Before you sign on the dotted line…

30 OCT 2018

 

The Court of Appeal recently dismissed a tenant’s case against a landlord for Misleading and Deceptive Conduct.

This decision presents an important reminder to all Tenants, Landlords and anyone signing a contract to give careful consideration to the wording of documents you are signing, and how crucial it is to ensure careful drafting during the commercial negotiation stages. It also points out the significant effect of a single word or sentence and the costly consequences which could flow from any oversights. 

NB2 Pty Limited v P.T. Limited [2018] NSWCA 10

In this case, NB2 Pty Limited (Tenant) owned and operated a fresh fruit and vegetable shop in the Fresh Food Precinct at Westfield Miranda Shopping Centre which was owned by the Respondent Landlord. 

Within the Precinct, there was also a Franklins supermarket and another fresh fruit and vegetable shop which was a smaller retail called ‘In Season.’ Towards the end of the Tenant’s lease, In Season’s business began to fail and eventually ceased trading in the Precinct.  In an effort to expand its business, the Tenant began negotiations with the Landlord to possibly acquire the space where In Season had been trading. During Lease negotiations, the Landlord took the view that the Tenant ought to pay higher rent as the Tenant now had a monopoly over the sale of fresh fruit and vegetable retail within the Precinct. Eventually, the Tenant agreed on the condition that the Landlord agree that the Tenant would have exclusive rights to sell fresh fruit and vegetables in the Precinct.

The Landlord ultimately agreed to the Tenant’s terms and agreed in writing:

            “To grant the Lessee the right to be the sole independent specialty fruit and vegetable retailer in the Fresh Food Market located on level 3...of Westfield Miranda..”.

On the facts, it was not evident that the Tenant ever replied to this letter that was issued by the Landlord however following this, and without the Tenant’s knowledge, the Landlord approved an application by a Franklins Supermarket to expand and sell fresh food and vegetables in the Precinct.  Franklins began to operate with the addition of a significant fruit and vegetable section in around March 2011.  As a result of this competition, the Tenant’s business and sales began to suffer and they began to default on rent.  Eventually, the Lease was terminated by the Landlord for this default. 

The original claim was brought by the Landlord in an effort to recover unpaid rent and damages. Once the matter reached Court, the Tenant brought a claim against the Landlord on the basis that the Landlord had engaged in misleading and deceptive conduct during negotiations. The Tenant’s argument was that the Landlord had represented and promised the Tenant that it would have exclusivity to the retail and sale of fresh food and vegetable retail in the Precinct as the sole independent retailer. The Tenant held the view that in failing to disclose Franklin’s expansion into fresh fruit and vegetable retail prior to the Lease with the Tenant being signed, the Landlord had engaged in misleading and deceptive conduct. 

Decision

In this case, the Court determined that the wording of the agreement between the Tenant and the Landlord was not misleading and the Landlord had made good his promise of exclusivity that the Tenant would remain “…. the sole independent specialty fruit and vegetable retailer in the Fresh Food Market….”. Essentially, it was held that the Landlord had not represented or promised that the Tenant would be protected from competition from supermarkets but only sole, independent retailers.

Even though the Landlord was successful in satisfying the Court that its conduct did not amount to misleading and/or deceptive conduct in this case, the decision identifies how the simple wording of a sentence within a legal document can have serious consequences if overlooked or misunderstood during the early stages of negotiation.   

Key takeaway

Whether you are looking to enter into a contract or lease and want to understand your risks or if you are unsure about any word, phrase, or clause in a contract, seeking legal advice from the Dispute Resolution Team at Marsdens Law Group could save you unnecessary expense down the line should a dispute arise. 

If you require assistance in reviewing a Contract or just need to know where you stand before you sign on the dotted line, call one of our Dispute Resolution Specialists on 02 46265077 or 02 9233 1133 for more information. 

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.

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