|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Federal Court of Australia - Full Court Decisions |
Last Updated: 27 February 2007
FEDERAL COURT OF AUSTRALIA
Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177
CORRIGENDUM
FINISHING
SERVICES PTY LTD (ACN 070 167 207) v LACTOS FRESH PTY LTD (ACN 088 647 278) AND
COLLIERS INTERNATIONAL (VIC) PTY LTD (ACN
005 032 940)
VID 342 OF
2006
KIEFEL, SUNDBERG AND EDMONDS JJ
7 DECEMBER 2006
(CORRIGENDUM 20 FEBRUARY 2007)
MELBOURNE
|
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
|
|
BETWEEN:
|
FINISHING SERVICES PTY LTD (ACN 070 167 207)
Appellant/First Respondent by Cross-Appeal |
|
AND:
|
LACTOS FRESH PTY LTD (ACN 088 647 278)
First Respondent/Cross Appellant COLLIERS INTERNATIONAL (VIC) PTY LTD (ACN 005 032 940) Second Respondent/Second Respondent by Cross-Appeal |
|
JUDGES:
|
KIEFEL, SUNDBERG AND EDMONDS JJ
|
|
DATE OF ORDER:
|
7 DECEMBER 2006
|
|
WHERE MADE:
|
CORRIGENDUM
1 In the Reasons for Judgment of Justices Kiefel, Sundberg and Edmonds [2006] FCAFC 177, after the words ‘Reasons for Judgment’ on a new line, insert the words ‘THE COURT:’.
2 At par [37] line 4: Delete the words ‘Colliers Victoria’ and replace with the words ‘Lactos Fresh’.
3 At par [37] line 8: After the word ‘contributed’ delete the ‘,’. After the word ‘to’ and before the word ‘Lactos’ insert ‘,’.
|
I certify that the preceding three (3) numbered paragraphs are a true copy
of the Corrigendum to the Reasons for Judgment of the Honourable
Justices
Kiefel, Sundberg and Edmonds JJ.
|
Associate:
Dated: 20 February 2007
FEDERAL COURT OF AUSTRALIA
Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177
CONTRACT – whether notice given
by landlord containing new rental assessment valid - whether notice unequivocal
and whether reasonable
recipient would have no doubt as to meaning –
whether reasonable recipient credited with knowledge of terms of lease –
whether party misled by notice – whether absolute clarity required
TRADE PRACTICES – misleading or deceptive conduct –
causation – whether third party assessment causative of applicant’s
loss –
sufficient cause or connexion required – consideration of the
commonsense approach and the but for test - whether break in casual
connexion between contravention and loss - whether reliance on third
party’s assessment
PRACTICE AND PROCEDURE – amendment
to pleadings – whether amendment should be allowed after appeal process
– whether issue of implied term
be remitted for further hearing
Trade Practices Act 1974 (Cth)
ss 52, 82
Byrne v Australian
Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 Cited
Chappel v Hart [1998] HCA 55; (1998) 195
CLR 232 Considered
Haynes v Top Slice Deli Pty Ltd (1995) ATPR
(Digest) p 46-147 Cited
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
Cited
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41;
(2002) 210 CLR 109 Considered
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437;
(1992) 37 FCR 526 Cited
Lex Services PLC v Oriel House BV [1991] 2
EGLR 126 Cited
Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19;
[1997] AC 749 Applied
March v Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
Considered
McCarthy v McIntyre [1999] FCA 784 Considered
Patel v
Earlspring Properties Ltd [1991] 2 EGLR 131 Cited
FINISHING SERVICES PTY LTD v
LACTOS FRESH PTY LTD AND COLLIERS INTERNATIONAL (VIC) PTY LTD
VID
342 OF 2006
KIEFEL, SUNDBERG & EDMONDS
JJ
7 DECEMBER 2006
MELBOURNE
|
AND:
|
THE COURT ORDERS THAT:
1. The appeal is allowed.
2. The cross-appeal is dismissed.
3. The declaration made by Weinberg J on 15 March 2006 and the orders numbered 2 and 3, as between the applicant and the first respondent to the application made on 15 June 2006 are set aside.
4. In lieu of those orders it is ordered that the application be dismissed as against the first respondent to the application and that the applicant pay the first respondent’s costs of the proceedings.
