FEDERAL COURT OF AUSTRALIA

Mikaelian v Commonwealth Scientific & Industrial

Research Organisation [1999] FCA 610

CONTRACT – whether a contract existed – agreement to lease – whether informal agreement between the parties was binding – whether agreement had been reached on fundamental terms.

TRADE PRACTICES – Section 52 – misleading and deceptive conduct – whether failing to disclose to a potential lessee a right of first refusal vested in a third party constitutes misleading and deceptive conduct by the lessor – whether the Court should grant a declaration that s 52 had been breached – applicant told by third party of the existence of right of first refusal – declaration not granted.

Masters v Cameron (1954) 91 CLR 353 at 360 cited

Geebung Investments Pty Ltd v Varga Group Investments No.8 Pty Ltd (1995) 7 BPR

14,551 cited

Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 cited

Warner v Elders Rural Finance Ltd (1992) 113 ALR 517 cited

General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 cited

Hanave Pty Ltd v LFOT Pty Ltd [1999] (unreported, 1 April 1999, FCA 357) cited

Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649 cited

Colliers Jardine (NSW) Pty Ltd v Balog Investments Pty Ltd (1995) ATPR (Digest)

46-140 cited

Lam v Austinel Investments Australia Pty Ltd (1990) ATPR 40-990 referred to

Poseidon Ltd v Adelaide Petroleum NL (1992) ATPR 41-164 referred to

Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations

Inc (No. 2) (1993) 41 FCR 89 cited

Odhams Press Ltd v London and Provincial Sporting News Agency (1929) Ltd [1936]

Ch 357 cited

The Dairy Farmers’ Co-operative Milk Company Ltd v The Commonwealth (1946)

73 CLR 381 cited

RAFFI MIKAELIAN v

COMMONWEALTH SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANISATION AND COLLIERS JARDINE (NSW) PTY LIMITED

NG 1154 of 1997

HILL J

12 MAY 1999

SYDNEY

THE COURT ORDERS THAT:

1.                  The application be dismissed.

2.                  The parties file and serve within seven days of the date of this order such short written submissions as they may seek to make as to costs.

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

REASONS FOR JUDGMENT

1                     Riverside Corporate Park is a real estate development which at relevant times was owned by the Commonwealth Scientific and Industrial Research Organisation (“CSIRO”), the first respondent to the present proceedings. A part of that development includes the Riverside Village Shopping Centre, a complex of 12 retail and other outlets to service the needs of the tenants and occupants of the Riverside Corporate Park. The project manager for the development was at relevant times the Australia Pacific Projects Corporation Pty Limited (“APPC”). As from June 1996 Colliers Jardine (NSW) Pty Limited (“Colliers”), the second respondent, was appointed by APPC as the leasing agent for CSIRO and the managers of the Riverside Village Shopping Centre.

2                     In or about February-March 1997 Colliers on behalf of CSIRO negotiated a lease of premises referred to in the evidence as Shop R2 within the Riverside Shopping Village. Shop R2 was to be used as a café brasserie. Its lessee was Mr George Charara. It will be necessary to refer in more detail later to Mr Charara’s position. Suffice it to say at the moment that as part of his lease Mr Charara had a right of first refusal to take a lease of premises referred to in the evidence as Shop R1, which was contemplated to be leased for the purposes of a restaurant. Shops R1 and R2 were adjacent. Mr Charara’s lease commenced on 1 March 1997.

3                     In or about August 1997 Mr Raffi Mikaelian (“Mr Mikaelian”), the applicant, became aware that a site for a restaurant at the Riverside Shopping Centre (Shop R1) was available for lease through the agency of Colliers. He made his first inquiry about it on 28 August 1997 in a telephone conversation with Ms Natalie de Angelis an employee of Colliers, employed as a shopping centre manager.

4                     From the time of Mr Mikaelian’s first contact in August until at least the beginning of November, Mr Mikaelian had negotiations with Ms de Angelis and a Mr Terence Tyler, who was a retail director of Colliers and Ms de Angelis’ superior until Mr Tyler resigned from Colliers on 20 November 1997 to commence a consultancy business effectively on his own account. It is common ground that at no time until 16 December 1997 did anyone from Colliers or anyone from CSIRO, or for that matter anyone from APPC, tell Mr Mikaelian that Mr Charara had a right of first refusal to take a lease of the premises Shop R1. Ultimately Mr Charara exercised that right and a lease was granted to Mr Charara of Shop R1.

5                     In the present proceedings Mr Mikaelian seeks, inter alia, damages against both CSIRO and Colliers. Against CSIRO Mr Mikaelian claims that a binding contract to lease Shop R1 had been formed with him and breached by CSIRO. He claims also that CSIRO engaged in conduct which was misleading or deceptive or likely to mislead or deceive under s 52 of the Trade Practices Act 1974 (“the Act”) or in the alternative s 42 of the Fair Trading Act. He claims to have suffered loss and damage by reason of that misleading and deceptive conduct. It is common ground that s 42 of the Fair Trading Act 1987 has no part to play in the present proceedings since the respondents are trading corporations and the question falls to be decided by reference to the Act rather than State legislation. In the alternative, Mr Mikaelian’s case against CSIRO is based upon estoppel. It is conceded that, if Mr Mikaelian’s case based upon the Act is unsuccessful, so too would his case in estoppel. Likewise, because the cases are pleaded in the alternative, if Mr Mikaelian succeeds in his case under the Act there will be no need to consider separately the case pleaded in estoppel.

6                     Mr Mikaelian’s case against Colliers is likewise expressed to depend upon breach of contract, breach of s 52 of the Act (and the corresponding provisions of s 42 of the Fair Trading Act) and estoppel. In addition Mr Mikaelian alleges fraud on the part of Colliers and claims damages against Colliers for what is said to be a fraudulent misrepresentation on its part.

7                     At the request of the parties it was agreed that the question of liability of CSIRO and Colliers be determined separately from the question of damages. The present case illustrates the difficulty which that course of action can pose where damages may be thought to be an essential ingredient in the liability arising under s 52 of the Act. On the last day of the hearing senior counsel for Mr Mikaelian who had not been involved in the trial before that day, sought leave to amend the application then current by the addition of a claim for a declaration that each of CSIRO and Colliers had engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of the Act. The claim for a declaration had appeared in earlier applications filed but not in the last application then on the file. There was no suggestion on the part of the respondents that there was any prejudice to them by my permitting the amendment and I would grant leave to make the amendment accordingly.

8                     Before considering the evidence it is necessary at the outset to outline the claim which Mr Mikaelian sought to make.

MR MIKAELIAN’S CLAIM AS PLEADED

The claim in contract

9                     As originally pleaded the claim in contract was said to arise out of an agreement reached on 9 November 1997 between Mr Mikaelian and CSIRO to lease the restaurant as a result of what is alleged to be an acceptance by Mr Mikaelian by fax dated 9 November 1997 of CSIRO’s offer to lease the restaurant. The express terms of the agreement to lease as pleaded were said to be:

“(a) that the first respondent would grant to the applicant a lease of the Restaurant for the term of 10 years with an option to renew for a period of 5 years;

(b)               the lease would be of the property known as “Shop R1” comprised in the Village;

(c)               the base rent was:-

(i)                 for the first 2 years to be rent free;

(ii)               6% of turnover in the 3^rd year;

(iii)             7% of turnover in the 4^th year; and

(iv)             8% of turnover in the 5^th and subsequent years;

(d)               the commencement date of the lease would be 1 January 1998;

(e)               customer parking of 50 spaces to be provided by the first respondent;

(f)                use of public toilets for Restaurant customers was to be provided;

(g)               the applicant would determine the hours of trading;

(h)               the Restaurant was not required to be ‘á la carte’ dining;

(i)                 the applicant was not required to pay turnover rent;

(j)                the first respondent would construct a concrete floor in the Restaurant;

(k)               the first respondent would construct an illuminated sign on Delhi Road; and

(l)                 the first respondent would arrange a clear passageway to the Restaurant.”

