and starting
to complain about the matter of air conditioning, and
I felt this was a
deterrent and taking away from our business.
What did he respond to that? --- I recall Mr. Jablko saying that most systems
that are installed have teething problems and he could
not see that being a
long term problem.
Did you discuss the cleaning problem with him? --- Yes, I mentioned the
tables, the chairs, the fact that the empty shops that had
become empty had
not been maintained. In fact, there would be empty cigarette packets etcetera
thrown through the grill doors that
had been there for a period of time, the
fact that the chairs had never been wiped and had accumulated a lot of dust
along the sides,
etcetera.
What did he say about that? --- Mr. Jablko was aware of the problem and the
thing was that the cleaning company would be put under
a microscope because of
other complaints that they had received and that the jobs associated with the
cleaning would be inspected
and people's jobs looked at as to what functions
they were to perform and to make sure these duties would be performed in the
future.
. . .
Can you explain to his Honour roughly when the meeting with Mr. Targett was
arranged, how it came to be arranged, and when it was
arranged, as best you
can recall? --- Yes. Mr. Jablko suggested that the landlords had appointed a
Mr. Targett to carry on negotiations
with the tenants, that Mr. Targett was
also a person who had not been involved with Centrepoint either emotionally or
had any other
contact with Centrepoint, and that he would be the ideal person
to voice our problems with because he had been delegated that type
of
authority with the landlord to negotiate with the tenants and reach a
settlement. Mr. Jablko arranged this appointment very late
in 1980.
And did you go along to that meeting? --- Yes, the meeting was in Mr.
Targett's office in South Melbourne and we went to that meeting,
yes.
. . .
Can you tell his Honour what was said. How did the meeting start off? --- We
started the meeting off with some very informal chats
by Mr. Targett and
eventually came down to Centrepoint and I started again as I had with Mr.
Jablko to present the problems that
I had faced at Centrepoint to Mr. Targett
who stopped me immediately and said, they are in the past. That is what has
happened in
the past. What we are now here to do is to settle our differences
and work together to promote Centrepoint and to put Centrepoint
back on the
map.
Mr. Targett was not interested in the problems we had had. He appreciated
them, he acknowledged them, but he wanted more to look to
the future and not
go through the previous problems that had occurred.
In that context did you discuss with him the cleaning problems and the future
of it? --- Yes, Mr. Targett briefly went through the
problems although he did
not want to tell about them.
When you say, briefly went through them, what did he say about the cleaning
problem? --- The cleaning company Mr. Targett claimed
to be partly at fault,
that they were going to or had been looking at the contract and certainly
would approach the cleaning company
and offer them the opportunity either to
perform to standard, otherwise they may not be engaged in future.
Did you make any suggestions about solving the cleaning problem? --- I
suggested that certainly more man hours needed to be achieved
in order that
the cleaning be brought up to standard. I did not think that whatever capacity
was available to clean that they could
have done a job for all the hours that
we were open.
What was his response to that? --- They were looking at the duties that the
cleaning company had delegated to its staff, and if needed,
then certainly
more man hours would be provided if there was a problem.
Did you discuss with him the air conditioning problem? --- Yes, we did, the
fact that it had not functioned. Mr. Targett again said
that these were
basically teething problems, problems with getting the system off the ground
and there was no reason why the system
cannot handle proper air circulation
and proper air conditioning of the whole of the building, and he could not see
a future problem
there. It was just the initial problems.
Did you discuss with him the vacancies and tenant mix in the basement? ---
Yes, I did.
What did you say to him? --- I said to Mr. Targett, these were basically a
major problem because they were very visible to our customers
the fact that we
had very dark holes throughout the basement, and in particular leading up to
my particular shop and that this had
to be given some top priority in
establishing new business to complement and to open up and light up a basement
area such as ours.
What was his response to that? --- There were no problems with what would
happen in the future. Mr. Targett said A.V. Jablko would
be assigned this
function, new tenants, a better tenant mix than what we started out with, and
he was specifically hired to solve
that problem and there would be no problem
in future because Mr. Targett and Mr. Jablko had been delegated authority with
the landlord
to do deals with the right sort of people to complement the
basement and to be able to provide tenants of a suitable calibre and
good
operators that would add to the basement.
