Profilio v Coogee Bay Village Pty Ltd (No 3) [2011] NSWADT 4 (14 January 2011)

Last Updated: 9 March 2011

Administrative Decisions Tribunal New South Wales

Case Title:	Profilio v Coogee Bay Village Pty Ltd (No 3)
Medium Neutral Citation:	[2011] NSWADT 4
Hearing Date(s):	3, 4 and 5 November 2010, written submissions 23 December 2010
Decision Date:	14 January 2011
Jurisdiction:
Before:	M Chesterman, Deputy President B Ward, Non-judicial Member
Decision:	1. The Respondent is to pay to the Applicants damages in the sum of $86,705, exclusive of interest. 2. Any application by the Applicants for interest on this sum and/or costs to be paid by the Respondent must be filed and served, together with supporting submissions, within 21 days of the date of this decision. 3. Any submissions of the Respondent regarding interest and/or costs must be filed and served within a further 21 days. 4. If the Respondent's submissions include an application for costs to be paid by the Applicants, any submissions by the Applicants in reply to such application must be filed and served within a further 14 days. 5. Unless the Tribunal accedes to a request made by a party, with supporting reasons, for either or both of these matters to be dealt with at a hearing, they will be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.
Catchwords:	Retail lease - breach by lessor of 'exclusivity provisions' - assessment of damages for economic loss
Legislation Cited:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
Cases Cited:	Bischof & Anor v Werncog Pty Ltd [2004] NSWADT 241 Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 Profilio v Coogee Bay Village Pty Ltd [2009] NSWADT 211 Profilio v Coogee Bay Village Pty Ltd (No 2) [2009] NSWADT 319
Texts Cited:
Category:	Principal judgment
Parties:	Joe Profilio (First Applicant) Rozi Sajko (Second Applicant) Coogee Bay Village Pty Ltd (Respondent)
Representation
- Counsel:	T Rogers, barrister (Respondent)
- Solicitors:	J Profilio, agent (Applicant)
File number(s):	085127
Publication Restriction:

REASONS FOR DECISION

Introduction

1	This decision is concerned with the businesses conducted at two adjacent retail shops, Shop 192 and Shop 194, in a retail shopping centre in Coogee Bay Road, Coogee. The relevant part of the centre was owned by the Respondent, Coogee Bay Village Pty Ltd ('CBV'). The Applicants, Mr Joe Profilio and Ms Rozi Sajko, were tenants of Shop 192 for a number of years under leases governed by the Retail Leases Act 1994 ('the RL Act')
2	In a decision in these proceedings delivered on 10 August 2009 ( Profilio v Coogee Bay Village Pty Ltd [2009] NSWADT 211 - hereafter 'the liability decision'), the Tribunal held that because the permitted use in a lease of Shop 194 granted by CBV in December 2004 included 'the provision of internet and email services', CBV breached an obligation, contained in a contemporaneous lease of Shop 192 to the Applicants, to ensure that they had exclusive use of Shop 192 as an internet caf.
3	Order 1 in the liability decision was in the following terms:-

1. The Tribunal declares as follows:-

(a) that the Respondent, through granting or having granted to Backpacker World Travel Pty Ltd a lease of premises at 194 Coogee Bay Road, Coogee, on terms that permitted the lessee to use these premises for the provision of internet and email services, was in breach of an obligation under its current lease of premises at 192 Coogee Bay Road, Coogee to the Applicants, such obligation being to ensure that the Applicants had exclusive use of these premises as an internet caf; and

(b) that the Respondent is liable to compensate the Applicants for the economic harm resulting from this breach.

4	Order 2 contained directions for the determination of a foreshadowed application by the Applicants for an interim costs order. In a decision delivered on 21 December 2009 ( Profilio v Coogee Bay Village Pty Ltd (No 2) [2009] NSWADT 319), the Tribunal dismissed this application. It indicated at [37], however, that at the conclusion of the proceedings the Applicants, or indeed the Respondent, might be able to satisfy the criteria for a costs order.
5	Since the grounds of relief sought by the Applicants included damages, the declaration granted in the liability decision did not bring the proceedings to an end. A further hearing would be required if the parties could not settle the outstanding question as to what damages (if any) were payable by CBV to the Applicants.
6	In the liability decision at [187], the Tribunal stated:-

187 At the commencement of the hearing on liability, the Tribunal granted a short adjournment... in order that the possibility of settlement of this case could be further explored. Unfortunately, no settlement was reached. The Tribunal now urges that a further attempt be made. The difficulties associated with assessing economic loss in a case like this are well recognised and the prospect of another long and costly hearing is all too evident.

7

The Tribunal understands that the parties did attempt to settle the remaining matters in dispute. But because their attempts were unsuccessful, the case came back for further hearing on 3, 4 and 5 November 2010. At this hearing, the First Applicant, Mr Profilio, acted as agent for the Applicants and Mr Rogers of counsel appeared for CBV. Evidence on the question of damages was put before the Tribunal. After the hearing, written submissions were filed by the parties pursuant to directions given at the hearing.

8

One of the grounds on which the Applicants claimed damages was that CBV engaged in unconscionable conduct. Accordingly, the Tribunal has been constituted in these proceedings in accordance with clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). It has been constituted by a Deputy President who is a member of the Retail Leases Division, assisted by an appropriately qualified member (Non-judicial Member Ward), acting in an advisory capacity only. Because no second advisory member has been available to assist at the hearings, the Tribunal has proceeded with only one such member. At the commencement of the first hearing, it drew the parties' attention to the fact that it was authorised to do so by sub-paragraph (4)(a) of clause 4 of Schedule 2, Part 3B.

Factual outline

9	The ensuing paragraphs contain an outline of the circumstances leading up to the granting by CBV of the relevant leases of Shops 192 and 194, the contents of the leases, the nature of the businesses conducted in these two shops during the relevant period and the termination of the Applicants' occupation of Shop 192. This outline is drawn from a more detailed account given in the liability decision at paragraphs [7] to [106], and from evidence admitted at the hearing on damages conducted in November 2010. Detailed evidence specifically bearing on the assessment of the economic loss (if any) suffered by the Applicants is summarised in a later section of this judgment.
10	The Applicants first took possession of Shop 192 under a lease granted by Randwick City Council ('the Council') in 1996 for the purposes of a video store, which was operated by them in partnership. This lease also related to Shop 194.
11	From the outset, an ATM owned by St George Bank was situated in Shop 192 under a licence arranged by the previous occupants with the consent of the Council. This licence was renewed in 2000, 2003 and 2005. The requisite consent on the part of the landowner was, it seems, given to St George Bank by the Applicants.
12	During 1999, the Applicants discontinued their video store business and opened an internet caf instead. The name of this business was 'The Chat Site'. It remained in operation until 31 October 2009. From a date in or before 2003 until 31 March 2007, the Applicants also operated an internet caf at premises in Randwick.
13	Mr Profilio maintained overall responsibility for the operations of these two businesses and also acted as the supervisor or sole operator in Shop 192. The Applicants employed a manager, Mr Lorant Corba, in this shop between January 2000 and December 2004 and also engaged a number of casual employees to work there. In addition to performing the role of bookkeeper, the Second Applicant, Ms Sajko was often the sole operator of the business in Randwick.
14	The opening hours of The Chat Site varied to some extent. During most of the period of relevance to these proceedings, it was open every day from 9 a.m. to 9 p.m.
15	In 2000 the Council sold Shops 192 and 194, along with other premises in the shopping centre, to CBV.
16	During 2001, the Applicants obtained from CBV the first of two leases of Shop 192 and vacated Shop 194. Having obtained possession of this Shop, CBV agreed during 2001 to lease it for a period of five years to a company called Dial a Coach Group Pty Ltd ('DAC').
17	In August 2004, a company called Backpacker World Travel Pty Ltd ('BWT') took over DAC's business in Shop 194. At all material times, BWT has owned and operated a chain of shops in many parts of Australia, conducting the business, as its name implies, of a travel agent providing low-cost travel services.
18	During the second half of 2004, CBV negotiated with the Applicants and with BWT regarding new leases of Shop 192 and Shop 194 respectively. Two issues dealt with at length in the negotiations between CBV (for which Ms Kathy Klonis, solicitor acted) and the Applicants (for whom Mr Angelo Hatsatouris, solicitor, acted) were (a) the terms of the permitted use or uses for Shop 192 and (b) the extent to which any use or uses permitted should be exclusive.
19	Paragraphs [72] to [77] of the liability decision set out the following: (a) a summary of the circumstances of the execution of the 2004 Lease of Shop 192 to the Applicants and of the broadly contemporaneous lease of Shop 194 to BWT; (b) the terms of the clauses in these two leases regarding the permitted uses; and (c) the provisions of the 2004 Lease dealing with the question of exclusivity (hereafter 'the exclusivity provisions'):-

72 On a date or dates earlier than 15 December 2004 (the date of stamping), the Applicants executed the 2004 Lease and Mr Dover [a director of CBV] executed it on behalf of CBV. No date of execution is shown on the Lease.

73 The 2004 Lease commenced on 1 November 2004 and terminates on 31 October 2009. It contains an option to renew for five years. The amount of rent stipulated is the amount that was agreed during the negotiations mentioned above.

74 On the issues of permitted use and exclusivity, the 2004 Lease provides as follows:-

4.1 The Lessee shall not use the Premises otherwise than for the purposes of an Internet Caf and related services and activities to the Lessees customers including but not limited to providing all computer services via the internet including online booking services for hotel and travel, online games, online job search general computer services, Internet services provider and the sale of phone cards, faxing services, postage web design, photocopying, printing, typing services, incoming phone services, photo processing, digital cards, mailbox rental, mobile phones, scanning, laminating, USB ports, office software, network installations, computer training, selling products and services online, and new services and products as computer as computer ( sic ) technology is developed, snacks, coffee, drinks, confectionery and sandwiches.