5. The first respondent to the appeal pay the appellant’s costs of the appeal and the costs of the appellant and the second respondent’s costs on the cross-appeal.
Note: Settlement and entry of orders is
dealt with in Order 36 of the Federal Court Rules.
|
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
|
|
BETWEEN:
|
FINISHING SERVICES PTY LTD (ACN 070 167 207)
Appellant/First Respondent by Cross-Appeal |
|
AND:
|
LACTOS FRESH PTY LTD (ACN 088 647 278)
First Respondent/Cross Appellant COLLIERS INTERNATIONAL (VIC) PTY LTD (ACN 005 032 940) Second Respondent/Second Respondent by Cross-Appeal |
|
JUDGES:
|
KIEFEL, SUNDBERG & EDMONDS JJ
|
|
DATE:
|
7 DECEMBER 2006
|
|
PLACE:
|
MELBOURNE
|
REASONS FOR JUDGMENT
1 The appellant (‘Finishing Services’) was as at 22 December 2002 the lessor of premises in Mulgrave, Melbourne, owned by it to the first respondent (‘Lactos Fresh’). The lease was dated 1 September 1999 and provided for a term of seven years with the option of a further term. Lactos Fresh was then called Nobi Holdings Pty Ltd. This appeal concerns the notification by Finishing Services on that date of a new and higher rent to be paid from 1 March 2003 which it purported to give under a rent review clause in the lease agreement. A single judge of this Court held the notice to be ambiguous and therefore invalid and made a declaration accordingly ([2006] FCA 219). The alternative case brought by Lactos Fresh was against the second respondent (‘Colliers Victoria’) who had advised Finishing Services as to an appropriate market rental. It is alleged that this conduct was misleading and deceptive, in contravention of s 52 of the Trade Practices Act 1974 (Cth) and that Lactos Fresh suffered loss in consequence of it.
2 The lease provided for an annual rental. At the time the lease was signed it was fixed at $244,152 per annum. Clause 3.1 of the lease provided that rent be paid by Lactos Fresh by equal monthly payments in advance. Clause 3.2.2 ‘market rental review’ provided:
‘Upon any day being not more than six months prior to 1 March 2003 and (if the Lessee exercises its option to renew) not more than 6 months prior to 1 September 2006 and 1 March 2010. The Lessor or the Managing Agent may give written notice to the Lessee stating the sum which the Lessor assesses to be the proper rent for the premises for the ensuing period such rent being the market rental value for the premises on the assumption that the premises are tenanted and with all fixtures and fittings and partitions, plant machinery utensils shelving safes and other articles and materialsin the natureas set out in schedule 2of trade or tenants fixturesinstalled by either the Lessor or the Lessee and having regard to the rents being obtained for comparable premises within the same municipality and the rent shall be varied accordingly, such variation to take effect on and from the day immediately following the date to which such notice shall relate and if the party receiving the notice does not object in writing to the proposed market rent within 30 days it becomes the rent for the review period PROVIDED that the Lessee may by notice in writing (delivered to the Lessor or the Managing Agent within 30 days following receipt of the Lessor’s or the Managing Agent’s notice of assessment) state that he disputes the Lessor’s assessment in which case sub-clause (a) hereof will apply AND in all respects time shall be of the essence in the delivery of the said notice within the time shall so stipulated ...’
The clause went on to provide for the resolution of any dispute by a determination to be made by the nominee of the President or other senior officer of the Australian Institute of Valuers.
3 The letter in question on the appeal, signed by Mr Allen a director of Finishing Services, dated 20 December 2002 and addressed to Nobi Holdings, was in these terms:
‘Re: Notice of Rental Assessment commencing 1 March 2003 for 42-44 Glenvale Crescent, Mulgrave
Under the terms of our lease a market review of the rent paid is to take effect from 1 March 2003. Please find enclosed the Managing Agent’s letter in this regard which is self explanatory and will form the basis of the new rent starting 1 March 2003.
In due course we will correspond with you regarding the new monthly rental and the appropriate GST that will be payable.’
4 The letter from Colliers Victoria 24 October 2002, which was enclosed, was addressed to Finishing Services and advised:
‘As your managing agent we draw your attention to the fact that a market value rental review is due in respect of this property on the 1st of March 2003.
