Benzlaw & Associates P/L v Medi-Aid Centre Foundation Ltd

For the reasons given earlier the last limb of the allegations against Logan Road may be disregarded.

The argument mounted in final addresses centred on the following passage from the reasons of the Court in Hurley v McDonald's Australia Ltd:[59]

"For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated - Cameron v Qantas Airways Ltd [1995] FCA 1304; (1994) 55 FCR 147 at 179. Whatever 'unconscionable' means in s 51AB

, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable - Qantas Airways Ltd v Cameron [1996] FCA 1483; (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term 'unconscionable' import a pejorative moral judgment - Qantas Airways Ltd v Cameron [1996] FCA 1483; (1996) 66 FCR 246 at 283-4 and 298."

[156] The case argued departed substantially from the pleaded case in that it was submitted that the following "conduct is so far removed from what can be considered moral or reasonable that it can only be described as unconscionable in every sense of the word":

"a) Mr Smith formed an intention to acquire the property beneficially for himself very early;

1. Mr Smith conspired with a variety of persons in attempts to: i) purchase the property;

ii) Starve Benzlaw of funds with which it could defend its rights and position;

1. Mr Smith took steps to hide his intentions from Mr Bennelli;
   1. Mr Smith held out to Mr Bennelli (or knowingly allowed him to believe) that he was acting to the benefit of both he and Bennelli;
   2. Mr Smith took advantage of the position he held out in order to obtain information of a confidential nature;
   3. Mr Smith used this information for a purpose far from the purpose for which it was provided."

[157] The passage quoted from the reasons in Hurley v McDonald's Australia Ltd is unhelpful for present purposes. As Gleeson CJ pointed out in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Limited[60] "...unconscionability is a legal term, not a colloquial expression. In everyday speech, unconscionable may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise".

By concentrating on the colloquial meaning of "unconscionable", Benzlaw has neglected to focus on establishing that the unconscionability involved in the conduct complained of was such as to give rise to the right to equitable relief under the principles established by the general law.

Whether in order to come within s 51AA the unconscionable conduct must be such as to support the grant of relief on the principles underlying specific equitable doctrines,[61] or whether the section may extend beyond such doctrines to include developments in common law principles[62] was left open by Gummow and Hayne JJ in Berbatis.[63] It is plain from the reasons of the majority in Berbatis however that in order to rely on s 51AA a plaintiff must establish more than inequality of bargaining power and legal or economic disadvantage flowing from a weak contractual position such as the impending expiration of a lease or the inability to remedy breach under a mortgage.

If the conduct alleged against Medi-Aid was not in breach of contract or in breach of any fiduciary duty owed by it to Benzlaw there was nothing unconscionable about it. It was merely exercising its rights as the holder of the mortgage.

The unpleaded case against Logan Road is relevantly unparticularised and, consequently, cannot be identified with any degree of precision. It was not explained in addresses how the conduct described above came together to produce conduct in respect of which a court would grant equitable relief. Some persons may consider aspects of the conduct complained of harsh or even unscrupulous but it is not conduct which placed Benzlaw in a position of "special disadvantage".

The reference to the conspiracy to starve Benzlaw of funds is a reference to the appointment of a receiver. It is probable that an object of the appointment was to deprive Benzlaw of funds and thus make it more difficult for Benzlaw to resist actions Mr Smith may wish to take with respect to the property. It must be recalled though that Logan Road acquired Medi-Aid's interest in the mortgage. Benzlaw was in default and there was no reasonable expectation that default would be remedied. In those circumstances the appointment of a receiver to get in the income of the property and take over its management was an obvious commercial course for Mr Smith to follow.

Even if Mr Smith hid from Mr Bennelli his intention to acquire the mortgage, that would not seem to be productive of any consequences. It is not suggested that had Mr Smith been more open about his intentions that Mr Bennelli could have done anything to thwart them. There is no evidence that Mr Smith, in any relevant way, held out to Mr Bennelli that Mr Smith was acting for the benefit of both of them or that Mr Bennelli did or failed to do anything in response to any such holding out. In case it is relevant to this claim, I find that in the early discussions between Mr Smith and Mr Bennelli, Mr Smith did make it known to Mr Bennelli that he was interested in acquiring Medi-Aid's interests in the mortgage and that he was taking steps towards achieving that objective. The confidential information point has been dismissed earlier. For these reasons, the claim based on unconscionable conduct fails.

