Re Gilda Johnston and Murray Robert Johnston v Delata Pty Limited; JP Hargreaves and Co Pty Limited and John Patrick Hargreaves Trading As Richardson and Wrench Neutral Bay and Sherelle Bergmann [1993] FCA 79 (10 March 1993)

FEDERAL COURT OF AUSTRALIA

Re: GILDA JOHNSTON and MURRAY ROBERT JOHNSTON
And: DELATA PTY LIMITED; J.P. HARGREAVES AND CO PTY LIMITED AND JOHN PATRICK
HARGREAVES trading as RICHARDSON AND WRENCH NEUTRAL BAY and SHERELLE BERGMANN
No. G 767 of 1988
FED No. 116
Number of pages - 29
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Einfeld J.(1)

CATCHWORDS

Trade Practices - misleading and deceptive conduct misrepresentations - lease of shopping complex premises - misrepresentations as to numbers and variety of shops leased - reliance - no rent paid - rescission - repudiation

Trade Practices Act Part V, ss 52, 53A, 87(2)

Brown and Anor v. The Jam Factory Pty Limited [1981] FCA 35; (1981) 53 FLR 340

Munchies Management Pty Limited v. Belperio (1989) 84 ALR 700

Myers v. Transpacific Pastoral Co Pty Limited (1986) ATPR 40-673

Creative Landscape Design Centre Pty Limited v. Platz (1989) ATPR 40-980

AGC Ltd v. Jennings (1981) 1 NSWLR 50

Spence v. Crawford (1939) 3 All ER 271

HEARING

SYDNEY, 14-16 October and 12-13 December 1991
10:3:1993

Counsel and solicitor : Ms H G Murrel instructed
for the applicants by Blackshaw Lindsay and

Bugden

Counsel and solicitor : Mr C J Stevens QC and

for the first respondent Mr J Svehla instructed by

Michell Sillar McPhee Meyer

Counsel and solicitor : Mr Lindsay Foster

for the second and third instructed by Murray
respondents Stewart and Fogarty

ORDER

The Court

1. Declare that the respondents, in trade or commerce, engaged in
conduct in relation to the applicants that was misleading or
deceptive or was likely to mislead or deceive.
2. The mutual cross-claims of the respondents are dismissed.
3. The quantification of damages, the first respondent's cross-claim
against the applicants and all questions of costs are stood over
in the first instance to a conciliation conference before a
registrar or other agreed person. Such a conference is to take
place and be reported back to me within 21 days, i.e. by not later
than 4pm on Wednesday 31 March 1993.
4. If the matter is not resolved, the parties will by the same time
and date submit an agreed timetable for the remaining matters to
be determined. The directions which will then be given will
include the following:
(a) By not later than a time and date to be fixed, the
solicitors for the parties will each furnish the New South
Wales District Registrar with a confidential letter, not to
be made available to the me before judgment or other
completion of the litigation other than costs, setting out
the latest offer of settlement acceptable to their clients.
The offers are to be updated as appropriate.
(b) The solicitors for the parties will file an affidavit by a
time and date to be fixed stating that their clients have
had fully explained to them the possible outcomes of the
litigation and their possible liabilities for costs,
including the anticipated solicitor and client element of
costs. These consequences are to include the possibility
that costs, including indemnity costs, may be awarded to an
unsuccessful party, or may be denied to a successful party,
in the event that the conduct of the litigation by a party
is unsatisfactory, including that the result of the
litigation is not an appreciable improvement on the last
offer of or response to settlement made by that party.
(c) The individual parties and a person in authority for
corporate parties are each to file affidavits that they
fully understand these possible consequences.

Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.

DECISION

Introduction
EINFELD J. This claim by Ms Gilda Johnston and her father under sections 52 and 53A of the Trade Practices Act was made in a statement of claim filed as long ago as 25 March 1988. The history of this case has been to say the least unsatisfactory. Certain material has been filed late contrary to court orders and directions, while other material has been filed in improper or unhelpful form. The second and third respondents' final submissions were several months overdue and the opportunity for an early judgment was thus lost. Furthermore, the case has involved, I believe, some 26 directions hearings which for a case of this kind, if not any case, is wasteful and unjustifiable. At their most conservative, the costs in this case far outweigh the amount in issue between the parties. Yet the parties declined my best efforts to encourage settlement and in the end failed to address their final submissions to a number of the issues raised by the dispute between them.