. . .
MR MERKEL: You mentioned the authority they had been delegated regarding new
tenants. Can you tell us what was said? --- By that what
I really meant ---
Not what you meant, what did he say? --- The fact that the original rentals
etcetera that were being asked by the landlord were thought
to be very high
and Mr. Targett and Mr. Jablko were able to negotiate favourably on those sort
of rentals in order to attract the
right sort of operators. They had very
little restrictions, more or less, on them to be able to encourage the right
sort of person
to the basement.
Can you recall whether there were any other problems at the centre that were
discussed other than those mentioned? --- Apart from
tenancy, cleaning and air
conditioning, I would have mentioned, or I did mention the fact that
escalators would be repaired and maintained
during period periods such as
lunch time. We had one instance where our escalators in the middle of the
basement led down to the
shop and had been turned off for one hour during
lunch time and I wanted to make sure that sort of maintenance was not carried
on
during peak periods because it would be inconvenience to customers and they
would not be encouraged to come down.
What was the general demeanour of Mr. Targett and Mr. Jablko during these discussions? --- They were very confident that the problems could and would be rectified. They were very confident that the right sort of tenant could be attracted and they gave me a lot of confidence in the manner and the professionalism that they adopted themselves too, and it was very encouraging for me to listen to Mr. Targett and Mr. Jablko speak and showed there was a very big future."
Mr. Yaghmoor was a most impressive witness and I do not doubt that his evidence was true and accurate. That such things could have been said by Mr. Targett to him on the day after the actual conversation with Mr. Cohen must go to the probabilities as to the accuracy of Mr. Cohen's evidence of the substance of what was said to him the day before.
The same may be said about the evidence of Mr. Johnstone, a tenant of the first floor with whom Mr. Targett and Mr. Jablko also negotiated a settlement of outstanding disputes. The following passage in his evidence is relevant:-
"MR. MERKEL: In about November of 1980, did you meet Mr. Jablko and did he
arrange for a meeting with himself and Mr. Targett for
you to discuss problems
that you were experiencing at the Centre? --- Yes.
Did that meeting take place? --- Yes.
Can you recall what was said in substance at the meeting concerning the
basement? Did you raise the topic of the basement? --- I had
not met Mr.
Targett before and we discussed what had gone on for the last 12 months and
yes, the basement was mentioned, and he told
me he hoped to get a Myer like
concept or a McDonald company interested in the basement and that would give
it a much - a big face
lift and a much better appearance and it should operate
successfully,
Did you say to him anything about the importance of the basement as far as
your business? --- I think at the time - I am sure at the
time I considered
everything was of vital importance, and I did feel that the basement - and I
still feel - that the basement is
of importance to everybody in the centre.
Why is that? --- When the centre was first advertised, a lot was made of the
magnificent food area that we were going to have with
all countries
represented, and it was going to be a real show place. I felt that that would
draw a lot of lunch time traffic for
us.
Did you discuss that concept or matter with Mr. Targett and Mr. Jablko? ---
That would have been included in the conversation, yes.
In relation to the future prospect of the basement and leasing for it, could you explain what Mr. Targett's demeanour was at the meeting? --- Mr. Targett inspired great confidence in me."
I certainly accept this evidence as truthful and accurate. That assurances as
stated above were given by Mr. Targett and Mr. Jablko
to Mr. Cohen is in my
opinion to be inferred from Mr. Cohen's evidence of what was said to him on 5
November and the context in which
it was said. Mr. Cohen was not articulate or
intellectually agile. I think he accepted Mr. Targett and Mr. Jablko as Mr.
Targett's
colleague as authoritative and genuine in explaining to him their
recognition of his disabilities and the attitude and intention
of the
respondent in relation to them. I am of the opinion that he went to the
meeting a very worried man, not that some money adjustment
could not be
achieved, but that even if it were he could not survive unless the
disabilities of the basement were remedied. I believe
that he conveyed this to
Mr. Targett and Mr. Jablko and that what they said to him was intended to put
him at ease on the prospects
of relief in relation to those disabilities and
that it did so.