We have investigated the current market rental levels for similar buildings that incorporate cool room and chiller facilities. We report that in our opinion the market rates for the various areas are as follows:-
Offices: 208 m2 x $155.00 p.sq.m. $ 32,240.00 p.a.
Coolroom, etc: 2,768 m2 x $135.00 p.sq.m. $373,680.00 p.a.
Warehouse 400 m2 x $ 75.00 p.sq.m. $ 30,000.00 p.a.
$435,920.00 p.a
Should you agree with the above we will notify the tenant accordingly.’
5 The letter from Finishing Services and its attachment were received by Nobi Holdings on 23 December 2002. After receiving that notice its general manager, Mr Bertrand, telephoned Mr Finkemeyer, who was in charge of another facility which the company rented in Victoria and who had an association with Jones Lang LaSalle, a commercial real estate agent. He asked Mr Finkemeyer to provide him with an opinion of the current market rent applicable to the Mulgrave premises.
6 Mr Bertrand gave evidence before his Honour that he had a telephone conversation with Mr Allen on 23 December 2002. Its purpose was to arrange a meeting to discuss alterations to the Mulgrave premises. They were unable to meet until 3 February 2003 because Mr Allen was unavailable over the Christmas period and until 15 January 2003 and Mr Bertrand was on leave between 15 January 2003 and 30 January 2003. Mr Bertrand said that the conversation would have occurred before he read the notice. He said that no reference to a rental increase was made by Mr Allen in the course of that conversation. Mr Allen, for his part, denied that any such conversation took place and said that it would not have been possible for him to have had a conversation on 23 December 2002 because the office of Finishing Services had closed for the Christmas break on the afternoon of 20 December 2002. Mr Bertrand then said that the conversation must have taken place on that date. Although it was not necessary for his Honour to make a finding as to whether the conversation had occurred, because of the conclusion he reached concerning the ambiguity and therefore ineffectiveness of the notice, he observed that he would not have been able to find, on the balance of probabilities, that Mr Bertrand’s version was correct. His Honour did not make any observation concerning Mr Bertrand’s creditworthiness.
7 Mr Finkemeyer replied to Mr Bertrand’s request for advice on 17 January 2003, but Mr Bertrand did not receive it until 31 January 2003, when he returned from leave. Mr Finkemeyer’s advices suggested an annual rental of $374 720 as appropriate.
8 Mr Allen sent a letter dated 20 January 2003 to Lactos Fresh addressed to its parent company, Lactos Pty Ltd, in Tasmania and marked to the attention of the company secretary, the person with whom he usually communicated regarding the lease of the Mulgrave premises. He asked that Lactos Fresh advise its bank to alter the telegraphic transfer due on 1 March 2003, to take account of the new rental for the current year at ‘$39 959.33 per month of which $3632.67 is the GST component’.
9 A meeting took place on 3 February 2003, the meeting which Mr Bertrand said had been arranged on 23 December 2002. Mr Allen said that this meeting was organised on 3 February 2003, after Mr Bertrand had called to inform him that alterations had been made to the leased premises. At that meeting Mr Bertrand gave Mr Allen a letter in which it was said:
‘We acknowledge receipt of your letter with the assessment by your agent of the market value for the property we rent from you in Mulgrave. The amount of the increase you are asking for is very detrimental to our business. Therefore we have requested an estimation from our own agent.
His assessment turns out to be significantly different from your agent estimation. His opinion on office/dry warehouse cost is $ 70 p.sq.m. and $ 120 p.sq.m. for refrigerated space,
We would like to understand how these two numbers coming from professional agents can be so different and resolve this matter with you in due course.’
Mr Bertrand reiterated the complaint that the increase in rental would have a detrimental impact on his company’s business in conversation with Mr Allen. Mr Allen said that it was too late to complain.
10 Mr Bertrand then sent a letter to Mr Allen dated 7 March 2003 in which it was said:
‘It is clear then that we do not have agreement as to the market rent for the premises and as such the provisions of clause 3.2.2(a) of the Lease are now operative.
We confirm our previous advices that we dispute that you have provided a proposed increase that is at market. We also note that you are estopped from relying on the time period set out in clause 3.2.2 due to your unavailability to meet during the relevant period.’
11 Mr Allen responded by letter on 12 March 2003 in which he said that no written objection, as required by clause 3.2.2, was received during the 30 day period and ‘[y]ou are therefore unable to dispute the rental as advised in our correspondence of 20 December 2002’.
