FEDERAL COURT OF AUSTRALIA

Jacara Pty Ltd v Perpetual Trustees WA Ltd [2000] FCA 595

TRADE PRACTICES ‑ Misleading and deceptive conduct ‑ Shopping centre lease ‑ Alleged misrepresentations regarding redevelopment.

EVIDENCE ‑ Shopping centre lease ‑ Alleged misrepresentations regarding redevelopment ‑ Representations allegedly made to other potential lessees ‑ Disallowance of propensity evidence ‑ Cross examination as to credit of alleged representor based on representations to other lessees ‑ Whether such evidence has “substantial probative value” ‑ Whether “probative value” assessed by reference to questions in issue or to credibility of witness.

.

Trade Practices Act 1974 s 51A, 52

Evidence Act 1995, s 102, 103

Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 119 ALR 187 applied

Nagy v Masters Dairy Ltd (1997) 150 ALR 301 applied

Jacara Pty Ltd v Auto‑Bake Pty Ltd [1999] FCA 417 considered

R v Beattie (1996) 40 NSWLR 155 applied

Preston Road Transport Insurance Pty Ltd [1982] 1 All ER 41 cited

Thors v Weekes (1989) 92 ALR 131 distinguished

Knight v FP Special Assets Ltd (1992) 174 CLR 178 applied

Oz B and S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128 cited

JACARA PTY LTD v PERPETUAL TRUSTEES WA LTD and PERPETUAL TRUSTEES WA LTD v JACARA PTY LTD, ROBERT GORDON and ASHLEY WILLIAMS

VG 702 of 1996

SUNDBERG J

30 MAY 2000

MELBOURNE

THE COURT ORDERS THAT:

1.                  The application be dismissed.

2.                  Judgment be entered on the cross‑claim for $6,796.86 together with interest of $2,986.29.

3.                  The applicant and the third cross‑respondent pay the respondent’s costs of the application including reserved costs.

4.                  The cross‑respondents pay the cross‑claimant’s costs of the cross‑claim on a solicitor client basis.

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

REASONS FOR JUDGMENT

BACKGROUND

1                     This case is about a kiosk in the Parkmore Shopping Centre at Keysborough, a Melbourne suburb.  The Centre is an asset of the GEM Retail Property Trust of which the respondent is trustee.  Between February 1994 and November 1995 the Centre was redeveloped.  The redevelopment took place in three stages.  Stage 1 was the fresh food precinct, which was completed in October 1994.  It opened on 10 October 1994, though some shops and kiosks were still vacant.  Stage 2 had two components: Stage 2A, comprising the north‑west mall, and Stage 2B, including the development of the eastern end of the east mall and the north mall.  Stage 2A was completed in April or May 1995 and Stage 2B was opened in June or July 1995.  Stage 3 comprised the food court, the Big W store and some specialty shops.  The food court opened in November 1995.  The kiosk in question is located in the fresh food precinct (Stage 1).  I will call this precinct the Food Hall.  The kiosk was let by the respondent to the applicant in early December 1994 for the purpose of operating a Cookie Man franchise.  Ashley Williams and Roberta Gordon were the directors and shareholders of the applicant.  Philippa Kelly was the leasing executive involved in the negotiations relating to the lease of the kiosk.  The negotiations took place between Ms Kelly and Mrs Evelyn Hicks of Auto‑Bake Pty Ltd (“Auto‑Bake”), the Cookie Man franchisor.  A signed offer to lease was provided by Auto‑Bake on 7 October 1994.  The offer recorded the lessee as a “franchisee to be advised”.

2                     Before entering into the franchise agreement and the lease Mr Williams met with Robert Hipwell, a Cookie Man franchisee who acted as consultant to Auto‑Bake.  The meeting took place at Mr Hipwell’s store in the David Jones building in Melbourne.  There is some dispute about the date of the meeting, but it was probably 28 October.  It is alleged that at this meeting Mr Hipwell passed on to Mr Williams various representations that he told Mr Williams had been made to him by Ms Kelly.  Mr Williams’ son, Vaughan, was also said to be at the meeting, though Mr Hipwell does not recall him being there.  Mr Williams says he made a file note of his discussions with Mr Hipwell.  After he left Mr Hipwell, Mr Williams called on Ms Kelly at the Centre.  Again it is said that Vaughan was present, but Ms Kelly does not recall him being there.  She gave Mr Williams a brochure describing the Centre and its redevelopment, and took him on a tour of the Centre, including the Food Hall.  Mr Williams said that in the course of the tour Ms Kelly made various representations that are the subject of this proceeding.  It is also claimed that the brochure contained relevant representations.  It will be necessary to describe the representations in detail later, but essentially they concerned the profitability of the Cookie Man business, the expected increase in customer traffic flow and profitability incident upon completion of the redevelopment, and the attributes of the Food Hall.

3                     The applicant executed the franchise agreement with Auto‑Bake on or about 28 November 1994.  Its execution was not expressed to be subject to the grant of a lease of the kiosk.  On 6 December the applicant executed an agreement for lease of the kiosk and the form of lease annexed to it.  Mr Williams and Ms Gordon executed the guarantee annexed to the agreement.  The lease was for five years commencing on 13 December, with a starting rent of $25,000 per annum.  The applicant commenced trading on or soon after the commencement date.  Trading at the kiosk was not as good as had been hoped, and the applicant failed to pay rent on various occasions.  It vacated the kiosk on 31 August 1996.  The applicant commenced this action on 22 November 1996 for a declaration that the representations contained in the brochure and those made by Ms Kelly constituted conduct by the respondent in trade and commerce that was misleading or deceptive or likely to mislead or deceive contrary to ss 51A and 52 of the Trade Practices Act 1974 (the Act).  The applicant claimed damages and an order that the agreement for lease and the lease be set aside.  The respondent cross‑claimed for rent and other amounts alleged to be due under the lease and guarantee.

