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[2001] FCA 757
Federal Court of Australia
2001-06-27
Emmett JJ
Original judgment source is linked above.
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: CG BERBATIS HOLDINGS PTY LTD (ACN 008 799 040)
AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
AND: CG BERBATIS HOLDINGS PTY LTD (ACN 008 799 040)
REASONS FOR JUDGMENT THE COURT: 1 This appeal and cross-appeal arise out of a proceeding commenced in the Court by the Australian Competition and Consumer Commission ("ACCC"). ACCC claimed declarations and injunctions in respect of the conduct of the owners of the Farrington Fayre Shopping Centre ("the Shopping Centre") located at Farrington Road, Leeming in Western Australia. ACCC alleged that the owners of the Shopping Centre imposed conditions on the renewal of leases to three tenants that required the tenants to withdraw pending legal proceedings against the owners ("the Tenancy Proceedings"). ACCC claimed that that conduct contravened s 51AA of the Trade Practices Act 1974 (Cth) ("the Act"). Section 51AA(1) prohibits a corporation from engaging in conduct that is unconscionable, within the meaning of the unwritten law from time to time of the States and Territories, where that conduct is in trade or commerce. 2 The primary judge concluded, in relation to one of the tenants, that the conduct of the owners and their agents contravened s 51AA. His Honour made declarations to that effect and ordered the individuals concerned to attend a trade practices compliance seminar. His Honour otherwise dismissed the proceeding in so far as it alleged contraventions in relation to the other two tenants. 3 The owners and the individual respondents have appealed to the Full Court from the orders made by the primary judge. In addition, the ACCC has cross-appealed in respect of his Honour's order that the proceeding be otherwise dismissed.
STATUTORY FRAMEWORK 4 Section 51AA(1) of the Act provides as follows: " (1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. 5 Section 51AA, together with ss 51AB and 51AC, is contained within Part IVA of the Act. Part IVA was inserted in 1992 and s 51AC was added in 1998. As part of his determination of the proceeding at first instance, the primary judge found s 51AA to be constitutionally valid. No appeal has been brought in relation to that finding. 6 The explanatory memorandum that was promulgated in connection with the bill for the act to insert Part IVA made the following observations concerning proposed s 51AA: "The provision embodies the equitable concept of unconscionable conduct as recognised by the High Court in Blomley v Ryan (1956) 99 CLR 362 and Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. ……………………… The advantages of providing a statutory prohibition for conduct which is already dealt with by equity lie in the availability of remedies under the Principal Act, the potential involvement of the Commission including the possibility of representative actions, and the educative and determinative effect of a legislative prohibition in the Principal Act. ……………………… Because of the position of the High Court of Australia as the ultimate appellate court for all States and Territories, the 'unwritten law' of the States and Territories is the same. If a court in the State or Territory were thought to deviate from the principles recognised by the High Court, another court exercising its jurisdiction in relation to s 51AA would not be bound to follow that deviation, unless it was satisfied that to do so was consistent (or at least not inconsistent) with the laws recognised by the High Court from time to time."
7 We might add that the learned primary judge found s 51AA to be constitutionally valid and no appeal has been sought against that finding. 8 Section 80 of the Act relevantly provides that where, on the application of ACCC, the Federal Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute: · a contravention of a provision of Part IVA · attempting to contravene such a provision · aiding, abetting, counselling or procuring a person to contravene such a provision · being in any way directly or indirectly knowingly concerned in or party to the contravention by a person of such a provision, the Court may grant an injunction in such terms as the Court determines to be appropriate. 9 Section 21 of the Federal Court of Australia Act 1975 (Cth) provides as follows: " 21. (1) The Court may, in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed. (2) A suit is not open to objection on the ground that a declaratory order only is sought."
10 The Tenancy Proceedings were brought by the tenants against the owners of the Shopping Centre under the Commercial Tenancy (Retail Shops) Agreements Act 1995 (WA) ("the Commercial Tenancy Act") (see paragraph [18] below). The object of the Commercial Tenancy Act is to regulate commercial tenancy agreements relating to certain shops and to provide for the determination of questions arising under such agreements. Part 2 of the Commercial Tenancy Act deals with retail shop leases and Part 3 is concerned with the determination of questions referred to the Commercial Registrar under the Commercial Tribunal Act 1984 (WA). 11 The Commercial Tenancy Act deals with "retail shop leases" as defined in s 3, being leases providing for occupation of a retail shop with a retail floor area of 1,000 square metres or less. "Retail shops" include any premises situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a business. "Retail shopping centre" is defined as a collection of premises, five or more of which are used wholly or predominantly for carrying on the business involving the sale of goods by retail, all of which have a common head lessor or comprise lots on a single strata plan under the Strata Titles Act 1985 (WA). 12 Section 6 of the Commercial Tenancy Act sets up a pre-contractual disclosure regime in relation to retail shop leases. A tenant may apply to the Commercial Tribunal for an order that the landlord pay compensation in respect of pecuniary loss suffered as a result of the failure to give a disclosure statement or the provision of a disclosure statement containing false or misleading information. However, a disclosure statement is not required to be given on a renewal of a retail shop lease under an option or on the assignment of a retail shop lease. 13 The Commercial Tenancy Act also deals with the concept of "key money". A provision in a retail shop lease to the effect that the landlord is entitled to, or may require from the tenant, key money, or any consideration in respect of the goodwill of the business, is void. Key money is defined in s 3 as: "(a) money that is to be paid to, or at the direction of, a landlord or his agent, by way of a premium, non-repayable bond or otherwise; or (b) any benefit that is to be conferred on, or at the direction of, a landlord or his agent, in connection with the granting, renewal or assignment of a lease or the sub-leasing of the premises the subject of a lease;"