12 A meeting took place between Mr Bertrand and Mr Allen on 17 March 2003, with some other persons present. Mr Bertrand offered to pay increased rent up to the figure which Lactos Fresh had been advised reflected market value. Mr Allen again said that it was too late to object to the increase in rent. Mr Bertrand said that Mr Allen should have told him about the 30 day deadline, but Mr Allen rejected this suggestion. The meeting ended with Lactos Fresh intending to consider its position.
13 On 20 March 2003 Mr Bertrand sent a letter to Mr Allen in which Lactos Fresh confirmed its position as set out in the letter of 7 March 2003. It went on:
‘Today, we have made an additional payment of $ 9,116.00. As such, we have now commenced paying rent at the amount set out in our letter to you of February 3, 2003. This increased payment is being made as a sign of good faith. It is, however, an interim measure pending the assessment of the correct amount.
As such, we repeat our request that you implement the provisions of clause 3.2.2(a) of the Lease and request the Australian Institute of Valuers to nominate a member to determine the current fair market rent.’
Mr Allen responded by letter dated 31 March 2003 in which he advised that the new rent had been fixed according to the lease and, in effect, he wished no further communication about the matter. Lactos Fresh thereafter paid the increase rental under protest.
14 These proceedings were commenced on 17 December 2003. In its original statement of claim Lactos Fresh, consistent with its assertion in the letter of 7 March 2003, alleged that Finishing Services was estopped from claiming the increase rent. In its amended pleading it alleged that the ‘purported letter’ did not state the proper rent for the premises for the period from 1 March 2003 ‘such rent being the market rental value for the premises having regard to the rents being obtained for comparable premises within the same municipality’. It gave as particulars:
‘... The Purported Notice did not state that the Lessor assesses the proper rent for the premises to be $435,920.00 and instead referred to a market review to take effect from 1 March 2003 and that further correspondence would be provided and the accompanying letter from the Managing Agent referred to a market rental review being due on the 1st of March.’
15 In the following paragraph of the statement of claim it was further alleged that the sum stated in the notice did not constitute an assessment, or a reasonable assessment, of the proper rent for the premises ‘such rent being the market rent or value for the premises having regard to the rents being obtained for comparable premises within the same municipality’.
The Validity of the Notice
16 Lactos Fresh sought to advance two arguments before his Honour. It was submitted that the notice was invalid because it did not meet the express requirements of clause 3.2.2, alternatively the notice was vague and uncertain and for that reason invalid.
17 There were two limbs with respect to the first argument. It was submitted that the lessor’s assessment of rent was not of a ‘proper rent’ because it knew the rent claimed to be excessive. His Honour rejected this submission, holding that clause 3.2.2 did not require the lessor to stipulate a ‘reasonable’ or ‘non-excessive’ sum. That contention was not pursued on the appeal. The second limb of the argument concerning the substantive requirements of the clause was that the assessment upon which the notice was founded included all fixtures and fittings in the premises and not just those referred to in schedule 2 of the lease, as clause 3.2.2 required. This had the effect of inflating the rental. His Honour concluded that the matter had not been pleaded and Lactos Fresh required leave to amend its pleading in order to pursue the argument. His Honour considered the two competing contentions: that the application was brought after the close of evidence when it might have been notified earlier; and that Lactos Fresh was not alert to the basis of the assessment until Mr Allen had been questioned. His Honour held that the application could have been brought after that evidence was given. If it had, the respondents would have been able to call evidence to meet the allegation. It might be concluded that it would be unjust to allow the amendment. His Honour denied leave.
18 The focus of his Honour’s reasons was therefore the clarity of the notice and what it could be taken to convey to a party in the position of Lactos Fresh. His Honour stated the test derived from Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19; [1997] AC 749 (‘Mannai’) to be:
‘129 The test to be applied to determine the validity of the notice is whether a reasonable recipient, who is credited with knowledge of the terms of the lease, and taking into account the surrounding circumstances, would have doubt as to the meaning of the notice or have regarded it as equivocal. If so, the notice will be found to be invalid.’
His Honour observed that the test has since been repeatedly applied in English and Australian courts.