2. The basic facts are reasonably simple. Following a letter of intent to lease of 13 January 1987 and pursuant to an agreement for lease signed on or about 6 April 1987, the applicants and the first respondent (Delata) executed a deed on 8 June 1987 whereby Ms Johnston leased shop 2 in the first respondent's then unfinished shopping centre located in Neutral Bay called the Bay Centre. It was her intention to conduct a beauty therapy business there upon completion of the centre. Under the deed Mr Johnston agreed to guarantee the lease payments by his daughter. The applicants now claim rescission of the lease and damages on the basis that the applicants' execution of the deed was induced by misleading and deceptive conduct in the form of oral misrepresentations by the respondents in contravention of Part v. of the Trade Practices Act. Occupation and the lease actually commenced on 21 October 1987.

3. Clause 20 of the deed stated that the documents signed, i.e. the lease attached to the deed and the deed itself, constituted the entirety of their agreement and that no inducement to sign by representation, verbal or otherwise, not set out in the documents is deemed to have occurred. Clause 21 of the deed states:

It is hereby expressly agreed acknowledged and declared that
the Lessor has agreed to enter into this Deed at the request
of the Guarantor. In consideration of the Lessor at the
request of the Guarantor entering into this Deed the said
Guarantor does hereby covenant and agree for himself and
each of his executors and administrators to guarantee to the
Lessor the due and punctual performance and observance by
the Lessee of all the Lessees obligations and duties on its
part to be observed fulfilled and performed pursuant to the
terms of this Deed...

Furthermore, clause 4.1(c) of the lease states:

The guarantees and indemnities contained in the two previous
paragraphs shall be continuing guarantees and indemnities
and shall remain in full force respectively for as long as
any monies whatsoever may become payable by the Lessee to
the Lessor under or in accordance with or by virtue of or in
consequence of this Lease. The guarantees and indemnities
contained in paragraphs (a) and (b) shall not in any way be
determined, discharged, impaired or released by any of the
following:-
i) any variation, whether with or without the consent or
knowledge of the guarantor, of any covenants or
provisions of this Lease; ....

4. The second respondents, J.P. Hargreaves and Co Pty Limited and John Patrick Hargreaves trading as Richardson and Wrench Neutral Bay (Richardson and Wrench), were at all material times real estate agents employed by Delata to lease the Bay Centre. Ms Sherelle Bergmann (now Mrs Horton), the third respondent, was at all relevant times the employee of Richardson and Wrench who mostly dealt with the applicants.

5. The respondents have cross-claimed against each other. Delata has cross-claimed against Richardson and Wrench and Ms Bergmann alleging that if the agents did make the representations which the applicants allege, it was in breach of their retainer which implied due care and skill in acting for Delata. Richardson and Wrench and Ms Bergmann claim indemnity and contribution from Delata by virtue of the facts that they were acting as agents for Delata and that any information they supplied to the applicants was conveyed in good faith and on information supplied by Delata. Delata at first denied that Richardson and Wrench and Ms Bergmann were its agents at the time any representations of the kind alleged by the applicants were made but during the hearing agency was in substance conceded, albeit by a most abstract and argumentative means.

6. Delata has also cross-claimed against the applicants for unpaid rent under what it alleges was an equitable lease. Although the applicants do not admit the existence of an equitable lease in their defence to the cross-claim, they do not anywhere else, including in their final submissions, take issue with the assertion of an equitable lease or when it commenced. Issues of damage have been set aside for separate hearing but the applicants did not put in issue the quantum of Delata's cross- claim. Therefore, if Delata's cross-claim against the applicants otherwise succeeds, they apparently do not dispute an obligation under the lease for the amount set out in Delata's affidavit of debt.

7. Paragraph C of the preamble to the deed states that:

The parties hereto have agreed that on completion of the
Centre the Lessor will grant and the Lessee will take a
lease of the part of the Centre described in the Second
Schedule hereto .....

8. Clause 2 of the deed says:

A Certificate from the Lessor's architect that the Centre
has been constructed in a proper and workmanlike manner in
accordance with the plans approved by and in accordance with
the building requirements of the Council shall be conclusive
evidence that the Lessor has fully and completely complied
with its obligations .....

9. By clause 3 of the deed:

The date of practical completion for the Centre shall be
deemed to be the date on which the Lessor shall furnish to
the Lessee the Certificate from the Lessor's architect .....