THE SHOPPING CENTRE 14 The registered proprietors, as tenants in common, of the land on which the Shopping Centre stands ("the Owners") are: · C.G. Berbatis Holdings Pty Ltd ("Berbatis Holdings"); · GPA Pty Ltd ("GPA"); · P&G Investments Pty Ltd ("P&G"); · George Palassis Atzemis ("Mr Atzemis");
The Owners carry on business in partnership as landlords of the shops in the Shopping Centre. Mr Atzemis and Constantine George Berbatis ("Mr Berbatis") are directors of Berbatis Holdings and GPA. Anna Maria Antonia Heijne ("Ms Heijne") is a director of P&G. Berbatis Holdings, GPA, P&G, Messrs Atzemis and Berbatis and Ms Heijne were all joined as respondents in the proceeding. They are the present appellants. 15 The Shopping Centre comprises some 26 shops. At all relevant times, Mr Craig Wilson was the Director, Retail, for the managing agent of the Shopping Centre. Mr Wilson's duties included overall responsibility and co-ordination of the retail department of the managing agent, which included the leasing management and marketing of retail properties. The Shopping Centre was part of his general responsibility in that position. 16 At all relevant times Ms Glenda Clapp, who was responsible to Mr Wilson, was the centre manager for the Shopping Centre. She was employed by the managing agent. She received instructions from Messrs Atzemis and Berbatis and Ms Heijne. Another employee of the managing agent, Mr David Hart, was responsible for negotiating leases of properties managed by the managing agent, including the Shopping Centre. Mr Hart's responsibility extended to canvassing retailers to lease the properties managed. 17 The eighth cross respondent, Brian Edward Sullivan ("Mr Sullivan"), was employed as a property consultant to the Owners. The seventh cross respondent, Brian Sullivan Property Pty Ltd ("Mr Sullivan's company"), was engaged to provide Mr Sullivan's services as asset manager of the Shopping Centre. Mr Sullivan was treated as if he were one of the Owners by Mr Wilson and Ms Clapp. 18 In 1996 and 1997, the tenants of the Shopping Centre included the following: · Margaret Joan Roberts and her husband James Arthur Roberts, trading as Leeming Fish Supply, who leased shop 14 ("the Roberts"); · Banlon Pty Ltd, trading as Farrington Dry Cleaners, which was a tenant of shop 15 ("Banlon"); · Peter William Ternent and his wife, Kathleen Elizabeth Ternent, trading as Leeming Hardware, who were the tenants of shop 7 ("the Ternents").
Another tenant who is relevant for present purposes was Hender & Farris Real Estate, who leased shop 6 ("Hender & Farris"). 19 From 1990, many of the tenants of the Shopping Centre were concerned about some of the charges being levied by the Owners under the terms of their leases. These included charges for variable outgoings and charges based on disputed calculations of the leased areas. In January 1996, some of the tenants instituted proceedings against the Owners in the Commercial Tribunal. On 24 April 1996 the Roberts also instituted legal proceedings against the Owners. On 26 April 1996, Hender & Farris referred a question arising under their lease to the Commercial Tribunal. In May 1996, all tenants agreed to treat the proceeding begun by Hender & Farris as a test case, on the basis that the continuance of proceedings instituted by the other tenants would depend upon the outcome of that proceeding. Something further will be said about the outcome of that proceeding in due course (see paragraphs [54] to [57] below). 20 In April 1996 it was necessary for the Owners to consider entering into new leases with a number of the tenants. On 23 April 1996, Mr Sullivan wrote a letter to the Owners providing an overview of various properties that they owned. He said that, in the absence of "catchment growth", he anticipated limited rental growth at the Shopping Centre due to increased competition. He said that among the things that needed doing was a "rebuilding of the relationship with the tenants". 21 Mr Sullivan was aware at that time of the proceedings in the Commercial Tribunal. In April or May 1996, he advised the Owners that no existing tenant should be given a new lease unless there was an undertaking by the tenant to discontinue litigation brought by that tenant against the Owners. By mid-May 1996, when Mr Sullivan became involved in discussions about a new lease for the Roberts, he was aware that the Owners were concerned and anxious about the pending litigation between them and the tenants in the Commercial Tribunal. He had received some legal advice from the Owners' solicitor that they could seek a release provision in any new lease granted to tenants involved in litigation against them. The general issue of linking the grant of new leases to withdrawal by tenants of pending proceedings against the Owners was also discussed at that time by Ms Clapp, Mr Wilson and Mr Sullivan at a management meeting at which the principals of the Owners were present.
THE ROBERTS DECIDE TO SELL 22 In about May 1993 the Roberts' daughter had contracted chicken pox and she continued to suffer bad health. In August 1995 she was diagnosed as suffering from encephalitis. The additional income obtained from their business enabled the Roberts to support her during and after this period including assisting her with hospital bills and medication costs. Mrs Roberts spoke to Ms Clapp on numerous occasions over the years about her daughter's condition and the emotional strain that placed on herself and her husband. 23 The term of the lease of shop 14 to Mr and Mrs Roberts was due to expire on 14 February 1997. In about March 1995, Mrs Roberts spoke to Ms Clapp about the possibility of renewal of the lease. Mrs Roberts said that they were thinking of selling the business. Their daughter required considerable attention and both she and her husband thought it was time to get out. They had been in the business long enough. She said that if they could negotiate a new lease term that would assist them. 24 On 10 April 1995, Ms Clapp wrote to the Roberts offering them a lease with alternative terms ranging from seven years and two months to ten years and two months effective from 15 February 1997. There was no period stated in the letter within which the offer had to be accepted. The Roberts did not take up the offer at that time. Mrs Roberts said that she treated the offer as an open offer.