19 His Honour accepted that the notice did not need to refer to clause 3.2.2, nor did it need to inform the recipient of the 30 day period in which to object to the increased rent. It was not required to adopt any particular form of words in order to be valid. Even taking these matters into account his Honour was unable to find that the notice satisfied the relevant test. In his Honour’s view it was not expressed unequivocally and ‘would leave a reasonable person in receipt thereof in doubt as to its effect’. His Honour went on:
‘136 The letter refers to the market review, and then proceeds to refer to the Collier’s letter "in this regard" which is said to be "self explanatory" and "will form the basis of the new rent". It does not state a particular figure, nor does it say what the Lessor "specifies" or even "proposes" to be the new rent. The Colliers letter gives an opinion as to the market rates applicable to the Mulgrave premises, and then goes on to say "[s]hould you agree with the above we will notify the tenant accordingly". Mr Allen’s letter ends by stating "[i]n due course we will correspond with you regarding the new monthly rental".
137 In my view, reading the notice as a whole, but particularly the reference to the "self explanatory" Colliers letter (which itself refers to corresponding with the tenant in due course), would create sufficient doubt in the mind of a reasonable recipient as to make the notice invalid. Any reasonable tenant apprised of the terms of the lease would, in reality, need to get some confirmation from the landlord as to whether this was, or was not, a notice under clause 3.2.2. It is quite possible, as the applicant submitted, that the notice could have been construed as constituting some sort of preliminary step prior to the activation of the formal rent review machinery under the lease.’
20 Lactos Fresh had apparently submitted that the context in which the notice should be read included the making of an arrangement in December 2002 for the meeting between Mr Allen and Mr Bertrand on 3 February 2003. His Honour said that he had not taken that into account and went on to refer to Mr Bertrand’s reaction to the notice:
‘139 I accept that had Mr Bertrand been aware of the rent review clause in the lease (which he acknowledged he was not when he received the notice), it is probable that he would [have] done something about it, rather than waiting until a meeting in early February to address the issue. Under cross-examination, Mr Bertrand acknowledged that the first time he looked at the lease was immediately prior to the 3 February meeting, and it was at this stage that he first realised that there was a 30 day time limit to object to rent review notices. Mr Bertrand said that he did not look at the lease before this time because, in his mind, 1 March 2003 was the date by which he had to do something.
140 Also under cross-examination, it was suggested to Mr Bertrand that when he received the notice, he could have:
"readily gone out and said, "Well, what does the lease say about market review?" Couldn’t you?"
141 Mr Bertrand replied that he wished he had done this. However, it was not clear whether he was suggesting that if he had done so, he would have appreciated that the notice was a notice under clause 3.2.2, or whether he would have contracted Mr Allen to find out whether the notice was intended to be a notice under clause 3.2.2.
142 In any event, the correct test to apply is not whether there is enough in a notice to put a reasonable tenant on inquiry to find out if a notice was indeed intended by the lessor to be a notice under 3.2.2. Nor is the subjective reaction of the recipient of the notice relevant: see Mannai at 767 per Lord Steyn and Lancecrest at [38] – [43] per Neuberger LJ and [88] per Brooke LJ. Either the notice is unequivocally a notice made pursuant to clause 3.2.2, or it is not. If the meaning of the notice is in doubt, objectively viewed, the notice is invalid.’
21 His Honour accepted that the notice was headed ‘Notice of rental assessment commencing 1 March 2003...’ but was of the view that the additional statements affected the clarity of and imported doubt into the rest of the notice. His Honour concluded that the notice was not a valid notice pursuant to clause 3.2.2.
22 Mr Bertrand said in cross-examination that he read the notice carefully when he received it. He believed a review was to occur in March 2003. He contacted Mr Finkemeyer and asked him to obtain advices about market rental. He did so to see that what was being proposed was reasonable. He said that he considered the notice to be important and when he saw it, by which we infer he means the rent referred to in it, he thought that this could be detrimental to Lactos. It was significant given the budget within which the business operated. He said that he made no further enquiry of Mr Finkemeyer because he had not read the lease. He had not done so when he received the notice. The first occasion upon which he saw the lease and clause 3.2.2 was on 31 January 2003 or 3 February 2003, just before his meeting with Mr Allen. That was the first time he realised there was a 30 day limit. When he received the notice he was busy concluding matters for the end of the company’s financial year and thought that he had time to deal with the rental review. He had in mind the March date as relevant. It was at the conclusion of the meeting on 3 February 2003, about alterations which had not been approved by Finishing Services, that he raised the question of the rent review for the first time. He thought that he would be able to negotiate a rental lower than that stated in Finishing Service’s notice.
