ROQUIN OFFICE SERVICES PTY LTD and ORS v TINGDALE PTY LTD and ANOR [1997] NSWCA 268

ROQUIN OFFICE SERVICES PTY LTD v TINGDALE PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

MASON P, MEAGHER JA and CLARKE AJA 10 June 1997, 21 October 1997 [1997] NSWCA 268

Lease Agreement — misrepresentation as to area of premises — construction of lease

Mason P I agree with the judgment of Clarke AJA. Meagher JA I agree with Clarke AJA.

Clarke AJA Tingdale Pty Ltd (the first respondent) was the owner of premises situated at 262 Castlereah Street, Sydney, which it purchased in 1987. Some three years later, that is in early 1990, it determined to let the first and second floor of its premises. A sign was then erected on the building stating that there were two floors available for letting, each with 235 square metres of space available. This sign was seen by Mr P Rosier (the second appellant), the managing director of a company known as Roquin Office Services Pty Ltd (the first appellant). This company operated as a service company for the second appellant, who carried on practice as a solicitor. Mr Rosier was at that time interested in leasing new premises for his business and, after some negotiation, the first appellant and first respondent entered into a lease for the premises which were described as "being second floor 262 Castlereagh Street Sydney". The lease was dated 6 April 1990 and under it the first appellant was granted a term of three years commencing on 7 April. The sole description of the premises was as I have recalled it and the lessee (the first appellant) was granted "the right to use in common with other persons entitled thereto the common parts". Those parts were defined in the lease to mean:

"Those parts of the building provided by the Lessor from time to time for common use by the occupants of the building and including (but without limiting the generality hereof) the entrances, lobbies, corridors, toilets, stairways, elevators and other common amenities and conveniences thereof and such other places or facilities as may be designated from time to time by the Lessor for use by the Lessee in common with others."

The base rent reserved by the lease was the sum of $63,450 per annum, which mathematically explains a letting of 235 square metres at a rental of $270 per square metre.

The first appellant entered the premises under the lease and remained there until 31 January 1993. Shortly prior to this time Mr Rosier was told that the rental area was closer to 200 square metres than 235 square metres. Upon leaving the premises he commenced proceedings against the first respondent and James Thiessen & Associates Pty Ltd (the second respondent), which was an architectural company operated by Mr James Thiessen, the managing director of the first respondent. In these proceedings a number of issues arose but the Court is presently concerned only with one of these issues. This relates to an allegation in the first appellant's statement of claim that the first respondent induced the first appellant to enter into the lease by making a representation that the premises had

2 UNREPORTED JUDGMENTS

an available area of 235 square metres, which was a false and misleading representation made in breach of s52 of the Trade Practices Act 1974 (Cth). In the pleading the first appellant contended that the premises only had an available area of 202 square metres and that, in accordance with the negotiations between the parties, the base rent should have been the sum of $54,540 per annum, that is, the sum of $270 per square metre for 202 square metres.

Brownie J, who heard the action, rejected the first appellant's claim that Mr Thiessen had knowingly made a false representation and also, as it seems to me, rejected the contention that the representation that the available area of premises was 235 square metres was a misrepresentation. This led his Honour to reject the allegation of false and misleading conduct. It is from this conclusion that the appellants appeal.

The evidence established that Mr Rosier and Mr Thiessen were known to each other and that they met on 16 February 1990 when Mr Rosier, who had fallen out with his present landlord and was proposing to leave the premises in which he conducted his solicitor's practice, had shown some interest in leasing the premises the subject of the claim. Following that conversation Mr Rosier visited the premises and then wrote a letter to Mr Thiessen in which he offered to lease the premises for three years at a rental of "$250 per square metre inclusive of outgoings". On the same day, that is 16 February, Mr Thiessen faxed back to Mr Rosier a copy of this letter with some handwritten notes added. The notes relevant to the words just quoted were "obligated to purchaser at 270 per square metre outgoings estimated 81 per square metre. Everything else OK...".