4.2 The lessee acknowledges that he will not use the premises during the term of the Lease and any further term or holding over period for any activity as a Licensed Travel Agency, Pizza or Kebab Shop, Tobacconist or Delicatessen without the prior written consent of the Lessor.

4.3 The Lessor acknowledges that the Lessee shall have exclusive use of the Premises as an Internet Caf relating only to the land owned by the Lessor and known as Lot 17 in Strata Plan 22899 attached hereto and marked as Annexure B.

4.4 Notwithstanding clause 4.3 the Lessee acknowledges and accepts that the Lessee and or its heirs, successors or assigns of the Lessors Land known as Shop 194 Coogee Bay Road, Coogee allows access to the Internet for the Lessees customers, however, the primary use of the land is a Licensed Travel agent.

75 On a date in December 2004, which appears from the document to be 5 December but might be 3 December, a director of BWT executed the BWT Lease on BWT's behalf and Mr Dover executed it on behalf of CBV.

76 The BWT Lease commenced on 1 October 2004 and terminates on 30 September 2012. It contains an option to renew for five years.

77 On the issue of permitted use, the BWT Lease provides as follows:-

4.1 The Lessee shall not use the Premises otherwise than for the purposes of a Travel Agency and associated administration office and the sale of travel goods and associated services and as a use of a retail shop and for the provision of internet and email services.

20	It will be seen that clauses 4.3 and 4.4 of the 2004 Lease constitute the 'exclusivity provisions'. The range of exclusive use guaranteed to the Applicants in clause 4.3 is qualified by clause 4.4.
21	During the currency of the 2004 Lease, most of the revenue of the business carried on by the Applicants in Shop 192 came from the provision of email and other internet services on a number of computers (ranging between 16 and 20) installed in the shop. In evidence, Mr Profilio estimated that this line of business accounted for about 70% of the takings. A further significant source of revenue until a date within the tax year 2007-2008 was the sale of phone cards. The business also provided a number of the 'related services' listed in clause 4.1 of the Lease - for example, photocopying, CD burning, word processing and printing. But from the point of view of revenue these were of subsidiary importance.
22	At some point in 2005, earlier than 10 May, Mr Profilio observed that BWT had erected signs both outside and inside Shop 194 advertising internet access and had also posted both an 'Internet Price List' on the front door and a price list of products and services above every computer, advertising fast internet connections. On or about 10 May 2005, he complained about these matters in a phone call to Mr Dover. On or about 10 June 2005, he took photographs of the external signage, which were admitted into evidence.
23	As from April 2005, the Applicants reduced their fee for one hour's use of the internet from $6.00 to $4.50. They also reduced the amounts charged for periods up to 10 minutes. In August 2006, they reduced the charges for periods up to 20 minutes. In July 2008, they reduced their charge for one hour's use to $3 and also made reductions in their charges for lesser periods. Mr Profilio testified that they made these changes in order to remain competitive with the internet caf operating in Shop 194.
24	During the period from May to August 2005, correspondence regarding the exclusivity provisions took place between the parties' solicitors. Mr Hatsatouris maintained that CBV was obliged by these provisions to require BWT to desist from advertising and providing internet services to the general public. Ms Klonis maintained that because the primary use to which Shop 194 was being put was 'a Travel Agent as per the terms of their Lease', no breach of these provisions had occurred. Ms Klonis also raised the matter with BWT, prompting a letter to her from its solicitor, Mr Herman Gonzalez, asserting that BWT was 'not prohibited by the Lease from announcing its internet and e-mail services and displaying signs promoting' these services.
25	The practice adopted by BWT was to require that any visitor to Shop 194 (or any other of its agencies) who wished to buy time on the internet should first obtain a BWT phone card. Visitors to Shop 194 might have done this at another BWT location or might do so in Shop 194. Any internet time not used in the shop where a card was obtained could be used in any other BWT shop in Australia. By contrast, The Chat Site did not make the use of its internet facilities dependent on the purchase of a phone card.
26	Towards the end of July 2007, Mr Profilio observed that the signage outside Shop 194 advertised 'Global Gossip' and that computers newly installed in the Shop displayed 'Global Gossip' as their login page. During July and August 2007, he complained about these matters to Mr Dover.
27	In the liability decision at [97] and [101], the Tribunal recorded the following evidence regarding Global Gossip, which it accepted in the absence of any contrary evidence from CBV's witnesses:-

97 Mr Profilio testified (a) that to his knowledge the company known as Global Gossip is a very large operator and owner of internet cafes, (b) that it sells access cards for internet use at any location where it provides services (including Shop 194 and the other agencies maintained by BWT), (c) that these cards can be used at any Global Gossip location and (d) that users of Global Gossip's services can earn and redeem 'Gossip Points' at any of its locations.

101 ... [In a letter to Ms Klonis dated 3 September 2007, Mr Profilio] pointed out (a) that Global Gossip had 114 locations in Australia, New Zealand, Vanuatu and Fiji; (b) that one of these locations, shown on its website, was identified as BWT's travel agency at Shop 194; and (c) that BWT had 33 locations in Australia and New Zealand.

28	As was the case when BWT provided internet services without any involvement by Global Gossip, access to the services furnished by Global Gossip could only be obtained by means of an access card which also operated as a phone card.
29	In a letter dated 23 August 2007 to BWT, Ms Klonis stated that BWT 'may' have breached its lease by granting a sublease to Global Gossip and by providing internet services to the general public.
30	In a letter dated 24 August 2007 to Ms Klonis, Mr Profilio repeated his complaints about the provision of internet services at Shop 194, indicating that if the matter was not resolved he would apply for mediation of the dispute between the parties by the Retail Tenancy Dispute and/or institute proceedings in the Tribunal.
31	In a reply to Ms Klonis dated 30 August 2007, BWT stated that it had not granted a sublease to Global Gossip, but that Global Gossip was its internet service provider. It stated also that BWT provided internet and email services 'as a marketing tool to encourage customers into our travel shops and to service the needs of our customers already travelling within our travel network'.
32	In the liability decision at [105], the Tribunal recorded further uncontested evidence that 'a person visiting Shop 194 could purchase internet access on the shop's computers without having first purchased a travel service or product'.
33	At about this time, the St George Bank was negotiating with the Applicants with regard to a renewal of the licence for the ATM in Shop 192. The proposed licence fee was $1,650 per month with an annual licence review fixed at 3%. On 21 November 2007, however, Ms Klonis stated as follows in a letter to the Applicants:-

We are instructed that you are in breach of an essential term of the Lease namely pursuant to clause 7.1.

We are instructed that you have sub-let the premises, and granted a Licence affecting the Premises to St George Bank without our client's prior written consent.

You are hereby placed on notice that you are to immediately rectify the breach, and must rectify the said breach within 14 days of the date of service of this letter.

If the breach is not rectified within 14 days, our client will be seeking compensation from you for the breach, and is entitled pursuant to clause 11(c) & 11(2) to recover damages from you in respect to your breach.

34	In a reply dated 23 November 2007, Mr Profilio pointed out that during the negotiations for the leases of Shop 192 to the Applicants in 2001 and 2004, 'at no time was the existence of the ATM raised or was it an issue'. He indicated that the solicitors for St George Bank were arranging for the ATM licence and the deed of consent by the lessor to be prepared and that once received these documents would be sent to Ms Klonis to obtain CBV's consent.
35	On 27 November 2007, an unsuccessful attempt was made at the Retail Tenancy Unit to resolve the dispute between the parties by mediation.
36	On 17 December 2007, Mr Hatsatouris sent to Ms Klonis a deed of consent to a proposed new licence for the ATM, for execution by CBV. In a letter of reply dated 14 February 2008, however, Ms Klonis stated as follows:-

In view of your client's consistent and continuing breach of his lease, we are instructed that our client is prepared to consent to the lease ( sic ) to St George Bank only on the following proviso:

1. Your client surrender the current lease and enter into a new lease with the same terms and conditions as is ( sic ) contained in the current lease except for the exclusive use clause;