There is no dispute that such a certificate was furnished or that the centre was practically complete on 9 September 1987.

10. The central issues for present determination are whether misrepresentations by the agents were made to Ms Johnston inducing her to enter the lease, and Mr Johnston the guarantee, and if so, whether she is entitled to rescind the lease. Ms Johnston claims the following misrepresentations were made either to her or her mother and induced her to enter the deed:

a) that shop 2 was suitable for a beauty therapy business
b) that outgoings and charges in relation to shop 2 would not exceed
$50 per week
c) that on 3 April 1987 other people were interested in leasing shop
2 and if the first applicant did not sign the agreement within 48
hours, she would lose the opportunity of leasing shop 2
d) that the Bay Centre as at 3 April 1987 was subject to agreements
to lease in respect of all shops except shop 2
e) that the tenants would include two fashion boutiques, a jeans shop
and a coffee shop

The facts
11. Some facts are not disputed. In December 1984 Ventry Projects Pty Limited (Ventry), of which Mr Peter Coventry was the managing director, acquired the Bay Centre site. As early as 1986 a partially constructed shopping complex stood upon the premises. On 29 November 1986 Ventry made a "commercial decision", as Mr Coventry described it, to sell the vacant and partially constructed centre to Delata. However, the sale was on the basis that the centre was substantially leased, otherwise the sale could not proceed. Mr Coventry continued to manage the centre for some time after the sale to Delata. At the time of the applicants' entry into the deed, the centre was still not completed and in fact there was or had been a building dispute in relation to it.

12. Ms Johnston was at the time a young woman with little or no commercial experience. Her primary occupation was as a beauty therapist in which activity she wanted to commence her own business. In early November 1986 Ms Johnston, accompanied by her mother Mrs Vanda Johnston, approached Ms Bergmann, then working for Richardson and Wrench, and enquired about the availability of rental premises suitable for a beautician shop. There were some discussions in relation to the Bay Centre, then under construction, which led to Ms Johnston paying a deposit on shop 4 of the centre.

13. The centre is a semi-enclosed horseshoe-shaped building where only shops 1 and 6 have direct street frontage. Shops 2 and 5 are further back and 3 and 4 are at the very back of the centre. Ms Johnston's case is that she did not go ahead with the lease of shop 4 because it was too far from the street. Street frontage was thought to be extremely important to her business as she did not have an established clientele and would be dependant on passing traffic. In January 1987 Mrs Vanda Johnston telephoned her daughter and said that Ms Bergmann had indicated that shop 2 was available. Ms Bergmann was said to have told Ms and Mrs Vanda Johnston on 13 January 1987 that the outgoings would be $50 per week and that all the other shops were leased. A letter of interest in leasing shop 2 was signed. For the two months following this conversation, i.e. January to March 1987, Mrs Vanda Johnston said that on at least three occasions she asked Ms Bergmann what the other shops were. This information was said to be very significant to the success of the proposed shop as the mix of shops would indicate what customers would be brought into contact with the beauty business. It is alleged that on the third occasion Ms Bergmann told Ms Johnston that there were going to be a coffee shop, a Country Road-style shop, a high fashion ladies' boutique, and what is apparently known as a jeanery. Mrs Johnston said that on each occasion she spoke to Ms Bergmann, Ms Bergmann said "the complex is fully leased".

14. In March 1987 Mrs Vanda Johnston and her daughter met Ms Bergmann and indicated their concern about the lack of a street frontage for shop 2. Ms Bergmann allegedly assured them that this would be fine as another beautician in another centre was doing well without a street frontage. Apparently there was some delay in the signing of the lease and the first applicant's evidence was that Ms Bergmann continuously rang one or other of the Johnstons in relation to the lease. On 3 April 1987, the lease still not having been signed, Ms Bergmann telephoned Mrs Vanda Johnston and told her that her daughter had 48 hours to sign the lease which had to be signed by 10am the following Monday. Ms Johnston claimed that but for these representations she would not have signed the lease.

15. Ms Johnston says that in late June 1987 she discovered certain plumbing problems within the shop. As soon as she got access to the shop, she commenced to fit it out for business, but on 21 October 1987 when the shop opened for business, there were only two other shops leased. On the date of opening, Ms Johnston says that she told Delata's Mr Andrew Stabback, manager of the centre, of the plumbing problems and complained that the centre was not properly maintained. She also complained that the other promised shop lessees were not in the centre as yet to which he allegedly replied:

Don't worry about that. We'll have the other shops up and
going in the next month.