INITIAL DISCUSSIONS BETWEEN THE ROBERTS AND THE HOLLANDS 25 In March 1996, Anthony James Holland ("Mr Holland") was looking to acquire a business. On or about 14 March 1996, he placed a letter under the door of the Roberts' shop in the Shopping Centre. After reading the letter, Mrs Roberts contacted Mr Allan Brown, a business broker ("Mr Brown"). Mr Brown got in touch with Mr Holland and arranged a meeting. 26 On 26 March 1996, Mr Holland and his wife made an offer to purchase the Roberts' business for $68,000. Their offer was accepted by the Roberts. Settlement was to take place on 23 April 1996. The agreement was expressed to be subject to a condition that a new lease for five years plus a five year option be granted to the Hollands by the Owners "as per letter of 10 April 1995". 27 A day or two after signing the agreement, Mr Holland was contacted by Mr Brown who told him that he would have to write to Ms Clapp to arrange the documentation required for him to obtain a lease. Mr Holland delivered a letter to the managing agent and followed that letter up with a telephone call to Ms Clapp enquiring when he would be sent the necessary documentation. Documentation for a new lease arrived in the week commencing 8 April 1996. By 15 April 1996, Mr Holland had obtained legal advice in relation to the purchase of the business and the documentation provided by the managing agent. His solicitor wrote to Ms Clapp seeking information about the proposed lease. 28 Mr Sullivan was informed by Ms Clapp of the agreement between the Roberts and Mr and Mrs Holland. He had been told at about this time by Mr Berbatis that he should become directly involved with the negotiation of the new lease in relation to the Roberts' shop. Ms Clapp told Mr Sullivan that the Hollands would be suitable tenants and potentially successful operators of the business. 29 At Mr Sullivan's request, Ms Clapp arranged a meeting among Messrs Sullivan, Holland, Brown and herself to sort out any difficulties with respect to the lease. The meeting was to be at the premises of the managing agent on 15 May 1996. However, there was some misunderstanding about the time for the meeting. At 2 pm on 15 May 1996, Messrs Brown and Sullivan and Ms Clapp met at Mr Sullivan's office. Mr Holland thought that the meeting was to start at 2.30 pm and was not there. Those present proceeded to discuss the proposed new tenancy of the Roberts' shop. Mr Sullivan identified two options under which Mr Holland could acquire the business. The first was a straight assignment of the existing lease for the balance of the term. The second was an assignment followed by a new lease for seven or ten years. Mr Sullivan said that if a new lease were to be given, the Owners would probably want the Roberts to drop the claim currently before the Commercial Tribunal. 30 When Mr Holland arrived at the managing agent's office at 2.30 pm on 15 May 1996, there was nobody to see him. Mr Holland subsequently saw Mr Brown, who explained to him that everybody was happy with his business plan and credentials but that certain conditions required by the Owners had to be met before he could get a lease. Mr Brown said that those conditions were not negotiable. They relevantly included a condition that the Roberts were to withdraw from the proceeding commenced in the Commercial Tribunal. Mr Brown informed Mr Holland that he could have an assignment of the existing lease expiring on 14 February 1996 and subsequently a 10 year lease with no option. Mr Holland told Mr Brown that he was not interested in a 10 year lease and that he was not interested in obtaining a lease if it meant that the Roberts had to withdraw from their legal action, which had nothing to do with him. 31 On 17 May 1996, Mr Holland wrote to Mr Brown stating that he and his wife were withdrawing from the agreement to purchase and requesting return of their deposit. Mr Brown rang Mr Holland and said he would have to talk to the Roberts to see if they would release him from the agreement. Mr Holland wrote a further letter to Mr Brown on the following day in which he relied on non-fulfilment of the special condition relating to the provision of a new lease for five years with a five year option. After delivery of the letter of withdrawal on 18 May 1996, Mr Holland informed the Roberts that he was still interested in purchasing their business under the right conditions. Mrs Roberts agreed to inform him of any other offers that they might have to purchase the business.
further offers by the owners to renew the roberts' lease 32 Following the Hollands' withdrawal from the proposed purchase of their business, the Roberts wrote to Ms Clapp on 6 June 1996 stating that they accepted "the lessor's offer of a seven year Lease following the expiry of the current lease subject to terms and conditions to be agreed upon". On 25 June 1996, after discussing the matter with Mr Sullivan, Ms Clapp wrote to the Roberts advising that the offer of 10 April 1995 had lapsed and that she had been instructed to advise of new lease terms. The new lease proposed was a seven year lease commencing 15 February 1997. A disclosure statement was enclosed together with a copy of a draft lease. There was no reference either in the covering letter or the draft lease to any mutual release clause or withdrawal of the proceeding pending in the Commercial Tribunal. 33 The Roberts did not take up the offer. Mrs Roberts telephoned Ms Clapp and told her that she was not happy with all the conditions of the proposed lease and that the disclosure document was inaccurate. Ms Clapp said that she could consider the issues of inaccuracy in the disclosure statement but that the lease was what the Owners were willing to offer and she could take it or leave it. Ms Clapp said that there was no guarantee that the Roberts would get another offer. There appears to have been no evidence as to the aspects of the proposed lease that were regarded as unsatisfactory by the Roberts. 34 In any event, on 14 August 1996, Ms Clapp sent to the Roberts a further form of offer to lease. It was unchanged from the previous offer except that it proposed a commencement date of 1 October 1996 and a term of 7 years. The offer did not include any release provisions in relation to the proceeding in the Commercial Tribunal. A copy of the offer was signed by the Roberts and an acceptance was signed by on behalf of the Owners. However, it appears that, for reasons that were not explained, no lease was granted to give effect to the arrangement thus concluded.