Probabilities and Credibility
Mr. Targett said that even at the meeting of 17 November all the problems were mentioned again and that he again said he would bring them to the attention of the appropriate parties. I do not think this was so. Before 10 November Mr. Targett had spoken to Mr. Alter who had said that in his view there was nothing wrong with the air conditioning. If, as between Mr. Targett and Mr. Cohen, the situation was that, in relation to the airconditioning Mr. Cohen was relying exclusively on Mr. Targett passing on the complaint, then, having regard to what Mr. Alter had said to him, it was nonsense to tell Mr. Cohen that he would pass on Mr. Cohen's complaint. Also it would not have been straight forward of Mr. Targett to refrain from telling Mr. Cohen what Mr. Alter had said. On that basis he would be allowing Mr. Cohen to think that his passing on of the complaint was capable of bearing fruit when officially the outcome on that point was much in doubt. If the situation was, however, that Mr. Targett had taken the responsibility of assuring Cohen that the air conditioning would be remedied, believing, as he said, that although Mr. Alter had spoken as he had, never-theless, he would attend to the matter. Any criticism of Mr. Targett in this respect would be greatly reduced. He might in such a situation feel justified in leaving Mr. Cohen under the impression that the assurance he had given still stood. It is true that Mr. Targett did tell Mr. Cohen at the meeting of 5 November that he would pass on the complaints. That he should so say was a natural implementation of the giving of the assurances.
It is true that Mr. Targett did say that it was his view that letting shops in the Centre would be difficult at that stage. But it is unlikely that Mr. Targett would introduce a note of hopelessness about letting the basement. Everybody recognized the difficulties. But to have introduced the notion that letting the vacant shops was unlikely for years would have been calculated to make Mr. Cohen think of the virtues of his Federal Court action. It would have introduced a jarring note into the negotiations and it is clear that there was no such. As to this aspect Mr. Jablko gave no hint in his evidence that, beyond referring to the acknowledged difficulties of the situation, Mr. Targett expressed pessimism. Mr. Jablko expressed no pessimism and I do not doubt that he expressed confidence that he could find suitable tenants and said that he had prospective tenants in mind. Mr. Targett acknowledged that Mr. Jablko said that he was seeking tenants. The following passage occurred in his evidence:-
"DR. PANNAM: Did you, or in your presence, did Mr. Jablko at any one of these
meetings say anything to Mr. Cohen about there being
tenants around who were
interested in taking tenancies at the Centrepoint? --- Not in that form. I
recall Mr. Jablko conveying that
he was seeking tenants but I cannot recall
him ever identifying anybody.
There was no specific identification of the tenant - any conversation where Mr. Jablko said he had a tenant in particular? --- None that I can recall, no."
His evidence on these two points is in the form it is, I think, because Mr. Targett was embarrassed. If the assurances were given they did not in fact represent the true attitude of the respondent. Mr. Targett having protected himself from being seen to give binding undertakings as to what the respondent would perform or about its intentions found himself at the trial faced with the reality that assurances he had given, perhaps in good faith as to the respondent's attitude and intentions, had not been in accordance with fact. On 5 November 1980 Mr. Targett perhaps interpreted what he said and what he allowed Mr. Jablko to say as having no legal effect. Mr. Targett would not wish to concede that his conduct was misleading. Accordingly Mr. Cohen is represented as having been satisfied without any promise or assurance of any kind or any knowledge as to the respondent's attitude or intentions.
There are other aspects of the evidence which raise serious questions as to the reliability of Mr. Targett on matters concerning the disabilities of the tenants. One was his reluctance to concede that when he entered upon the negotiating campaign with the tenants he expected them to talk about their matters of dissatisfaction other than the rents. He asserted also that although he knew that Mr. Jablko had been talking to the tenants before the negotiating meetings between them and himself he did not find out from Mr. Jablko what he had been talking about with those tenants. He said he did not do this "because as between him and me he was the person appointed to actually go and see the tenant and arrange a meeting.". But he knew that Mr. Jablko had been talking to the tenants to familiarise himself with the Centre. Obviously it would have been of importance to such a skilled negotiator as he was to know what was in the mind of the various tenants. Again he appeared reluctant to concede that anything he said would have induced confidence in Mr. Cohen or Mr. Yaghmoor or Mr. Johnson. On the contrary he said "I was very cautious not to engender a feeling of confidence and hope for the future, the only future that I expressed to these . . . was pessimism.". It is impossible to accept this as expressing the reality of what took place between him and Mr. Cohen or the others. It would be contrary to common experience that in embarking on a campaign to induce badly needed settlements with upwards of twenty worried and resentful tenants Mr. Targett should spread pessimism. I think Mr. Targett was in a difficult and embarrassing position because at the relevant time Mr. Alter and Mr. Faiman Jr. were just not interested in the tenants' problems. The following passage is illuminating:-
"MR. HAMPEL: What you are saying then is in the light of all that, you did not
discuss the problems with Mr. Alter that the tenants
had? --- Yes, I did
discuss with Mr. Alter and Mr. Faiman, but they were interested in one term.
