Plaintiff v Defendants

1 This proceeding involves a dispute over the sale of a business that provided letting and caretaking services at the Devlin apartment complex. Teddo Corporation Pty Ltd (the plaintiff) provided those services pursuant to a letting agreement and a caretaking agreement with Owners Corporation No. 1 PS731436J (the first defendant) and individual apartment management agreements with each of the Lot Owners at the complex (the second to thirtieth defendants).

2 In short, the plaintiff alleges the first defendant breached the letting agreement and the caretaking agreement by unreasonably withholding its consent to the sale by the plaintiff of its rights under the agreements to a third party purchaser. The plaintiff also alleges the first defendant breached the letting agreement by authorising people other than the plaintiff to carry on a business of letting agent from the common property of the complex. Further, the plaintiff alleges that in unreasonably withholding its consent and authorising others to carry on the letting agent business, the first defendant has engaged in unconscionable conduct in breach of ss 20(1) and 21 of the Australian Consumer Law contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (the ACL). Finally the plaintiff alleges that each of the second to thirtieth defendants is a person involved in contraventions of ss 20 and 21 of the ACL. The plaintiff seeks declarations, compensation and damages.

3 The defendants seek summary judgment, pursuant to s 62 or s 63 of the Civil Procedure Act 2010 (Vic) (CPA) and r 22.22 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules), in relation to the plaintiff's claim to the extent it alleges:

(a) unconscionable conduct by the first defendant contrary to the unwritten law (the s 20(1) ACL claim);

(b) unconscionable conduct by the first defendant contrary to statute (the s 21 ACL claim); and

(c) each of the second to thirtieth defendants was involved in the first defendant's unconscionable conduct.

4 In the alternative, the defendants seek, pursuant to r 23.01 of the Rules, a stay of the plaintiff's unconscionable conduct claims on the basis the claims are scandalous, frivolous or vexatious or an abuse of the Court's processes.

5 In the further alternative, the defendants seek, pursuant to r 23.02 of the Rules, that the Court strike out those paragraphs of the plaintiff's statement of claim comprising the plaintiff's unconscionable conduct claims, being paragraphs 28, 29 and 30 of the plaintiff's statement of claim.

6 For the reasons given below, I have decided that the plaintiff's unconscionable conduct claims against the first defendant and its accessorial claims against the second to thirtieth defendants contained within its statement of claim should be struck out and the plaintiff be given an opportunity to replead. I have decided that it is not appropriate at this stage for the Court to grant the defendants summary judgment in relation to those claims, nor that they be stayed.

7 The plaintiff's statement of claim alleges that on 7 April 2016 the first defendant entered into the Letting Agreement with Devlin Five Pty Ltd (Devlin Five), the company that sold the plaintiff its business. Under the terms of the Letting Agreement, Devlin Five was engaged as the letting agent for a term of ten years and the first defendant granted Devlin Five an irrevocable licence to use and possess those parts of the common property that Devlin Five considered necessary to carry out its work as letting agent.

8 Relevantly, the plaintiff alleges that by the terms of the Letting Agreement, the first defendant covenanted with Devlin Five not to authorise any person or corporation other than Devlin Five to carry on the business of a letting agent from the common property or a lot. Under the terms of the Letting Agreement, this covenant bound the first defendant and not the individual owners of the lots who were entitled to exercise their rights in accordance with clauses 3(1) and 3(7) of the Letting Agreement.

3 Letting

1. In relation to letting of lots within the Development the Letting Agent shall be entitled to carry on from the Caretaker's Lot the business of the letting of lots within the Development on behalf of such owners of lots in the Development as require that service together with all associated services commonly rendered in connection therewith including but not limited to the hiring of goods and the provision of services related to occupation of lots in the Development.

...

1. Nothing in this Agreement shall require individual proprietors to avail themselves of the Letting Agent's services.

10 The plaintiff's statement of claim alleges that in 2018, by a deed of assignment between the first defendant, Devlin Five and the plaintiff, the parties agreed to Devlin Five assigning its rights under the Letting Agreement to the plaintiff. The plaintiff alleges that since that assignment, it has been the sole authorised letting agent for the purposes of managing the letting of each apartment in the Devlin apartment complex.

11 The plaintiff alleges that on 7 April 2016, the first defendant entered into the Caretaking Agreement with Devlin Five to carry out the functions and duties of a caretaker at the Devlin apartment complex. Under the terms of the Caretaking Agreement, Devlin Five was engaged as caretaker for a term of ten years. The plaintiff alleges that under the terms of the Caretaking Agreement, the first defendant granted to Devlin Five an irrevocable licence to use and possess those parts of the common property Devlin Five thought necessary to carry out its Caretaking Duties, subject to the entitlements of the members of the Owners Corporation from time to time.

12 The plaintiff alleges that in 2018, by a deed of assignment between the first defendant, Devlin Five and the plaintiff, the parties agreed to Devlin Five assigning its rights under the Caretaking Agreement to the plaintiff. Accordingly, the plaintiff says that since the deed of assignment, the plaintiff is and has been the sole authorised caretaker of the Devlin apartment complex.

13 The plaintiff alleges that in 2016, by various agreements made between Devlin Five and each Lot Owner, Devlin Five was given exclusive letting service rights in respect of each apartment in the Devlin apartment complex on behalf of each Lot Owner.

14 On 14 February 2018 the plaintiff entered into an agreement to purchase all of Devlin Five's rights, title and interests in the business it conducted in respect of the letting of apartments in the Devlin apartment complex and the management agreements it had with the Lot Owners. The plaintiff says that by purchasing Devlin Five's business and the deeds of assignment, the plaintiff assumed the rights and ownership of:

(a) the management agreements with individual Lot Owners;

(b) exclusive letting rights under the Letting Agreement with the first defendant;

(c) exclusive caretaking rights under the Caretaking Agreement with the first defendant;

(d) all other business contracts in respect of Devlin Five's business; and

(e) the domain names and accounts in respect of Devlin Five's business.