sale of the Roberts' business to the hollands 35 In October 1996, the Roberts received an offer from a Mr Ian James to purchase their business. Mrs Roberts therefore informed Mr Holland of the offer, since she regarded him as having a right of first refusal. Mr Holland told Mrs Roberts that he was still interested in the business if the other issues had been sorted out. On 28 October 1996, Mr Holland signed an offer to purchase the Roberts' business for $65,500. The offer was accepted on the same day. Settlement of the sale was to take place on 25 November 1996. 36 The sale was to be subject to a special condition as follows: "Lease Agreement - the current 7 year lease (commencement date 1st October 1996) being assigned to the satisfaction of the purchaser." The special condition appears to have been drafted on the assumption that a new seven year lease had been granted as contemplated by the offer and acceptance of 14 August 1996. However, no lease had at that stage been granted. 37 On 29 October 1996, Mrs Roberts met with Mr Wilson at the offices of the managing agent and asked him whether the Owners would insist on her withdrawing from her legal action. She said that she did not wish to go through the process of selling the business again if the requirement to withdraw from the proceeding in the Commercial Tribunal remained. There was a dispute as to precisely what was said by Mr Wilson on that occasion. Mrs Roberts said that Mr Wilson told her that she would not be required to withdraw from the proceeding and assured her that he would make sure the clause requiring her to withdraw from all legal action would not be included in the settlement. 38 The primary judge was not prepared to find, on the balance of probabilities, that Mr Wilson gave any such assurance and the Full Court was not asked to review that finding. At that stage, of course, there was no such requirement from the Owners. As indicated above, the current offer that had been signed by the Roberts and on behalf of the Owners did not include any release provision. On the other hand, the evidence indicates that Mrs Roberts was aware at that stage that the Owners may well require the release of the claims then before the Commercial Tribunal as a condition of the renewal of the Roberts' lease. 39 On the same day, 29 October 1996, the Roberts' solicitor wrote to the Owners' solicitor requesting a copy of the Roberts' lease. That request appears to have been a reference to the lease contemplated by the exchange that had occurred in August 1996. The solicitor asked for a copy of the signed lease as a matter of urgency so that it could be provided to the prospective purchaser. He threatened that if the prospective purchaser withdrew from the sale as a result of the copy not having been supplied, any loss would be claimed against the Owners. Both the request and the threat were misconceived because there was no lease. 40 Also on the same day, Mrs Roberts signed a letter to Mr Wilson asking him to confirm that he had received a copy of the agreement to sell the business. In the letter she thanked Mr Wilson for his efforts "to expedite this matter to a satisfactory conclusion on or near the date of the agreement 25/11/96". Mr Wilson wrote back the following day confirming receipt of the agreement to sell the business and of her request for an assignment of lease to occur on the 25 November 1996. He told her that Ms Clapp would be processing the assignment of lease in accordance with normal procedures. He also said: "As was mentioned in our subsequent telephone conversation, a delay may occur as a result of the owners preparation of a new standard lease format, which in your particular instance will have a lease commencement date 1 October 1996." 41 Ms Clapp wrote to Mr Holland on 1 November 1996 confirming receipt of the request from the Roberts for an assignment of their lease. She pointed out that it might not be possible to meet the date of 25 November 1996 as a new lease had to be concluded with Mr and Mrs Roberts before any other documentation could be prepared. 42 At about this time, Mr Sullivan met with the Owners and they agreed that the Roberts should only be offered a new lease to assign to the purchaser of their business if they would agree to cease their legal action against the Owners. Mr Sullivan said that the managing agent was then instructed to prepare documents in relation to the proposed extension and assignment and to include a mutual release provision in them. 43 On 15 November 1996, Ms Clapp wrote to the Owners' solicitor advising that Mr Sullivan had approved the assignment and requesting preparation of the appropriate documentation. The information provided to the solicitor by Ms Clapp disclosed a proposed assignment to be dated 2 December 1996, the Roberts being the assignors and the Holland Family Trust being the assignee. 44 Within one or two days of sending the letter, Ms Clapp received a telephone call from Mr Sullivan who told her that he wanted her to ask the Owners' solicitor to include a deed of mutual release. Mr Sullivan said that he wanted it in all the leasing documents and that Ms Clapp should get the Owners' solicitor's view on whether it could be put in or not. 45 On 19 November 1996, Ms Clapp asked the Owners' solicitor for his comments on the incorporation of a deed of mutual release in the assignment document. She received no response but a mutual release was included in subsequent leasing documents that were prepared by the solicitor. They were sent to Ms Clapp on 29 November 1996. The documents comprised a deed of assignment and a variation and extension of lease. Mr Wilson arranged to have the documents sent by courier to the Roberts under cover of a letter dated 29 November 1996. 46 Clause 14 of the proposed deed of assignment contained the following provisions: "14.1 The Assignor and the Assignee do hereby jointly and severally release and discharge the Lessor from all actions, claims, demands, suits, proceedings and other liabilities arising directly or indirectly from any act or omission by the Lessor or its servants, agents or contractors which occurred prior to the assignment date which the Assignor or the Assignee may be otherwise able to make or bring pursuant to any rule of law or inequity or any statute absolutely. 14.2 Without limiting the generality of Clause 14.1 the Assignor shall immediately file consent orders to dismiss any action, claim, demand, suit or proceeding made against the Lessor or its servants, agents or contractors with no order for costs. 14.3 The Assignor and the Assignee acknowledge and agree the releases and discharges express or implied in this Clause 14 shall be construed as widely as possible and that the Lessor may plead the releases and discharges as a complete and effectual defence. 14.4 The parties covenant and agree with each other to execute all documents that may be required to give full effect to the provisions of this Clause 14." 