10                  At the commencement of the hearing counsel for Mr Mikaelian sought leave to amend the statement of claim to plead in the alternative the making of a contract on 10 November 1997. According to the amendment there is claimed to be on that day a contract between Mr Mikaelian and CSIRO in consideration of the payment of $1,000 by Mr Mikaelian whereby CSIRO agreed with him that it would lease the restaurant premises R1 to him, that it would before 24 November 1997 give him lease documents for execution, and that neither CSIRO nor Colliers would negotiate or discuss the lease with any other party until seven days after Mr Mikaelian had received the lease documents. It is said to have been an implied term of this agreement that CSIRO would give Mr Mikaelian a lease document for execution incorporating the terms of the lease which Mr Mikaelian had agreed to with Colliers, and that the lease document would include the terms specified in a document referred to as the disclosure agreement dated 10 November 1997 and also the matters specifically identified in the second respondent’s letter dated 6 November 1997.

11                  Although objection was made by the respondents to the proposed amendment on the ground that on its face the proposed amendment was frivolous, it was agreed that no prejudice accrued to the respondents in the amendment being permitted (it being accepted that no additional evidence would be relied upon in proving the alternative claim) and any question of whether the amendment disclosed a cause of action could be dealt with in the course of submissions.

The case under section 52

12                  In the statement of claim as pleaded it is Mr Mikaelian’s case that from at least 10 November 1997 and relying on representations made by Colliers, he believed that he would be granted a lease of the restaurant premises R1 and was induced to continue to rely upon those representations until 16 December 1997. It is alleged that in this period Mr Mikaelian had meetings with accountants and attended to matters such as pricing new equipment for the restaurant. Having said this however and although it appears to be expressed in the pleadings by way of an alternative, the case is in essence that the conduct on the part of the respondents which was said to be misleading and deceptive and in breach of s 52 was the failure to advise him during the period from 9 September 1997 to 16 December 1997 that Mr Charara had a right of first refusal to take a lease. It was said that the circumstances in which this failure to disclose arose were such as to give rise to a reasonable expectation that the existence of the right of first refusal would be disclosed to Mr Mikaelian. It is said that Mr Mikaelian relied upon the representations made to him and the failure to advise him of the right of first refusal and in the result suffered a detriment and in particular loss and damage. Particulars in the statement of claim refer to an expert report concerned with damages for loss of opportunity.

The case in fraud against Colliers

13                  The case in fraud is said to involve two representations made by Colliers. These are:

“(a) neither the first respondent nor the second respondent would negotiate a lease of the Restaurant with any party other than the applicant until 7 days after the applicant was provided with a lease containing the terms set out in paragraph 10;

(b)               before 24 November 1997 the first respondent would forward to the applicant a lease document which incorporated the terms set out in paragraph 10, and which the applicant could accept by executing and returning the lease document so provided within 7 days of receipt.”

14                  The reference to clause 10 is a reference to the clause setting out what are said to be the express terms of the contract to lease formed on 9 September 1997. These are earlier stated in paragraph 9 of these reasons.

15                  The case as pleaded alleges that at the time of making these representations Colliers was aware that a right of first refusal to take a lease over the restaurant had been granted to Mr Charara which required CSIRO to offer him a lease on the same terms and at the same rental as had been negotiated by Mr Mikaelian. The representations are alleged to be untrue to the knowledge of Colliers or in the alternative it is alleged that Colliers was recklessly indifferent to the truth of them at the time they were made. It is said that Mr Mikaelian suffered loss and damages in consequence of his reliance on the alleged fraudulent representations.

The lease with Mr Charara

16                  The lease to Mr Charara of shop R2 was negotiated by Mr Tyler on behalf of Colliers as agents for CSIRO. The initial negotiations which took place probably in February 1997 were for a lease of both shops R1 and R2. It was Mr Tyler’s understanding that Mr Charara did not proceed with a lease of shop R1 because he lacked the funds to fit out both shops. Mr Charara had sold a business which he had run as a café at Pennant Hills and was, at the time of the negotiations, awaiting his share of the proceeds of sale. Mr Tyler reported to Mr Hillier who was a development manager employed by APPC responsible, inter alia, for overseeing the letting and sale of sites in the development and specifically the letting of the 12 retail areas in the Riverside Village. Both ultimately reported to a Mr Harley of CSIRO who was the person at CSIRO responsible for the leasing of the village.

17                  According to Mr Charara the reason that he did not take a lease of both premises was unconnected with money. It is not necessary to resolve that question. It suffices here to say that Mr Tyler negotiated for Mr Charara a right of first refusal over shop R1. The relevant clause in Mr Charara’s lease provided as follows:

“18.1 If the Lessor wishes to grant a lease of Shop R1 in the Village (such shop to be used as a restaurant) (‘the other premises’) during the first year of the term of this Lease, the Lessor must first offer to lease the other premises to the Lessee as referred to in the following clauses.

18.2          The Lessor will offer to lease the other premises to the Lessee by notice in writing (‘the Lessor’s Notice’) given to the Lessee. The Lessor’s Notice will comply with the terms of clause 18.5.

18.3          If following receipt of the Lessor’s Notice the Lessee wishes to lease the other premises he must advise the Lessor of his intention to lease the other premises by notice in writing to the Lessor within 7 days after service of the Lessor’s Notice on the Lessee and comply with clause 18.4 within 14 days after service of the Lessor’s Notice upon the Lessee. If the Lessee does not within the said period of 7 days serve upon the Lessor the Lessee’s notice of acceptance and comply with clause 18.4 within the said period of 14 days or if the Lessee at any time within the said periods of 7 or 14 days signifies his irrevocable intention not to accept such offer then the Lessor shall be at liberty to lease the other premises to any other person or corporation.

18.4          If the Lessee decides to accept the Lessor’s offer referred to in clause 18.1 the Lessee must serve upon the Lessor the duly executed Lease of the other premises (as referred to in clause 18.5) together with any bank guarantee which may be required to be provided under such lease within the time period referred to in clause 18.3. Upon due service by the Lessee on the Lessor of the executed lease of the other premises and the bank guarantee (if any) within the time period referred to in clause 18.3, the Lessor and Lessee will be deemed to have entered into a lease of the other premises on the terms of the lease of the other premises.

18.5          The Lessor’s Notice will contain an offer to lease the other premises to Lessee at a rent nominated in the lease of the other premises. The Lessor’s Notice will be accompanied by a lease of the other premises setting out the terms upon which the Lessor is willing to lease the other premises to the Lessee.”

18                  According to Mr Charara whose evidence on this point I accept, he always intended to exercise the right of first refusal. It is not clear to me that he necessarily understood what that meant. Indeed he said that he intended to exercise the right in December 1997. Given that the right of first refusal was not directly an option to take a lease, his ability to dictate timing was not legally correct. However, no doubt as a practical matter, he had the expectation that should he wish it, CSIRO would grant a lease to him.

19                  The right of first refusal was a matter known to Mr Hillier. It was also a matter known to CSIRO, if for no other reason than that it appeared in the lease which was executed on behalf of CSIRO in favour of Mr Charara. It was of course known to Mr Tyler. It was also known to Ms de Angelis.