15 The plaintiff alleges that on 16 February 2018, the plaintiff entered into Apartment Management Agreements with each of the Lot Owners. Under the terms of the Apartment Management Agreements, the plaintiff would exclusively exercise the letting service rights in respect of each apartment in the Devlin apartment complex on behalf of each Lot Owner.

16 Under the terms of the Apartment Management Agreements, if a majority of Lot Owners notified the plaintiff in writing that they wished to terminate the plaintiff's engagement, the plaintiff was required within nine months to transfer its rights under the Apartment Management Agreements to an arm's length third party consented to by the Lot Owners. If the plaintiff did not complete the transfer within nine months, the plaintiff was required to transfer its rights under the Apartment Management Agreements to a replacement agent nominated by the majority of Lot Owners at a price specified by those Lot Owners calculated according to one of the valuation methods specified in the Apartment Management Agreements.

17 The term of each Apartment Management Agreement was ongoing until terminated by either party giving 90 days written notice.

18 Between 9 and 15 April 2020, each of the Lot Owners purported to terminate their respective Apartment Management Agreements with the plaintiff.

19 The plaintiff alleges that pursuant to the terms of the Letting Agreement and the Caretaking Agreement, the plaintiff was entitled to assign its interest in those agreements to an assignee with the prior consent of the first defendant. Under the terms of the Letting Agreement and Caretaking Agreement, the first defendant could not unreasonably withhold its consent.

20 The plaintiff alleges that between August 2020 and April 2021, it provided the first defendant with the details of two proposed assignees. The second proposed assignee was Jianyun Tao (Tao). The plaintiff alleges it has failed to reach agreement with the defendants on the transfer of the business or the proper method of valuing the business under the Apartment Management Agreements. The plaintiff alleges that the first defendant has unreasonably and persistently refused, and withheld its consent to the assignment of the Letting Agreement and the Caretaking Agreement to Tao.

21 In paragraph 23 of its statement of claim, the plaintiff further alleges that the first defendant breached clause 5 of the Letting Agreement by expressly or impliedly authorising, permitting or acquiescing in persons or entities other than the plaintiff to carry on the business of a letting agent from the common property or a lot in the Devlin apartment complex.

22 Clause 5 of the Letting Agreement is in the following terms:

5 Covenant by Owners Corporation

1. To the extent of its power to legally do so the Owners Corporation covenants that with respect of the letting of any lots in the Development it shall not authorise any person or corporation other than the Letting Agent to carry on the business of a letting agent from the Common Property or a lot.
2. This covenant shall bind the Owners Corporation and not the individual owners of lots within the Development who shall be entitled to exercise their rights in accordance with clauses 3(1) and 3(7) of this Agreement.

23 In its particulars of this allegation, the plaintiff alleges that:

(a) Maxwell Leigh Robertson [the fourteenth defendant], a member of the Owners Corporation Committee, applied in March 2020 for registration of the business name "Devlin Apartments"; established, with Barbara Ruth Clarke and Janine Frances Gowty, DGA (Vic) Pty Ltd (ACN 646 024 464) (DGA Vic) to provide letting services to Lot Owners; and in 2020 on behalf of the first defendant, engaged a contractor to change the locks of all apartments and the front entrance of the Devlin apartment complex.

(b) Barbara Ruth Clarke, the daughter of a Lot Owner, sought to transfer ownership of the Vintech system (an access keycard provider) from the plaintiff to herself claiming ownership of the Devlin apartment business; acted as a letting agent for various Lot Owners; provided access to the Devlin apartment mail accounts to take bookings for Lot Owners without the plaintiff's consent; attended to onsite guest check in and payments for the letting of apartments in the Devlin apartment complex and, in November 2020 with Maxwell Leigh Robertson and Janine Frances Gowty, established DGA Vic to provide letting services to Lot Owners.

(c) Jannine Frances Gowty [the twentieth defendant] in November 2020 with Maxwell Leigh Robertson and Barbara Ruth Clarke, established DGA Vic to provide letting services to Lot Owners.

(d) Miles Gowty [the nineteenth defendant], a member of the Owners Corporation Committee, on 9 November 2020, took booking inquiries and made bookings via the plaintiff's email account without the plaintiff's consent. These bookings were invoiced under the plaintiff's Devlin apartment letterhead and payments were directed to Miles Gowty's own superannuation fund.

(e) John Wright, Chair of the Owners Corporation Committee, on 7 October 2020, approached the plaintiff's web designer and requested the contact details on the Devlin apartments website be changed to his details.

(f) Anne-Marie Devlin acted as letting agent for various Lot Owners and has taken bookings and attended to onsite guest check ins and payments.

(g) The first defendant, in 2020, obtained access and control of the email account, website and domain name associated with the plaintiff's Devlin apartment business and, in November 2020, installed a key safe to facilitate Lot Owners in their conduct of the letting business.

24 The plaintiff alleges that the first defendant, by authorising or acquiescing in the activities of various people in carrying on the business of a letting agent, has breached an implied term of the Letting Agreement and the Caretaking Agreement to act in good faith. The plaintiff relies on the same particulars summarised at paragraph 23 above for this allegation.

25 The plaintiff alleges it was an implied term of the Letting Agreement and the Caretaking Agreement that the parties would act in good faith and exercise their powers and obligations so that the parties to those Agreements would substantially receive the benefit of each Agreement.

26 The plaintiff makes the unconscionable conduct claims against the defendants in paragraphs 28, 29 and 30 of its statement of claim. Those paragraphs are in the following terms:

Australian Consumer Law

Further and alternatively, in contravention of s 21, Schedule 2 Competition and Consumer Act 2020 (the Australian Consumer Law) in trade and commerce and in connection with the supply or possible supply of services to the Plaintiff, the Owners Corporations has engaged in conduct that is, in all the circumstances, unconscionable in that:

(a) it has unreasonably refused to consent to the transfer of the Letting Agreement, the Caretaking Agreement and the Scheme Rights;

(b) it has authorised, either expressly or impliedly, the conduct referred to in paragraph 23 hereof;

(c) it has aided, abetted, counselled or procured the conduct referred to in paragraph 23 hereof;

(d) it has been, directly or indirectly, knowingly concerned in, or a party to the conduct referred to in paragraph 23 hereof; and,

(e) it has conspired with others to effect the said contraventions.