He also advised her to put her grievances in writing which she did. Ms Johnston's version of the conversation is largely corroborated by the letter she thus wrote to Mr Stabback on 21 October 1987. The letter stated:

Dear Andrew,
Further to our recent discussion I would appreciate written
confirmation from you regarding our current rental
situation.
I would like to bring the following points to your
attention:
When I signed the lease agreement, I was assured that the
complex was fully leased. In fact only three of the shops
including mine are trading.
As things stand at the moment, the complex itself is in no
way fully operational. For example, three of the shops are
still to be let: the lifts are not working and maintenance
in general is non-existent.
Therefore the complex is not generating sufficient interest
... in view of this I strongly request that you consider and
confirm in writing at your earliest convenience an extension
of my rental holiday until such time as the complex is at an
acceptable operational level.

16. Mr Stabback denied that the personal conversation on opening day occurred in the manner alleged although he admitted the occurrence of a conversation on that day. In cross-examination he could not remember exactly how the conversation did occur and what was said. I find that the conversation occurred largely in the manner alleged by the first applicant.

17. Over the ensuing months, Ms Johnston traded or tried to trade but the business did not succeed and on 14 March 1988 her solicitors sent a notice of rescission to the lessors. She vacated the premises on the following day. She had and has not paid any rent at all.

Misrepresentations
18. It is necessary to consider separately the evidence as to the various misrepresentations alleged by the applicants:
1. Suitability for the applicant's business
Ms Bergmann did not deny, in fact she frankly admitted, stating to the applicant that there was another beauty therapy business in another centre without a street frontage. If in fact shop 2 was not suitable for a beauty therapy business, Ms Bergmann's statement can only be the opinion of a real estate agent. There was no evidence that she ever held herself out to be knowledgeable as to which shops were suitable for particular businesses, especially beauty therapy enterprises, and which shops were not. It is inconceivable to me that Ms Johnston relied on Ms Bergmann's opinion in entering the lease. Ms Johnston herself admitted in cross-examination that she did her own research. Certainly it was entirely her interest to find out which shops were suitable and whether a shop without a street frontage was unsuitable. In any event, the applicants did not lead any evidence to establish that shop 2 was unsuitable for a beauty therapy business, and if so, whether it was its lack of street frontage that made it unsuitable. I therefore find that whatever representations were made were not relevantly misleading or deceptive and were not relied upon.

2. Outgoings
19. The applicants did not plead that there was any discussion in respect of the outgoings of shop 2. Their actual allegation in this respect was that Ms Bergmann represented to them that the outgoings in respect to shop 4 would be $50 per week. At the highest, what they allege is that Ms Bergmann's representations were statements as to what the outgoings would turn out to be in the future for all the shops in the centre, at least of this size. Ms Bergmann's evidence was that she believed that the outgoings would be "about" or "approximately" $50 per week. In fact they apparently turned out to be about $300 per week. Putting aside Delata's argument that this allegation should have been pleaded as a breach of warranty rather than a misrepresentation, or the possibility that it was in any event a representation about future events involving section 51A which was not properly litigated, it was quite clear to me that Ms Bergmann's evidence in this matter is to be preferred.

20. The application for a lease in respect of shop 4, signed on 13 November 1986, bore next to "Outgoings" the words "approx $50 per week". Furthermore, as appears from both the cross-examination and the affidavits filed by the applicants in reply, Mrs Vanda Johnston and Ms Gilda Johnston have both simultaneously changed their minds as to when the conversation in relation to outgoings for shop 4 occurred. In her affidavit sworn on 1 August 1990, Ms Gilda Johnston said it was 13 January 1987. However, in her affidavit in reply the date is changed to 13 or 14 November 1986. Mrs Vanda Johnston's evidence is identical, i.e. in her affidavit in reply she changes her evidence in precisely the same fashion as her daughter.