2. Rent for the first year of the first term to be $70,000.00 plus GST inclusive of outgoings.

37	It is convenient to note here that the annual rent payable under the 2004 Lease was initially $57,500 plus GST, and that an increase of 3% each year was provided for. In February 2008, the annual rent was accordingly $69,115.00.
38	In a reply dated 13 March 2008, Mr Profilio rejected these proposed terms for a new lease.
39	In evidence given at the hearing on damages, Mr Christopher Alexandrou, a director of CBV, stated that CBV's claim that the Applicants were in breach of the 2004 Lease was based on the fact that they had never asked CBV to give its consent to the current licence for St George Bank to maintain an ATM in Shop 192. Instead, he said, Mr Profilio had given consent as if he were the owner of the premises. During cross-examination, Mr Profilio put it to Mr Alexandrou that CBV did not complain about this matter until November 2007, by which time the Applicants had communicated their intention to take proceedings against CBV in the Tribunal. Mr Alexandrou denied this, saying that he believed that during 2006 or early in 2007 Mr Dover had made a complaint of this nature to Mr Profilio. Mr Alexandrou did indicate, however, that when CBV bought the shopping centre from Randwick Municipal Council in 2001, it was aware that an ATM was located in Shop 192 pursuant to a licence.
40	Mr Alexandrou also testified that in late 2007 and early 2008, the attitude of CBV to the ATM in Shop 192 was that it should be removed. He summarised as follows the matters causing CBV to be dissatisfied with the Applicants during 2008: (a) they had signed the licence agreements with St George without CBV's consent and in the capacity of owner; (b) they were occupying areas of common property (he did not specify these); (c) they were (he believed) in arrears of rent; and (d) they had made unjustified claims about the operation of the exclusivity provisions.
41	The Applicants instituted the present proceedings in the Tribunal against CBV on 27 June 2008. Directions were given to the effect that questions of liability should be determined first and that the question of quantification of any damages ordered to be paid by CBV to the Applicants should be reserved for a later hearing. The hearing on liability took place over four days in June 2009 and two days in July 2009.
42	In the course of closing submissions on the final day of this hearing, Mr Profilio, who at that stage was appearing as agent for the Applicants, agreed with a suggestion by the Tribunal that their case was based on six grounds, as follows: (1) breach by CBV of the exclusivity provisions (clauses 4.3 and 4.4) in the 2004 Lease; (2) conduct derogating from the grant made to the Applicants in this Lease; (3) pre-lease misrepresentations falling within section 10 of the RL Act; (4) unconscionable conduct under section 62B; (5) misleading or deceptive conduct under section 62D; and (6) failure to comply with the requirements of section 11 relating to the contents of lessors' disclosure statements.
43	In the liability decision, which was delivered on 10 August 2009, the Tribunal upheld the first of these six grounds and rejected the remaining five. The principal relief that it granted was the declaration in Order 1 (see [3] above). This flowed from its conclusions, explained in the decision at [144 - 150] and [158 - 164], that BWT's activities in Shop 194 included the business of an 'internet caf', that a business of this nature was authorised by clause 4.1 of the lease granted to BWT and that CBV's inclusion of this clause in this lease amounted to a contravention of the exclusivity provisions.
44	Because it was not clear from the evidence whether the execution of the lease to BWT occurred before or after the execution of the 2004 Lease, the Tribunal expressed its agreement (at [158]) with the following proposition in its summary of the Applicants' submissions (at [144]):-

If, as appears most likely from the evidence, the 2004 Lease was the first of these two leases to be executed, the breach occurred at the time of execution of the BWT Lease. If on the other hand the BWT Lease was the first to be executed, the breach must be taken to have occurred at the time of execution of the 2004 Lease, on the ground that CBV undertook this obligation at a time when they were not in a position to comply with it.

45	This aspect of the Tribunal's reasoning is reflected in the phrase 'through granting or having granted' near the commencement of paragraph (a) of Order 1 in the liability decision.
46	The liability decision also contains the following rulings (at [162 - 163]), which are of significance for the assessment of the damages (if any) payable by CBV to the Applicants:-

162 It may well be that while the number of 'non-travel customers' using the internet facilities at Shop 194 remained at [a relatively low level] while also the availability of these facilities was not given any prominence in the Shop's advertising, the Shop was not being used for the purposes of an 'internet caf'. But as from early 2005, advertisements such as appeared in Mr Profilio's photographs were displayed and (it would seem) significant numbers of 'non-travel customers' used the internet facilities.

163 From this point of time onwards, if not earlier, the breach of Clause 4.3 committed by CBV through failing to include a restriction in the BWT Lease presumptively caused economic harm to the Applicants, for which CBV is liable.

47	Under clause 13 of the 2004 Lease, notice of exercise of the option of renewal had to be given not more than six months nor less than three months before the expiration of the Lease. During the hearing on liability, CBV through Mr Rogers, its counsel, agreed that the time for giving notice should be extended pending the delivery of the Tribunal's decision.
48	On 31 August 2009, however, Mr Profilio indicated in a letter to Ms Klonis that the Applicants did not wish to exercise the option, since the economic loss resulting from CBV's breach of the exclusivity provisions was still continuing. He stated that the Applicants wished instead to remain in Shop 192 until the amount of damages due to them under the liability decision had been determined in settlement negotiations or by the Tribunal. He also stated that any rent due to CBV would be set off against the amount of damages so determined.
49	In replies dated 14 and 15 September 2009, Ms Klonis advised Mr Profilio that CBV would not agree to any monthly tenancy following expiry of the 2004 Lease, that the rent due from the Applicants had fallen into arrears and that for this reason CBV intended to repossess Shop 192.
50	On 25 September 2009, the Tribunal gave consideration to an application for relief against forfeiture filed by the Applicants. The orders being sought by the Applicants were along the same lines as the request made by Mr Profilio in his letter of 31 August 2009 to Ms Klonis. By consent, the Tribunal ordered that, on an undertaking by Mr Profilio to secure the release of bond money amounting to $14,375 that had been paid under the 2004 Lease, CBV was not to interfere with the Applicants' tenure of Shop 192 during the remainder of the term (i.e., until 31 October 2009). It further ordered that the released bond money was to be taken to satisfy the rent requirements on an interim basis, with the balance due being taken into account in the final settlement between the parties.
51	The Tribunal adjourned the further hearing of the Applicants' application for relief against forfeiture to a hearing on 13 October 2009. Before that date, however, the Applicants withdrew the application.
52	In an email on 7 October 2009 to Ms Klonis, Mr Profilio advised that the Applicants would vacate Shop 192 on 31 October. An email response by him on 14 October to a letter faxed by her on 8 October included the following passages:-

Your client's assertion that it was a unilateral decision on the applicants' part to vacate the premises on 31 Oct 2009 is unfounded, your client Coogee Bay Village refused to allow set off for outstanding rent to a negotiated settlement or until damages are awarded and allow the applicants to remain in possession...

... if not for Coogee Bay Village's breach of its obligation, the applicants would not have suffered economic loss and would have taken up the option on a lease for a further years.

The respondent have ( sic ) disregarded our pledges, to allow the applicants to remain in possession and outstanding rent be set off, will cause the applicants financial hardship.

53	On or about 31 October 2009, the Applicants vacated Shop 192.

Outline of the evidence on quantification

54	The parties tendered a significant quantity of documentary evidence bearing specifically on the quantification of the economic loss allegedly suffered by the Applicants. In outlining this evidence, the tax years to which the various documents referred will be designated by the later of the two calendar years involved. By way of example, the tax year 2001-2002 will be called '2002'.
55	This evidence can be described under seven heads, as follows.
56	First, it included copies (or in some instances the originals) of a number of financial source documents relating to the Applicants' businesses carried on in partnership at The Chat Site and/or at the internet caf in Randwick. The most important of these were (a) a set of 'takings and wages books', setting out the cash receipts and the wages paid to casual staff at The Chat Site for the tax years 2002 to 2009 and the month of July 2009; (b) a summary of the charges for internet access levied by The Chat Site during this period; and (c) statements of account prepared by the Australian Taxation Office with respect to the Applicants, showing self-assessed amounts payable and paid by the Applicants for income tax and GST between 26 May 1999 and 27 November 2009.
57	Secondly, the Applicants tendered some material relating to the business activities of BWT and Global Gossip. These were (a) a copy of a 'client agreement' between these two enterprises, dated 22 June 2006, (b) copies of tax invoices rendered by Global Gossip to BWT during the period from 31 July 2007 to 28 February 2009 and (c) a table headed 'BWT Coogee Internet Revenue/Retention Summary', covering this same period.
58	Thirdly, the evidence included copies of documents showing the award rates for persons employed as shop employees or junior shop assistants between 2001 and 2009.
59	Fourthly, the Applicants tendered two verified reports, dated 19 December 2008 and 19 March 2010 respectively, by Mr Stephen McMahon and Mr John Worth, who are directors of a firm known as McMahon Worth Forensic Accountants ('McMahon Worth'). These reports, which were signed by Mr McMahon, contained analyses of a quantity of financial data supplied by Mr Profilio and provided estimates, based on different assumptions or 'scenarios', of the losses suffered by them as a result of CBV's breach of the exclusivity provisions. A corrected version of some of the important calculations contained in the second report was handed up at the hearing on damages.
60	Fifthly, CBV tendered two verified reports, dated 2 October 2009 and 7 September 2010 respectively, by Mr Schon Condon, the Managing Principal of Condon Associates, Forensic, Insolvency and Turnaround Practitioner. In these reports, Mr Condon expressed the opinion that the figures of estimated loss contained in Mr McMahon's reports were unduly high. His report included spreadsheets incorporating analyses drawing on financial source documents made available by the Applicants. These documents included (a) the wages and takings records for The Chat Site for the tax years 2003 to 2008; (b) profit and loss statements for this business for the tax years 2004 to 2007 and for the year ending 31 May 2008; and (c) the Applicants' income tax returns for the tax years 2004 to 2007. The figures in some of the spreadsheets in Mr Condon's reports were compiled by CBV from these source documents.
61	Sixthly, CBV re-tendered a verified report by Mr John Corrigan, a consultant on financial management and market research, that had been admitted in the hearing on liability. In his report, Mr Corrigan set out the results of a survey conducted by him during February 2009 on the availability of internet services in Coogee, Bondi Beach and the City of Sydney and expressed various opinions regarding the profitability of internet cafes in such areas.
62	Seventh and finally, CBV tendered a verified report by Mr Spiros Missiakos, an electronics engineer, setting out his observations on a quantity of computer equipment left in Shop 192 by the Applicants. Mr Missiakos inspected this equipment in the Shop during the latter half of November 2009.
63	During the hearing on damages, Mr Profilio, Mr McMahon, Mr Condon, Mr Corrigan and Mr Missiakos were cross-examined.

Outline of the Applicants' case on damages

64

Figures prepared by Mr Profilio showing annual income and expenditure for the Chat Site during the tax years from 2002 to 2009 were set out in a table (Schedule C) in McMahon Worth's second report. The income figures for 2002 and 2004 were $330,484 and $285, 614 respectively. As was pointed out in notes to other Schedules, this represented an average annual decrease of about 7%. In the years 2005 - 2009, however, the annual income figures decreased at a much higher rate, around 12%.