47 On 30 November 1996 Mrs Roberts provided a copy of the deed of assignment to Mr Holland for him to examine. They briefly discussed clause 14. Since it did not affect Mr Holland's rights, he returned the deed to her signed on or about 1 December 1996. Mrs Roberts also got her husband to sign it at that time. 48 However, Mrs Roberts withheld her own signature until she had obtained legal advice. On 2 December 1996, her solicitor advised her not to sign the documents because of the inclusion of clause 14. Her solicitor told her that he would speak to the Owners' solicitor. Her solicitor got in touch with her shortly afterwards and told her that the Owners' solicitor had told him that the Owners believed that they had given Mrs Roberts "due consideration" by allowing the sale of the business to proceed. She told her solicitor that she was very upset by that and very concerned that she had to decide that day without the opportunity to give the matter proper consideration. 49 After some further consideration, Mrs Roberts decided that she had little option but to sign. She believed that she had no choice but to sign the deed of assignment as it was, because her lease was due to expire on 14 February 1997 and without renewal she would have no business to sell. She felt extremely upset and angry that the Owners had, in her view, put her in a situation where she had no choice but to give up her legal rights. 50 Later on 2 December 1996, Mrs Roberts visited the offices of the managing agent to discuss the deed of assignment with Mr Wilson. Both Mr Wilson and Ms Clapp were present. Mrs Roberts expressed her concern over the inclusion of and insistence upon the release clause. Mr Wilson told Mrs Roberts that he would raise her concerns with Mr Sullivan and the Owners to see if they would delete the clause but that he could not guarantee anything. He told her that she did not have to sign it then and he could take it to the Owners and see how far they got. That would mean that settlement would "not occur on the due date". By this stage, the due date had already passed and it appears that there must have been some extension agreed. Mrs Roberts said that she wanted the settlement to go through since she could not afford to have the sale of the business fail again. She handed the signed documents to Ms Clapp and left the office of the managing agent. 51 Notwithstanding that the business of completing the extension of the lease and the deed of assignment remained unfinished, settlement of the sale of the Roberts' business took place on 2 December 1996. At that stage there had been no renewal of the lease granted and no assignment. There was no evidence of any formal waiver of the condition that "the current seven year lease" be assigned to the satisfaction of the purchaser. The settlement appears to have proceeded on the basis that the formalisation of any necessary renewal and assignment would be completed subsequently. 52 On 6 December 1996, Mrs Roberts' solicitor wrote to the Owners' solicitor contending that clause 14 offended against the provisions of the Commercial Tenancy Act relating to key money. The Owners' solicitor told the Roberts' solicitor on 11 December 1996 that he disagreed with that assertion. In addition, he said he was advising the Owners not to execute the deed and to have him prepare and forward a simple assignment only. Mrs Roberts' solicitor informed her of that by telephone on 13 December 1996. 53 Mrs Roberts told her solicitor that she had no choice but to sell the business as she owed money to her bank and could not afford not to get an extension of the lease. She said that, reluctantly, she would have to discontinue the proceeding against the Owners although she did not want to. She told her solicitor that she would not be taking up the issue of clause 14 as a key money clause and that the Hollands had already moved into the shop and paid her and that she would not be pursuing the matter any further. She asked her solicitor to advise the Owners' solicitor accordingly, which he did by letter on the same day. The Owners' solicitor wrote back on 19 December 1996 confirming that the Roberts had "agreed to do nothing and to call it a day". 54 Notwithstanding the release, the Roberts did not withdraw from the litigation and continued to contribute to all the costs involved. Nor did Mrs Roberts comply with the requirements of the deed of assignment to file consent orders removing herself from the litigation. She received no indication from the Owners that she was no longer a party to the litigation.
THE RESULT OF THE HENDER & FARRIS PROCEEDING 55 In the meantime, on 13 December 1996, a decision was delivered by the Commercial Tribunal in which Hender & Farris was partially successful. However, on 17 December 1996, the Owners filed an appeal to the District Court. Hender & Farris also filed an appeal. 56 Hender & Farris' solicitor subsequently took advice from senior counsel who advised that part of the ruling could not be supported and that unless the tenant made formal concessions promptly or offered to settle in a letter marked "without prejudice except as to costs", the Owners' appeal would succeed to a considerable extent and Hender & Farris would be ordered to pay the costs of the appeal. Accordingly, on 7 February 1997, orders were made by consent allowing the appeal, quashing the decision of the Tribunal and remitting the matter to the Tribunal for rehearing. On 20 February 1997, orders were made in the same terms on the Owners' appeal. 57 However, senior counsel advised that there was a reasonable prospect that the Hender & Farris would be entitled to recover its share of overpaid management fees on the basis that it did not know that it was not obliged to contribute to management fees. Subsequently, on 1 April 1997, Hender & Farris commenced proceedings in the Supreme Court of Western Australia claiming declarations and damages against the Owners in relation to matters similar to those which the subject of the proceeding that had been brought in the Commercial Tribunal. Mrs Roberts was aware that the proceeding was commenced. While she kept in contact by telephone with her solicitor, who was acting for Hender & Farris, she gave no instructions in relation to the new proceeding. 58 On 26 November 1997, the proceeding in the Supreme Court was settled on the basis that the Owners agreed to repay management fees at the rate of $34.51 per square metre and variable outgoings at the rate of $5.07 per square metre for all tenants involved in the action in the Commercial Tribunal and in the Supreme Court action. On 27 November 1998, the proceeding in the Supreme Court was dismissed by consent with no orders as to costs. If the Roberts had participated in the settlement agreement, they would have been entitled to $2,429.50 by way of refund of management fees and $356.93 by way of refund of variable outgoings.