Particulars

The Plaintiff refers to and repeats the particulars to paragraphs 21, 22 and 23 hereof.

Further and alternatively, the Owners Corporation has contravened s 20(1) of the Australian Consumer Law by, in the course of trade or commerce, engaging in conduct that is unconscionable, within the meaning of the unwritten law from time to time.

Particulars

The particulars to the preceding paragraph are repeated.

Further and alternatively, each of the Lot Owners is a person involved in the contravention of s 21 and s 20 of the Australian Consumer Law in that each Lot Owner has:

(a) authorised, either expressly or impliedly, the conduct referred to in paragraph 23 hereof;

(b) aided, abetted, counselled or procured the conduct referred to in paragraph 23 hereof;

(c) been, directly or indirectly, knowingly concerned in, or a party to the said conduct referred to in paragraph 23 hereof; and

(d) conspired with others to effect the said contraventions.

Particulars

The particulars in paragraphs 21, 22 and 23 are repeated.

27 Paragraph 23 of the plaintiff's statement of claim[1] alleges the first defendant breached the Letting Agreement by authorising or acquiescing in persons other than the plaintiff to carry on the business of a letting agent from the common property or a lot in the Devlin apartment complex. The particulars of this allegation are summarised above at paragraph 23.

28 Paragraphs 21 and 22 of the plaintiff's statement of claim, which are referred to in the particulars to paragraphs 28, 29 and 30, follow paragraph 20. In paragraph 20 of the statement of claim the plaintiff alleges that, by virtue of particular clauses contained in the Letting Agreement and the Caretaking Agreement, the plaintiff was entitled to assign its interest in the Letting Agreement and the Caretaking Agreement to a purchaser or transferee with the prior consent in writing of the Owners Corporation, which consent could not be unreasonably withheld.

In the period August 2020 to about April 2020 the Plaintiff provided to the Owners Corporation all pertinent detail of the proposed assignees including character references as required pursuant to clause 6(2) of the Letting Agreement and clause 6(3) of the Caretaking Agreement.

Particulars

(a) on about 4 August 2020 the Plaintiff notified all Lot Owners and the Owners Corporation of its intention to transfer the Letting Agreement, Caretaking Agreement and the Scheme Rights[2] to a new manager, Mr Vincent Cairns;

(b) on about the 7 August 2020 the Plaintiff provided notice in writing of the proposed assignment of the Letting and Caretaking Agreements to Vincent Cairns;

(c) on about 2 December 2020 the Plaintiff informed the Owners Corporation and the Lot Owners of another person who was interested in purchasing the Scheme Rights, Mr Jianyun Tao, and all relevant documents were provided to the Owners Corporation for its consideration and approval of the proposed transfer of [the] Letting Agreement and Caretaking [Agreement] and the transfer of the Scheme Rights;

(d) in the period from about 2 December 2020 to about April 2021, as requested by the Defendants the Plaintiff provided various documents and information pertinent to the proposed assignment of the Letting Agreement and the Caretaking Agreement to Mr Jianyun Tao or to his nominated corporate entity; and

(e) the Owners Corporation has unreasonably and persistently refused and withheld its consent to the assignment of the Letting and Caretaking Agreements.

In breach of the Letting Agreement and Caretaking Agreement, the Owners Corporation has unreasonably withheld and refused to consent to the transfer of the Letting Agreement and Caretaking Agreement to Jian Tao or to his nominated corporate entity.

30 Paragraph 22 of the plaintiff's statement of claim contains no particulars.

31 On 2 September 2021, the defendants filed a request for further and better particulars from the plaintiff. By that request, the defendants sought particulars of each authorisation, permission or acquiescence referred to in paragraph 23 of the plaintiff's statement of claim. The defendants also sought particulars of each of the second to thirtieth defendants' involvement in the alleged contraventions of ss 20 and 21 of the ACL as alleged in paragraph 30 of the statement of claim.

32 The plaintiff filed its response to the defendants' request on 20 September 2021. The plaintiff objected to answering the request as it related to paragraph 23 on the basis that the defendants were seeking evidence. Under cover of that objection, the plaintiff referred to and repeated the particulars of paragraph 23 of its statement of claim. The plaintiff then said that on 9 December 2020, the plaintiff sent an email to all Lot Owners informing them of the activities of persons conducting a letting business on the Devlin apartment complex common property in breach of the Letting Agreement and that the first defendant was attempting to take over the plaintiff's business in managing the Devlin apartment complex business. The plaintiff further said that on 3 February 2021, the plaintiff sent an email to Maxwell Robertson and Miles Gowty, copied to the Lot Owners, complaining that they, together with Anne-Marie Devlin and Ruth Clark, were involved in breaches of the Letting Agreement by conducting a business of letting apartments on behalf of various Lot Owners. The plaintiff then stated that in those circumstances the knowledge of Maxwell Robertson, Miles Gowty, Anne-Marie Devlin and Ruth Clark and the Lot Owners of their activities as letting agents is imputed as the knowledge of the Owners Corporation and of the Lot Owners for whom they acted as letting agents. The plaintiff said it was unable to provide further particulars until after the completion of discovery.

33 In relation to the second to thirtieth defendants' involvement in the alleged contraventions of ss 20 and 21 of the ACL, the plaintiff stated in identical terms for each of these defendants, that it will rely on the fact that the Lot Owners collectively comprised the first defendant and that the Owners Corporation Committee was authorised either expressly or impliedly by the Lot Owners by reason of the appointment of the Committee to act on behalf of the Lot Owners to manage the first defendant's dealings with the plaintiff in respect of the Apartment Management Agreements, the Letting Agreement and the Caretaking Agreement.

34 The plaintiff filed a second further and better particulars of claim on 28 February 2022 going to paragraphs 23 and 30 of its statement of claim.