20                  In her affidavit of 6 April 1999 Ms de Angelis deposed that she became aware of the existence of the right of first refusal in favour of Mr Charara in about July 1997 saying that she recollected that she was informed of the existence of the right of first refusal at a meeting held on 21 July 1997 when it was discussed. This is not true as Ms de Angelis admitted in the course of cross examination. When first asked she said that she was sure that she had known nothing of the existence of the right until July 1997. However when shown the minutes of a meeting held on 26 February 1997, at which she was present, she admitted that she knew of the existence of the right of first refusal, at least as and from that date. The entry in the minutes reads as follows:

“George Charara – signed lease Monday 24 February 1997. Still interested in operating the restaurant and has the first right of refusal.”

21                  The entry corroborates Mr Charara’s evidence which I accept that he told Ms de Angelis and Mr Tyler that he intended to take up a lease of shop premises R1 and I find that he had conversations from time to time with both Ms de Angelis and Mr Tyler on this topic although not necessarily in a formal way.

22                  There is no doubt that each of Messrs Hillier and Tyler and Ms de Angelis were aware of the significance of Mr Charara’s right of first refusal. At a meeting which took place on 21 July 1997 between Mr Hillier and Ms de Angelis at which time there were some eight parties interested in negotiating for a lease of the Shop R1, the minutes record:

“It should also be noted that George Charara has the first right of refusal over the Restaurant and this must be managed carefully.”

23                  The note appears in the context of the immediately preceding entry that attempts should be made to encourage one of the then interested parties, a Mr Nemme “to commit to the lease agreement”. The matter was again dealt with at a meeting of 4 August 1997 attended by Mr Hillier and Ms de Angelis where the following entry appears:

“George Charara’s first right of refusal over the restaurant should be discussed with him once we have a firm commitment form (sic) another party to lease the restaurant.”

24                  It was the practice that minutes of meetings between Collier staff and Mr Hillier in relation to the village be sent to Mr Tyler, at least where he was not present.

25                  On at least one occasion before Mr Mikaelian was advised of the existence of the right of first refusal, Mr Tyler discussed it with Mr Hillier. According to Mr Tyler that discussion took place on or about 2 September 1997 although the evidence suggests that perhaps another conversation occurred either in late November or on 2 December 1997. According to Mr Tyler on one of those occasions he, Mr Tyler, recommended that CSIRO should disclose the existence of the right of first refusal. According to Mr Tyler, Mr Hillier felt that there may be no need to disclose the existence of the right of first refusal because, at that time, Mr Mikaelian and CSIRO were “poles apart” in their negotiations. Mr Hillier said he had no recollection of a discussion with Mr Tyler prior to the matter coming to a head on the question of a right of first refusal. However, his later evidence in cross examination suggests that a meeting did occur in mid October. I accept Mr Tyler’s evidence that such a discussion occurred.

26                  As I have already indicated it is common ground that no one on behalf of CSIRO or Colliers mentioned the matter of the right of first refusal to Mr Mikaelian until the conversation which took place between Mr Tyler and Mr Mikaelian on 16 December 1997.

The course of negotiations with Mr Mikaelian up to and including
9 November 1997

27                  As already indicated, Mr Mikaelian first made contact with Ms de Angelis on 28 August 1997. At that time the space upon which the restaurant was to be located was completed although not fitted out, plumbing and electrical connections were visible, and where the restaurant kitchen was to be was still a dirt floor.

28                  As a result of Mr Mikaelian’s inquiry, Ms de Angelis wrote to him a letter dated 1 September 1997. On the front page of that letter appear the words “Subject to Owner’s approval, lease documentation and vacant possession”.

29                  The letter sets out what are said to be the basic terms and conditions regarding a lease of shop R1. The term is to be five years with an option for a further five years and the suggestion of a second five year option is open for consideration. The gross rent is shown as $70,175 per annum. In addition there is to be a promotion levy of 5% of gross rent with the lease to commence on 1 October 1997 (subject to negotiation) and rent to commence at the same time. However, the first two years were to be subject to a discount on rent. Usage of the restaurant is said to be “á la carte restaurant (BYO or licensed) with a quality fit out and presentation and a menu and theme distinctly different to that of the adjoining Café/ Brasserie”. The conditions include a bank guarantee equivalent to three months base rent. The restaurant’s menu is to be subject to approval. At the end of this letter is a request that a copy be signed and returned together with a holding deposit of $5,847.92 being one month’s gross rent in advance to be applied against the first month’s rent and/or promotion levy. The holding deposit is to be refunded less legal costs if the matter does not proceed. That letter was never signed by Mr Mikaelian nor were its terms then agreed. It was accompanied by a document called “Disclosure Statement”. In the first paragraph of that document under a heading “Advice to Lessees” it is said that before signing agreements to lease or leases, lessees should ensure that they fully understand the documents and, if in any doubt, that they should seek independent legal advice.

30                  The so-called disclosure statement sets out in greater detail the terms to apply to a proposed tenancy of the Riverside Corporate Park site R1. It is to be noted that, in addition to the matters referred to above, the disclosure statement refers to there being a proposed 50 parking spaces available for customers. The document makes clear that plans for fitout had to be presented for approval by CSIRO. At the end of the disclosure statement there is a page headed “Declaration by Lessee”. This page, which appears in other disclosure statements to be referred to later, contains an acknowledgment that the disclosure statement contains all agreements and representations that influence the lessee to contemplate entering into the proposed lease. There is space for that declaration to be signed by the lessee.

31                  Upon receipt of the letter and accompanying disclosure statement Mr Mikaelian faxed Ms de Angelis requesting that consideration be given to various changes and additions to the proposed terms. These included the removal of the word “á la carte”, removing restrictions on trading hours, requiring the lessor to concrete the kitchen area floor and to construct a ceiling, requiring the lessor to install an illuminated sign at Delhi Road outside the centre and dealing with rent, with the purpose that there be an initial rent free period of one year and thereafter reduced rent for the next two years, with the gross rent being a percentage of audited gross sales.

32                  Ms de Angelis responded with a letter dated 17 September answering the points raised by Mr Mikaelian. In that letter it was agreed that the word “á la carte” would be deleted. However, it is said that there should be maintained a difference between the restaurant and the adjoining brasserie. A counter offer is made about the rent, the matter of trading hours is explored but the suggestions that the lessor construct a floor or ceiling and erect signage on Delhi Road were rejected. The reply attaches a further amended letter of offer and disclosure statement reflecting matters dealt with. Again the letter of offer contains the warning that it is subject to the owner’s approval and the disclosure statement declared by the lessee.

33                  Mr Mikaelian responded agreeing on a number of matters including the question of construction of the ceiling but counter offering in respect of rent and requesting further consideration to the question of the erection of a sign on Delhi Road.

34                  By letter dated 26 September 1997 Ms de Angelis responded to Mr Mikaelian and proposed a different rental arrangement. She also suggested that Mr Mikaelian propose the type of signage required. That letter again contains an amended letter of offer and disclosure statement requesting that it be returned, signed, together with a holding deposit of $5,000.

35                  As a result of a meeting between Ms de Angelis and Mr Hillier on 7 October 1997 the decision was made that there be a meeting arranged at which both Mr Mikaelian and Mr Tyler should attend. That meeting took place on 13 October 1997. Although Ms de Angelis was present at the meeting, most of the negotiations appear to have taken place between Mr Hillier and Mr Tyler on the one side and Mr Mikaelian on the other.

36                  There were many issues discussed at the meeting which continued for some two hours. One matter discussed was the question of rent. Mr Mikaelian was concerned that the development was only one fifth full and was concerned that the rental not increase to a commercial rental until the development was further advanced. Another matter of considerable concern was the question of toilets, a question related to Mr Mikaelian’s desire to secure a liquor licence for his proposed restaurant. There is some disagreement about the terms of the conversation. It appears that Mr Tyler expressed the view that there were enough toilets in the village complex to enable Mr Mikaelian to obtain a liquor licence for the restaurant. Particularly there were toilets located on the next floor and patrons could use an elevator to go to them. There was certainly some discussion about whether Mr Mikaelian could put the name of the restaurant on the doors of certain toilets.