THIS PROCEEDING 59 The respondents to the proceeding were the Owners, Mr Berbatis. Ms Heijne, Mr Sullivan and Mr Sullivan's company. The further amended statement of claim made the following allegations so far as conduct relating to the Roberts was concerned: "34. On or about 26 March 1996, Anthony Holland signed an agreement by which he offered to purchase Leeming Fish Supply from the Roberts which agreement was dependent upon the execution by the Owners of a new or assigned and extended lease of Shop 14 as previously offered in accordance with the First Offer and further assured by the Owners under the Roberts Assurance.
The …. Owners informed the Roberts' Business Agent, Mr. Allan Brown, in substance that the Owners would not grant a new lease of Shop 14 while the legal action was being pursued by the Roberts against the Owners.
(b) It was difficult or impossible to sell Leeming Fish Supply at a fair market price or at all without a new or extended lease of a substantial term.
(c) The value of Leeming Fish Supply was significantly reduced without a lease.
The value of Leeming Fish Supply was reduced from an amount in the order of $65,000 to about $50,000.
(d) Leeming Fish Supply was subject to health and licensing requirements which made relocation outside a shopping complex costly and onerous.
(e) There were already fish and chip shops operating at shopping centres within approximately5 kilometres of Farrington Fayre.
(f) Further, goodwill attached to Leeming Fish Supply in part because of its geographical location.
(g) The Roberts daughter was suffering from a serious illness which involved medical expense and substantial care.
(h) As a result of the matter particularised in (g), the Roberts were preoccupied with those anxieties and accordingly unable to give full attention to the protection of their own economic interests (collectively 'the Roberts' Special Disadvantage'). 52. The Owners and [Mr Sullivan and his company] knew or ought to have known of the Roberts' Special Disadvantage. PARTICULARS The facts and matters constituting the Roberts' Special Disadvantage were expressly known by the Owners and/or [Mr Sullivan and his company]. (a) through their close course of dealings with the Tenants, particularly the Roberts; and
(b) further, by their general experience in owning and leasing Farringtron Fayre and other shopping centres and properties. 53. The imposition of the First Roberts Condition and/or the Second Roberts Condition by the Owners was unconscionable in that it was conduct which: (a) took advantage of one or more of the factors constituting the Roberts' Special Disadvantage;
(b) was imposed in circumstances where the Roberts were exercising their legitimate and agreed right to litigate disputes between the Owners and themselves and was an illegitimate means of persuading the Roberts to enter into contractual relationships; and/or
(c) was imposed in circumstances where the choices available to the Roberts and their lack of relative bargaining power meant that the imposition of the Roberts condition was to leave the Roberts with no choice other than to comply with it." (sic)
60 ACCC also alleged that conduct by the Owners in relation to Banlon and the Ternents contravened s 51AA of the Act. For reasons that will become apparent, it is not necessary to particularise those allegations. 61 The primary judge said that the focus of the case was on that class of unconscionable conduct, which equity would remedy, that involves the unconscientious exploitation by one person of the serious disadvantage of another to secure a disposition of property or the assumption of contractual or other obligations by the weaker party. His Honour regarded the release by one party of an obligation that another may have to it as falling within the same genus as a disposition of property. That is to say, the question was whether the owners unconscientiously exploited a serious disadvantage of the Roberts, Banlon or the Ternents to secure a disposition of property in the form of the release of their claims in the Commercial Tribunal. 62 His Honour accepted that circumstances of inequality do not of themselves necessarily call for the intervention of equity. His Honour accepted that a party may take advantage of the disadvantage of another without necessarily acting unfairly or so unfairly, having regard to the nature of the disadvantage, that equity would intervene. Where the disadvantage or the inequality is great it may take less to discern unconscientious exploitation of it than in a situation involving less disadvantage or inequality. 63 His Honour also accepted that, in the case of an owner of land who has leased that land to another and is asked to grant a new lease upon the expiry of the first lease, the pre-existing relationship of tenant and landlord by itself will not give rise to a situation of inequality or disadvantage which would attract the interest of equity. His Honour emphasised that there is no equitable obligation on a landlord to renew a lease simply because of the vulnerability of the tenant whose lease is expiring. 64 His Honour observed that whether there is inequality, and the extent of it, in such circumstances, will also depend upon the size of the tenant, the quantum and reliability of the tenant's rental payments, the extent to which the presence of that tenant will attract others and, in the context of renegotiation, the negotiating resources and advice available to the tenant. His Honour considered that a tenant operating a small business with a limited opportunity to sell the business may be in a particularly vulnerable position and therefore in a position approaching the level of special disadvantage or inequality which a landlord may not unfairly exploit. 