23 The references to Mr Bertrand’s evidence, and his state of mind, were made by Finishing Services in argument on the appeal. The argument that was sought to be developed in reliance upon this evidence in connexion with the notice was not entirely clear. At some point in argument it appeared to take the shape of an estoppel, by which Lactos Fresh could not positively assert that it was misled by the notice. Certainly the strong impression gleaned from the evidence was that Mr Bertrand realised that a claim for increased rent was being made. The matter of which he was unaware was that his company had only 30 days within which to dispute the claim that the new figure for rental represented rental at market rates. He assumed that he had longer, perhaps until early March to respond.
24 A court might decline relief where it is shown that a party was not in fact misled by a ‘trigger’ notice, although they had argued that they were. This point should however rarely be reached if regard is had to how a reasonable person, having knowledge of the terms of the lease, would read the notice. The knowledge which such a person is assumed to have is of some importance on this appeal.
25 Lord Steyn in Mannai said that the inquiry is ‘what reasonable persons, circumstanced as the actual parties were, would have had in mind’ (at 768). His Lordship went on:
‘... It follows that one cannot ignore that a reasonable recipient of the notices would have had in the forefront of his mind the terms of the leases. Given that the reasonable recipient must be credited with knowledge of the critical date and the terms of clause 7(13) the question is simply how the reasonable recipient would have understood such a notice ...’
Further observations may be added in connexion with the approach to be taken to what a notice is likely to convey. The courts often point out that the process of construction is not one by which lawyers might dissect its terms or place particular emphasis upon parts of it in order to prove ambiguity. As Lord Clyde pointed out in Mannai (at 782), perfect precision is not required: ‘It is not an absolute clarity or an absolute absence of any possible ambiguity which is desiderated’. The courts also bear in mind that these are commercial provisions and the notices are directed to commercial people (see for example Patel v Earlspring Properties Ltd [1991] 2 EGLR 131 at 132; Lex Services PLC v Oriel House BV [1991] 2 EGLR 126 at 126).
26 A reasonable person upon reading the notice in question in December 2002 would have in mind that the lease gives the lessor the right to nominate a rental which the lessor assesses to be the proper rent for the period from 1 March 2003; that they have the right to dispute the appropriateness of the rent within 30 days; and if they did so it would activate an independent determination as to the rental payable if a dispute remains. The letter dated 20 December 2002 from Finishing Services in its title clearly states that it is a notice with respect to rental commencing 1 March 2003. The word ‘assessment’ conveys no more than the clause does, that is to say that it is the lessor’s assessment of what is appropriate. Likewise the statement that ‘a market review of the rent period is to take effect from 1 March 2003’ would not indicate that some process was then to be undertaken. The recipient would understand from the terms of clause 3.2.2 that the lessor had reviewed the rent, through the agent whose advices were attached, and was talking about the rental which was required to be paid as and from 1 March 2003. The agent’s letter was itself self-explanatory and it formed ‘the basis of the new rent starting 1 March 2003’ which is to say the annual rent. In this respect the letter could hardly be clearer. Having referred to the agent’s assessment of the annual rent, the letter advises that there will be further correspondence concerning the amount of the new monthly rental and the tax applicable to it. This would be neither unsurprising nor confusing to a reasonable reader.
27 In our view the notice could not reasonably be read to suggest that something other than a claim to a new and increased annual rent in the sum of $435 920 was being made. The reference in the letter to the agent’s advices did not create any uncertainty about what was intended. It was a letter directed to the lessor advising of a higher annual rental which might apply and the lessor was adopting it. If the terms of the letter itself were not this clear, the purpose of the letter must have been apparent to anyone who had knowledge of clause 3.2.2. Such a person would not have understood the reference to what was to occur on 1 March 2003 to be the commencement of a review process, assuming for present purposes that the letter could be taken to convey this, in light of the other statements made. They would have understood that the rent claimed was to take effect from that date, the date of the new period referred to in the lease, unless they disputed it.