21. The applicants' evidence in this respect is not only unreliable because the affidavits of Ms Johnston and her mother are in this identical form, but because the changes occurred only after the Johnstons realised from the evidence that on 13 January 1987 Ms Johnston was almost certainly not present at any conversation with Ms Bergmann because the letter of intent to lease signed that day was otherwise inexplicably signed by Mrs Johnston. Even if these doubts are disregarded, it is difficult to see how the Johnstons could have relied on whatever Ms Bergmann said about outgoings. They had the benefit of independent legal advice. They had a deed and an agreement to lease. The lease made clear the liability of the lessee to pay defined outgoings but did not mention a sum of money at all. I am unable to accept that they relied in relation to shop 2 on the advice of Ms Bergmann in relation to shop 4, and believed that this was an immutable precise or nearly precise sum which would forever or for the first several months of occupation apply to shop 2. It must have been obvious that it was an estimate that could not be firmed up until the centre was complete and the cost of maintenance and services for the whole centre could be more accurately assessed and divided between the actual lessees. Clause 20 of the deed is of some relevance in this regard.

22. I find that Ms Bergmann did use the word "approximately" in the conversation relating to outgoings and that no reliance was placed by the Johnstons on her representations in this respect in entering the lease.

3. The deadline
23. In substance the applicants' allegations were based upon the following words of Ms Bergmann to Mrs Vanda Johnston on 3 April 1987:

Monday is the deadline. I must have the signed agreement
here by 10 am. You are the last shop to sign and there is
someone else interested in your shop. If you don't sign
within 48 hours you will lose the shop.

24. Mr Johnston's evidence was that on 4 April 1987 Ms Bergmann phoned him and said:

All shops are leased. Somebody is interested in shop 2. I
have given them (i.e. you, the Johnstons - or I have told
them that I have given you) 48 hours to finalise the lease.

25. Mr Coventry admitted asking Ms Bergmann to chase up the Johnstons to find out if they wanted the shop or not. He did give a deadline which was meant to be passed onto the Johnstons although he said that the threat was not included. Ms Bergmann agreed that by about 2 April she was "starting to get pretty persistent about the fact that the Johnstons should be signing the lease". Although her affidavit contained nothing about a conversation with Mrs Johnston on Friday 3 April 1987, she admitted in cross-examination that she contacted the Johnstons on that day and stated that the agreement must be signed "most probably" by the Monday. Ms Bergmann said that she was in effect transmitting the instruction given her by Mr Coventry in relation to this deadline. She disputed the threat and the "last shop to sign" assertion; the words "you are the last shop to sign" were not in fact put to her in cross-examination.

26. Nevertheless the substance of this representation, i.e. that if Ms Johnston did not sign the lease by the Monday following 3 April, she would lose shop 2, is admitted. I find that Ms Bergmann gave the Johnstons to believe that they had one last chance to sign and that if they did not do so by the stipulated time, the shop would be regarded as on the market again.

27. I seriously doubt that this statement is susceptible to being a contravention of Part v. of the Trade Practices Act and if susceptible, that it was misleading or deceptive. It is not necessary to decide those questions here and I proceed by assuming that it is both. I also assume, without deciding, that if Ms Bergmann's words included "you are the last shop to sign", this would be a relevant allegation of misleading or deceptive conduct although it is so similar to the next one to be discussed as not to require separate discussion. Although Ms Johnston said in cross-examination that the deadline representation was "crucial" to her decision to execute the agreement for lease, and it was submitted on her behalf that this evidence was supported by her signature of the agreement to lease on 6 April, there was little objective evidence that this statement was relied upon in any way. In fact the rest of the evidence contradicted reliance upon such a statement. For example, on 6 April a handwritten note of the Johnstons' solicitor Mr Lindsay reads "limit guarantee to payment of rent by guarantor?". This tends to demonstrate that Mr Johnston was still seeking to limit the scope of the guarantee as at 6 April 1987 which would hardly be the conduct of a person who was panicked into executing a document by reason of a conversation which had taken place three days before.

28. Furthermore, on 10 April 1987, Delata instructed its solicitor, in relation to the lease, to "hold pending further instructions". It is also uncontested that the solicitors for the parties continued to negotiate the terms of the lease by letters up to at least 12 May 1987. Ms Johnston could not have been unaware that she could at any time withdraw from the agreement to lease before the lease itself was signed. In such event, the deadline representation could not have induced her to enter the lease. I find that in fact it did not.