WITNESSES

4                     Mr Williams and Vaughan Williams gave evidence for the applicant.  Ms Kelly, Mr Hipwell and an expert specialising in the analysis of the retail and shopping centre industries, Anthony Dimasi, gave evidence for the respondent.  Mr Williams presented as a witness who was doing his best to recall events that happened more than five years ago.  The passage of time had certainly dulled his recollection, and to quite some extent I think he was reconstructing events and attributing to others his own ruminations, calculations and extrapolations in October 1994 and thereafter.  Some of his assertions were just not credible, and this cast doubt on the reliability of other more credible, though controverted, claims.  Mr Williams regarded himself as an astute and successful businessman who, it appeared to me, was unable to accept that his business venture had failed through any fault of his own.  The central features of Mr Williams’ evidence were challenged by Ms Kelly, who appeared to have a better recollection of certain events, and who seemed to be a truthful witness.  She was no longer in the respondent’s employ, and thus had no subsisting loyalty that might influence her evidence.  She frankly distinguished between what she could remember she had said in October 1994 and what, in conformity with her practice at the time, she would have said.  Mr Hipwell was an important witness who had nothing to gain by giving false evidence, and had no allegiance to the respondent.  I accept the whole of his evidence, and as a result I have rejected crucial parts of Mr Williams’ evidence about the important meeting at David Jones on 28 October 1994.

5                     Vaughan Williams swore an affidavit in which he purported to verify his father’s account of the events at David Jones and the Centre on 28 October 1994.  His affidavit was almost word for word the same as his father’s in respect of the meetings at which he said he was present.  His demeanour in cross‑examination robbed his evidence of any credibility.  When asked whether he knew what “commercial efficacy” (an expression used in one of his affidavits) meant, he said he did not know, but would have known at the time he swore the affidavit, because he always used a thesaurus when “doing a word document”.  Later, he asked the Court to believe that he had himself written the affidavit that reproduced so much of his father’s.  He later conceded that it had been drafted by the applicant’s solicitors and placed before him for swearing.  I do not regard him as providing any corroboration of his father’s account.

WERE THE REPRESENTATIONS MADE?

I will deal with each of the representations alleged in the statement of claim.

(a)               When extensions and renovations … then being carried out at the Shopping Centre were completed there would be a substantial increase in the number of customers attending the Shopping Centre

6                     Mr Williams’ evidence was that during the tour of the Centre on 28 October 1994 (“the tour”) Ms Kelly told him that when the extensions and renovations were completed there would be a substantial increase in the number of customers attending the Centre.  Ms Kelly denied having said this.  She said that when people asked her about future traffic flows it was her custom to say that, as was obvious if they looked around, a lot of money was being spent on the redevelopment, and the owner was hoping that the traffic flow would increase on its completion.  Mr Williams also claimed that earlier on the same day, at Mr Hipwell’s shop at David Jones, Mr Hipwell had said that when the extensions and renovations were completed there would be a substantial increase in the number of customers attending the Centre, and that Ms Kelly had said an increase of between 50% and 60% could be expected.  Mr Hipwell denied having said there would be a substantial increase, and said that Ms Kelly did not tell him about an expected percentage increase.  Mr Williams has not satisfied me that Ms Kelly made the representation alleged.  As I have said, I thought Ms Kelly was a witness of truth, and she denies having made it.  A contributing factor to my lack of satisfaction is that if she had said there would be a substantial increase, there was no reason for her to have lied about it, because to her knowledge there had in fact been a substantial increase in the number of customers attending the Centre following the completion of the renovations.  I accept Mr Hipwell’s denial that he made the identical “substantial increase” statement to Mr Williams, and his evidence that Ms Kelly did not tell him about an expected percentage increase.

7                     If, contrary to my view, Ms Kelly did make the “substantial increase” statement, it was a representation with respect to a future matter for the purposes of s 51A of the Act, and is to be taken to be misleading unless the respondent had reasonable grounds for making it.  Unless the respondent adduces evidence to the contrary, it is deemed not to have had reasonable grounds.  I accept the evidence of Mr Dimasi that on 28 October there were reasonable grounds for a statement that on completion of the renovations there would be a substantial increase in the number of customers attending.  He gave detailed reasons for holding this opinion, which I find convincing.  He summarised his reasons by saying the proposed redevelopment would expand the Centre from a single discount department store (K Mart) based centre to a more modern double discount department store based centre with the arrival of Big W.  Double discount store based centres normally attract significantly higher volumes of customer traffic than single discount department store based centres.

8                     If Ms Kelly did make the alleged representation, it was borne out by the events that happened.  There was a substantial increase in customer volumes on completion of the redevelopment.  The redevelopment began in February 1994 and was completed in November 1995.  The annual foot traffic figures for the two years during which the development took place (1994 and 1995) were 6,121,525 and 5,854,943.  For 1996 they were 6,843,415, for 1997 - 7,344,018 and for 1998 - 7,504,874, increases of 12%, 20% and 23% respectively.  Focusing on the October/November periods in 1994 and 1995, the monthly figures were 450,000 to 460,000 (1994) and 631,418 (1995), an increase of about 40 per cent.  Those increases are in my view substantial, a view shared by Mr Dimasi.

(b)               Prior to the redevelopment there were approximately 125,000 customers who attended the Shopping Centre but these numbers would rise by at least 50% ‑ 60% following the redevelopment

9                     The brochure contains the first part of this representation, and Ms Kelly accepted that she may have told Mr Williams the same thing.  Mr Williams said that during the tour, in response to his enquiry, Ms Kelly said that as the development of the Centre progressed phase by phase the owner expected an increase of 50% to 60% in traffic flow.  Mr Williams also said that when he met with Mr Hipwell earlier in the day, the latter said Ms Kelly had told him the numbers would rise by at least 50% to 60% following the opening of the renovated Centre.  Ms Kelly denied having said anything about a percentage increase to either Mr Williams or Mr Hipwell.  Mr Hipwell agreed that Ms Kelly did not say anything about a 50% to 60% increase, and said he did not tell Mr Williams she had.  He did not have any discussion with her about expected increase in foot traffic after completion of the renovations.