65

According to Schedule C, the income figures in the tax years from 2001 to 2009 (excluding the licence fee paid to the Applicants for the ATM, which was around $20,000 per annum) were as follows:-

Income of The Chat Site

2002 $330,484

2003 $306,323

2004 $285,614

2005 $237,129

2006 $149,356

2007 $153,804

2008 $129,228

2009 $111,716

66	The starting-point for the Applicants' case on damages was the proposition that the cause of this increase in the rate of decline in The Chat Site's income from 2004 onwards was CBV's breach of the exclusivity provisions, in consequence of which BWT advertised and maintained publicly accessible internet facilities in Shop 194 next door.
67	Schedule C to McMahon Worth's second report also contained annual figures, supplied by Mr Profilio, for the expenses and the net profit of The Chat Site during the tax years 2002 to 2009. The profitability of the business declined sharply over this period, as the following table shows:-

Profits and (in brackets) losses of The Chat Site

2002 $111,831

2003 $66,634

2004 $75,834

2005 $28,545

2006 ($19,954)

2007 $2,772

2008 ($34,376)

2009 ($26,088)

68	In Schedules B(1) and B(3), McMahon Worth's second report set out different estimates, based on two different 'scenarios', of the losses suffered by the Applicants on account of CBV's breach of the exclusivity provisions. In both Schedules, it was assumed that but for this breach the Applicants would have obtained a lease of Shop 192 from 1 November 2010 to 31 October 2014 through exercising the option to renew contained in the 2004 Lease.
69	A hypothesis adopted in 'Scenario A', on which the figures in Schedules B(1) and B(2) were based, was that if CBV's breach had not occurred the average downward trend of 7% in the income of the Chat Site spanning the tax years 2002, 2003 and 2004 would have been perpetuated during the tax years 2005 to 2014. It was also assumed that because the income would have been significantly higher, the expenses in two significant categories - wages paid to casual staff and the cost of phone cards - would also have been higher than was in fact the case. For figures relating to periods after March 2010 (this being the date of preparation of McMahon Worth's second report), discounts at increasing rates were applied so as to arrive at amounts representing the present value of future income.
70	As at 31 March 2010, making the assumptions in 'Scenario A' and excluding interest on past losses, McMahon Worth calculated as follows the differences between (a) the profits that The Chat Site would have generated during the tax years 2006 to 2014 but for CBV's breach and (b) the profits that it in fact generated:-

Estimated lost profits ('Scenario A')

2006 $62,517

2007 $24,550

2008 $45,554

2009 $22,257

01/07/09 to 31/10/09 $21,132

Loss to end of 2004 Lease $176,010

01/11/09 to 31/03/10 $23,794

Total past loss $199,804

01/04/10 to 30/06/10 $13,135

2011 $28,575

2012 $14,255

2013 $6,169

2014 $1,616

01/07/14 to 31/10/14 ($204)

Total future loss $63,545

Total lost profits $263,349

71	The alternative hypothesis in 'Scenario B' was that the average downward trend of 7% would have continued until the end of 2005, but then ceased. As calculated by McMahon Worth in Schedules B(3) and B(4) of their second report, the total lost profits would be $662,252, comprising $369,829 for the period until the end of the 2004 Lease and $292,423 for the period of the renewed lease.
72	In opening his case on damages, Mr Profilio argued that this was the correct approach. In his written submissions filed after the hearing, he submitted that 'the annualised decrease in operating profit and percentage ( sic )' was irrelevant in assessing damages.
73	It is convenient to make it clear at this point that the Tribunal does not agree with this argument made by Mr Profilio. It cannot see any ground for assuming that the average downward trend of 7% in the income of the Chat Site during the tax years 2002, 2003 and 2004 would have come to an end after 2005. No reasons for maintaining such an assumption were spelt out in McMahon Worth's reports or in the submissions made by Mr Profilio. Significant grounds for believing that the downward trend would have continued, and indeed have become more pronounced, were advanced in the evidence given by Mr Corrigan, which is summarised below.
74	Accordingly, the Tribunal considers that it is only from McMahon Worth's calculations of estimated lost profits based on Scenario A that any useful guidance may be obtained.

CBV's broad criticisms of the Applicants' case on damages

75	Mr Rogers' submissions on behalf of CBV included a broad assertion that 'there is no evidence that the Applicants have suffered any loss as a result of the grant of the lease to BWT'. An accompanying proposition advanced by him was that 'if it be the case that there has been a loss, it is not quantified by the Applicants and, so far as loss can be quantified, the evidence produced by the Respondents demonstrates that it is very much in the low range'.
76	In elaborating on these propositions, Mr Rogers argued that it was not enough for the Applicants, relying on the analysis of financial data conducted by McMahon Worth, to point to an accelerated rate of decline in the profits of the Chat Site in the years following CBV's grant of a lease permitting BWT to operate an internet caf. The Applicants, he maintained, had not made any attempt to establish a 'causative relationship' between these occurrences. They had merely put forward the 'unsustainable' proposition that because The Chat Site's turnover decreased at a faster rate after BWT's internet caf opened up, this reduction in turnover was wholly attributable to the grant of the lease in November 2004 to BWT. They had taken no account of other possible reasons for this phenomenon. Neither in the reports by McMahon Worth nor in any other evidence adduced by the Applicants had any steps been taken towards analysing 'in full and proper detail' how the opening of an internet cafe by BWT affected the profits generated by The Chat Site.
77	According to Mr Rogers, one such step that should have been but was not taken was to ascertain the amount of the increase, if any, in BWT's revenue generated in Shop 194 following CBV's grant of the lease permitting it to operate an internet caf. Mr Rogers submitted that the maximum liability that could be attributed to CBV was the amount of this increase in BWT's revenue. But although, as he put it, the 'starting point' was 'knowing how much business the competitor is doing', the Applicants had failed to produce any evidence of a change in BWT's revenue. He claimed that this failure was 'fatal to the Applicants' application', or that at least it meant that they had failed in the task of quantifying their loss.
78	In reply to this contention, Mr Profilio asserted that BWT and Global Gossip did not produce a number of financial records requested by the Applicants and that CBV did not assist in obtaining them. Mr Rogers' response to this was to assert that the Applicants could have used the coercive powers of the Tribunal to obtain access to these records and that CBV was under no obligation to provide assistance.
79	Mr Profilio also submitted that the 'BWT Coogee Internet Revenue/Retention Summary' that was in evidence showed that BWT's revenue in Shop 194 would have increased 'by more than $80,000' in the 2008 and 2009 tax years. This summary showed that the amounts retained by BWT (including GST) were $41,204.55 for the 2008 tax year and $33,171.30 for the period between 1 July 2008 and 28 February 2008. In response, Mr Rogers argued that this document was of little use because (a) no explanation of the charging system employed by BWT and Global Gossip had been provided and (b) it related to one year only.
80	The Tribunal's conclusions regarding this general critique of the Applicants' case on damages are as follows.
81	First, it considers that it would be wholly counter-intuitive to find that the advertising and maintenance of publicly available internet services in the premises next door to Shop 192 had no material impact on the revenue generated by The Chat Site in this Shop. In so concluding, the Tribunal takes into account the absence of any evidence of 'agglomeration': i.e., evidence to the effect that BWT, through advertising these services, attracted larger numbers of potential users of such services to the shopping centre owned by CBV, with the consequence that Shop 192 obtained new customers to replace those who decided to go into Shop 194. For a comparable case in which 'agglomeration' was discussed but held not to have occurred, see Bischof & Anor v Werncog Pty Ltd [2004] NSWADT 241 at [129 - 134].
82	The Applicants' evidence regarding the rates charged for internet use in The Chat Site provides support for this view. According to this evidence, which is summarised above at [23], they reduced their internet fees significantly in April 2005, August 2006 and July 2008. Mr Profilio's testimony that the Applicants made these reductions in order to remain competitive with the business endeavours of BWT and Global Gossip in Shop 194 was not challenged.
83	Secondly, the Tribunal believes, as Mr Rogers maintained, that it would be wrong to assume, in the absence of specific evidence on the matter, that the acceleration in the rate of decline of the profitability of the Applicants' business after 2004 was wholly attributable to the establishment and advertising of the internet caf in Shop 194. Other factors may well have played a role. The question of what impact any such factors may have had will be discussed further below. It is one of the most difficult aspects of this case. But it has been emphasised more than once in the case law (see for example Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 83, 135) that the fact that damages are difficult to assess does not mean that no damages should be awarded.
84	Thirdly, the Tribunal does not accept the proposition that the Applicants failed to produce any evidence of a change in BWT's revenues earned in Shop 194. Although the 'BWT Coogee Internet Revenue/Retention Summary' did not convey a great deal of information, it did suggest that the scale of Global Gossip's operations in those premises was substantial. No doubt further evidence of this nature, if reliable and reasonably comprehensive, might have assisted the Tribunal in the task of assessing the damages due to them (as was indeed the case in Bischof v Werncog Pty Ltd : see the decision at [144 - 155]). But it would have been subject to the same general objection as Mr Rogers has raised with respect to the Applicants' evidence of decline in their own revenue. This is that any change in BWT's revenue might well be the consequence of a number of factors, including but not limited to the advertising and provision of internet facilities to the public at large rather than to a group comprising only the customers of BWT's travel agency.
85	The ensuing paragraphs of this decision deal with a number of more specific criticisms that may be made of McMahon Worth's approach to assessing the Applicants' loss of profits. Some, but not all, of these criticisms were made by Mr Rogers in his submissions. It is noteworthy, however, that Mr Rogers did not suggest that the financial data supplied by Mr Profilio to McMahon Worth should be held to be generally unreliable. A number of his specific submissions were predicated on the assumption that these data should be accepted, at least in general terms.