35 Paragraph 23 of the statement of claim contains the plaintiff's allegation that the first defendant breached the Letting Agreement by authorising or acquiescing in persons other than the plaintiff to carry on the business of a letting agent from the common property or a lot in the Devlin apartment complex. By its second further and better particulars, the plaintiff stated that the defendants knowledge of the conduct of the other persons and its authorisation or acquiescence can be further inferred from twenty five specified documents discovered by the defendants.

36 Paragraph 30 of the plaintiff's statement of claim contains the allegation that each of the second to thirtieth defendants were involved in the contravention of ss 20 and 21 of the ACL. By its second further and better particulars, the plaintiff stated that insofar as that allegation related to each individual defendant, the plaintiff referred to and repeated that the defendants' knowledge of the conduct of the other persons and their involvement can be further inferred from the same twenty five specified documents discovered by the defendants.

37 It is unnecessary at this stage to summarise the content of the twenty-five documents referred to in the plaintiff's second further and better particulars of claim document. It is sufficient to say that the documents comprise various emails and letters. The majority, but by no means all, of the emails are from Ruth Clarke to various people.

38 The provisions of the CPA and the Rules relevant to summary judgment are well known and were not in dispute between the parties.[3] Section 64 of the CPA provides that a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success, the civil proceeding should not be disposed of summarily, because it is not in the interests of justice to do so or because the dispute is of such a nature that only a full hearing on the merits is appropriate. The principles relevant to the application of the legislative provisions were not in dispute.[4] It is unnecessary to rehearse them again here.

39 Rule 23.01 of the Rules provides that where a proceeding generally or any claim in a proceeding is scandalous, frivolous or vexatious or is an abuse of the process of the Court, the Court may stay or give judgment in the proceeding generally or in relation to any claim. The Court will not make such an order unless it is clear that no proper amendment of the pleading can raise a good cause of action.[5]

40 Rule 23.02 of the Rules empowers the Court to strike out the whole or part of a pleading on the basis that it does not disclose a cause of action, is scandalous, frivolous or vexatious, may prejudice, embarrass or delay the fair trial of the proceeding, or is otherwise an abuse of the process of the Court.

41 The parties were not in dispute about the meaning of the terms scandalous, frivolous or vexatious, embarrass or abuse of process.

42 Section 20 of the ACL provides that a person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time. Section 20 of the ACL does not apply to conduct that is prohibited by s 21 of the ACL.

43 Section 21 of the ACL is in the following terms:

21 Unconscionable conduct in connection with goods or services

(1) A person must not, in trade or commerce, in connection with:

1. the supply or possible supply of goods or services to a person; or

2. the acquisition or possible acquisition of goods or services from a person;

engage in conduct that is, in all the circumstances, unconscionable.

(2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct:

1. institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
2. refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition.

(3) For the purpose of determining whether a person has contravened subsection (1):

1. the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
2. the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.

(4) It is the intention of the Parliament that:

1. this section is not limited by the unwritten law relating to unconscionable conduct; and
2. this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and
3. in considering whether conduct to which a contract relates in unconscionable, a court's consideration of the contract may include consideration of:
   1. the terms of the contract; and
   2. the manner in which and the extent to which the contract is carried out;

and is not limited to consideration of the circumstances relating to formation of the contract.

44 Section 22 of the ACL sets out a non-exhaustive list of matters the court may have regard to for the purposes of determining whether a person in the position of an acquirer of goods or services from a supplier, has contravened s 21.

45 The term 'involved' is defined in s 2 of the ACL as follows:

a person is involved, in a contravention of a provision of this Schedule or in conduct that constitutes such a contravention, if the person:

(a) has aided, abetted, counselled or procured the contravention; or

(b) has induced, whether by threats or promises or otherwise, the contravention; or

(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or

(d) has conspired with others to effect the contravention.

46 At the hearing of the defendants' application, counsel for the defendants set out at length the principles arising from the authorities relevant to unconscionable conduct claims. These principles were not disputed by the plaintiff.

47 In Jams 2 Pty Ltd v Stubbings[6] ('Stubbings'), the Victorian Court of Appeal sought to explain the equitable doctrine of unconscionable conduct by reference to the following passage from the judgment of Nettle and Gordon JJ in Australian Securities and Investments Commission v Kobelt:[7]

Relief under the doctrine of unconscionable conduct requires that the innocent party was subject to a special disadvantage in dealing with the other party when the transaction was entered into, 'which seriously affect[ed] the ability of the innocent party to make a judgment as to [their] own best interests'; and that the other party unconscientiously took advantage of that special disadvantage. The existence of those circumstances at the time of the transaction is what 'affect[s] the conscience' of the stronger party and renders the enforcement of the transaction, or the taking of the benefit, 'unconscientious' or 'unconscionable'.

It is not possible to identify exhaustively what amounts to a special disadvantage. However, the essence of the relevant weakness is that it 'seriously affects' the innocent party's ability to safeguard their own interests. Relevant matters may include, but are not limited to, 'poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary'; as well as 'illness, inexperience, impaired faculties, financial need or other circumstances' that affect the innocent or weaker party's ability to protect their own interests. It is not sufficient that the matters give rise only to an inequality of bargaining power.

A party will have unconscientiously taken advantage of an innocent party when the former knew or ought to have known of the existence and effect of the special disadvantage; or, put another way, when the special disadvantage was sufficiently evident at the time of the transaction to make it unconscientious to procure or accept the assent of the innocent party.

Unconscionable conduct does not require a finding of dishonesty. However, it is not merely concerned with what is 'fair' or 'just'. Unconscionable conduct can include the passive acceptance of a benefit in unconscionable circumstances. And unconscionable conduct can be found even where the innocent party is a willing participant, the question is how that willingness or intention to participate was produced.

As this Court has recognised and restated a number of times, invocation of equitable doctrines, including unconscionable conduct:

calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [weaker party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition...[']A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case'.