65 His Honour accepted that the word "special" to describe the class of disadvantage or disability which will attract the application of the doctrines of equity indicates that the requisite disadvantage will not necessarily be found in the normal run of bargaining inequality between large landlords and small tenants. However, his Honour was of the view that the circumstances in which a tenant operating a business under a lease may effectively lose the value of that business upon expiry of the lease place the tenant at a special disadvantage in dealing with the owner. His Honour accepted that such circumstances did not import any obligation on an owner to renew a lease that had expired but considered that unfair exploitation of a disadvantage amounting to unconscionable conduct may occur when an owner uses its bargaining power to extract a concession from the tenant that is commercially irrelevant to the terms and conditions of any proposed new lease. 66 His Honour concluded that for the Owners to insist upon the Roberts abandoning their rights to proceed with bona fide litigation in relation to their rights under the existing lease was to engage in unconscionable conduct. His Honour concluded that it was unconscionable conduct on the part of the Owners, on the two occasions in May 1996 and November 1996, to insist upon the inclusion of a release as a condition of the grant of a new lease and assignment thereof to Mr Holland. His Honour characterised the way in which the Owners acted as "a grossly unfair exploitation of the particular vulnerability of the Roberts in relation to the sale of their business". His Honour concluded, therefore, that the Owners had acted in contravention of s 51AA and that their principals were knowingly involved in that contravention. 67 Accordingly, his Honour made the following orders: "1. It is hereby declared that in May 1996 and October 1996 [the Owners], engaged in conduct that was unconscionable within the meaning of the unwritten law from time to time of the States and Territories, in contravention of s.51AA of the Trade Practices Act 1974, in that the said Respondents required, as a condition of the grant of a new lease to Margaret Joan Roberts and James Arthur Roberts, as Trustees of the Roberts Family Trust, trading as Leeming Fish Supply at Shop 14, Farrington Fayre Shopping Centre, that the Roberts do release [the Owners] from various claims arising under their existing lease. 2. It is hereby declared that in May 1996 and October 1996 [Messrs Atzemis and Berbatis and Ms Heijne] were directly or indirectly knowingly concerned in or party to conduct in trade or commerce that was unconscionable within the meaning of the unwritten law from time to time of the States and Territories, in contravention of s.51AA of the Trade Practices Act 1974, in that the said Respondents required, as a condition of the grant of a new lease to Margaret Joan Roberts and James Arthur Roberts, as Trustees of the Roberts Family Trust, trading as Leeming Fish Supply at Shop 14, Farrington Fayre Shopping Centre, that the Roberts do release [the Owners] from various claims arising under their existing lease. 3. It is hereby declared that [Mr Sullivan's company], in October 1996 and [Mr Sullivan] in May 1996 and October 1996, acting as agent for or on behalf of the owners of Farrington Fayre, were directly or indirectly knowingly concerned in or party to conduct in trade or commerce that was unconscionable with the meaning of the unwritten law, from time to time of the States and Territories, in contravention of s.51AA of the Trade Practices Act 1974, in requiring, as a condition of the grant of a new lease to Margaret John Roberts and James Arthur Roberts, as Trustees of the Roberts Family Trust, trading as Leeming Fish Supply at Shop 14, Farrington Fayre Shopping Centre, that the Roberts do release the First to Fourth Respondents from various claims arising under their existing lease." 68 His Honour also ordered that, within four months, Messrs Atzemis, Berbatis and Sullivan and Ms Heijne, at their own cost, arrange and attend a trade practices compliance seminar conducted by a trade practices law specialist in the terms of an outline annexed to the order. The seminar was to address the unconscionable conduct provisions of the Act and, in particular, section 51AA. His Honour ordered the respondents to the proceeding to pay one third of ACCC's costs of the proceeding. 69 However, his Honour concluded that the conduct alleged in relation to Banlon and the Ternents did not contravene s 51AA. For reasons that will be apparent, it is not necessary to record his Honours reasons for that conclusion.
REASONING ON APPEAL 70 There was no dispute between the parties as to the relevant legal principles that should be applied in the case. Both parties accepted that, in the circumstances of the present case, it was necessary to demonstrate that the Roberts were under a "special" disadvantage in their dealings with the Owners in connection with proposals for renewal or extension of their lease. The dispute between the parties on appeal was whether the circumstances of the Roberts were such that a conclusion should be drawn that they were at a special disadvantage within the meaning of the relevant equitable principles. 71 The situation of special disadvantage of the Roberts that was alleged by ACCC is set out in paragraph [51] of the further amended statement of claim (see paragraph [59] above). Two separate factors of special disadvantage can be identified as follows: · The financial security of the Roberts depended upon their ability to sell their business, but it was difficult or impossible to sell the business without a new or extended lease of the shop in the Shopping Centre; · As a result of their daughter's illness, the Roberts were unable to give full attention to the protection of their own economic interests.