The rate of decline in The Chat Site's revenue before it suffered compensable loss

86	An important factor in McMahon Worth's assessment of the Applicants' losses was its calculation of the average rate of decline in The Chat Site's revenue during what may be called 'the pre-injury period': that is, the period immediately before CBV's breach of the exclusivity provisions caused the Applicants to suffer compensable loss.
87	It was provisionally held in the liability decision, for reasons stated at [162 - 163] (these two paragraphs are quoted above at [46]), that the period of compensable loss should be taken to have commenced when BWT began to advertise that its internet facilities could be used by any member of the public, not merely by its travel customers, with the consequence that a significant number of non-travel customers began to use those facilities.
88	In paragraph [162] of the liability decision, this was said to have happened in 'early 2005', if not earlier still. The phrase 'early 2005' was derived from Mr Profilio's principal affidavit.
89	For the purposes of the present decision, however, the Tribunal has reviewed the evidence and submissions regarding this matter. It confirms the ruling, stated provisionally in the liability decision, that Shop 194 was not used for the purposes of an 'internet caf', giving rise to compensable loss of profits by the Applicants, until advertisements such as were depicted in Mr Profilio's photographs were displayed and significant numbers of 'non-travel customers' used the internet facilities in the Shop. But in conformity with a submission made by Mr Rogers, it finds also that the time when these events first occurred was in or about May 2005, not earlier (as the phrase 'early 2005' would suggest).
90	Its reasons for making the latter finding are as follows: (a) although during cross-examination in the liability hearing, the date 'May 2005' was suggested to Mr Profilio more than once, he did not say in his answers that this date was incorrect; (b) in paragraph 11 of his written submissions on liability, he stated that BWT had 'operated as an Internet Caf since May 2005'; (c) as found in the liability decision at [83], it was 'on or about 10 May 2005' that he first complained to CBV about BWT's advertising of internet services; and (d) he did not take any photographs of the external signage on Shop 194 until a date on or about 21 June 2005.
91	This finding that the time of commencement of compensable loss of profits was in May 2005, not earlier in that year, has significant implications for the assessment of the loss sustained by the Applicants.
92	As stated above at [68 - 70], McMahon Worth based its assessment of lost profits according to 'Scenario A' on the assumption that but for CBV's breach of the exclusivity provisions the average downward trend of 7% in the income of the Chat Site during the tax years 2002, 2003 and 2004 would have been perpetuated during the tax years 2005 to 2014.
93	During cross-examination of Mr McMahon in the hearing on damages, however, Mr Rogers contended that the date from which Applicants could claim that their lost profits were compensable was indeed in May 2005, near the end of the 2005 tax year. Mr Rogers also pointed out that the income of the Chat Site in that year was markedly less than in 2004. The rate of decline between these two years was in fact 16.9% (from $285,614 to $237,129), well above the figure of 7% calculated by McMahon Worth as an average rate for the tax years 2002, 2003 and 2004.
94	Mr Rogers asked Mr McMahon if there was any reason to believe that this steep decline during the tax year 2005 was attributable in any significant degree to the impact of new competition for The Chat Site's customers during the last two months (May and June) of that year. Mr McMahon said that he had not been supplied with income data that would give an answer.
95	The important question that arises is whether for these reasons McMahon Worth's calculation of the rate of decline in The Chat Site's revenue during the pre-injury period produced an unduly low figure. Neither Mr Profilio nor Mr Rogers addressed this question at any length in their submissions.
96	In the Tribunal's opinion, the rate of decline in revenue during the pre-injury period (7%) on which McMahon Worth based its calculations was indeed too low. A better figure would be one reached by initially treating the whole of the tax year 2005 as being within the pre-injury period. This produces an annual average decline of 9.4% for the tax years 2002 to 2005. Some allowance should then be made for the fact that the last two months of 2005 coincided with the commencement of BWT's advertising and provision of internet facilities to the public in Shop 194. But the Tribunal is not minded to follow this path, which would necessitate recalculating all of McMahon Worth's figures for lost profits under Scenario A. It considers instead that this defect in McMahon Worth's methodology should be treated as a factor requiring that the overall figure calculated for loss of profits should be discounted significantly.

Trends in the profitability of internet cafes in the Coogee area

97	As mentioned above, the report prepared by Mr Corrigan and tendered by CBV included the results of a survey conducted by him during February 2009 on the availability of internet services in Coogee, Bondi Beach and the City of Sydney. The scope and nature of his survey are outlined in the liability decision at [121 - 125]. His principal mode of investigation was to interview owners, managers or employed staff at a number of relevant businesses. These included travel agencies and hotels as well as internet cafes. After the hearing on damages, Mr Corrigan, at the request of the Tribunal, delivered to the Registry for inspection by the parties the worksheets that he had completed when carrying out these interviews.
98	One of the findings from Mr Corrigan's survey was that the number of computer screens made publicly available for internet users in Coogee had increased from 50 in 2004 to a figure of 105 (excluding screens available to guests staying in 'major accommodation providers') in February 2009. In the course of cross-examination, Mr Profilio put it to him that the figure given for 2004 was too low and identified some providers in 2009 (for example, a shop called Civic Video) which according to Mr Profilio's own knowledge were trading in 2004. Mr Corrigan stated in reply that he relied on information given to him by the person whom he interviewed. In some instances, this was a staff member attending to the customers of the business. Mr Corrigan acknowledged that such a person might not have known whether the business in question existed in 2004.
99	Mr Corrigan referred in his report to a number of additional factors which, in his opinion, substantially reduced the number of actual and potential customers of The Chat Site during the period from 2004 to 2009. The most important of these factors were as follows: (a) the new internet providers in the Coogee area operated in the same market as The Chat Site, chiefly made up of backpackers and other tourists; (b) to an increasing extent, hotels and other providers of accommodation maintained internet facilities, including Wi-Fi, for their guests; (c) taking advantage of cheaper technologies, a number of enterprises that were not internet cafes (for example, restaurants and video stores) began to provide internet facilities; (d) between 2000 and 2007, the number of budget travellers in Australia increased by an average of only 3% per year; and (e) Australia's 'internet penetration' increased from 33.8% of its population in 2000 to 74.3% at a date (unspecified) in 2009 or earlier, reducing the need for residents to visit internet cafes.
100	Mr Corrigan expressed the opinion that because of developments such as these, resulting in increased competition and less demand, the revenue earned by internet cafes in areas such as Coogee decreased significantly in the period of relevance to these proceedings, namely from 2004 to 2007.
101	In his submissions, Mr Profilio included his own figures for the numbers of computer screens in the Coogee area in 2004 and in 2009. These showed a decrease from 135 to 110, instead of an increase, as claimed by Mr Corrigan, from 50 to 110. One of the reasons given in Mr Profilio's submissions was that some enterprises offering internet services before 2004 had closed in or about 2007. As was pointed out to him during the hearing, however, his figures were not put forward as evidence that could be tested in cross-examination.
102	In response, Mr Rogers made the following submissions. First, Mr Corrigan's survey showed that the Applicants were increasingly faced with competition additional to the competition afforded by BWT's business. Secondly, Mr Corrigan's opinion evidence 'tells us what the entire community already knows - that the existence of home internet and email services and their extension to all manner of other establishments has had, and continues to have, an increasingly deleterious effect on so-called internet cafes'.
103	In the Tribunal's opinion, Mr Corrigan's findings regarding the number of computer screens in the Coogee area must be treated with caution, for the reasons suggested by Mr Profilio in cross-examination and in his submissions. It may well be that Mr Corrigan under-estimated the number of such screens in and before 2004.
104	Subject to this qualification, the evidence given by Mr Corrigan is clearly useful in providing reasons why the revenue earned by The Chat Site diminished during the period from 2005 to 2009. It does not, however, indicate any of the following: (a) whether the factors identified by him were the only factors responsible for this diminution; or (b) whether these factors, being operative before 2005, were also responsible for the diminution in revenue between 2002 and 2004 and should be taken to have caused the revenues earned after 2004 to diminish at about the same rate as in this earlier period; or (c) whether the truth lies somewhere between these extremes. The first of these alternative hypotheses would support CBV's case, the second is in line with McMahon Worth's calculation of loss of profits based on 'Scenario A' (see [70] above) and the third represents a compromise between these two positions.
105	The first of these hypotheses implies that no loss of revenue to the Chat Site flowed from the advertising and maintenance of an internet caf in the premises next door. For reasons already given (see [81 - 82] above), the Tribunal does not accept this proposition. In choosing between the second and third hypotheses, it is faced with the problem that Mr Corrigan's report did not indicate to any material degree whether the developments in internet provision that he identified were already occurring at the same pace between 2002 and 2004. Having regard particularly to the matters outlined above at [99], the Tribunal is inclined to the view that these developments were under way before 2005, but became more pronounced from 2005 onwards. This accords with the third hypothesis, and provides further grounds for thinking that in the McMahon Worth reports the Applicants' losses are over-estimated.