48 In Stubbings, the Court of Appeal also considered the statutory standard applicable in assessing whether conduct is, in all the circumstances, unconscionable within the meaning of s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (ASIC Act). Section 21 of the ACL mirrors the provisions of s 12CB of the ASIC Act albeit that the ASIC Act provisions are concerned with the supply or acquisition of financial services while the ACL provision is concerned with the supply or acquisition of goods and services.

The applicable standard is a normative one involving the evaluation of whether the conduct in question is 'so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience'; in the sense that a court should only take the serious step of denouncing conduct as unconscionable when it is satisfied that the conduct is 'offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society'. The evaluation exercise is informed by the non-exhaustive list of factors in s 12CC.

[citations omitted]

50 In Australian Competition and Consumer Commission v Dukemaster Pty Ltd[8], Gordon J considered the meaning of unconscionable conduct in business transactions as that phrase appeared in s 51AC of the Trade Practices Act 1974 (Cth) (the TPA). The TPA was replaced in 2010 by the Competition and Consumer Act 2010 (Cth), with the ACL being Schedule 2 to the latter Act. Notwithstanding the change in legislation, Gordon J's consideration of the authorities on unconscionable conduct under the TPA remains pertinent. Gordon J referred to Foster J's summary of the relevant propositions in Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2)[9] where Forster J said the authorities established that statutory unconscionable conduct is wider and not limited to the meaning of unconscionable conduct according to established principles of common law and equity. Forster J noted that there is no prescribed definition capable of application to every set of circumstances presented to the Court for consideration. The application of the meaning accorded to the concept will always be a matter of judgment in every case and will depend upon a careful consideration of the circumstances of each case.

51 The Full Court of the Federal Court of Australia (Allsop CJ, Jacobson and Gordon JJ) in Australian Competition and Consumer Commission v Lux Distributors Pty Ltd[10], described the task of the Court as involving:

the evaluation of the facts by reference to a normative standard of conscience. That normative standard is permeated with accepted and acceptable community values. In some contexts, such values are contestable.... The content of those values is not solely governed by the legislature, but the legislature may illuminate, elaborate and develop those norms and values by the act of legislating, and thus standard setting... Values, norms and community expectations can develop over time. Customary morality develops "silently and unconsciously from one age to another", shaping law and legal values: Cardozo, The Nature of the Judicial Process (Newhaven, Yale University Press, 1921) pp 104-105.

The task of the Court is an evaluation of the impugned conduct to assess whether it is to be characterised as a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience and so be characterised as unconscionable: ACCC v Quantum HG [92].

(citations omitted)

52 The Full Court of the Federal Court of Australia (Allsop CJ, Besanko and McKerracher JJ) in Australian Competition and Consumer Commission v Quantum housing Group Pty Ltd & Anor[11] stated:

The legislature has expressly stated that s 21 is not limited by the unwritten law: s 21(4)(a). That alone is sufficient to deny the proposition that a special disability or vulnerability as recognised in equity of which advantage is taken with sufficient knowledge or predatory state of mind (if that be required in equity) is an essential requirement of statutory unconscionability.

Likewise, some lessened through real disadvantage, disability or vulnerability of which advantage is taken cannot be seen to be, as a matter of statutory construction (for that is what the proposition must be founded on) an essential requirement of statutory unconscionability.

....

Predation on vulnerability, taking advantage of disability or disadvantage and victimisation may be found in business, as in other fields of human life. Such behaviour does not, however, exhaust the meaning of against conscience. The kinds of consideration in s 22 and the kinds of circumstances to which the Chief Justice referred to in Paciocco 236 FCR 199 at [296]-[298] are apt to inform evaluations about business standards that the courts are required by Parliament to make. They may be contestable judgments; they may be by reference to a standard that is not definable; but they are evaluative judgments that Parliament demands be made. That they are subject of a civil penalty requires that the boundary of impugned conduct be reasonably known to the subject. This last factor reinforces the proposition that it is no light matter, indeed it is a serious matter, to have one's conduct impugned as against or as offending conscience. Business people understand such things, as do ordinary people. They need no definition to assist them. "Unconscionable" is the language of business morality and unconscionable conduct is referrable to considerations expressed and recognised by the statute. The word is not limited to one kind of conduct that is against or offends conscience.

...

There may be more or less serious examples. That will reflect in penalty. The task is an evaluation of the impugned conduct to assess whether it is to be characterised as a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience and so be characterised as unconscionable. In any particular case, it should be recognised that if the evaluative answer be "no: it is not unconscionable", the court is concluding that by an Australian business conscience the conduct was conscionable and is not to be deterred by penalty.

The requirements for a pleading on unconscionable conduct

53 Perhaps because the defendants' primary application is for summary judgment, the parties did not address the Court in any detail on the authorities regarding pleading of unconscionable conduct claims. In my view, these principles are relevant to the determination of the defendants' application.

54 While there is a general requirement that pleadings be clear and precise, a pleading which involves an allegation as serious as unconscionable conduct demands a particular degree of clarity and precision.[12] A pleading which simply repeats the language of a provision of the ACL, and then baldly asserts a contravention of that provision without sufficient elaboration of the factual basis for the claim made, will be liable to be struck out.[13] It is likewise not enough to plead facts which expose unfairness or general and wide ranging conduct,[14] nor is it enough for an applicant to "plead a set of facts and a bare conclusion that what has taken place is unconscionable".[15]

55 Each element of the cause of action of unconscionable conduct needs to be properly pleaded and particularised,[16] and an applicant must explain why the facts and circumstances stated lead to the conclusion contended for, "[i]n a coherent way, anchored in the facts".[17] Thus, for the purposes of an allegation of unconscionable conduct in contravention of either s 20 or s 21 of the ACL, a pleading must elaborate the particular conduct which is said to give rise to the alleged unconscionability, as well as set out why that conduct is said to be unconscionable.[18]