72 The primary judge found that Mrs Roberts had spoken to Ms Clapp on numerous occasions over the years about her daughter's condition and the consequent emotional strain placed on herself and her husband. However, his Honour made no finding that any such emotional strain had a causal connection with the Roberts' decision to agree to release their claims against the Owners as a condition of the grant of an extension of their lease. 73 Thus, the essence of his Honour's conclusion was that the relevant special disadvantage was simply the circumstance that the ability of the Roberts to sell their business depended upon obtaining the grant of a renewal or extension of their lease. Any proprietor of a business carried on in leased premises, where the goodwill of that business depends upon its location, is in precisely the same position as the Roberts. That fact alone would not constitute special circumstances that would attract the intervention of equity. 74 His Honour accepted that the insistence by an owner, as a condition of the renewal of a lease, that a tenant not engage in frivolous or vexatious litigation against the owner would not be unconscionable. Nor did his Honour consider that the relevant equitable principle would prevent an owner from simply refusing to renew a lease in favour of a tenant with whom the owner was engaged in litigation. However, his Honour concluded that making it a condition of the grant of an extension or renewal of their lease that the Roberts release bona fide and serious claims was unconscionable. 75 With the greatest respect, it is difficult to see the difference. A tenant engaged in litigation with a landlord could well suffer a greater detriment by loss of the opportunity to extend or renew than he would be abandoning claims that he had against the landlord. That would be a matter about which the tenant must make a judgment. A tenant with no option to renew and not right at all to require an extension may be very grateful to be offered the opportunity of a renewal or extension on terms. The tenant would not have to accept the terms but he would be in a better position than if he were simply refused a renewal or extension. 76 The apparent abandonment of the offer and acceptance in August was not adequately explained. There was an exchange between the Roberts and the Owners following Ms Clapp's letter of 14 August 1996 whereby agreement appears to have been reached for the grant of a further lease without any requirement for release of the claims. Mrs Roberts appears to have assumed that they had been granted an extension of their lease on the terms of the offer sent on 14 August 1996. However, there was no explanation as to why the Roberts made no attempt to pursue the formalisation of the arrangement that was then made. 77 This is not a case where it can be said that there was any expectation engendered in the tenants to the effect that they would be granted a leave or extension without any requirement for a release. Although, as noted at paragraph [47] above, Mrs Roberts gave evidence to the effect that she had been given an assurance to this effect by Mr Wilson, his Honour made a specific finding that he was not satisfied such an unequivocal and groundless statement had been made by Mr Wilson. 78 His Honour concluded that the release was "irrelevant" to the question of renewal. Requiring, as a quid pro quo for the grant of renewal of a lease, some benefit that was not necessarily connected with the lease would not, of itself, constitute unfair exploitation. In any event, it could not be said that the release elicited from the Roberts was commercially irrelevant to the terms and conditions of any proposed new lease. The claims that were being made by the Roberts arose out of the relationship of landlord and tenant that they were seeking to renew. 79 His Honour considered that it was of no consequence that the detriment suffered by the Roberts may have been small in money terms. The Roberts' business, it appears, had very little value in the absence of any security of tenure in respect of the shop in the Shopping Centre where it was carried on. Mrs Roberts appears to have accepted that if she did not get a renewal or extension of the lease, the business would be lost. If the Owners had simply refused to renew or extend the lease but had granted a lease of the shop to the Hollands on its expiration, the Hollands cold well have been in a position to reap some benefit by establishing, in the same shop, a business similar to that that had been carried on by the Roberts. The Roberts would have lost everything. His Honour accepted, however, that there would have been no unconscionability in the bare refusal to grant a renewal or extension of the Roberts' lease. 80 By offering terms upon which a renewal or extension of the lease could be granted, the Roberts were, in effect, thrown a lifeline. Whether they were better off by foregoing their claims and accepting that lifeline than if the lifeline had not been offered to them may be a matter of judgment for them to make. Clearly, their judgment was that they were better off by accepting the lifeline. It would be curious, therefore, to characterise the conduct that led to that result as unconscionable. 81 A distinction can be drawn between parties who adopt an opportunistic approach to strike a hard bargain and parties who act unconscionably - see ACCC v Samton Holdings Pty Ltd [2000] FCA 1725 at [99]. It cannot be said that the Roberts' wills were so overborne that they did not act independently and voluntarily. Unfortunately for the Roberts, the Owners were under no obligation to renew or extend their lease. The Roberts had the choice of either maintaining their legal claims against the Owners and losing the opportunity to sell their business or abandoning their claims and gaining the opportunity to sell their business. They made that choice of abandoning their claims. That may have been a hard bargain, but it was not an unconscionable one. 82 It is inappropriate to characterise the detriment that a tenant has by reason of the imminent expiration of a lease as a special disadvantage. His Honour appears to have accepted that proposition. His Honour erred, however, in concluding that the Roberts were under a special disadvantage such that the arrangements that they entered into in December 1996, with proper legal advice, were unconscionable. It follows that there was no contravention of s 51AA in relation to the conduct of the Owners from October to December 1996. 83 Since the bargain that was struck between the Roberts and the Owners in December 1996 was not unconscionable, it follows, a fortiori, that nothing that was done in May by the Owners could be characterised as unconscionable. Equity is concerned with a remedy where a transaction has been entered into against good conscience or which is unconscientious. No transaction was entered into in May. There could be no conduct that could be characterised as unconscionable under the unwritten law.
CONCLUSION 84 The appeal should be upheld. The declarations and the order that Messrs Atzemis, Berbatis and Sullivan and Ms Hiejne attend a compliance seminar should be set aside. The ACCC should pay the costs of the appeal. 85 The statement of claim also sought relief in respect of conduct alleged to have contravened s 51AA in respect of Banlon and the Ternents. The ACCC accepted on the hearing of the appeal and cross appeal that, if the circumstances relating to the Roberts did not give rise to any contravention of s 51AA then, a fortiori, the circumstances concerning Banlon and the Ternents would not give rise to any contravention. It follows, therefore, that the cross-appeal by ACCC should be dismissed with costs. 86 In lieu of the orders made by the primary judge, there should be orders that the proceeding be dismissed with costs. I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Hill, Tamberlin & Emmett.
Counsel for the First to Sixth Appellants: Mr M McCusker QC with Mr H Robinson
Solicitor for the First to Sixth Appellants: Hadyn Robinson
Counsel for the Respondent: Mr N McKerracher QC with Ms J Lord
Solicitor for theRespondent: Australian Government Solicitor
Counsel for the Cross-Appellant: Mr N McKerracher QC with Ms J Lord
Solicitor for the Cross-Appellant: Australian Government Solicitor
Counsel for the First to Sixth Cross-Respondents: Mr M McCusker QC with Mr H Robinson
Solicitor for the First to Sixth Cross-Respondents: Hadyn Robinson
Counsel for the Seventh and Eighth Cross-Respondents: Mr J Johnson
Solicitor for the Seventh and Eighth Cross-Respondents: Ilberys Lawyers
Date of Hearing: 31 May 2001
Date of Judgment: 27 June 2001
CG Berbatis Holdings Pty Ltd
ACCC
(1957) 99 CLR 362
(1982) 151 CLR 447
(1992) 175 CLR 621
(1956) 99 CLR 362
(1983) 151 CLR 447