The nature and quality of the computer equipment at The Chat Site

106	As mentioned earlier, Mr Spiros Missiakos, an electronics engineer, visited Shop 192 during the latter half of November 2009 at the request of CBV and inspected a quantity of computer equipment left there by the Applicants.
107	In his report, dated 7 December 2009, Mr Missiakos expressed the opinion that this equipment was outdated, being 'possibly 4-5 years behind the minimum acceptable level'. He said also that the equipment, generally speaking, was in poor condition. He provided a number of specific reasons for this assessment.
108	During cross-examination by Mr Profilio, however, Mr Missiakos acknowledged (a) that he may not have seen all of the Applicants' equipment remaining in the shop, (b) that for various reasons he did not test the equipment that he did see and (c) that in 2004 or 2005 this equipment would have been considered both reasonably up-to-date and 'mid-range' in standard.
109	Similar negative comments about the standard of the equipment in Shop 192, and indeed the 'attractiveness' of the Shop, were made in the report prepared by Mr Corrigan.
110	In his submissions, Mr Profilio argued that according to the answers given by Mr Missiakos in cross-examination the computers in Shop 192 would have been 'current' in 2004 and 'at an acceptable level' from the end of 2004 to early 2008. He added that once Global Gossip became involved in BWT's activities in Shop 194, the 'uncertainty of the business' in the shopping centre impelled the Applicants to stop replacing computer equipment and to pay only for maintenance of their computers and software.
111	Mr Rogers submitted that the Tribunal should accept the evidence from Mr Missiakos that the Applicants had 'outdated machinery which would have tended to drive customers elsewhere'.
112	The accounts accompanying the McMahon Worth reports contain the following figures for expenditure on computers in Shop 192: 2002 (tax year), $2,402; 2003, $1,239; 2004, $1,053; 2005, $10,782; 2006, 2007 and 2008, zero. A separate expenditure item called 'Maintenance and repairs' shows annual expenses ranging from $167 to $455. This pattern of expenditure is consistent with Mr Profilio's statement on the matter, except that it suggests that the policy of not replacing computer equipment commenced during the tax year 2006, not (as Mr Profilio said) in mid-2007, when Global Gossip became involved with BWT.
113	Despite this inconsistency between the pattern of expenditure on computer equipment depicted in the accounts and Mr Profilio's statement on the matter, the Tribunal finds that a significant factor inducing the Applicants to stop updating their computer equipment in 2006 or 2007 was the decrease in the revenue of their business in Shop 192 during these years and in later years. As indicated above at [65], their revenue dropped from $237,129 in 2005 to $111,716 in 2009. In 2005 they made a profit of $28,545, but thereafter the situation deteriorated to the extent that in 2009 they incurred a loss of $26,088 (see [67]). One of the consequences was that by 2009, as Mr Missiakos and Mr Corrigan claimed, the equipment had become outdated.
114	It follows from this reasoning that, to the extent that CBV's breach of the exclusivity provisions, making possible the establishment of an internet caf in Shop 194, contributed to this decrease in the Applicants' revenue, it must be taken to have caused or contributed to their dependence on increasingly outdated equipment. To the extent that an outcome of this dependence was that their business generated even less revenue and became less profitable, CBV's breach caused or contributed to these losses.
115	For these reasons, the Tribunal rejects the argument, made on CBV's behalf, that any damages awarded to the Applicants should be reduced in amount on the ground that they failed to take appropriate steps to replace computer equipment in The Chat Site when it became outdated. This failure was, in the Tribunal's opinion, attributable to a material extent to CBV's breach of the exclusivity provisions.

The claim that all categories of business carried on by the Applicants in Shop 192 should be taken into account in assessing their economic loss

116	Mr Profilio submitted that in calculating the damages due to the Applicants, it was appropriate for McMahon Worth to have taken account of the whole of their business carried on at Shop 192, not merely their provision of internet services. He claimed that BWT and Global Gossip supplied 90% of the same services as The Chat Site, though he did not furnish any particulars identifying the services that they did not supply.
117	With regard particularly to the sale of phone cards, Mr Profilio relied on undisputed evidence that both BWT and Global Gossip required their customers seeking access to the internet to purchase their phone cards. For this reason, he submitted, any resulting diminution in revenue earned by the Applicant through the sale of phone cards after May 2005 should be included in the damages awarded to them.
118	Mr Rogers' brief submission on this specific question took the form of referring to a claim by Mr Profilio that 'phone cards purchased at BWT could be used to access the internet' (emphasis added) and contending that this claim was 'a non sequitur '.
119	In the Tribunal's opinion, this question must be resolved by considering the extent to which BWT conducted activities falling within the range of both (a) the uses permitted by its own lease and (b) the use defined in the exclusivity provisions in the 2004 Lease to the Applicants. Under clause 4.1 of the lease to BWT, the permitted uses included 'the provision of internet and email services'. The use defined in the exclusivity provisions was that of an 'internet caf'.
120	The method by which BWT provided internet and email services to the public, initially without any intervening agency and subsequently through Global Gossip, required the purchase of BWT's or Global Gossip's phone cards. Mr Rogers' statement that phone cards could be used to access the internet did not reflect the evidence.
121	The Tribunal accordingly determines that, to the extent to which BWT's and Global Gossip's sales of phone cards to customers seeking to use the internet and email services in Shop 194 reduced the amount of profits earned by the Applicants through the sale of phone cards, those lost profits should be included in the damages awarded to the Applicants. There is a sufficient causal link between the authorisation given by CBV to BWT to provide internet and email services to the public and the loss of any such profits sustained by the Applicants to support this conclusion.
122	Any losses sustained by the Applicants because BWT provided 'related services', such as photocopying and CD burning, should not, however, be held recoverable by them. Mr Profilio described this aspect of the business at The Chat Site as being of subsidiary importance only. But even if, as he argued, the provision of such services should be viewed as a normal, if not also a necessary, function of an internet caf, it does not fall within the phrase 'provision of internet and email services' as used in clause 4.1 of the lease to BWT. BWT's provision of these 'related services' (to the extent, if any, that it occurred) was therefore not a consequence of the CBV's breach of the exclusivity provisions, as identified in the liability decision.
123	This ruling furnishes an additional reason for concluding that in the McMahon Worth reports the compensable loss sustained by the Applicants was overstated.

The implications of a decline in the sales of phone cards by The Chat Site

124

Both in his cross-examination of Mr Profilio and of Mr McMahon and in his submissions, Mr Rogers placed emphasis on the fact that the annual costs of purchasing phone cards to be resold to customers at The Chat Site diminished substantially during the tax years 2003 to 2008. The figures given for this category of expenditure in Schedule C of McMahon Worth's second report were as follows:-

Cost of purchase of phone cards

2003 $73,076

2004 $52,674

2005 $30,112

2006 $14,770

2007 $6,346

2008 $3,220

125	Mr Rogers' arguments based on these figures were as follows: (1) during these six years, the revenue generated from the sale of phone cards must also have diminished, probably at a rate comparable to that shown in the above table; (2) when the rate of decline in the costs of purchase of phone cards between 2006 and 2007 (being of the order of $8,400) is considered in conjunction with the figures for total revenue earned in these two years, it becomes apparent that, contrary to the pattern alleged by the Applicants, the Chat Site's income from providing internet services during 2007 must have exceeded the equivalent figure for 2006 by even more - indeed by a ratio of about 10% - than the figures for total income ($149,356 in 2006; $153,804 in 2007) would suggest; (3) since, as Mr Profilio agreed in cross-examination, phone cards between 2003 and 2008 became less popular (due in part to an increased use of mobile phones) and also came to be obtainable from a wider range of outlets in the Coogee area, there were no grounds for believing that the sale of phone cards in Shop 194 had any appreciable impact on the number of sales of such cards at The Chat Site, or indeed on the revenue gained from the provision of internet services.
126	Mr Profilio did not dispute the first of these propositions, which in any event accords with common sense. His submissions did not address the two remaining propositions.
127	The Tribunal agrees with Mr Rogers' second proposition. This proposition casts doubt on the Applicants' claim that their sales of internet services started to suffer significantly from the time in or about May 2005 when BWT first advertised these services as available to the public in Shop 194. On the other hand, the Applicants have indicated throughout these proceedings that the most damaging competition to their trade commenced when Global Gossip became involved in BWT's internet business. This occurred near the commencement of the 2008 tax year, and while in this tax year the cost of purchase of phone cards for The Chat Site decreased significantly (from $6,346 to $3,220), the overall takings decreased by a materially larger amount (from $153,804 to $129,228).
128	As to the third proposition advanced by Mr Rogers in this context, the Tribunal agrees that the rapid decline in the revenue obtained by The Chat Site from 2006 onwards through the sale of phone cards cannot be attributed solely to the sales of such cards made by BWT and Global Gossip in Shop 194. But because (as just explained) these two enterprises made the purchase of a phone card an integral part of the process of gaining access to the internet in Shop 194, any diminution to The Chat Site's profits from the sale of phone cards that can be attributed to the competing sales of these items by BWT and Global Gossip must be included in the damages recoverable by the Applicants, even if only a small sum is involved. Indeed, the linking of internet provision to phone cards by BWT and Global Gossip has the consequence that the sales of phone cards by either of them had the potential to deprive The Chat Site of profits derived both from selling phone cards and from providing access to the internet.