10                  Traffic figures from October 1992 to late 1999 were before the Court.  For the period October 1992 to January 1994, prior to commencement of the redevelopment in February 1994, the weekly figure was approximately 128,638 people.  Mr Dimasi’s calculation for the twelve months up to and including February 1994 was “around 128,000 visitors per week”.  The applicant has not established that the representation relied on was inaccurate.  Although figures for the period March to September 1992 were not available, based on those that were, the probability is that the statement in the brochure that in the two years preceding March 1994 an average of 125,000 customers per week passed through the Centre was correct.

11                  Mr Hipwell and Ms Kelly both denied that she told him there would be a 50% to 60% increase in traffic.  I accept the whole of Mr Hipwell’s evidence as an honest account of what was said at and about his meetings with Ms Kelly and Mr Williams.  He survived sustained cross‑examination unscathed.  Mr Hipwell had nothing to gain by giving evidence that favoured the respondent.  He had no connection with the respondent.  Nothing was put before me to suggest why he should give false evidence.  I accept his evidence that Ms Kelly did not say anything to him about a 50% to 60% increase, and that he did not tell Mr Williams she had.  I also accept Ms Kelly’s evidence that she did not tell Mr Hipwell there would be a percentage increase.  Of course Mr Williams was not present at the conversation between the other two.  Mr Williams relied on a diary note he said he made while talking to Mr Hipwell near the latter’s work room at the David Jones shop.  There are some unsatisfactory features of the note to which I will refer later.  But for present purposes it is sufficient to say that it does not support Mr Williams’ account.  On the view of the entry most favourable to him, it records “$3000 per week turnover to increase to 50‑60 when complex completed”.  The representation currently under consideration is that there would be an increase in foot traffic, not in turnover.

12                  I am not satisfied that during the tour Ms Kelly said foot traffic would increase by 50% to 60% after completion of the renovations.

(c)                The Food Hall would only have food shops in it

13                  Mr Williams’ evidence was that on the second occasion on which he met Ms Kelly at the Centre (sometime after 28 October) she told him there would be only food shops in the Food Hall.  His evidence as to what, if anything, Ms Kelly said about this at their first meeting is less clear.  On that occasion Mr Williams gained the impression from plans on the walls of Ms Kelly’s office that the Food Hall would have only food shops in it.  He said that Ms Kelly drew attention to parts of the brochure “which indicated that there would be an emphasis on fresh food sales in the designated areas of the Centre dedicated to the sale of fresh food only”.  Ms Kelly then said that each of the kiosks had been let to well‑known food brand name tenants including Muffin Break, Uncle Demos, Nutshack, Pasta Fiesta, a fish shop and a delicatessen.  Although Mr Williams did not expressly state that Ms Kelly said at their first meeting that the Food Hall would have only food shops in it, it is implicit in his evidence as to what she said on 28 October, and in his account of what was said at the second meeting, that he was asserting that she made this representation on 28 October.  Thus he claimed that at the second meeting Ms Kelly said there would be only food shops and “repeated the names and types of retailers who would be in the Food Hall”.  Mr Williams claimed that at his meeting with Mr Hipwell on 28 October Mr Hipwell told him Ms Kelly had told him that the Food Hall would be tenanted by food retailers alone.

14                  Ms Kelly denied having said there would be only food shops in the Food Hall.  She said that on 28 October Mr Williams asked her who the other tenants in the Food Hall would be.  On 20 October, that is to say about a week before she took Mr Williams on the tour, she had written to Auto‑Bake reporting on the tenancy situation as to the shops and kiosks in the Food Hall.  The letter recorded that three of the kiosks were yet to be leased.  Two were leased ‑ Uncle Demos (ice cream) and Nutshack.  Discussions were progressing with Muffin Break about another kiosk.  All the shops except one had been let ‑ Lenard’s Poultry, a butcher, a greengrocer, a delicatessen, Baker’s Delight, another delicatessen, a health food shop, a cake shop, Klein’s jewellery, Rabbit Photos, a sewing machine shop and Ocean Blue (Jeanery).  Discussions were progressing with a fishmonger for the remaining shop.  Ms Kelly said she could not recall exactly what she told Mr Williams, but she would have told him what the existing situation was, as recorded in the letter.  Ms Kelly said that prior to the redevelopment of the Food Hall the fresh food retailers had been scattered throughout the Centre.  One of the aims of the redevelopment was to bring them into one precinct.  This was achieved by Stage 1.  But she did not tell Mr Williams that only food retailers would be in the area.  She denied having said that to him at the second meeting at the Centre.

15                  A number of factors have led me to prefer Ms Kelly’s account of what she said to Mr Williams.  She had researched the kiosk/shop position shortly before the meeting on 28 October and had recorded it in her 20 October letter.  She thus knew there were non‑food tenants in the Food Hall.  It is most unlikely she would have told a lie about it, since she could so easily have been found out then and there.  The first and second meetings involved a tour of the Food Hall.  Mr Williams could observe the mix of tenants and that some of them were not food retailers.  According to Ms Kelly, there were non‑food retailers in the Food Hall at the time of each tour.  This is confirmed by Mr Hipwell’s evidence that when he visited the Centre in late January an optometrist and a camera shop (probably wrongly identified as Kodak rather than Rabbit) were there.  I accept Mr Hipwell’s evidence that Ms Kelly did not tell him that the Food Hall would be occupied by food retailers only, and that he did not tell Mr Williams that Ms Kelly had so informed him.  I accept Ms Kelly’s evidence that she did not say that to Mr Hipwell.