Section 52 of the Trade Practices Act 1974

[164] The conduct relied on to support the allegations of breach of s 51AA is relied on in the alternative to constitute a breach of s 52 of the Trade Practices Act by each of the defendants.

[165] Conduct, in order to be "misleading or deceptive" for the purposes of s 52 must induce or be capable of inducing error.[64] If misleading or deceptive conduct is established, no damages are recoverable unless the plaintiff shows that the wrongful conduct was causative of loss. Section 82(1) of the Act operates where a person has suffered "loss or damage by conduct of another person".

Benzlaw has identified no conduct on the part of Medi-Aid which can be said to be misleading or deceptive. Nor can it be said that any loss or damage claimed to have been suffered by Benzlaw was by any conduct of Medi-Aid in breach of s 52.

I find that at the time Mr Smith met Mr McKenzie at the property on 7 September he had an open mind as to how he would go about profiting from an investment in the property even though he then contemplated that he might acquire Medi-Aid's interest in the mortgage. By the end of September he set about taking steps to that end but that is not necessarily inconsistent with his maintaining some interest in reaching agreement with Benzlaw. I am unable to find that Mr Smith had no intention of entering into a joint venture agreement with Mr Bennelli until on or about 20 October 2005. It is thus probable that for a short period in late October 2005 Mr Smith allowed Mr Bennelli to entertain the erroneous belief that Mr Smith continued to be interested in entering into a joint venture. It is not alleged however that Mr Bennelli did or refrained from doing anything in reliance on Mr Bennelli's erroneous belief. Again, if there was any Benzlaw misleading or deceptive conduct on Mr Smith's part it has not been shown that suffered any loss or damage by it.

[168] Logan Road's claims against Benzlaw in excess of $12 million in accordance with the calculations of a chartered accountant, Mr Knight, there was no challenge to Mr Knight's calculations and, on the face of things, Logan Road is entitled to judgment for a sum established by those calculations updated to today's date. There is also a claim by Logan Road against Medi-Aid for breach of a warranty contained in clause 7 of a deed of assignment dated 17 October 2005 entered into between Medi-Aid and Logan Road. Having regard to the above findings I apprehend that the claim against Medi-Aid will not be pursued. If there was a breach of warranty it is difficult to see that the breach was productive of any loss having regard to the value of the property and Benzlaw's lack of assets.

[169] Medi-Aid claims "an account of the ... joint venture agreement" and payment of any amount shown by such account to be due to [Medi-Aid].

[170] Nothing was said in final addresses about the counterclaim and I assume it was made as a precaution against a successful claim against Medi-Aid by Benzlaw. I can see no practical point in the counterclaim and unless persuaded otherwise by further submissions, I propose to make no order in respect of it.

[171] None of Benzlaw's claims against Medi-Aid succeeded.

[172] Benzlaw failed to establish that a joint venture agreement had been entered into between it and Logan Road or that a fiduciary relationship arose in the course of negotiations for a joint venture.

[173] Benzlaw also failed to establish any liability on Logan Road's part under the rule in Barnes v Addy. Nor was it successful in its Trade Practices Act claims.

[174] Logan Road in exercising its power of sale did not act bona fide for the purpose for which the power was conferred and it is appropriate that the sale to Brunswick Street be set aside.

[175] I will hear submissions as to the appropriate form of order and costs.

1. [1] Joint Venture Agreement, Clause 3.
2. [2] Clause 1.1(vi).
3. [3] Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337.
4. [4] Ibid, at 347.
5. [5] Clauses 8 and 14.
6. [6] [1985] HCA 49; (1985) 157 CLR 1 at 12.
7. [7] [2002] QSC 270 at [36].
8. [8] [1984] HCA 64; (1984) 156 CLR 41 at 96-97.
9. [9] See the reasons of Wilson J at pp 118, 119 and the reasons of Dawson J at pp 149, 150.
10. [10] At 149-150.
11. [11] At 70.
12. [12] At 69.
13. [13] Hospital Products at 147.
14. [14] At 142.
15. [15] At 96-97.
16. [16] [2001] HCA 31; at 196.