The Applicants' claim for profits lost during the option period

129	In his submissions, Mr Profilio argued that but for CBV's breach of the exclusivity provisions the Applicants would have exercised the option to renew the 2004 Lease for a further five years and would have continued to operate their business in Shop 192 during the period from 1 November 2009 to 31 October 2014. It followed, he maintained, that the damages awarded to them should include the profit that they would have derived thereby, free from impairment by any competing internet cafe in Shop 194 or in other premises owned by CBV within the shopping centre.
130	The evidence given by Mr Alexandrou in the hearing on damages (this is summarised above at [39 - 40]) included an assertion that if the Applicants had sought to exercise the option CBV would have refused to recognise any entitlement on their part to do so. Mr Alexandrou maintained that this refusal would have been justified on account of the Applicants' breaches of the Lease, committed in the course of granting successive licences to St George Bank to locate the ATM in Shop 192.
131	In seeking to substantiate this assertion, Mr Alexandrou also relied on the following allegations made by him: (a) that in 2006 or early 2007 Mr Dover had communicated to Mr Profilio CBV's concerns about the Applicants' breaches of the Lease in the course of their dealings with the Bank relating to the ATM, (b) that the Applicants had occupied areas of common property in the shopping centre and (c) that they had been in arrears of rent.
132	In his submissions, Mr Profilio pointed out that CBV knew that there was an ATM in Shop 192 from the time of its purchase of the shopping centre in 2001. Furthermore, in 2001 and again in 2004, it granted a lease to the Applicants without expressing any concern about the presence of the ATM. It raised no objection until a date (21 November 2007) after the Applicants had applied for mediation of the dispute stemming from the exclusivity provisions and had indicated that if the mediation was unsuccessful they would institute proceedings in the Tribunal.
133	Mr Profilio relied also on Ms Klonis's letter of 14 February 2008 (as to which, see [36] above). This letter stated that CBV was prepared to withdraw its objections to the proposed new licence for to the ATM if the Applicants agreed to surrender the 2004 Lease and enter into a new lease with the same terms and conditions, except for the exclusivity provisions and a slightly higher annual rent. Mr Profilio also denied that Mr Dover had raised the matter of the ATM with him during 2006 or early in 2007.
134	In his submissions, Mr Rogers referred only briefly to the matters raised by Mr Alexandrou. His primary contention was for a finding that the Applicants would not have sought to exercise the option. He raised the following four considerations: (a) because the Second Applicant, Ms Sajko, had not been called as a witness, the Tribunal should not assume that she would have wished to exercise the option; (b) Mr Profilio testified that he had looked around for other premises in which to relocate The Chat Site; (c) as a condition of renewing the lease, CBV would have required removal of the ATM; and (d) independently of any economic loss caused by the competing business in Shop 194, the decline in the turnover of the Applicants' business in Shop 192 was so severe that they would not have wanted to continue to trade there.
135	The Tribunal is satisfied that the inference urged by Mr Profilio regarding the stance adopted by CBV should be drawn. It finds that the reason why in late 2007 CBV alleged past breaches of the 2004 Lease on the part of the Applicants and refused to consent to a new licence for the ATM was that it wanted to put pressure on them (a) to withdraw their claim that CBV had breached the exclusivity provisions and (b) to accept a new lease which omitted these provisions. This conclusion has a strong evidentiary foundation in the terms of Ms Klonis's letter of 14 February 2008. It is at odds with Mr Alexandrou's claim that Mr Dover complained to Mr Profilio about the ATM in 2006 or early 2007. But this claim was not verified by Mr Dover, who gave evidence at the hearing on liability without mentioning it and could, it must be presumed, have been asked by CBV to verify it at the hearing on damages.
136	The other reasons that Mr Alexandrou identified for CBV's dissatisfaction with the Applicants during 2008 were not convincing. As indicated above at [131], he claimed that they were occupying areas of common property. He did not, however, specify what these areas were. He claimed also that they were (he believed) in arrears of rent. But the only evidence of rent default on the part of the Applicants related to the last two months of the 2004 Lease (see [38 - 40] above). By this time, the Applicants were not seriously considering exercise of the option.
137	In addition, the Tribunal does not agree with the first three of the four reasons given by Mr Rogers in support of his submission that if CBV had not breached the exclusivity provisions the Applicants would still not have sought to exercise the option. The Tribunal is satisfied from the evidence throughout these proceedings that Ms Sajko would have acquiesced in any decision by Mr Profilio regarding the option. The evidence that Mr Profilio looked on occasions for other premises for The Chat Site carries little weight, given that he was prepared to stay in Shop 192 for a number of years after BWT opened a competing business next door. Mr Rogers' suggestion that CBV would not have allowed the ATM to remain in Shop 192 is at odds with the Tribunal's finding that the reason why it raised objections, for the first time, to the ATM late in 2007 was that the Applicants had commenced proceedings based on its alleged breach of the exclusivity provisions.
138	The fourth argument raised in this context by Mr Rogers was that even if BWT had not opened a business next door competing with that of the Applicants, their profitability during the tax years 2005 to 2009 would still have declined so severely that they would not have wished to exercise the option.
139	This argument derives significant support from the figures calculated by McMahon Worth under Scenario A (using data supplied by Mr Profilio) for the estimated profits or losses that The Chat Site would have generated if CBV had not breached the exclusivity provisions. For the tax years 2007, 2008 and 2009, those figures were $27,323 (profit), $11,178 (profit) and $3,831 (loss) respectively.
140	For the four-month period from 1 July to 31 October 2009, however, McMahon Worth calculated an estimated profit of $12,436, representing a much higher rate of profit than in any of the preceding years. This higher rate was attributable, according to McMahon Worth's tables, to a significantly lower amount being estimated for expenses than is shown for any of the preceding years. The estimated expenditure for this four-month period was only $49,019, representing a monthly amount of about $12,254. By contrast, the estimated annual level of expenditure shown in the three preceding years ($202,149) gives a monthly amount of $16,846.
141	McMahon Worth's reports provided no explanation for this change in the estimated rate of expenditure. If the estimated expenses during this four-month period had been maintained at the previous level, they would have amounted to $67,383. The estimated result for the period would have been a loss of $5,928. For these reasons, McMahon Worth's estimated profit figure of $12,436 for the last four months of the 2004 Lease should, in the Tribunal's opinion, be replaced with an estimated loss of $5,928.
142	Having regard particularly to this change in the hypothetical fortunes of the Chat Site during the last four months of the 2004 Lease, the overall picture presented is that of a business that would have been struggling to survive even if there had been no breach of the exclusivity provisions by CBV. This impression is fortified by Mr Profilio's statement during cross-examination that the figures shown for expenses did not include any withdrawal of funds by way of salary for himself or Ms Sajko. This impression is not dispelled by the fact that, as indicated above at [65], the income figures shown in McMahon Worth's tables did not include the licence fees from the ATM, amounting to some $20,000 per annum.
143	Mr Profilio's submissions on this question went little further than to claim that were it not for CBV's breach The Chat Site would have continued to be profitable during the whole term of the 2004 Lease and the Applicants would have decided to exercise the option.
144	Taking into account the above figures from McMahon Worth's reports, together with the reasons given earlier for believing that McMahon Worth under-estimated the pre-injury rate of decline in the profits of The Chat Site, the Tribunal concludes that even if CBV's breach had not occurred the Applicants would have felt compelled by economic necessity to decide against exercising the option. It follows that the lost profits calculated by McMahon Worth for the option period specified in the 2004 Lease - i.e., from 1 November 2009 to 31 October 2014 - must be excluded from any damages awarded to the Applicants.