4. That the centre was fully leased
29. Consistent with her denial of having used the words "you are the last shop to sign" on 3 or 4 April 1987, Ms Bergmann strenuously denied that she ever represented that the centre was fully leased. However, the evidence seemed to me to bear out the opposite conclusion. The circumstance that the sale of the centre by Mr Coventry to Delata depended on its substantial letting by early 1987 suggests a strong incentive to lease the centre in a short period of time and to give any assurances to any likely lessees necessary to achieve early agreement. Furthermore, it was not disputed that Mr Coventry sent a leasing schedule to Ms Bergmann which indicated that certain shops were "leased". It is common ground that these shops were in fact not leased but were at most only subject to expressions of interest. Although Mr Coventry stated that he explained to Ms Bergmann that "leased" did not mean legally leased but meant only an expression of interest, there is little doubt that Ms Bergmann believed that certain shops were off the market because they were already leased. Her admission in cross-examination that she had told the Johnstons on several occasions that certain shops were "unavailable" would probably have conveyed the same as "leased", even if the word "leased" was not actually used.

30. Mr Coventry stated in cross-examination, perhaps a little euphemistically, that real estate agents are "optimistic" people. It is far more likely that Ms Bergmann's "optimism" was reflected in her use of the word "leased" to the Johnstons and that she had in fact represented to the Johnstons that the centre was substantially or fully leased. This is further strengthened by Ms Johnston's letter to Mr Stabback following his representation to her on 21 October 1987 that the centre would be fully occupied within a month.

31. There are also some problems with the applicants' evidence. For example, they admitted that there were "For Lease" signs from various agents in some shop windows at the very time when they say they believed that the centre was fully leased. It was submitted, although without clear evidence, that these signs were interpreted by Ms Johnston as signs of real estate agents advertising themselves. However, Ms Johnston was unable to explain in cross-examination how the presence of even the signs she took them to be could be consistent with a belief that the centre was fully leased. The respondents criticised the fact that the affidavit of Mrs Vanda Johnston is in virtually identical terms to her daughter's affidavit. There is no doubt that these two affidavits represent a pooling of the recollections of these two people, rather than constitute the unaided testimony of two separate people. This fact certainly demanded the close scrutiny of their oral evidence but I found their evidence generally persuasive, if occasionally a little convenient or too naive to be completely true.

32. On the other hand, Ms Bergmann's evidence on this matter was not convincing. I am unable to accept that she referred in these conversations only to "expressions of interest", "applicants" or "applications for leases". I believe that Ms Bergmann did say words that led Ms Johnston and her mother to believe that the centre was in fact fully leased, or at least that it would be fully leased when she went into occupation of shop 2 and commenced paying rent. This also corresponds to commonsense. It is conceded and indeed argued by both parties that Ms Johnston had a complete lack of commercial experience and established clientele. It is unlikely that she would make her first foray into business in premises that were in fact almost completely empty. It is even less likely that she would commence, or that her parents would allow her to commence, paying rent until the centre was at least reasonably well established and occupied. Mr Johnston's guarantee gave the parents extra leverage and influence on her in this respect if she was otherwise minded to act independently.

5. The mix of shops
33. That Ms Bergmann gave the Johnstons the impression that the centre was to be occupied by a varied mix of shops and businesses can be gained from her affidavit and draft statement. In this draft prepared for the proceedings, Ms Bergmann stated that she had told the Johnstons on 13 January 1987 that:

...definitely a jeans shop, a picture framer, a photo shop
and a coffee shop. There will be offices and a restaurant
upstairs.

34. The word "definitely" was removed from the final version of the statement. In the course of cross-examination, Ms Bergmann appeared to correct certain answers by saying that she had told the Johnstons that there was an applicant for a coffee shop. Moreover, Ms Bergmann made no reference in her affidavit to a conversation with the Johnstons on 10 February 1987 in relation to the mix of shops. In cross-examination she admitted that such a conversation occurred, as was confirmed by her own diary entry, although she qualified this by claiming that they were applicants for shops.

35. I find that Ms Bergmann did make the alleged representations about the mix of shops. In the process she misled Ms Johnston into believing that the centre was fully or substantially let to a variety of shops and businesses such as would expose her to a reasonable or satisfactory breadth of potentially interested clientele such as to improve her chances of developing a successful business.