They were only concerned with the rents and not the problems? --- Yes.
That is what you are saying, they were only concerned with settling the
financial things and not the problems with the tenants? ---
As they expressed
it, the concerns that existed between them and the tenants were only monetary
terms.
That is their point of view? --- As expressed, yes."
Yet Mr. Targett was expected to soothe the hostilities and induce consensus in circumstances in which there were current practical disabilities threatening the survival of the tenants and calling for urgent action.
In my opinion Mr. Jablko was also unreliable on the subject of Mr. Cohen's complaints and how they were dealt with on 5 November. His approach was that there were no assurances given to Mr. Cohen for the reason that he was not seeking any assurances. According to Mr. Jablko, Mr. Cohen was not concerned about the air conditioning problem. According to him also Mr. Cohen did not state cleaning or air conditioning as serious problems, they came up "in passing" and were never stressed or never made of any importance by Mr. Cohen, nor did he ever require any action from them nor did Mr. Targett or Mr. Jablko himself say anything to Mr. Cohen to the effect that his complaints would be placed before either the Manager or the directors. This approach to the conversations with Mr. Cohen is quite out of touch with reality and to my mind deprives his evidence with respect to them of value. Mr. Jablko was an intelligent, quick thinking witness on whose evidence in competition with that of the other witnesses or on any critical point I am unable to rely.
The trouble was that the tenants' problems were real problems. Mr. Targett believed he had a good deal of influence with the directors. He may well have been satisfied that the existing disabilities would be remedied, and although he could not guarantee the attitude of the directors he perhaps felt that could take the step of giving any necessary assurances, or at least reasonable assurances, relying on his own ability to secure a sufficient degree of co-operation from the directors. Mr. Targett could hardly have said to the tenants, "Oh well, I am not in any position to give you any assurances about these important matters and the directors seem to have no interest in them at all.".
But it was put by Dr. Pannam that for a number of reasons the evidence of Mr. Cohen should not be accepted. It was said that the case he endeavours to make was never specifically stated until formulated in September 1981 in the cross-claim in these proceedings. He points out that one would not learn anything specific in the letter of Mr. Cohen's solicitors of 20 July 1981 which purported to rescind the agreement of 22 December 1980.
Clause 7 of the agreement of 22 December 1980 was the successor to clause (f) of the document of 17 November 1980. Dr. Pannam adds that it is significant that in the case of Mister Figgins Pty. Ltd. v. Centrepoint Freeholds Pty. Ltd. V.G. 116 of 1980 against the respondent Mr. Justice Northrop gave judgment in favour of Figgins on 6 July 1981 and adjourned the matter until 20 July 1981 for the making of the final order. It was on that latter day that the agreement of 22 December 1980 was rescinded.
As I understood it the issues in the Figgins case were largely similar to those set out in Mr. Cohen's statement of claim in this case. The judgment ordered a variation in the terms of Figgins' lease very favourable to the tenant. A similar result in Mr. Cohen's case would, as he agrees, be much more beneficial to him than the terms of the agreement of 22 December 1980.