28 Whilst his Honour correctly stated the test, it was not applied in one critical respect. His Honour’s approach did not assume knowledge of the terms of cl 3.2.2 on the part of the recipient of the notice. In our view the notice could not have been unclear to such a person. The notice was valid for the purposes of cl 3.2.2.
The Cross Appeal
29 In its cross-appeal Lactos Fresh submitted that his Honour should in any event have found in its favour having regard to the misrepresentation by the agent to Finishing Services about what was market rental. It argued that his Honour should not have found that it would not be possible to conclude that it suffered loss or damage ‘by conduct’ of the agent. We observe at the outset that no findings were made by his Honour as to whether Colliers Victoria had misrepresented the position and gave advice as to figures which excluded rentals paid in the market. Mr Allen clearly did not think so, because he thought this figure to be rather low. Lactos Fresh did not explain how a conclusion of a contravention of s 52 of the Trade Practices Act could be reached by this Court. Its argument assumed that a contravention could be made out and we shall proceed upon that basis for present purposes.
30 The claim by Lactos Fresh was, as his Honour observed, somewhat unorthodox in terms of causation. It did not claim that it was misled but rather that Finishing Services had been. It submitted that it was sufficient for it to demonstrate that Finishing Services relied upon the agent’s advices and that Lactos Fresh suffered loss and damage by reason of that reliance.
31 His Honour accepted that Lactos Fresh did not itself have to rely upon the misrepresentation in order to make a claim under s 82. The authorities accept that third party reliance may cause an applicant’s loss: Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437; (1992) 37 FCR 526; Haynes v Top Slice Deli Pty Ltd (1995) ATPR (Digest) P 46 – 147; McCarthy v McIntyre [1999] FCA 784 (‘McCarthy v McIntyre’). However the authorities require there to be a ‘sufficient and direct link’ or a ‘requisite element of proximity’ in order for the section to be satisfied.
32 In McCarthy v McIntyre the Full Court observed that precisely what tests should be used to judge what constitutes the sufficient cause or connexion required between the misleading conduct and the outcome is the subject of some difficulty. A commonsense approach had been required and the ‘but for’ test of causation used in many areas. Whilst that test, as an exclusive test of causation, had been found to be wanting in some contexts, it still provided a useful approach to the issue of causation. In the present case his Honour applied that test at the outset. In his Honour’s view it could not be said that ‘but for’ the agent’s assessment Mr Allen would have sent the applicants a notice for less than the sum actually specified in it. The figure may have even been higher, given that Mr Allen believed that the figure advised by Colliers Victoria was ‘a bit low’ and that the premises were worth more. The case presented by Lactos Fresh would require findings about ‘what would have happened’ in a way which would border upon speculation.
33 His Honour identified a further insurmountable hurdle in relation to causation. In his Honour’s view the failure of Lactos Fresh to object to the notice would constitute a break in the chain of causation. What Colliers Victoria would have ‘caused’ was a rental assessment notice to be sent which specified an annual rental which did not reflect the proper rent as defined in the clause. Whilst negligence on the part of a ‘victim’ of the contravention is not a defence to a claim for damages under s 82 of the Trade Practices Act, this did not apply where the victim’s conduct operates so as to destroy the causal connexion between the contravention and the loss or damage: Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at 468. Accordingly, in his Honours view, had the notice been valid Colliers Victoria would not by its conduct have caused Lactos Fresh’s loss.
34 It is submitted by Lactos Fresh that his Honour’s error was to apply the ‘but for’ test of causation an approach which had been rejected in March v Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 and a commonsense view of causation preferred (and see Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 (‘Chappel v Hart’); I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109).
35 The cases do not deny that the test may have some use, but it cannot operate exclusively for the reason that it is not a comprehensive test: Chappel v Hart, Gummow J at 255 [62]. As Hayne J observed in Chappel v Hart (at 283 [117]), it is of most use as a negative test. If it is not satisfied, it is unlikely that there is the necessary causal connexion. It seems to us that this was the use to which the test was put by his Honour in the present case.
36 Accepting that more is required than the application of the ‘but for’ test, it does not follow that Lactos Fresh would succeed in establishing that the agent’s statements were causative of its loss. Justice Gummow in Chappel v Hart (at 255-256 [62]) pointed out that it may need to be tempered. It may be unjust to hold a defendant legally responsible for an injury which, though it may be traced back to the wrongful conduct of the defendant, was the immediate result of unreasonable action on the part of the plaintiff.