56 For an allegation of unconscionable conduct in contravention of s 20, a pleading must also contain material facts which support the elements of unconscionable conduct as it is understood at common law. Thus, an applicant must, at a minimum, "plead the special disability it relies on and how [the defendant] took advantage of that disability",[19] as well as how it can be said that the defendant obtained a benefit in taking advantage of the applicant's special disability.[20]

57 A pleading of 'involvement in', or accessorial liability in respect of, unconscionable conduct in contravention of s 20 or s 21 of the ACL must identify, "in terms of alleged material facts and circumstances... with some reasonable precision", the specific acts which are said to give rise to the relevant party's involvement in the relevant conduct.[21]

58 The question of whether particular conduct ought to be characterised as unconscionable requires a "careful examination of the facts... the precise relationship between the relevant parties, and consideration of their respective capacities and vulnerabilities (if any) in the circumstances", matters which are clearly dependent on the facts as established by the evidence at trial.[22] Given the factual complexity of such claims, a particular degree of care is required in any decision to enter summary judgment or to strike out a pleading of unconscionable conduct. In addition, a Court will only stay or give judgment under r 23.01 of the Rules if it is clear that no proper amendment of the pleading can raise a good cause of action.

59 The defendants' application for summary judgment must be considered against the case the plaintiff has put before the Court. That case is contained in the pleadings. For that reason, although the defendants' primary application is for summary judgment, it is necessary to commence with an examination of the pleadings and the parties' submissions on them.

60 The defendants submitted that for the purposes of their application, the Court should accept that it is arguable that the first defendant breached the Letting Agreement and Caretaking Agreement as alleged by the plaintiff.

61 In relation to the plaintiff's s 20 ACL claim, the defendants submitted that there was nothing in the circumstances and facts of the case as pleaded to indicate the principles of the unwritten law of unconscionability have been engaged. In particular, the defendants point to the plaintiff's failure to plead special disadvantage.

62 In relation to the plaintiff's s 21 ACL claim against the first defendant, the factors relied upon by the plaintiff to establish statutory unconscionability are the matters pleaded at paragraphs 21, 22 and 23 of the statement of claim. The defendants submitted that paragraph 28 alleges statutory unconscionability in three ways: (a) by the first defendant unreasonably withholding consent to the transfer; (b) by authorising the conduct described in paragraph 23; and (c) by being involved in the conduct described in paragraph 23.

63 The defendants submitted that by the first proposition, the plaintiff seeks to assert that the first defendant's unreasonable withholding of consent to a transfer of the Letting Agreement and Caretaking Agreement amounts to statutory unconscionability. The first defendant denies its consent was withheld unreasonably and in any event, submits that the language of the ACL is not concerned with unreasonable conduct but rather unconscionable conduct and that the two must not be conflated.

64 The defendants submitted that the second proposition conflates the conduct of others, as alleged in paragraph 23, with conduct of the first defendant. The defendants submitted that there is nothing in the allegations described in paragraph 23 to suggest the impugned conduct was the conduct of the first defendant, let alone that it was unconscionable conduct of the first defendant.

65 The defendants submitted that the third proposition, as pleaded in sub-paragraphs 28 (c) to (e) of the statement of claim confuses the distinction between being engaged in conduct and being involved in the conduct of another. By paragraph 28, the plaintiff pleads the first defendant was engaged in conduct that was, in all the circumstances, unconscionable. Subparagraphs 28(c) to (e) allege this conduct was constituted by the first defendant aiding, abetting, being directly or indirectly knowingly concerned in the conduct of others, and conspiring with others. The defendants complain that this language simply recites the language of the statutory definition of 'involved' in s 2 of the ACL without explication.

66 In relation to the plaintiff's claim against the second to thirtieth defendants as persons involved in the first defendant's alleged unconscionable conduct, the defendants submitted that the plaintiff has not pleaded the basis of the claim against each individual lot owner but rather used identical pleadings and particulars in relation to each of the second to thirtieth defendants without differentiation or elaboration. The defendants submitted that the plaintiff's assertion that each of the second to thirtieth defendants was involved in the first defendant's contravention simply because they collectively comprised the owners corporation is unsustainable as is the plaintiff's assertion that each of the second to thirtieth defendants alleged knowledge of certain things is enough to demonstrate each defendant was 'involved' in a contravention.

67 The defendants further submitted that the plaintiff's second further and better particulars do not advance the plaintiff's case in that it baldly seeks to assert that the first defendant's alleged knowledge is imputed to be knowledge of the second to thirtieth defendants, again without an proper explanation of why this is the case.

68 During the course of the hearing, the plaintiff's counsel articulated the plaintiff's case as:

(a) the first defendant, through various members of its Committee, were involved in seeking to establish a competing letting service business and effectively turned a blind eye;

(b) in turning a blind eye, the first defendant implicitly authorised the activities of the competing letting agent;

(c) when the plaintiff sought to assign its rights, the first defendant persistently refused to consent because it was actively involved in a competing business;

(d) the individual lot owners were involved because they were a part of the first defendant.

69 The plaintiff submitted that its unconscionable conduct claim was based in the first defendant's refusal to consent to the transfer of the Letting Agreement and the Caretaking Agreement and the Scheme Rights and in permitting various persons and entities to conduct letting services from the common property and 'whether the [second to thirtieth defendants] are jointly liable with the [first defendant] for such breaches'.

70 The plaintiff submitted that paragraph 23 of the statement of claim pleads the first defendant's breach of clause 5 of the Letting Agreement by either expressly or impliedly authorising, permitting, countenancing or acquiescing in persons or entities other than the plaintiff carrying on the business of a letting agent from the common property or a lot of the Devlin apartment complex. According to the plaintiff, the particulars to paragraph 23 'extensively set out conduct by members of the Owner's Corporation Committee who were involved in setting up and conducting letting services for various Lot Owners, which necessarily involved access to the common property'.

71 The plaintiff submitted that whether the first defendant had a reasonable basis for refusing to consent to the proposed transfer of the Letting Agreement, Caretaking Agreement, and Scheme Rights is a matter for trial where the Court will consider all of the relevant circumstances of the defendants' conduct. The plaintiff submitted that as members of the Owners Corporation Committee were involved in 'this conduct', it follows that the Owners Corporation Committee knew about the activities of the persons who were providing letting services to Lot Owners and that the Owners Corporation knew the 'relevant facts as to their conduct as well'.