16                  The brochure states that the Centre will have “very strong fresh food and fast food components”, and that the “Central Food Court and Fresh Food Market areas form the dual nucleus of the complex”.  The brochure also says the Fresh Food Market will allow shoppers to choose from a wide range of fresh food produce.  On the page opposite that containing these last two statements is a stylised representation of the Food Hall.  In the foreground appear fresh fruit and vegetable areas, and in the background the sign “Meats”.  However, the statements in the brochure must be read in the light of all the events that occurred on 28 October, including the tour, and Mr Williams’ two later visits there.  The purpose of visiting the Hall was to locate kiosk 9, understand the layout of the kiosks and shops and their exposure to the traffic generated by the two discount stores, and see which kiosks and shops were tenanted and who the tenants were.  Whatever impression the brochure may have been imparted to Mr Williams about the make up of the tenants in the Hall, his three visits there could have left him in no doubt that there were non‑food tenants there.  He conceded that those tenants were there when he signed the agreement for lease and the lease on 6 December and when he occupied the kiosk.  He did not answer Ms Kelly’s evidence that some non‑food retailers were in the Hall on 28 October and at his two later inspections in November.  In the light of those inspections, all the respondent was representing to him, via the brochure and Ms Kelly, was “What you see is what you get”.

17                  Had I found that Ms Kelly did make the representation alleged, I would have concluded that Mr Williams did not rely on it in entering into the lease.  He grudgingly conceded that when he signed the lease he was aware that there were non‑food shops operating in the Food Hall.  For some reason Mr Williams signed the lease again on 30 March 1995.  By then the jeweller, the jeans shop, Rabbit Photos, and the sewing shop were all up and running.

(d)               Stage 1 of the redevelopment which included the Fresh Food Hall would open late 1994 and would be part of a two stage development

18                  The applicant relied on the brochure and statements alleged to have been made by Ms Kelly to establish this representation.  The brochure stated that the Fresh Food Market was “scheduled to open in late 1994”.  That statement does not establish the promissory assertion that Stage 1 would open in late 1994.  Mr Williams said that on 28 October Ms Kelly told him Stage 1 would open in late 1994.  Ms Kelly denies having said this.  Stage 1 of the Centre opened on 10 October 1994.  Ms Kelly remembered this date because it was her birthday.  It is inherently unlikely that Ms Kelly would say that part of the Centre that had been open for more than two weeks would open in late October.  Ms Kelly struck me as an intelligent person who would not blindly repeat a formula that had once made sense but had ceased to do so by the date in question.  Further, there is no reason for her falsely to deny making the statement when Stage 1 did in fact open in late 1994.  I find that she did not make the statement attributed to her.  Nor did she say Stage 1 was part of a two stage development.  It is clear from the plans in the back of the brochure that it was a three stage development.  Mr Williams ultimately accepted this, as did Vaughan.

(e)                The redeveloped Food Hall would be attractive, relaxing, inviting and well lit thereby attracting customers to the Food Hall

19                  The brochure contains the statement that

“The Grand Opening in late 1995 will consolidate and enhance Parkmore’s position as:

…

Attractive, relaxing and inviting environment offering spacious, well‑lit malls with a cosmopolitan streetscape atmosphere creating an ideal situation for retail presentation.”

Mr Williams said that on the tour Ms Kelly said the re‑developed Food Hall would be attractive, relaxing, inviting and well lit and would thereby attract customers.  Ms Kelly denies she said this.  She says that when the Food Hall was opened on 10 October, the building work such as the floor and ceiling finishes had been completed, and on the tour Mr Williams saw what these features looked like.  There were a number of tenants who were still to complete fit‑out, and there were some vacancies in the area, but the building works were complete.  As I have said before, I do not think an intelligent person like Ms Kelly would repeat the material contained in the brochure about the planned attributes of a yet to be completed Centre when the Hall was in fact complete.  It is just not credible that, standing in the completed area, Ms Kelly would repeat the words of the brochure in relation to part of the Centre that had been completed.  I find that she did not make the statements alleged.

20                  The statements in the brochure are directed to the completion of the Centre in late 1995 and not to the completion of the Food Hall in late 1994.  In any event the brochure must be read in the light of all the events that occurred on 28 October, including the fact that Mr Williams saw the Food Hall in its completed state.  In context, the only representation conveyed to Mr Williams was that the Food Hall had the features it displayed.  His complaints were that the Food Hall was poorly lit and there were hoardings blocking off the yet to be completed Stage 2A ‑ the north west mall area which adjoined the Food Hall.  Mr Williams was aware of these features on the tour and on his later visits to the site.  He saw the hoardings and saw that the lighting was, as he said in evidence, poor.  The brochure does not assist Mr Williams in relation to the hoarding because it relates to the state of the Centre after completion of the whole redevelopment which was not scheduled until late 1995.  As to the lighting, he saw it as it was.

21                  Had I found that the alleged representation was made, I would have found that Mr Williams did not rely on it in entering into the lease.  He would have signed up anyway.  He agreed that he was aware of the poor lighting when he signed the lease, and went ahead.

(f)                 The applicant’s turnover would increase with the completion of each of the two stages of the redevelopment

22                  Mr Williams said that during the tour Ms Kelly said that with the completion of each stage of the development he could expect the traffic flow to increase, particularly when the walkway to the north was finished, since that would increase traffic flow coming into the Food Hall and passing the kiosk.  The context in which this evidence appears in Mr Williams’ affidavit suggests that he meant to assert that Ms Kelly said the increase in flow would result in an increase in Cookie Man sales.  He also said that earlier on that day, at the David Jones shop, Mr Hipwell told him Ms Kelly had informed him that customer numbers would increase from 125,000 per week by at least 50% to 60% when the renovations were complete, and that Mr Williams could expect an increase of at least 50% to 60% in minimum takings of $3000 per week following the completion.  Mr Williams supported his account of this conversation by the diary note referred to earlier, which he says he made while talking to Mr Hipwell on 28 October.  The relevant part of it reads:

“$3000 p/week    turnover

24,000 p/a rent    to increase to 50-60 when complex completed

price $65,000 including $3‑5,000 stock.”