Reliance
36. The representations that the centre was fully leased with an attractive mix of shops were misleading, deceptive and false. Whether there was reliance on them so that they induced the applicants into entering the lease and the guarantee respectively is the aspect of the case which causes the most difficulty. Ms Johnston signed an agreement to lease as well as a deed which unequivocally stated that no representations had been made to her. Furthermore, she signed the deed when the centre was still under construction, and when no other tenants were visible. If the extent of the tenancies granted was so important to Ms Johnston, it might well have been included in the contract. It is not disputed that she was being represented by her solicitor at the time. Although no party argued that clause 20 was effective in this regard, clearly the solicitor would have been conscious that the "no representations" clause was inserted to try to avoid the rigours of the Trade Practices Act.

37. It is undisputed that the Bay Centre is a high quality centre bearing some prestige, and it is clear that Ms Johnston liked it. I accept Ms Bergmann's evidence that the applicants had first intended and were keen to take shop 4 which they believed was in a better position than shop 2. Mr Coventry had said that shop 4 was not available as confirmed by a letter sent to the applicants by Ms Bergmann dated 17 December 1986 stating:

We sincerely regret the failure of this tenancy to proceed
and will make every endeavour to find a suitable location as
quickly as possible.

38. This letter contradicts the Johnstons' evidence that it was in fact they who refused to take shop 4. The whole of the evidence shows a keenness by the Johnstons to take whatever shop in the centre was available. Despite the talk about a street frontage shop, there is no evidence that if Ms Johnston had known that the front shops were not leased, she would have preferred one of them and not leased shop 2 or that it would have made any difference to what occurred if she had.

39. In some ways Mr Johnston's position in relation to inducement is even more difficult than his daughter's. He admitted that before signing the deed and agreement for lease, he had had explained to him the provisions of the agreement. He must have taken into account clause 20 providing that no extra-contractual representations had been made. He candidly admitted in cross-examination that he would have done or signed anything that would have enabled his daughter to obtain her shop. Undoubtedly Mr Johnston was largely influenced by his daughter's belief in the viability of the shop and her enthusiasm to launch her first business.

40. On the other hand, from what his daughter and his wife had undoubtedly told him, and from what he otherwise came to know, this was to Mr Johnston an agreement for the commencement of a business made viable by his daughter's professional talents and by being part of an appealing complex of varied retail businesses. What he in fact ended up guaranteeing were the talents of his daughter unable to be made profitable because she had taken, contrary to what she had been promised, a space in a shopping centre bereft of shops and customers.

41. Thus this admission of unqualified support for his daughter's wishes ties Mr Johnston quite tightly to his daughter's claim that she relied on the representations of a centre fully leased with a suitable mix of shops. Although Ms Johnston was not an experienced businesswoman, and although the market research she did in relation to her business was fairly insubstantial, it is inconceivable that she would have signed an agreement to pay a substantial rent for participation in empty or largely empty premises. Indeed, as she said in her letter to Mr Stabback on the opening day, it would not have been fair to make her pay rent for an empty shopping centre. Although they manicured some of its details, the applicants' evidence led me to believe that Ms Johnston would not have agreed to pay rent and Mr Johnston would not have guaranteed the rent payments if they had known that none or few of the shops in the centre were leased. I find that the applicants signed their agreements only because they were under the impression, from what they were told by Ms Bergmann as agent for Delata, that the centre was fully, or at least substantially, leased to a varied cross section of operating businesses.

Rescission of lease
42. The next major issue in this case is whether in these circumstances the first applicant was entitled to and did rescind the lease. Ms Johnston opened the shop called The Beauty Aspect at shop 2 on 21 October 1987 and sent the notice of rescission on 14 March 1988. At that time the centre was at most half let. There was no evidence as to why the lease was in fact rescinded at that particular time, nor indeed why she elected to rescind and leave the shop on that date rather than apply solely for damages. During all this period no rent was paid at all. In her letter to Mr Stabback of 21 October 1987, Ms Johnston did not raise any question of rescission but asked for an increased rental holiday. Her evidence on the conversation with Mr Stabback preceding that letter included this statement:

...but we have had a lot of delays because of the plumbing
and the complex is still almost empty. I don't think it is
fair to have to start paying rent under these circumstances.
The complex isn't even properly maintained.

43. I accept that evidence. It seems that at that time at least, Ms Johnston herself did not want or believe she was entitled to rescind the agreement. It is noteworthy that the failure to pay rent was not pleaded as a repudiation of the lease. The premises were re-let after the rescission on 10 December 1988 when shop 2 and another shop were let to a company called Made In Japan. It appears that the centre was by this time fully let. Ms Johnston did not explain why she did not wait for the premises to be fully let and then commence payment of rent.