72 The plaintiff further submitted that the activities of 'various people who are identified, and who necessarily had the knowledge that was available to the Owners Corporation Committee, as well as the Owners Corporation, as they were members of the Owners Corporation and the Owner's Corporation Committee, overlapped and coincided with the applications by the plaintiff for the transfer of the Letting Agreement and the Caretaking Agreement and the Scheme Rights'.

73 According to the plaintiff, the Owners Corporation members who were involved in setting up competing letting services must have been involved in considering and refusing to consent to the transfer of the Letting Agreement, the Caretaking Agreement and Scheme Rights. The plaintiff submitted that it was therefore, 'strongly arguable that the refusal by the Owners Corporation to agree to the assignment and transfer of the Letting Agreement and the Caretaking Agreement to the persons nominated by the plaintiff was unconscionable and not founded upon a genuine assessment of the suitability of the proposed transfer but by a desire to refuse such transfer and so that the benefits of the business of letting apartments in the Devlin apartment complex could be taken by persons associated with the Owners Corporation and the Lot Owners'.

74 The plaintiff submitted that there is evidence the defendants had knowledge of the conduct of the Owners Corporation members and third parties in carrying on letting activities and attempting to establish a letting business to take over the plaintiff's letting business. That evidence can be found in the various emails and letters referred to in the plaintiff's second further and better particulars of claim.

75 Counsel for the plaintiff submitted that the first defendant's breach of clause 5 of the Letting Agreement could potentially be unconscionable conduct. Similarly, counsel submitted that unreasonable conduct may very well be unconscionable conduct in all the circumstances and that it is open for the plaintiff to establish that the conduct complained of was unconscionable in all the circumstances.

76 In Olson v Keefe (No 3)[23], Bromwich J considered the requirements for a pleading of a contravention of s 20 of the ACL, observing:[24]

... in order for a claim to proceed under s 20 (and for that matter, under s 21), it is not enough to plead a set of facts and a bare conclusion that, in all the circumstances, what has taken place is unconscionable in the sense identified in the authorities cited above, or in some like sense...

What is required in bringing a claim under s 20 in this case (and for that matter, under s 21) is a pleading as to what particular conduct or part of the conduct is said to be unconscionable, and why. It is only then that the pleadings will serve to ensure that a clear distinction is maintained and adjudicated upon between, for example, contractual dealings that may be seen as no more than robust, or even harsh or unfair, and conduct that crosses the proscribed line of unconscionability. When the legal and factual distinction between what is permitted and what is forbidden may be close or finely balanced, such pleadings are especially important...

Two particular and related features of [the applicant's] argument as to the pleading requirements for a claim of unconscionability warrant a principled rejection. The first argument is that, as put by [the applicant's] senior counsel, "unconscionability is determined by the circumstances ... [y]ou plead the circumstances", that all that is required is to plead "the facts that give rise to the conclusion that it's unconscionable" and that there is no need to spell out why the pleaded conduct is unconscionable. The second and related argument is that, having done no more than plead what has happened and assert a conclusion that it is unconscionable, the Court is required, without any allegation as to why particular conduct is unconscionable, to determine whether that has been established ... [t]hat evaluative task is very different and much more difficult if it is required to be carried out in a pleading vacuum.

...

... unconscionability is ultimately a conclusion of law required to be reached by a court before a claim on that basis can succeed. The things done which are said to meet that description must be stated, in the sense of asserting why that conclusion is warranted. It is only then that the respondents in this case could properly have been called upon to plead to such allegations, so that issue could be joined and that issue could proceed to the filing of evidence and to trial...

In the circumstances of this case, the respondents were entitled to be told why [the applicant] contended that any particular aspect of what they were said to have done met the threshold of being unconscionable so that they could appropriately plead to it. In the case of the s 20 claim at least, there had to be an identification of special disadvantage, or something akin to that, such that this could be admitted or denied, before the question of whether that was known, or ought to have been known, by the respondents could be addressed. While it is alleged ... that [the applicant] was at a special disadvantage, that is said to be so by reason of no more than a bald assertion that he was denied information which he contends was necessary to protect his position. Nothing is pleaded as to why this is capable of constituting a special disadvantage ... [t]he mere incantation of those conclusory words does not constitute any sufficient pleading.

77 In the same case, his Honour also noted the case sought to be brought under ss 20 and 21 against the first and third respondents on the basis of their alleged involvement in the unconscionable conduct was, in any event:[25]

... either not pleaded at all or inadequately pleaded because the specific conduct of [the third respondent] that is said to be unconscionable is not identified in terms of alleged material facts and circumstances, as opposed to conclusory assertions. [The applicant] would have needed to identify with some reasonable precision what [the third respondent] is said to have done so as to have been "involved" as an accessory in the conduct of [the fourth respondent] and thus to have been legally responsible for any unconscionable conduct.

The accessorial case brought against [the first respondent] is inadequately pleaded by reason of the failure to identify the specific acts that are said to have made him an accessory.

78 The plaintiff's pleading of its unconscionable conduct claims in this case are plainly deficient. Although in submissions counsel for the plaintiff expanded on the intended meaning of the pleading, the pleadings do not clearly identify the cause of action and the material facts being relied upon with necessary precision. This deficiency means that the plaintiff's unconscionability claim is embarrassing and is likely to delay the fair trial of the proceeding.

79 It is unnecessary to point out every defect in the plaintiff's pleading. I note however that the pleading in relation to unconscionable conduct within the meaning of the unwritten law does not plead the existence of a special disadvantage, nor that the first defendant knowingly acted unconscionably to take advantage of or exploit that special disadvantage. For this reason alone, paragraph 29 of the plaintiff's statement of claim should be struck out.