37                  On 17 October 1997 Ms de Angelis wrote again to Mr Mikaelian with a letter of offer and disclosure statement. It is unnecessary to go into the full detail contained in these documents. The permitted use is described as being a restaurant. The lease is for a term of ten years with an option for a further five years and a commencement date shown as 1 January 1997 (this was clearly a mistake and intended to be 1 January 1998) with that date being subject to negotiation. Hours of access are said to be by arrangement with the lessor. Parking is still set as a proposed 50 spaces, approximately, for customers. There is reference in the documentation both to a holding deposit of $5,000 and a bank guarantee in the sum of $15,750. As a special condition it was provided that the restaurant was to operate as an á la carte restaurant and maintain a menu with distinct points of difference to that available at the adjoining café brasserie. A concrete floor was to be constructed by the lessor. In the first year there was to be no rent. In the next three years rent was an escalating percent of turnover, moving from 6% to 8%. In the fifth year and thereafter rental was to be 8% of gross sales with a market review at the exercise of the option. Ms de Angelis advised that the lessor had agreed to the construction of the concrete floor but would not agree to construct the ceiling. By way of offset, the rent in the third year was therefore to be 7% of turnover instead of 8% of turnover. On the question of signage she pointed out that all tenants would need to be consulted but asked Mr Mikaelian for suggestions as to the form and content of a sign. She indicated that final approval of a sign would reside with CSIRO. On the question of liquor licensing, it was agreed that Mr Mikaelian’s application for licence would be supported. On the issue of car parking, Ms de Angelis pointed out that no parking was allowed on roadways but that signs would be erected to direct customers to the car park. The letter acknowledged that trading hours could be determined by the lessee although subject to approval by CSIRO with minimum core trading hours to be specified in the lease. The letter discussed the need for there to be clear access to the restaurant with a 5 cm line to be drawn to guide customers to the restaurant entrance.

38                  The attached letter of offer and disclosure statement reflected the matters in the letter and other terms which had been the subject of negotiation.

39                  In response Mr Mikaelian wrote a letter of 28 October detailing his fears that the park would not be finished to ensure a sufficient number of customers for the restaurant to break even. He sought further concessions to rental or an undertaking on the part of the CSIRO that there would be at least 2,500 people in the park at the end of the first year of operation. The letter contained suggestions for the sign proposed to be erected at the entrance gate at the expense of CSIRO, reiterated Mr Mikaelian’s view that trading hours should be at his discretion and dealt also with access to the restaurant and in particular the problem of delineating the restaurant from a take-away food shop next door. He rejected the idea of a simple painted line and suggested a rope barrier.

40                  By facsimile dated 7 November 1997 Ms de Angelis replied. Included in that facsimile was a copy of letter dated 6 November 1997 to Mr Mikaelian which was also sent to him by mail. In that letter Ms de Angelis rejected the idea of a guarantee of the number of occupants of the village but proposed a different rental basis in which, for the first two years, there would be no rent and for the next three years rent would be a percentage of turnover increasing from 6% to 8%. The letter then dealt with the question of trading hours, signage and access as follows:

“Regarding your other concerns we can now agree to the following:

·        We agree the trading hours should be determined by the lessee. This is subject to the restaurant opening at least for lunch every week day (actual times at which you will trade for breakfast, lunch or dinner are to be advised by you). … This requirement is similar to the core trading hours clause applicable to other Lessee’s (sic). The restaurant must also trade within those times set out by the Liquor Licensing Board in accordance with the law.

·        The lessor agrees to erect Village signage on Delhi Road before the opening of the restaurant. Such signage will blend appropriately with the Park’s image.

·        The lessor agrees to provide suitable indicators to act as a guide for people seated on the walkway, to ensure a clear passage for entry to the restaurant and for fire exit.”

41                  In the last sentence of the letter Ms de Angelis mentioned that Colliers was in discussion with other parties.

42                  On 9 November 1997 Mr Mikaelian sent a facsimile to Ms de Angelis. That facsimile read as follows:

“I was pleased to receive your fax of 6 November 1997 in which you advised the additional benefits that CSIRO were prepared to make available to me.

On the basis of that offer, I now wish to proceed with the lease of the restaurant.

Will you please have a lease prepared for shop R1, in the Village Riverside Corporate Park for me to sign, which incorporates all the matters we have agreed upon.

I am excited by the opportunity of having CSIRO as a partner and believe that the facility they have provided is an excellent venue for a restaurant.

However, I am concerned by one matter that you raised in your letter. You advised that you are in discussions with other parties regarding the lease of this shop. As I am now about to incur substantial costs in legal, accounting services and shop fitting and design consultancies in order to finalise my plans, can I have a commitment that any other negotiations will be held in abeyance until a lease is prepared.

Please let me know how we can do this together as having now decided to go ahead, I do not want to be disappointed to find that my plans and efforts have been in vain.

Thank you for your assistance with negotiations so far and I look forward to successfully finalising everything with you.”

43                  In cross examination Ms de Angelis agreed that in her mind the letter of 6 November 1997 was to be a final offer. She took time in preparing the letter and sent drafts to both Mr Hillier and Mr Tyler. The drafts were amended and the final document sent to Mr Mikaelian was actually the third draft. There is no suggestion that the drafts or letter or the terms of it were approved by CSIRO.

The events of 10 November 1997

44                  Before Ms de Angelis had a chance to take matters further, Mr Mikaelian telephoned her and asked her what he needed to do next. Ms de Angelis told Mr Mikaelian that he needed to pay a holding deposit of $1,000 and sign a disclosure statement. After that telephone conversation Mr Mikaelian went to see Ms de Angelis and handed to her a cheque for $1,000 in favour of Colliers. In turn Ms de Angelis handed to Mr Mikaelian a receipt for the $1,000 holding deposit and a letter dated 10 November 1997 to which was attached a further disclosure statement. The letter, unlike the other letters of offer (apart from that of 6 November) to which reference has been made, omitted the words “subject to owner’s approval, lease documentation and vacant possession”. It read as follows:

“Further to our recent telephone conversation, please find attached a disclosure statement setting out the details of the agreement to lease Shop R1 in The Village Riverside Corporate Park for your records.

We accept the amount of $1,000 as a holding deposit and will now instruct our solicitors to prepare lease documents for execution, these will be forwarded to you within the next fourteen (14) days.

To honour this agreement to lease shop R1 with you, we will cease all negotiations and discussions with other parties regarding the lease of shop R1 at The Village provided the lease documents are executed by you within seven (7) days of your receipt.

We look forward to working with you and the opening of your Restaurant at The Village Riverside Corporate Park.”

45                  The disclosure statement showed the lease commencement date to be “1 January 1997 (subject to negotiation)”. The premises were shown as being available for occupation on execution of the lease document. Under the heading “Facilities and Services provided by Lessor” was the remark that the lessor was to construct a concrete floor in restaurant in the section which currently remained unfinished. The base rent was set out in accordance with what had been agreed in a letter of 6 November. The document indicated that approximately 50 car spaces were proposed for customers with a licence agreement for two bays for the lessee’s own cars. Under the heading “Hours of Trading” it was indicated that core trading hours were not fixed. The document contained references to a bank guarantee. The restaurant was to be operated as an á la carte restaurant with a menu different from that applying to the café brasserie adjoining and its menu was subject to approval of the lessor prior to commencement of trading. There was provision made for declarations to be signed on behalf of CSIRO and by Mr Mikaelian.