A number of matters reduce the force of the entry:

·                 Although it purports to record a conversation on 28 October, it is not an entry made on the page reserved for that date, but appears earlier in the diary on a page headed “Expenses for October”, and is not dated.

·                 But for the arrow, the increase “to 50-60” would be an increase in the rent; the arrow is doubtless intended to indicate that it is not the rent but the turnover that is to increase.

·                 The expression “to increase to 50-60” is an odd way to record a percentage increase in turnover.

·                 The arrow appears to have been inserted by use of a different pencil from that used in the balance of the entry.

·                 The last line of the part of the entry set out above appears to have been altered.  The words “including $3-5000” appear to have been inserted after something else had been rubbed out.

·                 Although Mr Williams said he made the diary note while he was talking to Mr Hipwell, the latter has no recollection of this.

·                 The amount of the rent is wrong.

However, despite these features of the entry, it is clear that Mr Williams intended by the arrow to record that it was the turnover and not the rent that would increase.

23                  Ms Kelly denied having told Mr Williams his turnover would increase on completion of the renovations.  However, she said that after Mr Williams commenced trading he told her he expected his turnover to increase when Big W opened.  Ms Kelly also denied having told Mr Hipwell about an expected percentage increase in takings.  Mr Hipwell agreed that Ms Kelly did not say this to him, and accordingly that he did not pass it on to Mr Williams.  Mr Hipwell appears to have misread the relevant part of Mr Williams’ affidavit, because he denied having himself said that Mr Williams could expect an increase of at least 50% to 60%, whereas the allegation is that he told Mr Williams that Ms Kelly had told him that an increase of that order could be expected.  It is however clear from his cross‑examination that at his meeting with Ms Kelly at the Centre in mid‑1994, which was the only time they met, she did not provide any information about the Centre other than that contained in the brochure.  At the time, Ms Kelly was talking to Mrs Hicks, and Mr Hipwell and his wife were not part of their conversation.  As I have said elsewhere, I accept Mr Hipwell as a witness of truth.  Mr Williams has not satisfied me that Mr Hipwell told him he could expect an increase of at least 50% to 60% in takings, or that Mr Hipwell told him that that is what Ms Kelly had said.  The respondent could not, in any event, be bound by anything Mr Hipwell said.  It is not claimed that he was its agent.  Ms Kelly denies having told Mr Hipwell that Mr Williams could expect such an increase.  In those circumstances I am not satisfied that she did.

24                  As appears from the opening sentences of par 22, there is no clear evidence that Ms Kelly said anything to Mr Williams about an expected increase in turnover.  By reference to that part of the statement of claim in which it is alleged that she made the relevant representation, Ms Kelly denied having said that the turnover would increase with the completion of each stage of the redevelopment.  I accept her evidence.

(g)               The other kiosks in the Food Hall had all been tenanted with well‑known food brand name tenants

25                  Mr Williams’ evidence was that during the tour Ms Kelly told him that each of the kiosks shown on the plans had been let to well‑known food brand name tenants including Muffin Break, Uncle Demos, Nutshack, Pasta Fiesta, a fish shop and a delicatessen.  Ms Kelly said she told Mr Williams the true position as to the tenancies as it appeared in her letter of 20 October to Auto‑Bake.  She recalled mentioning the names listed by Mr Williams except Pasta Fiesta.  She said negotiations were progressing with a fishmonger and with Muffin Break.  She would also have mentioned the other entities listed in her letter.  Mr Williams’ evidence on this issue is confusing.  The pleaded representation is that he was told that all the kiosks had been let.  Although his evidence purported to verify this, it dealt as well with the shops.  The delicatessen and fishmonger were not to occupy kiosks.  In cross‑examination Mr Williams conceded he was wrong about Muffin Break, and that Ms Kelly had merely said that negotiations were in progress with Muffin Break.  In fact these negotiations did not result in Muffin Break leasing a kiosk.  This change of mind suggests a faulty memory of the relevant conversation.  As I have said in another connection, having recently gone into print as to the true position of the tenancies, Ms Kelly is unlikely to have told lies about the matter.  I do not think she did.

(h)               Each of the kiosks would be fully operational by Christmas 1994

26                  Mr Williams said that on 28 October, after listing the named tenants, Ms Kelly added that all the kiosks would be operating by Christmas.  Ms Kelly said she did not say this, because a number of the kiosks were vacant, with no leasing deals concluded, and she had no expectation that they would be operational by Christmas because she was still looking for tenants.  Since I am not satisfied that Ms Kelly told Mr Williams the other kiosks had been tenanted, I am also not satisfied that she said all the kiosks would be operational by Christmas.

27                  Had I found that Ms Kelly represented that each of the kiosks would be fully operational by Christmas, I would have found that Mr Williams did not enter into the lease in reliance thereon.  In cross‑examination it was put to him that if Ms Kelly had said “Look, I’d love it if all the kiosks would be operating by Christmas, but they are not going to be”, he would still have proceeded.  He said he would have, but then qualified the answer by saying that he probably would have delayed his decision or would have gone in later.  He then effectively removed the qualification by agreeing that he would not have wanted to miss the Christmas trade.  In my view he would have entered into the lease anyway.

(i)                 The applicant could easily take $3000 per week

28                  Mr Williams’ evidence was that at his meeting with Mr Hipwell on 28 October the latter assured him that at least 1% was a reliable percentage of through traffic customers who would purchase cookies from a Cookie Man store.  He said the weekly takings of the kiosk would be $3000 based on 1% of a minimum number of 125,000 customers, that is 1250 customers per week spending an average of $2.50 each per sale.  The weekly takings would increase when the renovations were complete.  On the same day, at the Centre, Mr Williams put to Ms Kelly the 1% calculation.  He told her he had no prior experience of running a retail food shop in a shopping centre, and asked her if he could expect a minimum of 1% of the traffic flow to purchase from his kiosk.  Ms Kelly replied that 1% was a very conservative estimate, that even on only 1% he would easily take $3000 per week.  On the next day Mr Williams had another meeting with Mr Hipwell at which the latter said Mr Williams would easily make $3000 per week and even more when the traffic flow increased on completion of the renovations.  Mr Williams’ diary note of his conversation with Mr Hipwell on 28 October records “$3000 per week”.

