Australian Competition and Consumer Commission v Berbatis Holdings & Ors

[2002] HCATrans 407

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P64 of 2002

B e t w e e n -

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Appellant

and

CG BERBATIS HOLDINGS PTY LTD

First Respondent

GPA PTY LTD

Second Respondent

P & G INVESTMENTS PTY LTD

Third Respondent

GEORGE PALASSIS ATZEMIS

Fourth Respondent

CONSTANTINE GEORGE BERBATIS

Fifth Respondent

ANNA MARIA ANTONIA HEIJNE

Sixth Respondent

BRIAN SULLIVAN PROPERTY PTD LTD

Seventh Respondent

BRIAN EDWARD SULLIVAN

Eighth Respondent

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON MONDAY, 21 OCTOBER 2002, AT 10.17 AM

Copyright in the High Court of Australia

__________________

MR N.W. McKERRACHER, QC:   May it please the Court, with my learned friend, MS E.C. GORDON, I appear for the appellant.  (instructed by the Australian Government Solicitor)

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR P.G. CLIFFORD, for the first six respondents who are the owners of the property in question.  (instructed by Haydn Robinson)

MR N.C. HUTLEY, SC:   If the Court pleases, I appear with my learned friend, MR N. PERRAM, for the seventh and eighth respondents.  (instructed by Julian Johnson)

GLEESON CJ:   Mr McKerracher.

MR McKERRACHER:   Your Honours, at first instance in this litigation, Justice French, the learned trial judge, concluded that the owners, through Mr Sullivan, had grossly, unfairly exploited the particular vulnerability of the Roberts in relation to the sale of their business. He concluded that there had thus been a contravention of section 51AA of the Trade Practices Act.

KIRBY J:   I noticed that adverb, “grossly”.  It seemed to be a very strong adverb in all the circumstances.  Is that necessary?  If it is necessary for your case, I think you will have problems myself; “grossly”, it is a very strong word.

MR McKERRACHER:   Terminology will not necessarily answer all the questions, in our respectful submission, your Honour.  I accept that “grossly” is a strong conclusion, but it is clear that his Honour wished to convey that it was certainly something more than mere unfairness. 

GLEESON CJ:   The word that attracted my attention was “vulnerability”.  What was their particular vulnerability, apart from the fact that they did not have an option to renew their lease?

MR McKERRACHER:   There were a sequence of vulnerabilities, your Honour, which really invites a detailed examination of all of the facts but the ‑ ‑ ‑

GLEESON CJ:   Was that their essential vulnerability, that they had no option to renew?

MR McKERRACHER:   That was an important feature of it, your Honour.  It was also regarded by his Honour the learned trial judge as being a relevant consideration that they needed to sell the business in order to meet medical bills to pay for their daughter’s serious illness.  It was also relevant, in our respectful submission, that the imposition of the mutual release clause, as it was described, was something which was effectively placed upon the Roberts at the last minute ‑ ‑ ‑

GLEESON CJ:   But none of this would have been a problem if they had had an option to renew the lease?

MR McKERRACHER:   The Roberts were under the impression that they in fact had at least a lease and they were perhaps mistakenly under the impression, but they formed that view in light of the fact that they had received communications from the owners offering them a lease without the condition of a mutual release clause; and in each instance when they purported to sell the business of attempted to sell the business, expressly imported into the sale documentation those communications from the owners in which the lease had been offered.  So, in a technical sense, with respect, your Honour, the Chief Justice is correct, but his Honour was viewing the matter from a perspective of small business owners who were not enormously experienced in commerce.

But, of course, the circumstances of the appeal are different from previous decisions of this Court in that it does invite consideration of the doctrine of unconscionable dealings in trade and commerce for the purposes of section 51AA and in particular looks at small business proprietors which has not been a significant feature of previous decisions of this Court.

But what has usually been important in previous decisions and is equally important in this appeal, in our submission, is that the individual circumstances require close analysis in order to form an evaluation as to whether or not the conduct is unconscionable. It is not the submission of the appellant, I should say, that the inclusion of the notion of unconscionable conduct in section 51AA changes the law in any way; but rather that it would be expected to stimulate from time to time the development of the concept of unconscionability in trade and commerce, most probably and certainly so in this case, we say, in assessing what is special disadvantage in commerce.