46                  Ms de Angelis subsequently contacted Ms Tomas of Middletons Moore and Bevins Solicitors requesting that she prepare a lease for execution within the fourteen days mentioned in the letter of 10 November. Ms de Angelis also advised Mr Hillier that she had received a holding deposit and had reached agreement with Mr Mikaelian in regard to the execution of documents.

Events between 10 November 1997 and 16 December 1997 inclusive

47                  Shortly after Mr Mikaelian had received the documents dated 10 November 1997 he had a further conversation with Ms de Angelis. He said to her, according to his own evidence:

“We want to agree what are the points that have to go into the lease. Some of the things we have agreed on aren’t in the Disclosure Statement. We don’t want to waste time and money on solicitors, and have the paperwork go back and forth.”

48                  Ms de Angelis agreed upon a meeting which was arranged to take place on 14 November and at which Mr Tyler was to be present. Prior to that meeting, Mr Mikaelian discussed matters with his younger brother, Armen, and together they listed a number of points for discussion. Mr Mikaelian and his brother Armen attended at the meeting with Ms de Angelis. Mr Tyler was unable to attend. Among the points for discussion were: toilets, car spaces, signage, walkway, trading hours, the deletion of the requirement that the restaurant be á la carte and the commencement date of the lease.

49                  At the meeting Mr Mikaelian and his brother discussed each of the matters in the list of points which they had prepared. The matters discussed and Ms de Angelis’ reaction to them are set out in a memorandum she prepared that day addressed to Mr Tyler. In the first paragraph of that memorandum Ms de Angelis makes the point that Mr Mikaelian wanted agreement to various points or comments in writing on them. Not all of the points are of importance. Some of them are. Those of importance include:

“1. Toilets for the restaurant

2.                  Allocation of parking spaces for customers

3.                  The erection of a sign on the roof of the restaurant

4.                  Trading hours

5.                  The requirement that the restaurant be an á la carte restaurant

6.                  Lease commencement date”

50                  Ms de Angelis concluded her memorandum to Mr Tyler with the following paragraph:

“The meeting was positive – the main points being the licence, signage and what the café is allowed to sell. Middletons have been advised to prepare a Lease but changes may be required to include some of the above.”

51                  It is necessary to make some comments about each of the matters which were discussed:

1.                  Toilets

It seems that Mr Mikaelian had visited the appropriate liquor licensing authorities and had been advised to the effect that, if the restaurant itself had no internal toilet, it might be necessary for there to be dedicated toilets in the centre, properly signed and locked. Mr Mikaelian sought that this be approved. What Mr Mikaelian did not know at that time is that the question of toilets was a concern to Mr Harley, the General Manager Corporate Property of CSIRO, who was responsible for the overall plan of the development. Mr Harley was not prepared to permit toilets to be dedicated specifically to the restaurant. In was his view that the lessee of the restaurant should install toilet facilities at his expense. Mr Harley’s concern stemmed in part from the distance between and public toilet facilities in the centre. In particular he was concerned about security issues. He communicated his concern to Mr Hillier telling him that public toilets should not be dedicated to the restaurant.

2.                  Car Parking

It seems that the Liquor Licensing Authority also had suggested to Mr Mikaelian that there should be specified car spaces allocated to customers of the restaurant. It was for this reason that Mr Mikaelian wished to have dedicated spaces so that he could advise the Liquor Licensing Authority accordingly. At no time was this ever agreed.

3.                  Signage

The subject of the Delhi Road sign had been agreed by the time the meeting of 14 November 1997 was held. At that meeting Mr Mikaelian raised the question of himself erecting a sign on the roof of the restaurant. Ms de Angelis suggested that he should provide details for CSIRO’s approval.

4.                  Trading Hours

The question of trading hours was discussed and it would seem agreed. Minimum trading hours were to be Monday to Friday, 12.00 pm to 3.00 pm, with the lessee permitted to operate outside these hours for seven days a week after advising the managing agent of these times in advance.

5.                  Permitted use – á la carte

Ms de Angelis agreed with Mr Mikaelian that it would not be required that the restaurant be á la carte. In doing so, she was acting contrary to the views of Mr Harley who had told Mr Hillier that approval was not to be given unless the permitted use was defined as an á la carte restaurant and nothing else.

6.                  Lease commencement date

Mr Mikaelian asked that the commencement date of the lease be extended to 1 February 1998. In part this discussion arose because Mr Mikaelian wished to know when the concrete floor would be filled in. Ms de Angelis advised him that this would occur only after the lease was signed. There was discussion at the meeting whether Mr Mikaelian could arrange for the floor to be filled in but at the cost of CSIRO. Ms de Angelis agreed upon a commencement date of 1 February 1998 subject to approval of the fit out plans.

52                  On 16 November 1997 Mr Mikaelian faxed Ms de Angelis, recording his understanding of agreements that had been reached. The letter sets out Mr Mikaelian’s understanding on the various points discussed, not all of Mr Mikaelian’s understanding was shared by Ms de Angelis. Suffice it to say that Mr Mikaelian’s letter suggests that agreement was reached that modification to the premises required to obtain a liquor licence would be undertaken at the expense of CSIRO, that keys for toilets would be provided to him for use by customers, that there be a fixed number of car spaces dedicated to the restaurant and that opening hours be at his discretion. The final matter in the letter concerns the starting date. On this matter Mr Mikaelian wrote:

“Finally, we raise with you the necessity of delaying the start date of the lease by at least a full month. Of course the final date will depend upon the expediency of the process leading to the finalisation of the lease.”

53                  The letter concludes:

“Having had the opportunity to discuss our needs, I feel confident that we will shortly be able to resolve any points at issue so that I may soon be able to establish a quality restaurant that will be for the benefit of all the Riverside Park residents.”

54                  Mr Tyler was in touch with Mr Harley on a number of the matters which Mr Mikaelian had raised. On or about 20 November 1997 Mr Tyler resigned as an employee of Colliers to commence his own consultancy business. Mr Hillier requested Mr Tyler to continue to be involved with the leasing and management of the Riverside Shopping Village.

55                  On 24 November Mr Hillier sent a facsimile to a Mr Prassas who, it may be inferred, had effectively taken over Mr Tyler’s role at Colliers. Mr Hillier referred to Mr Charara’s first right of approval and asked Mr Prassas how Colliers intended to manage the issue. He urged Mr Prassas to discuss the matter with Mr Tyler. Mr Prassas sought advice from Ms Tomas and arranged for Mr Tyler to meet Mr Charara that day. It appears from a memorandum that Mr Prassas at least contemplated that Mr Charara might not exercise the option available to him. It was agreed that Ms Tomas would send out to Mr Mikaelian the lease documents that day as well. Ms Tomas did that.

56                  On the same day Mr Tyler met with Mr Charara, Mrs Charara and their accountant. Mr Charara advised that he was in a position to lease the restaurant and that he would exercise his “option”. He also indicated his desire to lease other premises in the village as a convenience store with a liquor licence.

57                  On 2 December 1997 Mr Charara forwarded a facsimile to Mr Tyler exercising his right of first refusal. On the same day a management meeting was held at the village at which Mr Tyler, Mr Hillier, Mr Prassas and Ms de Angelis attended.

58                  Meanwhile Mr Mikaelian on 26 November 1997 wrote to Ms Tomas returning to her the draft she had prepared saying that it contained none of the matters that have been negotiated. In part the letter referred to the following matters, all of which the letter suggested had been agreed:

“1. Lessor to complete the premises by installation of a concrete floor.

2.                  Designation of the next door takeaway food shop as a “coffee shop”.

3.                  The removal of the clause requiring the Lessee to provide a bank guarantee.

4.                  The total number of car spaces to be allocated was two spaces for the Lessee and 50 spaces for restaurant customers.”