37 His Honour the primary judge did not in any event deal with the question of causation only on the basis of the ‘but for’ test. In his reasons which follow it appears to us that his Honour applied the commonsense approach which is now mandated. The argument for Colliers Victoria does not meet this aspect of the judgment. In our respectful view the conclusion his Honour reached must be correct. It may be said that the agent’s advice facilitated the notice. They may have formed the basis for it, if they were relied upon. The giving of the notice containing the advice cannot however be said to have caused, or to have materially contributed, to Lactos Fresh paying a higher rental than it might have. The loss it claims was caused by the figure not being correct, on its own case. That was caused by it not invoking the dispute process. Whilst the notice containing the agent’s rental figures commenced the process provided for by cl 3.2.2, it could not be said to have materially contributed to it. The notice itself was not productive of any loss.
38 To this point the argument for Lactos Fresh has been considered upon the assumption that the agent’s advices contained misstatements as to the proper market rental to be applied. Another assumption, which his Honour identified, was that Mr Allen relied upon the agent’s figures. It is difficult to see how it could be said Mr Allen was misled or deceived. He had his own views about rental figures and the value of the property and formed his own opinion about Colliers Victoria’s advice. The fact that he utilised the advice for the purpose of the notice under cl 3.2.2 does not prove reliance. It is more likely that he utilised the advices because they were the assessments of professional agents and more likely to carry weight with Lactos Fresh.
39 In view of the conclusion we have reached it is not necessary to deal with that part of the cross-appeal in which it is contended that his Honour should have allowed Lactos Fresh more by way of interest and costs. Lactos Fresh however raised two further issues on its cross-appeal. It contended that in the event that the appeal was successful, it would be necessary to remit the matter to his Honour to determine the issue as to whether Finishing Services had breached an implied term of the lease, one to act honestly, fairly and reasonably. It was not necessary for his Honour to determine that issue. It then submits that, since the matter will be remitted, there is no reason to refuse it leave to amend to raise the issue as to whether the rent was properly assessed. It is not obvious to us why it is thought that leave to amend in that regard should be given now, when it was denied at the conclusion of the trial, for the reason that Finishing Services had not had the opportunity to meet the allegation during the course of evidence. The fact that an appeal process has now been undertaken and completed renders less likely the prospect that the matter should be revisited. In any event, on Lactos Fresh’s argument, this issue would only arise if the matter were to be remitted for further hearing on the issue of the implied term. The Court would not remit that issue for hearing unless it was satisfied that there was a basis for the implication of the term in question.
40 A claim to have implied a further term, in the context of a provision such as cl 3.2.2, is not easily maintainable. Whether a term will be implied depends upon it being necessary to the enjoyment of the rights conferred by the contract or its effective operation: see Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 450. The rent review clause here in question does not require any particular standard of conduct on the part of the lessor, as his Honour held in connexion with another issue. The lessor’s claim is subject to independent review at the option of the lessee. A requirement of good faith is not necessary to the effective operation of the clause.
Conclusions
41 The notice pursuant to cl 3.2.2 was valid and effective and Lactos Fresh was liable to pay the rent claimed in it as and from 1 March 2003 when it did not dispute Finishing Services’ assessment of it. Lactos Fresh has no maintainable claim to damages in relation to that assessment. The appeal should be allowed and the cross-appeal dismissed. The declaration made by his Honour on 15 March 2006 and the orders numbered 2 and 3, as between Finishing Services and Lactos Fresh made on 15 June 2006 should be set aside. In lieu it should be ordered that the application be dismissed as against Finishing Services with costs. Lactos Fresh should pay Finishing Services’ costs of the appeal and it and Collier Victoria’s costs of the cross-appeal.
Associate:
Dated: 7
December 2006
|
|
|
|
Solicitors for the Appellant:
|
|
|
|
|
|
Counsel for the First Respondent:
|
|
|
|
|
|
Solicitors for the First Respondent:
|
|
|
|
|
|
Counsel for the Second Respondent:
|
Mr P G Cawthorn
|
|
|
|
|
Solicitors for the Second Respondent:
|
Phillips Fox
|
|
|
|
|
Date of Hearing:
|
|
|
|
|
|
Date of Judgment:
|
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FCAFC/2006/177.html