The approach taken by Mr Condon

145	Mr Rogers argued that an alternative approach to assessing the Applicants' loss of profits, adopted by Mr Condon in his reports, constituted 'the best and only attempt to empirically establish what, if any, reductions in turnover or loss suffered by the Applicants was attributable to BWT selling internet and email services to the public'. The Tribunal, he maintained, should therefore accept Mr Condon's reports in preference to those prepared by McMahon Worth.
146	Mr Condon's assessment was based on the following aspects of the evidence: (a) during the relevant period, The Chat Site was open every day (including Sunday) from 9 a.m. to 10 p.m., whereas BWT was only open between 10 a.m. and 7 p.m. (and not on Sundays); (b) the 'takings and wages books' compiled by the Applicants showed the income earned and the amounts paid to employees each day during each of three 'shifts'; (c) according to the instructions given to Mr Condon, the latest shift each day - 'Shift 3' - ran from 6.30 p.m. to 10 p.m.; and (d) Shift 3 therefore included a significant period of time each day during which BWT was closed and The Chat Site remained open.
147	According to Mr Condon, a reliable estimate of the profits (if any) lost by The Chat Site on account of CBV's breach could be obtained by comparing the trend in profits generated between 2006 and 2009 during the course of Shift 3, when The Chat Site was mostly free from competition by BWT, with the equivalent trend for Shift 1 (9 a.m. to 1.30 p.m.) and Shift 2 (1.30 p.m. to 6.30 p.m.).
148	Mr Condon found that in the tax years 2005 to 2009 and the four-month period from 1 July to 31 October 2009, the profits generated by internet sales in The Chat Site declined by an annual average amount of $14,218.84, or 22%. The equivalent figure that he calculated for internet sales in Shift 3 only was $2,617.31, or 31%.
149	Mr Condon performed an alternative calculation of a similar nature, based on the assumption that since Mr Profilio's figures for wages paid to casual staff were significantly below what Mr Condon understood to be industrial award rates, the amounts shown by Mr Profilio as expenditure on wages each year were too low. According to this calculation, the profits generated by internet sales in The Chat Site during Shift 3 declined by an annual average amount of $7,838.82, or 19%.
150	A further step taken by Mr Condon was to calculate the following: (a) the average annualised profit from internet sales of The Chat Site during the tax years 2006 to 2009 plus the four-month period from 1 July to 31 October 2009; (b) the equivalent figure for Shift 3 only; and (c) a figure, drawn from (b), representing the average annualised profit from internet sales that would have been generated if, as he put it, 'the business worked only in Shift 3', that is, without significant competition from BWT. The amounts calculated were (a) $26,388.67; (b) $7,650.44; and (c) $27,323.00. The significant conclusion, according to Mr Condon, was that figure (a), representing the average annualised profit from internet sales of The Chat Site, was not much less than figure (c), representing the annual Shift 3 internet profit. The difference between them was only $934.33. It followed, in Mr Condon's opinion, that the competition from BWT during the tax years 2006 to 2009 plus the four-month period from 1 July to 31 October 2009 caused The Chat Site's profits from internet sales to decrease by a 'minimal' amount: that is, by an annual amount of about $934.33 and a total amount of about $4,048.76.
151	At the hearing on damages, Mr Profilio testified that during the relevant period the hours of Shift 3 were from 6.30 p.m. to 9 p.m., not 10 p.m. as assumed by Mr Condon. This was not contested. Mr Profilio also tendered evidence showing that Mr Condon, in making his alternative calculation of the profit trends in Shift 3, had relied on incorrect award rates. This evidence was to the effect that the hourly amount of $10 paid by the Applicants to their casual staff, who were mainly students aged between 17 and 19 years, was in accordance with the relevant award.
152	Mr Profilio also asserted in an affidavit filed on 22 March 2010 that customers of BWT or Global Gossip who had bought phone cards entitling them to use the internet services in Shop 194 would be unlikely to visit the Chat Site during the period within Shift 3 when Shop 194 was closed. Except when their matter was urgent or they wished to avoid delay, they would wait until Shop 194 reopened the next day. For these reasons, Mr Profilio submitted that Mr Condon's methodology based on profit trends for Shift 3 was 'inappropriate and unrealistic'.
153	In his submissions, Mr Rogers argued that Mr Condon's approach involved an 'objective test' that did not 'suffer from the disadvantages inherent in the approach taken by the Applicants'. He argued also that Mr McMahon and indeed the Applicants made no 'challenge' to Mr Condon's reports, but accepted his evidence 'without contradiction'. Mr Rogers acknowledged that since Shop 194 was open during a part of the period of Shift 3, Mr Condon might have 'slightly' underestimated the amount of turnover lost by The Chat Site. But he added that even if it was assumed 'generously' that the Applicants' loss was four times the amount estimated by Mr Condon, it was still 'considerably less than $15,000 per annum'.
154	It may be observed in passing that Mr Rogers's figures at this point do not seem to tally with Mr Condon's conclusions. As mentioned above, Mr Condon estimated the total amount of lost profits during the tax years 2006 to 2009 plus the four-month period from 1 July to 31 October 2009 at about $4,048.76. This amount multiplied by four gives the sum of $16,195.04.
155	As a Panel member pointed out during the hearing on damages, the process whereby Mr Condon arrived at the figure of $4,048.76 for the profits lost by the Applicants suffers from the disadvantage that he did not take account of the profits generated by internet sales (either during all shifts or during Shift 3 only) during the pre-injury period. The time frame on which he focused in this part of his report began on 1 July 2005, which is about two months after the time when the Applicants started to suffer compensable loss.
156	It is indeed quite possible that during the pre-injury period the average annualised profit from internet sales in all shifts was higher than the equivalent figure for Shift 3 alone. The Chat Site's hourly profits on internet sales during the daytime shifts (Shifts 1 and 2) within this pre-injury period may well have exceeded its profits during the evening shift (Shift 3). If this entirely plausible assumption is correct, Mr Condon's calculations would support, not contradict, the Appellants' claim that BWT's provision of internet access in Shop 194 reduced their takings and therefore their profits. According to those calculations, the period comprising Shifts 1 and 2, once competition from next door's business commenced, constituted a less profitable period of trading than Shift 3, when competition occurred during only half an hour within a period of two-and-a-half hours.
157	On the other hand, Mr Condon's finding that that in the tax years 2005 to 2009 and the four-month period from 1 July to 31 October 2009, the profits generated by internet sales in The Chat Site during Shift 3 declined at a faster annual rate (31%) than the rate (22%) applying to all three shifts is at odds with the Applicants' case. Significantly, the period analysed in this part of Mr Condon's report included one tax year (2005) which, save for the last two months, falls within the pre-injury period. If the Applicants' claim that their trading was hurt by competition from BWT were correct, one would expect the rate of decline during Shift 3 to be slower, not faster, than the rate for all three shifts.
158	The Tribunal accepts Mr Profilio's evidence that the wages paid by the Applicants to casual staff were in accordance with award rates. It accordingly puts to one side Mr Condon's alternative calculations, applying higher wage rates, of the average annual rate of decline in the profits generated by internet sales in The Chat Site during Shift 3.
159	For the above reasons, Mr Condon's comparisons of the profit rates for different shifts in The Chat Site convey conflicting and somewhat inconclusive messages. Their overall effect is insufficient to induce the Tribunal to resile from the proposition, stated and explained at [81 - 82] above, that it would be wholly counter-intuitive to find that the advertising and maintenance of publicly available internet services in the premises next door to Shop 192 had no effect, or virtually no effect, on the revenue generated by The Chat Site in this Shop.

Other disputed matters

160

In the reports prepared by McMahon Worth and by Mr Condon, conflicting views were expressed on various matters arising in the course of calculating the profits earned by the Applicants' business at The Chat Site during the relevant years. These matters included the allocation of the Applicants' expenditure between this business and their business at Randwick, the allocation of their expenditure on items such as electricity and telephones between the different categories of business carried on at The Chat Site and, as already mentioned, the amounts shown in the McMahon Worth reports as expenditure on wages. These topics were also raised during cross-examination of Mr McMahon and Mr Condon.

161

The parties' submissions did not, however, address these topics to any material extent. On one of them - that of the wages paid to casual staff - the Tribunal has already indicated that it accepts the evidence given by Mr Profilio. As to the rest, the Tribunal has insufficient evidence or argumentation on which to base any specific findings.

The Tribunal's conclusions

162	The stage has now been reached where the various threads in this judgment on damages may be drawn together.
163	As initially stated above at [81 - 82] and repeated subsequently, the Tribunal does not accept the proposition that the emergence of competition by BWT in premises next door to the internet caf operated at The Chat Site had no significant impact on The Chat Site's profitability.
164	For this reason and for other reasons already explained, the Tribunal also does not accept the conclusion, reached by Mr Condon, that this competition caused those profits to decrease each year by a 'minimal' amount, estimated at only $934.33.
165	The Tribunal treats the financial data supplied by Mr Profilio to McMahon Worth and used by McMahon Worth in calculating the Applicants' losses as providing the best guidance available. As indicated above at [85], Mr Rogers made no claim in his submissions that these data should be treated as generally unreliable. He only relied on the different figures contained in the spreadsheets attached to Mr Condon's report to the extent that they supported conclusions by Mr Condon that the Tribunal, as just stated, is not inclined to accept.
166	As stated above at [73 - 74], the only calculations made by McMahon Worth that the Tribunal considers to be useful are those based on 'Scenario A': that is, on the hypothesis that the average downward trend in The Chat Site's revenue during the pre-injury period - assessed at 7% per annum by McMahon Worth - would have continued, but for CBV's breach of the exclusivity provisions, during the remainder of the 2004 Lease.
167	The total amount of the lost profits estimated by McMahon Worth under Scenario A is $263,349. But the period during which McMahon Worth assumed that losses would continue included the option period, from 1 November 2009 to 31 October 2014. As indicated above at [144], the Tribunal's view is that, even if CBV had not breached the exclusivity provisions, the Applicants, due to an ongoing decline in profitability of The Chat Site, would have been compelled by economic necessity to decide against exercising the option.
168	For this reason, the profits, totalling $87,339, estimated by McMahon Worth to have been lost during the option period must be excluded from the damages awarded to the Applicants. What remains for consideration is McMahon Worth's estimate of the profits lost during the period of about 4.5 years between the commencement of compensable loss (May 2005) and the termination of the 2004 Lease (31 October 2009). The figure estimated for this period is $176,010.
169	For the following four reasons, of which the first is the most important, the Tribunal considers this figure to be too high:-

1. Because McMahon Worth assumption regarding the date when the Applicants' losses of profits became compensable was incorrect, its figure of 7% for the average annual decline in revenue during the pre-injury period is unduly low. A figure closer to 9% would be more appropriate (see [96] above).

2. It is likely that some at least of the developments causing The Chat Site's revenue to decrease during the pre-injury period became more pronounced during the period from CBV's breach to the termination of the 2004 Lease (see [105] above).

3. McMahon Worth's estimates of profits lost because of CBV's breach include profits that would have been generated by the provision of 'related services' at the Chat Site. Although the Tribunal has accepted the Applicants' claim that losses of profits from the sale of phone cards are compensable, it has held otherwise with regard to 'related services', on the ground that they were not within the scope of the exclusivity provisions. The 'related services' were, however, of subsidiary importance (see [121 -122] above).

4. McMahon Worth's estimated profit figure of $12,436 for the last four months of the 2004 Lease should be replaced with a loss of $5,928 (see [141] above).

170	On account of the last of these four considerations, McMahon Worth's figure of $176,010 should be reduced by $18,364 (i.e., the sum of $12,436 and $5,928). This gives a figure of $157,646.
171	In order to take account of the remaining three considerations, the Tribunal has little choice but to apply a substantial discount to this figure of $157,646. It does not have the benefit of evidence making possible a more precise approach to quantification. In applying a discount, it follows a well-recognised practice in assessing damages. The rate of discount should be significantly higher than the rates that are commonly applied to allow for unforeseen contingencies, but not so high as to render the damages merely nominal.
172	Having considered factors such as these along with the above-stated reasons why a discount is needed, the Tribunal's conclusion is that the rate of discount should be 45%.
173	The Tribunal accordingly awards damages in the sum of $86,705 to the Applicants. It notes that this represents an average annual figure of $19,268 over the 4.5 years during which compensable losses of profits were sustained.
174	Under section 72A of the RL Act, the Tribunal may award interest on any sum that it has ordered to be paid by a party to proceedings to another party. The submissions in these proceedings did not, however, address this question of interest.
175	Under section 77A, the Tribunal may award costs under section 88 of the RL Act. As mentioned above at [4], it has already considered and dismissed an application for an interim award of costs to the Applicants following delivery of the decision on liability. It indicated however that at the conclusion of the proceedings the Applicants, or indeed the Respondent, might be able to satisfy the criteria for a costs order.
176	The Tribunal accordingly makes the following directions regarding interest and costs:-

1. Any application by the Applicants for interest and/or costs to be paid by the Respondent must be filed and served, together with supporting submissions, within 21 days of the date of this decision.

2. Any submissions of the Respondent regarding interest and/or costs must be filed and served within a further 21 days.

3. If the Respondent's submissions include an application for costs to be paid by the Applicants, any submissions by the Applicants in reply to such application must be filed and served within a further 14 days.

4. Unless the Tribunal accedes to a request made by a party, with supporting reasons, for either or both of these matters to be dealt with at a hearing, they will be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

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