It is reasonable to think that when Mr. Cohen heard of the success of Figgins he might have regretted having made the agreement of 20 December 1980. I would infer that the judgment in the Figgins Case encouraged Mr. Cohen actually to rescind that agreement. I would infer also that the letter of 20 July was drafted by a person with very sketchy instructions as to the real basis of the claim to rescind the agreement. It would seem likely also that in December 1980 those solicitors had no real knowledge of the background of clause 7 of the agreement. Mr. Cohen had said that he regarded clause (f) as the best he could get in written form in relation to what had been said to him. His solicitors endeavoured to have the clause deleted or at least to have the referrence therein to the lessee deleted. They made no effort to include or record what one may call the collateral assurances. This is certainly surprising and would indicate either that they did not know of them or appreciate their significance. There is no explanation of this. The point was taken by Mr. Cohen's counsel that investigation as to whether or not Mr. Cohen had told his solicitor or barrister who were both active in relation to the agreement of these collateral assurances was covered by legal professional privelege. There was objection to Mr. Cohen being asked to waive it. It was indicated by me to counsel that however that might be there was obviously a question as to why Mr. Cohen's solicitors did not attempt to formulate and include the collateral assurances in the agreement if they knew of them, or, if they did not know of them, how Mr. Cohen could have omitted to tell them. Technically the matter was resolved by Dr. Pannam forbearing from pressing his question. But as a matter of substance the question still remains and there is no satisfactory answer and it casts a shadow over Mr. Cohen's evidence. It may be that the introduction of clause (f) obscured and complicated an otherwise straight forward situation.
Dr. Pannam also relied upon the relative absence or infrequency of complaints to management on the matter of air conditioning and cleanliness after 22 December 1980, the absence of any specific complaints about the continuing vacancies in the basement and the inability of Mr. Cohen to make clear in his evidence what exactly it was that he alleged Mr. Targett and Mr. Jablko actually said.
I do not think that the first three of these last mentioned items are of significance to a decision whether Mr. Targett and Mr. Jablko gave assurances of intent or merely undertook to pass on Mr. Cohen's complaints. As to the third, it was clear that Mr. Cohen is not an articulate man.
However, if it had not been that Mr. Cohen by demeanour and otherwise
appeared to me to be a truthful person and that the probabilities
in his
favour were not supported by some significant positive factor he might well
have failed to carry the onus upon him. But he
did impress me as a witness
giving a true statement of the substance of what took place between himself
and Mr. Targett and Mr. Jablko.
And there is one positive item strongly
supporting the probability that the case made by Mr. Cohen is a true one. That
is the description
by Mr. Targett of the purpose of clause (f). It was to
express the idea that in relation to the claims and problems of the tenants
the lessor would in future be more responsive. This is hardly what clause (f)
says but the description of its purpose seems to me
to show beyond doubt that
the claims and reasonable requirements of at least one tenant, Mr. Cohen, had
been the subject of discussion,
and that the landlord's attitude had been
stated as a new one, in terms of intention to respond to them. It is an
indication of what
actually had taken place. It fits a scenario which might
summarise the negotiations of 5, 10 and 17 November as follows:-
COHEN --- It is vital to me that the air conditioning be made efficient, the
cleaning service be greatly upgraded, that the vacant
shops in the basement be
let to tenants giving a proper tenant mix.
TARGETT and/or JABLKO: --- You may rest easy about those things. The Company
intends to remedy the air conditioning, improve the cleaning
and do its best
to let the vacant shops to suitable tenants as soon as they can be found.
COHEN: --- Will you give me a letter to that effect?
TARGETT: --- No, but I will put something to that effect in the agreement.
I think that in substance this is what had occurred. Of course if Mr. Targett
had not misjudged the attitude and intentions of Mr.
Alter there is little
doubt that not only would the air conditioning have been remedied, but the
cleaning would have been promptly
upgraded, and, what is more important, there
would have been new tenants in the basement. Yet there were none. And that was
not because
no suitable tenants appeared.
The Respondent's actual attitude and intentions
On the evidence the inference I draw is that Mr. Alter had no intention of letting shops to suitable tenants on the best terms obtainable in the circumstances which existed. For some reason not disclosed a number of propositions which in the opinion of Mr. Targett and Mr. Jablko ought to have been accepted were rejected and promising tenants were lost through delays in responding to their propositions. The mere fact that during more than twelve months no shop was let in the basement does of itself indicate that, for reasons it considered to serve its interests, the landlord was holding out for higher rents than available and was failing to have any regard to the interests of the basement tenants in having the shops filled.