44. Although the parties did not make detailed submissions on this matter and rescission was inadequately pleaded, it is necessary to say a little about the possible application of rescission to the circumstances of this case. There is no doubt that section 87(2) of the Trade Practices Act empowers this Court to declare part or whole of a contract void ab initio. This discretion is not limited by principles of general law: AGC Ltd v. Jennings (1981) 1 NSWLR 50. Nevertheless, equitable principles can and should be used to guide the exercise of discretion. A significant matter is the presence or absence of fraud. It is well established that in the absence of fraud the court will be reluctant to find a contract rescinded: Munchies Management Pty Limited v. Belperio (1989) 84 ALR 700; Creative Landscape Design Centre Pty Limited v. Platz (1989) ATPR 40-980, and that it should only be granted on the very strictest evidence: Spence v. Crawford (1939) 3 All ER 271. There is no such evidence in this case.

45. Furthermore, acts amounting to affirmation of the contract before a notice of rescission is given generally weigh against the grant of the remedy of rescission: Myers v. Transpacific Pastoral Co Pty Limited (1986) ATPR 40-673. Payment of rent, especially with knowledge of the lessor's non-compliance with any contractual or other legal obligations, is a typical affirmation of a lease. That no rent was paid here appears to have been a consensual arrangement between the parties. It does nothing to prove or disprove affirmation. On the other hand, although the evidence on this matter was scant, the benefit of the lease was taken for almost five months in that the business was apparently operated between 21 October 1987 and 15 March 1988.

46. Without deciding the issue of whether or not the lease agreement was affirmed, this is, in my opinion, an inappropriate case for the remedy of rescission. No fraud was pleaded, no evidence was adduced as to why the lease was rescinded, and for reasons already outlined, Ms Johnston acted in a way which was inconsistent with any desire on her part to rescind the contract. In my view Ms Johnston has not made out any basis upon which she is entitled to rescind the deed or lease agreement. I do not believe that she validly rescinded the deed on 14 March 1988. The applicants repudiated the agreement, a repudiation which Delata was entitled to accept. I refuse the applicants' request for declarations that the deed, the equitable lease and the guarantee were void ab initio.

47. The quantification of damages was set aside for later consideration. I will also postpone a final decision on the cross-claim between Delata and the applicant. The applicants will be entitled to damages resulting from the particular misrepresentations which I have found, but the question of any set off against those losses for the apparently agreed amount of unpaid rent is still to be debated. At present it is difficult for me to see how damages can be awarded for such things as expenditure in fitting out the shop and loss of profits if the rent is not credited. As presently advised, I should have thought that damages should be dealt with here on broadly the same lines as an almost identical case was dealt with in Brown and Anor v. The Jam Factory Pty Limited [1981] FCA 35; (1981) 53 FLR 340. In that case Fox J. said at 351:

The correct way to approach the assessment of damages in
this case in my view is to compare the position in which the
applicants might have been expected to be if the misleading
conduct had not occurred with the situation they were in as
a result of acting in reliance on that conduct...This is the
same or analogous to the general principle respecting the
measure of damages in torts. There was not anything
promissory in the statements relied upon and no basis exists
for adopting the measure of damages applicable in contracts.

48. Finally, I have to decide the cross-claims between the respondents. Delata conceded that Richardson and Wrench and Ms Bergmann were entitled to accept that Mr Coventry was Delata's agent at relevant times but it claims that they were negligent in their work. It is true that some of the misleading conduct alleged by the Johnstons resulted from information passed on by Mr Coventry to Ms Bergmann, but basically the two misrepresentations which I have found proved were made by Richardson and Wrench and Ms Bergmann in the course of their agency from Delata. I could find no evidence of negligence in the carrying out of this agency. It was not argued that acts or conduct in contravention of sections 52 and 53A of the Act by an agent on behalf of a principal are per se negligent. In any event, in terms of the Trade Practices Act, Richardson and Wrench and Ms Bergmann were directly liable to the applicants along with Delata. No case for their also being ordered to contribute to Delata's liability to the applicants has been made out.

49. The remaining steps in this case should be settled by negotiation or court-assisted conciliation. If this is not done the parties should be on notice that an order for costs will not necessarily follow the event and will not necessarily be limited to party and party costs.