On no view was there agreement that no guarantee need be provided, as Mr Mikaelian in cross examination conceded.

59                  Ms Tomas replied on 1 December 1997 to Mr Mikaelian indicating that some of the matters raised by him had not been agreed to by CSIRO. She indicated that she was awaiting instructions. It seems clear that, by this date, Ms Tomas was well aware of the right of first refusal of Mr Charara. Indeed it seems she advised that Mr Mikaelian not be told about the existence of that right at that stage. She assisted in the preparation of a letter that was sent by Colliers to Mr Mikaelian on 3 December. That letter asserted that there had not been agreement in relation to the bank guarantee or the allocation of 50 car parking bays exclusively for restaurant patrons. The letter raises as well concern about exclusive use of public toilets and asks Mr Mikaelian for alternative suggestions. The letter concludes:

“It appears at this stage we have not reached a formal agreement to lease, therefore I would advise that no steps be taken to begin establishment of the Restaurant, until such an agreement has been reached and lease documents are executed. If you have any further questions, please do not hesitate to contact me.”

60                  The letter followed an earlier telephone conversation which Ms de Angelis had had the same day with Mr Mikaelian in which the same matters were discussed.

61                  On 11 December Mr Mikaelian spoke to Ms de Angelis about the lease. He was advised that the matter had been referred to CSIRO. Mr Mikaelian contacted Ms Tomas who told him she was not fully appraised of the situation but would seek clarification from CSIRO. Mr Mikaelian wrote to Ms Tomas confirming this conversation on 12 December 1997.

62                  Mr Mikaelian then phoned Mr Tyler. He discovered that Mr Tyler had left Colliers. Mr Tyler suggested they meet the next day.

63                  On 16 December 1997 Mr Mikaelian met Mr Tyler. At the meeting Mr Mikaelian told Mr Tyler that he had made a mistake about the bank guarantee and that he would provide the bond. The various matters such as car spaces, the need to install internal toilets, the need for the permitted use to be described as á la carte restaurant, the signage on Delhi Road, then raised by Mr Tyler, were agreed to by Mr Mikaelian on the spot. To use Mr Tyler’s words, Mr Mikaelian “rolled over to all of the … conditions”. Mr Tyler then told Mr Mikaelian that Mr Charara had a first right of refusal and that it was likely that it would be exercised. Mr Tyler reporting on the meeting to Mr Prassas observed that Mr Mikaelian and his brother were “understandably, upset by this revelation”.

64                  Mr Mikaelian immediately wrote to Ms Tomas threatening specific performance of the agreement he alleged existed with CSIRO. He sought a meeting to discuss the matter.

65                  It is unnecessary to discuss the further developments that occurred between the parties thereafter. A lease was entered into between CSIRO and Mr Charara. Mr Mikaelian lodged a caveat and proceedings were initiated and determined in the Supreme Court of New South Wales concerning that caveat. The respondents seek to rely upon the judgment of the Supreme Court of NSW given in those proceedings as creating an issue estoppel that no agreement for lease arose. I do not find it necessary to consider that question.

THE CASE IN CONTRACT

66                  There is no real dispute between the parties as to the applicable principles to be applied in determining whether a binding contract of lease was entered into between CSIRO and Mr Mikaelian. Obviously there can be no claim against Colliers in contract as it was not the lessor.

67                  First, where the contract alleged is said to have been entered into by an agent on behalf of a principal, the agent must have authority to bind the principal. If authority be lacking then no doubt the agency may be ratified at a later time. Second, there must be an intention to create legal relations. Related to that question, there must be a consensus between the parties on all essential elements of the contract to warrant a finding that there was a concluded agreement. Third, if the parties reach an agreement subject to contract, a question will arise as to whether the parties intend to be immediately bound, although proposing to have the terms restated in a later document (the first class of cases mentioned in Masters v Cameron (1954) 91 CLR 353 at 360) or whether the prima facie position prevails; namely that what has been agreed upon is “regarded as the intended basis for a future contract and not as constituting a contract”, see Masters v Cameron at 363.

68                  It is clear that Colliers had no actual authority given to it by CSIRO to bind that company as lessor. The evidence is to the contrary. CSIRO required that no arrangement could be finally concluded without its consent. This was a requirement that CSIRO imposed on APPC and which was communicated to Colliers. All proposals for leases were submitted to CSIRO for approval by Mr Harley. At no time is it suggested that CSIRO ever agreed to the conditions ultimately negotiated by Colliers, at least in their entirety, nor is there any suggestion in the evidence that there was any ratification on the part of CSIRO of any arrangement entered into without authority. Mr Harley’s evidence, which I accept and which was not seriously challenged, was that in relation to the negotiations with Mr Mikaelian he would not approve of the use of dedicated public toilets by the restaurant but insisted upon toilets being constructed internally within the restaurant. Further, Mr Harley was adamant that the permitted use should include the words á la carte restaurant rather than, as Mr Mikaelian wanted, that the permitted use clause be expressed differently.

69                  Colliers, in its various letters of offer prior to the letter of 6 November 1997, specifically stated that the offer was made subject to the approval of CSIRO and also subject to lease documentation. While I accept that the letter of 6 November 1997 was regarded as serious and was the subject of various drafts, the omission from that letter and from the letter dated 10 November 1997 of the same words had no significance. The omission of these words was not intended to suggest nor could it reasonably be interpreted as suggesting that Colliers had suddenly become entitled to bind CSIRO.

70                  In Geebung Investments Pty Ltd v Varga Group Investments No. 8 Pty Ltd (1995) 7 BPR 14,551 Kirby P, as His Honour then was, summarised the principles applicable in cases where the parties contemplate the execution of a formal document. His Honour said at 14,569:

“1. The mere fact that the parties contemplate the execution of a formal contract, subsequent to an informal agreement, does not mean that that informal agreement is not presently binding.

2.            The fact that the parties contemplate the drawing up and execution of a formal contract is a consideration which may point to the conclusion that no presently binding agreement was intended until that formal contract is executed.

3.            The existence of matters of importance in which the parties have not reached consensus in their informal agreement will render it the less likely that they intended immediately to be bound before the execution of a formal document. Even where the parties have agreed on the ‘major matters’, their subsequent conduct may indicate that they did not intend to be bound until the other issues between them were resolved in a formal document (see in particular Masters v Cameron (1954) 91 CLR 353, at 361; Barrier Wharfs Ltd v W Scott Fell and Co Ltd (1908) 5 CLR 647, at 666; and Marek v Australasian Conference Association Pty Ltd [1994] 2 QD R 521 at 528).

4.            In order to determine in what areas the parties were, and were not, in agreement, and what matters they considered necessary in order for an agreement to exist, it is legitimate to examine their subsequent conduct. Where correspondence between the parties after an informal agreement refers to important terms and conditions not mentioned during that informal discussion, it may more readily be inferred that the earlier discussion was simply a preliminary negotiation and not a binding agreement.

5. Depending on the size, importance and complexity of the subject matter, the less formal the initial agreement, the less likely it will be that it was intended to be legally binding and enforceable. Thus, an oral discussion which contemplates a subsequent formal written agreement is less likely to have been intended to have been immediately binding.

6. It is necessary in every case to consider the nature and importance of the transaction which the parties contemplate. Where the agreement concerns a large sum, or concerns a significant transaction, it is less likely to have been intended to be presently binding.

7. Depending on the subject matter, where the parties have not used solicitors but intended to do so for the drawing up of their formal agreement, that may also be a factor which will point to the non-existence of a binding agreement until the contemplated formalities have been agreed.