There the matter rested for some time. On 27 or 28 March, after Mr Rosier's attempts to find other premises had come to nothing, Mr Rosier and Mrs Stewart (Mr Thiessen's agent) agreed in principle to a lease on the terms discussed in the exchange of 16 February and the formal memorandum of lease was prepared. There was some further, minor, discussion and the lease was executed. The first appellant took possession on 7 April.

At the trial there was considerable debate about the correct manner of measuring the floor space. In the event his Honour accepted the evidence of a surveyor to the effect that the area of the second floor area is 235 square metres, including an area of 23.6 square metres occupied by the lift and fire stairs, and another area of 4.9 square metres, occupied by the second floor toilets.

On the question of whether a representation was made his Honour found that on 16 February 1990 Mr Thiessen said to Mr and Mrs Rosier that the area offered was 235 square metres, which was consistent with the sign on the building and, in addition, reflected Mr Thiessen's belief.

The debate focused on whether the two statements that the available area was 235 square metres were misrepresentations or whether either was. In the course of the discussion much emphasis was placed on the expression net lettable area and on a method of measurement upon which the appellants relied, the BOMA method. His Honour concluded that both these subjects had been given undue prominence and as it seems to me said that as the second floor was the subject of the lease and as it contained 235 square metres no misrepresentation had been established.

In my respectful opinion his Honour failed to recognise that it was necessary to construe the lease in order to determine what was let, and in doing so, to pay proper regard to all its provisions. It is only when the lease is properly construed that a conclusion can be reached as to whether the statements made constituted misdescriptions. Earlier I referred to the description of the area leased and the

URJ ROQUIN OFFICE SERVICES PTY LTD v TINGDALE PTY LTD (Clarke AJA) 3

common parts. The former, being the "second floor" and the latter "those parts of the building (which included toilets, stairways and lifts) provided by the lessor from time to time for common use by the occupants....".

What is clear is that the areas which fell within the definition of common parts were reserved for use by the occupants of the building in common and were not part of the areas let to the tenant, nor were they areas in which the tenant was granted the right of exclusive possession.

It follows, in my respectful opinion, that what was let by the first respondent to the first appellant was all the second floor excluding the common areas reserved for the use of all the occupants of the building in common. In other words the area the subject of the lease was 207.1 square metres.

This was a smaller area than the area represented as available to the tenant, an expression which, in my view, could only be understood as the area available to be leased. Such an expression could not, in my view, be reasonably understood as an area available, in part, to be leased and, in part, to be shared in common. Accordingly the misrepresentation alleged was made out (in so far as the statements were objectively false) and his Honour's findings cannot stand.

This conclusion is one of fact and not dependent upon a technical description, such as "net lettable area" and depends upon the determination that the representation related to the area available to be leased, which was in fact smaller than the area represented.

The next question concerns the orders which this Court should make. On one view the matter should be referred to the Equity Division to assess the damages flowing from the misrepresentation. On another, this Court should endeavour to carry out the exercise itself. In my view the amount of damages must be small and the costs of referral comparably much greater. For this reason it seems to me that the Court should carry out the exercise of assessing the damages. The measure would be, as the President said during argument, the difference between what was given and what was represented - that is between 235 square metres at $270 per metre and 207 square metres (excluding toilet, stairwell and elevator) at $270 per metre for the term of the lease.

In these circumstances I would stand the matter over for twenty-four hours to enable short minutes to be filed including the calculations of the damages and reflecting the allowance of the appeal, the setting aside of Brownie J's judgment, the entry of an alternative judgment and proper costs orders. One matter which the respondents may seek to argue is the question of costs and that can be done, if it is desired, upon the presentation of the short minutes.

Stand the matter over for twenty-four hours to enable short minutes to be filed including the calculations of the damages and reflecting the allowance of appeal, the setting aside of Brownie J's judgment, the entry of an alternative judgment and proper costs orders. One matter which the respondents mat seek to argue is the question of costs and that can be done, if it is desired, upon the presentation of the short.

Counsel for the appellant: Dr G Flick SC, Mr Alexis Solicitor for the appellant: Rosier Associates Counsel for the respondent: F Donohoe

Solicitor for the respondent: J A Meagher & Decoek