It is clear from Mr. Tallent's evidence that he was unmoved by the view that the presence of tenants was an overriding consideration. At a time when every consideration of reasonableness and fairness to tenants demanded a positive and immediate response to the dark and dusty gaps in the basement, he approached the problem by reference to long term interests. It was quite unreasonable in prevaailing circumstances to reject a two year plus option tenancy on the ground that a departure at the end of two years might be a disturbing event. Mr. Alter's explanation of the lost opportunities was not available at the trial. He gave no evidence. There was no suggestion that he was not available.
It was said that Mr. Alter had said to Mr. Tallent "You find the tenant. I will make sure we do an appropriate deal.". But this was not what happened in practice. No deals eventuated, and various reasonable propositions were rejected. It is my view that nothing like "best endeavours" were made to let shops to suitable tenants.
Mr. Yaghmoor was a very suitable tenant efficiently conducting a business in the basement shop B.15. In early 1981 he sought an agreement from the respondent to extend his business into the adjoining shop B.16. He offered a rental of $100 per week, such rental to be subject to later review and the terms to be otherwise the same as that of his existing lease. Mr. Yaghmoor was told that he could have B16 but only at a rental of $200 per week. Mr.Yaghmoor was unwilling to pay this rent and the proposal fell through. This proposal was taken by Mr. Jablko direct to Mr. Alter. The decision to reject it was made by Mr. Alter. It was strongly recommended to Mr. Alter by Mr. Jablko. Even in the view of Mr. Tallent the proposal was one which "should have been accepted.". Mr. Jablko regarded the rejection as a lost opportunity.
In the absence of explanation by Mr. Alter it is to be inferred that Mr. Alter was not willing to accept the best terms reasonably available, notwithstanding that it was very much in the interests of the basement tenants.
Another proposition which arose during the relevant period was put by Mr. Yaghmoor jointly with Mr. Trachsel. They offered to take four of the vacant basement shops, namely, B.11, B.12, B.16 and B.17. This was a major proposal seriously made. It involved financial provisions of some magnitude but within the competence of the parties. It is not necessary to examine the details. In due course Mr. Targett reluctantly told Mr. Jaghmoor and Mr. Trachsel that it was rejected. Mr. Targett had recommended to Mr. Alter that he ought to accept the proposition. Again, late in 1981, Mr. Yaghmoor offered to lease shop B.19 on a monthly tenancy, indefinitely, but primarily for the Christmas period. This was rejected on the ground that the proposal related to too short a period. But to fill that shop over Christmas with a suitable tenant already firmly in the basement would have had obvious advantages.
Another proposal was in respect of shop B.19 concerning prospective tenant other than Yaghmoor. That proposal was lost because the respondent would not agree to a two year lease with an option of two years.
As indicated above Mr. Targett said that he believed that there were a number of lost opportunities in 1981. Mr. Jablko also said that in addition to the loss of Mr. Yaghmoor as a tenant for B.16 there were a number of other lost opportunities. The following passage ensued:-
"MR. HAMPEL: That shop 16 was not the only opportunity of its kind lost to the
landlords in 1981, was it? --- What do you mean by
not being lost?
The opportunity, as you have agreed with me, to have some rent coming in,
albeit not as much as they would like, but at the same time
having some empty
shops leased, that is what I refer to as opportunity lost? --- Yes, I would
agree with that.
There were a number of others? --- Yes.
I just want to put this general question to you; was the position from your point of view that in the cases where there was an opportunity to lease a shop, even though at the lower rent, that you would recommend that to the owners but the owners would not accept it? --- Yes."
Later in his evidence Mr. Jablko retreated from what he said in the passage set out above. I was and am more impressed by his frank statements in that passage than by his retraction. Dr. Pannam argued that the retraction was supported by Mr. Jablko's reference to what he had just looked at in his files and that Mr. Hampel in cross examination did not seek access to the contents of the files. To my observation Mr. Jablko's reference to his files as he stood in the witness box was but fleeting and his retraction was unconvincing. If it was sought to reinforce the retraction by reference to the actual contents of the files that matter might have been taken up by the respondent, but it was not. I am satisfied that Mr. Jablko's real recollection was that he had lost various tenants for the basement because the respondent, Mr. Alter, would not accept his recommendation. Mr. Jablko was the respondent's expert.