29                  Mr Hipwell denied the whole of Mr Williams’ account of the calculation of the amount of weekly takings.  He said he had never referred to the number of customers of a Cookie Man, or any other business, as a percentage of the total foot traffic for a shopping centre.  Nor had he ever heard of such a statistic being used in any retail analysis.  Even if he had wanted to use such a statistic, he could not have made such a calculation as he did not keep total shopping centre foot traffic figures.  Mr Hipwell also denied the other component of the calculation, namely that customers would spend an average of $2.50 each.  He said he showed Mr Williams the turnover figures for the Highpoint, Belconnen and David Jones stores which he had operated, and told him they disclosed an average turnover of $12,000 per month, or just under $3000 per week (which is what those figures in fact disclose).  He did not say Mr Williams would take $3000 per week.  It was Mr Hipwell’s practice to pass on to potential franchisees the information about the three Cookie Man businesses he had operated, and not to make predictions about a potential franchisee’s likely turnover.  He did not use $2.50 as an average spend.  This was not a figure that was derived from any of his three stores, the average spend at which was between $3.60 and $3.80.  Ms Kelly denied having confirmed Mr Williams’ calculations.  She had no idea what a Cookie Man business would take.  The franchisor might have that knowledge, but she did not.

30                  Crucial to this aspect of the case is whether Mr Hipwell made the prediction he is alleged to have made.  The calculation that Mr Williams said he put to Ms Kelly was either Mr Hipwell’s calculation or a joint Hipwell‑Williams calculation.  As I have said elsewhere, Mr Hipwell came across as a truthful witness.  He had no reason to favour the respondent’s position.  There is no apparent reason why he would deny the 1% and $2.50 figures if they were in fact his, or were figures he had agreed with Mr Williams.  I believe Mr Hipwell’s evidence.  There is no reference in Mr Williams’ diary note to the makeup of the $3000, even though both the 1% and $2.50 figures were, as he said, critical to the working out of the turnover.  Mr Williams said it was his custom to make a diary note of matters relating to money.  Nor do I accept that Mr Williams put the calculation to Ms Kelly.  Given my rejection of Mr Williams’ evidence about the origin and basis of his calculation of weekly takings, it is unlikely that he put that calculation to Ms Kelly.  Further, one is compelled to ask why Mr Williams would ask Ms Kelly about the financial aspects of the Cookie Man business when he must have known she would know nothing about it.

(j)                 On takings of $3000 per week the business would clear $1350 per week

31                  The calculation of $1350 per week clear was based on 45% of takings of $3000.  In his affidavit Mr Williams referred to the 1% and $2.50 components of his conversation with Mr Hipwell.  He did not claim that Mr Hipwell provided the percentage.  Mr Williams then said that “Based on what Mr Hipwell told me I recorded some calculations concerning what I believed to be the break‑even point of the business.  I based my calculations on a turnover figure of $3000 per week which revealed a gross profit figure of $1350 per week”.  However, in cross examination he attributed the 45% to Mr Hipwell.  Counsel put to him the allegation in further and better particulars that Ms Kelly said that on takings of $3000 per week the business could expect a profit of 45%, that is $1350 per week, and asked him whether Ms Kelly had said that.  He said she had not said that, by which I understood him to mean that she had not volunteered the figures but had agreed they were reasonable when they were put to her for comment.  In that context Mr Williams said that the figures in the further and better particulars were given to him by Mr Hipwell.  The calculations referred to are those in the 28 October diary note ‑ “$3000 p/week 45% Gross = $1350 p/week”.  The diary note is in three parts.  The first, according to Mr Williams, records what Mr Hipwell told him.  The second consists of Mr Williams’ own calculation of outgoings (rent, staff, electricity, insurance etc) totalling $1269.  The third is the net profit calculation based on 45% of gross profit.  The diary note is consistent with Mr Williams’ affidavit evidence, which does not attribute the 45% to Mr Hipwell.  In Mr Williams’ account of his conversation on 28 October with Ms Kelly, the 45% is put forward as something in respect of which Mr Hipwell had some input.  He said she “confirmed the calculations I had made with Hipwell that on these takings the business could expect a profit of 45% that is $1350 per week”.

32                  Mr Hipwell said that had Mr Williams asked him about the likely profits of the Cookie Man business he would have said the rough rule of thumb he used when assessing the potential profitability of a Cookie Man business run by him was that gross profit (excluding proprietor’s and family member wages) on turnover was approximately one third of gross takings.  If Mr Williams was asserting that Mr Hipwell provided the 45% figure, Mr Hipwell can be taken to have denied it.  I find that Mr Hipwell was not the origin of the 45% of gross profit method of estimating net profit.  It was Mr Williams’ own percentage that he said he put to Ms Kelly.  The probability is that Mr Williams derived the percentage from Auto‑Bake’s indicative trading accounts that had been given to him.  They show a net weekly margin before payroll costs of 43% of gross sales of $4000.  Mr Williams appears to have adjusted that percentage to 45%.  But he did not adjust the gross sales to those predicted for his kiosk ($3000).  Had he done so, he would have arrived at a net weekly margin of 33%, the same as that used by Mr Hipwell.

33                  Ms Kelly denied having confirmed that the calculation of net profit was reasonable.  I accept her evidence.  It is not credible, in my view, that an intelligent person such as Ms Kelly, who had no familiarity with a Cookie Man business, would agree that the net profit calculation was reasonable.  She would have been unable to express an informed view about the average Cookie Man spend per customer, the percentage of passers by who would be attracted to a Cookie Man kiosk or the percentage of takings that would represent gross profit.  I do not think she expressed a view on those matters about which she knew nothing.  For the same reason, it is unlikely that Mr Williams would have thought it useful to obtain Ms Kelly’s reaction to the figures.  I find she was not asked for her reaction.  Mr Williams agreed in cross‑examination that he did not regard Ms Kelly as someone he ought to rely on about the figures for a Cookie Man franchise.