80 Similarly, the terms of paragraph 30 of the plaintiff's statement of claim merely assert a conclusion based upon a recitation of the statutory definition of 'involved'. The particulars of this pleading, referring back to the particulars of previous paragraphs, one of which does not contain particulars, do not clarify the specific conduct of each of the second to thirtieth defendants said to meet the statutory definition. The plaintiff's second further and better particulars refers to a series of correspondence without any real attempt to specify in a differentiated way how that correspondence relates to the involvement of each of the second to thirtieth defendants. Without this level of clarity and precision, the second to thirtieth defendants are left to divine the elements of the causes of action against them.

81 In my view, paragraph 28 of the plaintiff's statement of claim is also defective. It pleads a bare conclusion that the first defendant has engaged in statutory unconscionable conduct from the fact of its unreasonable refusal to consent to the transfer of the Letting Agreement, Caretaking Agreement and Scheme Rights as well as its 'involvement' in conduct of others particularised in paragraph 23 of the statement of claim. It does not set out with any precision why the first defendant's alleged unreasonable refusal of consent rises to the level of statutory unconscionability. Beyond a reference to some of the people identified in the particulars to paragraph 23 being members of the Owners Corporation Committee, the pleading does not seek to explain what the first defendant is said to have done to aid, abet or be knowingly concerned in or conspire with others to 'effect the said contraventions'.

82 In my view, the interests of justice require that paragraphs 28, 29 and 30 of the plaintiff's statement of claim be struck out on the grounds that they may prejudice, embarrass or delay the fair trial of the proceeding. It is appropriate that the plaintiff be given an opportunity to replead its unconscionable conduct case.

83 I decline to grant summary judgment or judgment pursuant to r 23.01 of the Rules to the defendants, or to otherwise stay the plaintiff's unconscionability claims. I have taken this course for the following reasons. First, the defendants' summary judgment application in practical terms invited the Court to evaluate whether generally particularised conduct is unconscionable. It is not in the interests of justice that the Court attempt this task in a pleading vacuum. Second, it is not for the Court to trawl through the documentary evidence to assess whether the plaintiff could articulate with precision a cause of action in unconscionable conduct. Third, while the defendants' application was, at least in part, put on the basis that the proceeding is an abuse of process, that aspect was not specifically argued and nor does the evidence before the Court suggest such a finding should be made.

84 For the reasons given above, paragraphs 28, 29 and 30 of the plaintiff's statement of claim will be struck out pursuant to r 23.02 of the Rules. The defendants' application for summary judgment in respect of the claims made in paragraphs 28, 29 and 30 of the statement of claim is refused as is the defendants' alternative application for a stay or judgment in relation to those claims pursuant to r 23.01 of the Rules. The plaintiff will be granted leave to replead its unconscionable conduct case.

85 I request that the parties confer of the terms of orders required to give effect to this judgment and any question of costs. In the event the terms of orders dealing with those matters cannot be agreed within a period of seven days following delivery of this judgment, the matter will be relisted.

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[2] The term Scheme Rights is not defined in the plaintiff's statement of claim. Scheme is defined in clause 1.1(16) of the Apartment Management Agreements to mean the managed investment scheme constituted by the [Lot] Owners entering into apartment management agreements with the Manager, (i.e. the plaintiff). Scheme Rights is defined in clause 1.1(18) of the Apartment Management Agreements to mean any rights the Manager has or any of its associates have in respect of any real or personal property that facilitates the operation of the Scheme.

[3] The defendants' application was brought pursuant to ss 62 or 63 of the CPA and r 22.22 of the Rules or alternatively, rules 23.01 or 23.02 of the Rules.

[4] The plaintiff and defendants both referred to the summary of the test contained in the Court of Appeal's judgment in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; (2013) 42 VR 27, 40, [35] (Warren CJ and Nettle JA, Neave JA agreeing in part).

[5] Annesley v Westpac Banking Corp [2016] VSC 323.

[6] [2020] VSCA 200, [75] per Beach, Kyrou and Hargrave JJA. This decision was successfully appealed in Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 96 ALJR 271 however the principles articulated by the Court of Appeal were effectively restated by the High Court at [38]-[40] per Kiefel CJ, Keane and Gleeson JJ and [155]-[156] & [159] per Steward J.

[8] [2009] FCA 682, [16].

[9] [2009] FCA 17, [109]-[115].

[10] [2013] FCAFC 90, [23].

[11] [2021] FCAFC 40, [83]-[84] & [91]-[92].

[12] MacFadyen & Ellis v Bank of Queensland (No 2) [2014] VSC 653, [44] (Sifris J).

[13] Toben v Jones [2012] FCA 1193; (2012) 298 ALR 203, 210 [35] (Yates J).

[14] MacFadyen & Ellis v Bank of Queensland (No 2) [2014] VSC 653, [44] (Sifris J).

[15] Olson v Keefe (No 3) [2018] FCA 2001, [22] (Bromwich J).

[16] MacFadyen & Ellis v Bank of Queensland (No 2) [2014] VSC 653, [44] (Sifris J);

[17] Australian Securities and Investments Commission v Australia and New Zealand Banking Group Limited [2019] FCA 1284; (2019) 139 ACSR 52, 53 [4] (Allsop CJ).

[18] Olson v Keefe (No 3) [2018] FCA 2001, [23], [30]-[31] (Bromwich J).

[19] Owners-Strata Plan 91349 v Hallmark Construction Pty Ltd [2019] NSWSC 591, [64] (Ball J). See also, Olson v Keefe (No 3) [2018] FCA 2001, [31] (Bromwich J).

[20] Roo Roofing Pty Ltd v Commonwealth [2017] VSC 31, [134], [140] (John Dixon J).

[21] Olson v Keefe (No 3) [2018] FCA 2001, [33] (Bromwich J).

[22] Pritchard v Racecage Pty Ltd [1997] FCA 27; (1997) 142 ALR 527, 546 (Branson J, with whom Spender and Olney JJ agreed).

[23] [2018] FCA 2001.

[24] Ibid, [22]-[31] (emphasis in original).

[25] Ibid, [33] (emphasis in original).