8. Where a binding agreement is said to have been formed as a result of correspondence, it is necessary to look at that correspondence as a whole. It is wrong to isolate any part of the correspondence from the rest in order to prove or disprove the existence of a binding agreement. The same approach should be taken to the analysis of words and phrases within the correspondence. Reference to an ‘agreement’ having been reached does not necessarily prove the existence of a presently binding contract. Conversely, references to a ‘proposed’ agreement, and similar expressions, will not necessarily mean that no agreement presently exists. It is a question of how the words are to be interpreted in their context, and in the light of the correspondence, viewed as a whole.”

71                  It is obvious from the facts that I have narrated that there were various matters upon which a final consensus had not been reached. I have already detailed these. They include the question of toilets, car parking spaces, permitted use, commencement date and the like.

72                  Insofar as it is relevant, it is obvious too that Mr Mikaelian himself did not regard there to be a final agreement entered into. His facsimile of 9 November 1997 spoke of the need to finalise everything. It sought a commitment that no other negotiations proceed. Such a commitment would hardly be necessary if a binding agreement had been entered into. That is no doubt why he paid the holding deposit on 10 November and secured an agreement on the part of Ms de Angelis that negotiations with other interested parties be suspended. However, even then, Mr Mikaelian’s response does not suggest that he regarded there to be a binding agreement. Negotiations were only to be suspended pending the expiration of seven days after he had been provided with lease documents for execution. If a binding agreement had been entered into, again there would be no reason why there could be further negotiations.

73                  Further, Mr Mikaelian did not cease negotiations once he had paid the holding deposit. He proceeded to continue negotiations on various matters at the meeting of 14 November 1997. The present is a case where it can readily be inferred that what happened on either the 9 or 10 November 1997 was merely a part of the negotiations for a binding lease, but not a binding agreement.

Were the respondents guilty of misleading and deceptive conduct?

74                  As has already been noted, it is common ground that at no time did any representative of Colliers or CSIRO tell Mr Mikaelian until 16 December 1997 of the existence of Mr Charara’s first right of refusal to take a lease of the premises R1. The question is whether in the circumstances this failure constitutes conduct which is misleading or deceptive or likely to mislead or deceive within the meaning of s 52 of the Act.

75                  There is no real argument on the applicable law. It is dealt with in decisions of full courts of this Court in Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608; Warner v Elders Rural Finance Ltd (1992) 113 ALR 517; General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 and, most recently, in Hanave Pty Ltd v LFOT Pty Ltd [1999] (unreported, FCA 357). There are also many decisions of single judges which have dealt with the matter. Reference to two will suffice: Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649 and Colliers Jardine (NSW) Pty Ltd v Balog Investments Pty Ltd (1995) ATPR (Digest) 46-140. While mere silence could hardly of itself constitute conduct which is misleading or deceptive or likely to mislead or deceive, the question has to be looked at by reference to the context in which the failure to speak arises. As Black CJ said in Demagogue at 609-610:

“… Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of ‘mere silence’ or of the duty of disclosure can divert attention from that primary question. Although ‘mere silence’ is a convenient way of describing some fact situations there is in truth no such thing as ‘mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.”

76                  Generally, if there exists a legal obligation to disclose, there will be a reasonable expectation which will arise. In other cases, as I pointed out in Winterton, failure to disclose may render that which is disclosed but a half truth. I said at 666 in that case:

“ … if the circumstances are such that a person is entitled to believe that a relevant matter affecting him or her adversely would, if it existed, be communicated, then the failure to so communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his or her detriment is entitled to infer from the silence that no danger of detriment existed.”

77                  In Balog Investments the applicant had been engaged by the respondent to sell a hotel. Unbeknown to the applicant the occupier of the hotel had a right of first refusal to purchase. That right of first refusal was in fact exercised. The applicant sued, inter alia, claiming misleading and deceptive conduct. Beazley J had no difficulty in concluding that there was a breach of s 52. In reaching that conclusion, her Honour formed the view that it was likely that the respondent intended to use the services of the applicant as a means of establishing the price at which they would offer the property to the grantee of the right of first refusal and also to have a buyer immediately available if that right was not exercised. Her Honour said:

“However, even if that was not the respondent’s purpose, in circumstances where the respondents believed that it was important for the applicant to know both the terms and the consequences of clause 24, Mr Balog’s failure to include any reference to it … takes on special significance.”

78                  Her Honour formed the view that what had been disclosed was in essence but half the story and that the norm of conduct encapsulated in s 52 had been breached.

79                  There are of course differences between the present case and the circumstances in Balog Investments. But in my view the result is the same.

80                  Counsel for Colliers submits that s 52 does not require arm’s length negotiations to be completely open or require full disclosure at all times. It is said that puffery is part of the ordinary stuff of commerce. So, no doubt, where arm’s length parties have conflicting interests there will be circumstances where full disclosure would not be required: cf Lam v Austinel Investments Australia Pty Ltd (1990) ATPR 40-990 at 50,880 and see Poseidon Ltd v Adelaide Petroleum NL (1992) ATPR 41-164 per Burchett J. I accept that this is so, but it does not excuse the conduct of the respondents here.

81                  A party negotiating for a lease is entitled to assume that, if the negotiations are successful, the lessor is free to grant exclusive possession of the premises which are the subject of negotiation. The failure to disclose the existence of a first right of refusal is, in my view, such as to lead a person negotiating a lease to the conclusion that no impediment exists. As such the failure in my view amounts to misleading or deceptive conduct. Estate agents and developers should by now be aware that no longer can they engage in what the community as a whole would see as sharp practice. Section 52 is designed to protect the public. It is designed to ensure that in trade or commerce persons conduct themselves honestly and truthfully. Here neither Colliers nor CSIRO did.

82                  In the present case it is quite clear that the failure to disclose was deliberate. It is obvious that all parties regarded the question of the right of first refusal as a matter of some sensitivity and one to be “managed”. It is clear enough that no one from Colliers or, for that matter, CSIRO wished to alert Mr Mikaelian to the existence of that right. One may ask rhetorically why this was so. The only inference open is that both Colliers and CSIRO were happy to progress negotiations so that the alternative existed, beneficial to them, either of forcing Mr Charara to exercise the right of first refusal or entering into a lease with Mr Mikaelian. I would infer that to be the case here. The fact that this conduct could cause loss to Mr Mikaelian never appears to have been a matter of any concern to Colliers or CSIRO. I should say that it is in the present case irrelevant whether the failure to disclose was a deliberate attempt by Colliers or CSIRO to seize an advantage.

83                  In the circumstances therefore of this case, I am of the view that both Colliers and CSIRO breached s 52 of the Act.

Should the Court grant a declaration to the effect that Colliers and CSIRO
had breached s 52?

84                  The applicant urges that the Court make a declaration that the respondents breached s 52. However, it is conceded by the applicant that no declaration should be made if the facts establish that Mr Mikaelian, although not advised by the respondents of the existence of Mr Charara’s right, had been told in fact at quite an early date by someone else. In my view this concession in the course of oral submissions was properly made. After the conclusion of oral submissions I directed the parties to file written submissions directed at whether a declaration should be made in case I should conclude that Mr Charara’s evidence was not to be believed and as to the form such a declaration might take.

85                  It is not really in dispute that the Court has power to make a declaration that certain conduct of a respondent infringes s 52 of the Act even where an applicant may have suffered no damage. Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No. 2) (1993) 41 FCR 89 is but one example of a case where a declaration was made in such circumstances. The more difficult question is whether a declaration should be made at the suit of an applicant who claims damages but in fact suffers none but nevertheless the respondent has breached s 52. It would, it seems to me, be a rare case where declaratory relief would, in such a case, be given.