(k)               The applicant’s business would be highly profitable

34                  Mr Williams said that after confirming the calculations he and Mr Hipwell had made, Ms Kelly added “and therefore the business would be highly profitable”.  Ms Kelly denied having said this.  She said she simply did not know about profitability or otherwise of a Cookie Man business.  That was a matter within the knowledge of the franchisor.  For essentially the reasons I have given in respect of the previous representation, I find that Ms Kelly did not make the statement alleged.

(l)                 The applicant’s rent was tied to its turnover and rent payments would be easily met on weekly takings of $3000

35                  The point seems to be that because rent was tied to turnover, the rent of $25,000 would be easily met on weekly takings of $3000.  There is no evidence to support this representation.  In fact on weekly takings of $3000 no turnover rent was payable under the lease.  This was known to Ms Kelly and Mr Williams.  As I understand clause 4.1 of the lease, the applicant would have to have had weekly takings of around $6500 in order for the turnover rent to become payable.  Turnover was in truth irrelevant to the applicant’s ability to pay rent of $25,000.  Ms Kelly denied having said that the rent was tied to turnover.  I accept her evidence.  She would not have said this when it was plainly wrong and could have resulted in the applicant paying more than the base rent of $25,000.  Indeed Mr Williams accepted in cross‑examination that it was “not 100% correct” to say that rent was tied to turnover.  He agreed that turnover rent did not become payable until a pre‑set turnover amount was reached.

36                  Mr Williams did say that Ms Kelly said the rent was fair and reasonable and that he would have no difficulty paying it on weekly takings of $3000.  Ms Kelly denied saying this.  I have explained why I do not accept Mr Williams’ evidence that Ms Kelly confirmed the $3000 per week figure.  It follows from this that I do not accept that she said he would have no difficulty paying the rent on weekly takings of $3000.

THE CROSS-CLAIM

37                  The respondent’s cross‑claim seeks to recover rent and outgoings in respect of the period between the applicant’s abandonment of the kiosk on 31 August 1996 and the new tenant’s commencement of trading on 18 November 1996.  Under the lease the applicant agreed to pay the rent and all operating expenses, including a promotion levy.  By the terms of the guarantee Mr Williams and Ms Gordon agreed to be liable for any breaches of the lease by the applicant. The quantum was not disputed: $5,614.58 lost rental and $1,182.28 for outgoings, a total of $6,796.86.  The applicant admitted that the monies were owing but stated that it was not legally obliged to repay them.  It asserted that but for the respondent’s misrepresentations it would not have entered into the lease, and Mr Williams and Ms Gordon would not have executed the guarantee.  As such, neither document had legal force.  It follows from my finding that the applicant has not established that the representations pleaded were made, that the lease agreement and guarantee are enforceable documents, and the cross‑claim is made out.  The judgment on the cross‑claim should bear interest from 18 November 1996 to 10 May 2000 at the rate applicable to judgment debts in the Supreme Court of Victoria.  See Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 119 ALR 187 and Nagy v Masters Dairy Ltd (1997) 150 ALR 301 at 317.  The amount of interest is $2,986.29.

MS KELLY’S CREDIT ‑ DEALINGS WITH OTHER TENANTS

38                  In the course of cross-examination of Ms Kelly counsel for the applicant sought to put to her statements the applicant alleged she had made to other persons who had leased shops in the Centre.  Those persons had sworn affidavits alleging that Ms Kelly had made representations to them about foot traffic volumes, increase in customer traffic flow following redevelopment, likely store turnover and the ease with which rent would be paid.  In an earlier ruling I held this material inadmissible as “similar fact” evidence on the basis that it lacked “significant probative value”, an expression that appears in s 97(1) of the Evidence Act 1995 (Cth) ‑ the tendency or similar fact section.  The allegations did not reveal any “striking similarities, unusual features, underlying unity, a system or pattern of behaviour or a business practice, so as to endow what was said with the ‘strength’ required for evidence to have significant probative value”: see Jacara Pty Ltd v Auto-Bake Pty Ltd [1999] FCA 417 at par 14.  In this instance, counsel sought to put to Ms Kelly the allegations in these affidavits in order to test her evidence about her business practice of saying or not saying certain things in the course of her dealings with prospective tenants.  If she were to admit that she made different statements to other individuals, that would bear on whether her statements as to her general practice should be believed.  This, it was said, went to her credit and not to facts in issue in the case, and was thus not covered by my similar fact ruling.

39                  Counsel for the respondent objected to this line of questioning. He pointed to s 102 of the Evidence Act which provides that “[e]vidence that is relevant only to a witness's credibility is not admissible.”  One of several exceptions to the “credibility rule” is dealt with in s 103: cross-examination as to credibility.  It provides:

“(1)     The credibility rule does not apply to evidence adduced in cross‑examination of a witness if the evidence has substantial probative value.

(2)               Without limiting the matters to which the court may have regard in deciding whether the evidence has substantial probative value, it is to have regard to:

(a)               whether the evidence tends to prove that the witness knowingly or recklessly made a false representation when the witness was under an obligation to tell the truth, and

(b)               the period that has elapsed since the acts or events to which the evidence relates were done or occurred.”

Counsel for the applicant submitted that the case fell within the exception in s 103, and that whether evidence has substantial probative value is directed to the credibility of the witness and not to the issues in the case.  Counsel for the respondent submitted that the words “substantial probative value” are directed to the issues in the case and not to the witness’s credibility.  He also submitted that even if the evidence did have substantial probative value, it should be excluded under s 135 as being unfairly prejudicial, misleading, confusing or causing an undue waste of the Court’s time.  I ruled that the evidence was not admissible and gave short reasons which, at the request of counsel for the applicant, I said I would expand in my substantive judgment.