I am satisfied that there were a number of lost opportunities in 1981 and that they were lost because for some purposes of its own the respondent preferred to keep the shops vacant rather than to let them on the best terms reasonably available at the time. It did not use its best endeavours to let the shops.
There was evidence of negotiations with certain prospective tenants. One was from Kentucky Fried Chicken who made an offer which was acceptable. However, the respondent took too long in notifying its acceptance and when it did Kentucky Fried Chicken had changed its mind. Mr. Tallent considered that the failure to complete an agreement with Kentucky Fried was partly the fault of the respondent. It certainly did not exercise its best endeavours.
In respect of shops B.01 and B.02 there were negotiations with a prospective tenant, Spaghetti Bazaar. The negotiations came to an end because the solicitor for Spaghetti Bazaar wrote a letter wrongly expressing the terms of agreement thought by Mr. Jablko to have been reached. The matter was allowed to rest until it was discovered that Spaghetti Bazaar was itself unaware of the error of their solicitor. Negotiations were resumed but without success. Spaghetti Bazaar was a most suitable tenant and would have added great impetus to business in the basement. The incident as described by Mr. Jablko does not reflect a "best endeavours" approach.
In the result I am satisfied that in giving to Mr. Cohen the assurances referred to above in respect of the letting of the basement shops the respondent engaged in misleading conduct and Mr. Cohen was misled. The respondent did not intend to use its best endeavours to let, or to let the vacant shops to suitable tenants on the best terms available.
I am similarly satisfied that the assurances concerning air conditioning and cleaning constituted misleading conduct and misled Mr. Cohen. The assurance concerning air conditioning was misleading because Mr. Alter had no intention that the respondent would do anything about it. The assurance concerning cleaning was misleading for the same reason.
So far as the assurance concerning air conditioning was misleading it would seem that factor had no serious consequences. By dint of the exertions of Mr. Targett himself the respondent's air conditioning consultants were activated and early in 1981 remedial efforts were made. I am not satisfied that less was done than would have been done had Mr. Alter had an intention in November 1980 to take remedial action.
But so far as cleaning was concerned no action was taken until April 1981 and that taken then was a bare minimum, the most that the tenants' association could induce the respondent to do and not enough to constitute upgrading to an extent to satisfy the reasonable requirements of the applicants.
But the really important matter was that of the tenant vacancies. A full complement of active traders was vital. The absence of an attitude or intention on the part of the respondent to let shops in the basement to suitable tenants on the best terms obtainable rendered the assurances given to Mr. Cohen not only misleading but misleading in a respect that serious consequences. The result has been that since November 1980 none of the basement vacancies have been filled, a situation far removed from the original concept of the Centrepoint basement.
I am satisfied that the probability is that had Mr. Cohen not believed that the respondent did intend to use its best endeavours to find suitable tenants for the basement and to let the vacant shops to such tenants on the best terms available at the time, the applicants would not have entered into the agreement of 22 December 1980 and that they would not have done so but for the assurances given to Mr. Cohen concerning the air conditioning and cleaning of the basement.
Having regard to the foregoing I find that,1. the respondent represented to the applicants that:
(a) the respondent intended to use its best endeavours forthwith to find
suitable tenants for the basement vacancies at Centrepoint
Mall and to let
such vacant shops to them at the best rent reasonable obtainable in the
circumstances;
(b) that the respondent intended to use its best endeavours to ensure a good
tenant mix in the basement in accordance with the concept
of a basement
international food hall;
(c) that the respondent intended to upgrade the cleaning services provided by
the respondent in the basement to provide a service
reasonably adequate for
the purpose of the use of the basement for trading in as a food hall;
(d) that the respondent intended to make the air conditioning system of the
basement satisfactory for the basement for use as a food
hall as soon as
reasonably possible;
(e) that the respondent intended to promote the interests of Centrepoint Mall
in association with the other tenants and to the advantage
of members of the
public;
2. at the relevant time the respondent did not have the intention described in
paras. 1(a) - (e) above;
3. the making of each of the representations was conduct
engaged in by the respondent and was misleading within the meaning of s.52 of
the Trade Practices Act 1974;
4. that each item of misleading conduct referred to in para. (f) above was conduct which induced the applicants to enter into the agreement of 22 December 1980.
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