86                  On the one hand the granting of declaratory relief would have no utility as between the parties. It would serve, as between the parties, no greater role than a finding of contravention in the Court’s reasons would have.

87                  A declaration with no practical effect would never be made: Odhams Press Ltd v London and Provincial Sporting News Agency (1929) Ltd [1936] Ch 357; The Dairy Farmers’ Co-operative Milk Company Ltd v The Commonwealth (1946) 73 CLR 381. But it can be said that a declaration that a respondent contravened the Act might have a salutary effect in a particular case so that the public interest would give to the declaration a practical effect. I do not think that the public interest here is of such consequence as to outweigh matters such that there is no reason to believe the offending conduct would be repeated or that the conduct did not result in damage to the applicant; matters which weigh against the making of a declaration. I take into account also the fact that a declaration was only sought at a late stage and the difficulty of framing a declaration in a case such as the present so as to fulfil such public purpose as it might serve.

88                  Mr Charara swore an affidavit in the proceedings. In it he deposed to the fact that, in or around October 1997, Mr Mikaelian took photographs of the village and came into his shop and copied his menus. He deposed to a conversation which he said took place in the shop at that time. The conversation deposed to was as follows:

“I said: “What is your intention here?”

He said: “I am interested in next door, the restaurant.”

I said: “What terms did they offer you?”

He said: “I got 6 months rent free and $70,000 after that.”

I said: “What do you propose to do with it?”

He said: “I’m going to set up a buffet. My prices will be much the same as here but I will be able to offer the customers a beer.”

I said: “We have an option over the restaurant which we are taking up in December. We have to wait until we’ve sold another shop.”

He said: “Oh well that’s the end of that then. It’s gone.”

I said: “Yeah, it’s ours.”

89                  It was common ground that Mr Mikaelian had taken photographs of the village and that he had had a cup of coffee in Mr Charara’s shop. However, Mr Mikaelian denied both that he had copied Mr Charara’s menus and that the conversation to which Mr Charara deposed had taken place.

90                  Mr Charara was cross examined. That cross examination did not succeed in impugning Mr Charara’s evidence. He gave it quite forthrightly. It is true that he agreed that he did not see Mr Mikaelian taking photos and that he was not close enough to Mr Mikaelian to know whether he was in fact copying the menu although that was the impression he was given. It is perhaps possible that Mr Mikaelian did not copy the menu. I make no finding on that matter. Given that the proposed lease to him required that he differentiate his menu from that of Mr Charara it is quite likely that he did.

91                  If Mr Charara’s evidence and Mr Mikaelian’s denial of it had stood alone, I would have formed the view that I was unable to find whether or not the conversation took place if the burden of proof fell, as I think it does, on Mr Mikaelian. On the one hand there is no particular reason why Mr Charara should lie. He had no financial interest in the litigation at all. He had a lease and the litigation could not affect it. Mr Mikaelian on the other hand had a clear interest in the outcome of the litigation. He was not always a good witness: at times belligerent and at times argumentative. It was clear that he gave his evidence wishing to put the best case forward that was possible. On the other hand it certainly appears to be the case that he was angry when told by Mr Tyler of the existence of the option and one may ask why he was so angry if he already knew. There may be an answer to that question. It may be that while Mr Mikaelian was told, he did not fully understand the significance of the right of first refusal or did not believe that it was likely to be exercised. By the time 16 December 1997 came around the situation may perhaps have been different.

92                  But the evidence of Mr Charara does not stand alone. There is also the evidence of Mr Hillier. Mr Hillier had made no reference in his affidavit evidence in chief to having had any conversation with Mr Charara in which Mr Charara told him of the conversation with Mr Mikaelian. However, Mr Hillier was cross examined by counsel for Mr Mikaelian. He was asked in the course of that cross examination whether Mr Charara had ever told him around October 1997 that he had told Mr Mikaelian about the first right of refusal. Mr Hillier answered:

“He did tell me that he told Raffi Mikaelian about his first right of refusal. The exact date of which I cannot be sure but it was around that period.”

When pressed, he said that Mr Charara had said words to him to the effect that Mr Mikaelian was sniffing around and that they had had conversations in which Mr Mikaelian had said he was going to take a lease of the restaurant to which Mr Charara had answered:

“Well I have a first right of refusal over the restaurant as part of my lease for the café.”

Mr Hillier said that this was clear in his recollection.

93                  There was no attempt to impugn in any way Mr Hillier’s evidence. His credit was not attacked. I accept his evidence as corroborating Mr Charara’s evidence and accept Mr Charara’s evidence therefore that the conversation did in fact take place as he deposed.

94                  It follows that, in accordance with the concession made by senior counsel for the applicant, I would not make a declaration.

95                  Before concluding this section of my reasons, I should say that had I believed Mr Mikaelian and not Mr Charara there would still have been a question whether a declaration should be made as requested. It would have been necessary to take into account the public interest that such a declaration be made. On the other hand there is a real question whether Mr Mikaelian’s evidence ever showed that he suffered any damage at all arising from the breach of s 52. I do not need to decide this question. On one view, perhaps he did by showing that he had employed an accountant at the end of the negotiations. A mere breach of s 52 does not establish a cause of action in Mr Mikaelian. All that section does is formulate a norm of conduct. A cause of action arises only if loss has been suffered. Such a loss can include of course a loss of opportunity. The cause of action which Mr Mikaelian asserted arises not from s 52 itself but from the provisions of s 82 or s 87 of the Act. For Mr Mikaelian to have a cause of action in damages it is clear he must suffer some loss. It is this matter which makes it difficult to divide liability from damages in the way the parties agreed. Where this happens, it may be necessary at the very least for an applicant to show some damage even if the question of quantum of damage is left to a later time. However, it is unnecessary to consider that matter further.

The case in Fraud against Colliers

96                  At the outset I detailed the allegations pleaded by the applicant which were said to constitute a fraudulent misrepresentation on the part of Colliers. It will be recalled that these turn upon the letter of 10 November 1997 in which Colliers represented that Mr Mikaelian would be given a lease incorporating terms set out in the statement of claim and would cease all negotiations with other parties.

97                  As to the first of these matters there is no evidence which suggests any falsity in the statement that Mr Mikaelian would be provided with a lease document. Since however not all the terms in paragraph 10 of the statement of claim were terms agreed upon with Mr Mikaelian the claim suffers a difficulty. The representation not to negotiate was not understood by Ms de Angelis to be erroneous when it was made. She did not think that there was any negotiation to be entered into with Mr Charara but saw this as a mechanical matter. No one else from Colliers was ever suggested to have made any such representation even if it were possible to treat the representation made in the letter by Ms de Angelis as a representation made by Colliers.

98                  In my view the applicant did not establish that Ms de Angelis had no honest belief in the truth of these representations in the sense in which she intended those representations to be made and at the time they were made.

99                  The claim in fraud must likewise fail.

100               I should say in any event that the claim is misconceived. It is difficult to see how any loss could possibly be shown to Mr Mikaelian by the representations in the letter of 10 November, assuming the letter to constitute a representation. There is no suggestion that Mr Mikaelian really relied on that letter as such and, in any event, Mr Mikaelian could never have obtained a lease from CSIRO as Mr Charara would exercise the right of first refusal. There is no suggestion that Mr Mikaelian had any other negotiations on foot at the time the so called representation was made which he put to one side as a result of the letter.

CONCLUSION

101               In my view the application must be dismissed. The parties have all requested that I make no cost orders until they have had the opportunity to study these reasons. Accordingly I do no more than order that each party file within seven days such submissions as they may care to make and I shall make a costs order after these submissions are received. I should say that prima facie it would seem that the costs should follow the event.

Associate:

Dated: 12 May 1999