40                  The words of s 103 and the context of Part 3.7 in which it appears support the view that the words “substantial probative value” are directed to the question of the witness’s credibility.  The Australian Law Reform Commission, in its Interim Report on the draft Evidence Bill, described the effect of the clauses that became ss 102 and 103 as stating

“[A] general rule having the effect of prohibiting cross-examination as to credibility unless it has substantial probative value on the question of credibility.”

That was also the view taken by the New South Wales Court of Criminal Appeal in R v Beattie (1996) 40 NSWLR 155 at 163.  However, the evidence must have “substantial probative value”.  In determining whether the evidence has that character the Court is required to have regard to whether the evidence tends to prove that the witness knowingly or recklessly made a false representation when the witness was under an obligation to tell the truth, and the period that has elapsed since the acts or events to which the evidence relates occurred.  However the specification of these two matters does not limit the matters to which the Court may have regard.

41                  In my view the evidence proposed to be elicited lacks substantial probative value.  Some five years have elapsed since the representations are alleged to have been made to the other tenants.  As this case has demonstrated, it is dangerous to assume that after five years conversations and figures have been remembered accurately, and that the content of remembered conversations has not been coloured by the passage of time.  Furthermore, as I said in my similar fact ruling, the alleged representations are too dissimilar to those alleged against Ms Kelly in the present case to make it possible to find the underlying pattern of behaviour necessary to endow the allegations with significant or substantial probative value.  Finally, all the other tenants were partisan, as they had been involved in litigation with the respondent.  I have had regard to whether the proposed evidence tends to prove that Ms Kelly knowingly or recklessly made false statements in her evidence before me.  Because of the matters to which I have just referred, I do not think it does.  It was for the foregoing reasons that I said in my ruling that “for reasons very similar to those I gave in my [similar fact] judgment, I do not think the case falls within s 103(1) on the ground that the evidence that is proposed to be called lacks substantial probative value”.

CONCLUSION

42                  None of the representations alleged by the applicant has been made out, and the application must be dismissed.  There will be judgment for the respondent on the cross‑claim.

COSTS

Solicitor client

43                  The respondent has sought its costs on a solicitor client basis.  Costs on that basis can be awarded where there is some special or unusual feature in the case that justifies the court exercising its discretion in that way.  See Preston Road Transport Insurance Pty Ltd [1982] 1 All ER 41 at 58.  In Thors v Weekes (1989) 92 ALR 131 solicitor client costs were awarded where a s 52 claim was based on knowingly false accounts of conversations.  The present case turned largely on credit, and on the whole I have preferred Ms Kelly’s and Mr Hipwell’s accounts of the relevant conversations to Mr Williams’.  But as I have said, I do not think Mr Williams was knowingly giving false evidence.  In the exercise of my discretion I do not think it appropriate to award costs of the application on the basis sought.  The cross‑respondents should however pay the cross‑claimant’s costs of the cross‑claim on a solicitor client basis.  That was the agreement the parties made when they entered into the lease and guarantee.  See clauses 23.6 and 26.2 of the lease and clause 1 of the guarantee.  I do not accept the applicant’s submission that “legal costs” refers only to costs connected with the preparation of the lease.  See the opening lines of cl 23.6 and sub‑cl (b) of cl 26.2.  Although the parties’ agreement cannot fetter the Court’s discretion, I think it is appropriate in the present case that that agreement be reflected in the order for costs.

Cross‑respondent’s liability for costs of application

44                  The respondent submitted that Mr Williams and Ms Gordon should be liable with the applicant for its costs of the application.  In Knight v FP Special Assets Ltd (1992) 174 CLR 178 the High Court held that the Supreme Court of Queensland’s discretion to award costs extended to an award against a person who, while not formally a party to the proceeding, was the “real party”.  This Court has the like discretion under s 43 of the Federal Court of Australia Act 1976: Oz B and S Pty Ltd v Elders IXL Ltd (1993) 117 ALR 128.  In Knight Mason CJ and Deane J said at 193 that it was appropriate to award costs against a non‑party:

“[W]here the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party … has an interest in the subject of the litigation.  Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.”

In Oz B and S the applicant company’s principal director unsuccessfully sought to set aside an order dismissing the applicant’s claim for declarations and damages under the Act.  Einfeld J noted (at 129-130) that the applicant was impecunious and had no capacity to meet an order for costs, that the director acted alone and without the authority of the applicant’s board, that the director had an interest in the proceeding and would have benefited from its success, and that due to the applicant’s impecuniosity the director could be assumed to have spent his own money to fund the proceeding.  In those circumstances his Honour decided that the interests of justice demanded that the respondent be protected from exposure to further costs.  The considerations bearing on the exercise of the court’s discretion in Knight and Oz B and S are in my view applicable to a case such as the present where a person, though not a party to the application, is before the court as a cross‑respondent.  Cf Knight at 203.

45                  The applicant has paid up share capital of ten dollars.  It does not appear to have any other assets.  Mr Williams lent it substantial sums which he borrowed on the security of his assets in order to provide money to fund the Cookie Man business.  The business traded at a loss.  Mr Williams is now the applicant’s sole director and shareholder, and should be taken to have been responsible for the initiation and maintenance of the proceeding.  He was present in court throughout the hearing and was the applicant’s principal witness.  It is proper to infer that he funded the application himself, and that he had a direct personal interest in the outcome of the application and stood to benefit from its success.  In those circumstances it is in the interests of justice that Mr Williams be liable with the applicant for the costs of the application.  On the other hand, Ms Gordon is no longer a director, and would not have benefited from a successful application.  She took no interest in the proceeding.  She did not attend court and did not give evidence in support of the applicant’s case.  It is not appropriate that she be liable for the costs of the application.

Associate:

Dated:              30 May 2000