KIRBY J:   It is a curious section, is it not, as it were, Parliament surrendering to the courts the development of the law which Parliament lays down.  I saw that constitutionality was tested at first instance and is not for us, but is that not a little like the native title provision that was struck down by the Court?

MR McKERRACHER:   It is a little like it, with respect, your Honour, but the analysis of Justice French in that decision where the constitutionality was assessed, in our submission, was correct and it has not been challenged at any point since that decision and, indeed, there was not even a challenge giving rise to that decision, but the distinction his Honour drew was that it was not a surrender as such but, rather, if I can use just a shorthand term for present purposes, a definition by which the courts could be guided.

KIRBY J:   I suppose if Parliament had just used the word “unconscionable conduct”, that itself would pick up the baggage of that expression but it is the way it has been stated which seems a little curious.  It seems to be an assignment to others to do the work of Parliament in terms.  However, it is not before us so I suppose we can ignore it.

MR McKERRACHER:   I think that is correct, with respect, your Honour.

GUMMOW J:   Now, paragraph 9 of the trial judge’s judgment sets out the section, but is that in the right form?  There is particular reference in subsection (2).  My note is that it was amended by Act 36 of 1998 which would be too late for these events.  I may be wrong about that.  What is the relevant date?

MR McKERRACHER:   Yes, that was an edition subsequent to the events referable to this ‑ ‑ ‑

GUMMOW J:   We need to know the text at the right time, do we not? 

MR McKERRACHER:   Yes, your Honour, that needs to be understood. That is way in which we have prepared our submissions.

GUMMOW J:   Someone had better give us the text.

MR McKERRACHER:   But it does not ‑ ‑ ‑

GUMMOW J:   Do not say it does not matter.  You just have to have the right text.

MR McKERRACHER:   The relevant provision is, of course, that contained in subsection (1), as his Honour considered that.

GUMMOW J:   You are saying it does not matter?

MR McKERRACHER:   We submit it does not matter for relevant purposes.

GUMMOW J:   I am not going to hold up any more time, but we have really got to be shown the right text by somebody at some stage. 

MR McKERRACHER:   Your Honours, subject to the convenience of the Court, I propose to touch on the facts and then move to the submissions in support of the grounds of appeal.

GUMMOW J:   Firstly, we have to work out what is meant by this phrase, the statutory phrase, “conduct that is unconscionable”.  If we do not do that, we do not know what we are measuring the facts against.  Now, does this form of words exclude what some English cases call economic duress?  Is there any consideration of that?

MR McKERRACHER:   In our submission, no.  The pleadings in this case were ‑ ‑ ‑

GUMMOW J:   Just a minute.  The second question is, is there in Australia any doctrine of economic duress.  There are some cases in the New South Wales Court of Appeal.  One is called Crescendo v Westpac, I think, in 19 NSWLR 40 which says there is. It may be right, may be wrong. Secondly, does this phrase, “unconscionable conduct”, include the sort of wrongful pressure falling short of duress but not being undue influence which the Privy Council was talking about in Barton v Armstrong [1976] AC 104 at 118 which no one seems to have considered either? So what do you say is the content of this phrase, “unconscionable”?

MR McKERRACHER:   Your Honour, for statutory purposes, it is large.  We have touched upon the options in paragraph 35 of our written submissions in saying that the context of the unwritten law ‑ at least four possible interpretations of conduct that is unconscionable may arise.  Firstly, the discrete doctrine of unconscionable dealing which was the way this case was pleaded and run ‑ ‑ ‑

GUMMOW J:   Yes, but what is that?

MR McKERRACHER:   It is essentially the doctrine which flows from cases such as Amadio.

GUMMOW J:   Amadio did not come suddenly from heaven.

MR McKERRACHER:   No, your Honour ‑ ‑ ‑

GUMMOW J:   Talking about setting aside transactions for undue influence or ‑ ‑ ‑?

MR McKERRACHER:   Yes, section 51AA is at large in that regard, your Honour.

GUMMOW J:   Some form of pressure or some inequality of dealing between people going to reality of consent or what are we talking about?

MR McKERRACHER:   All of those matters, with respect, your Honour, but ‑ ‑ ‑

GUMMOW J:   Because unless you analyse it, it is just a slogan, to my mind.  Unless you analyse that word, it is not going to get anywhere.

MR McKERRACHER:   Yes, but in terms of the present litigation, the parties ran it on the limited basis of an Amadio‑type of doctrine recognising…..in time.

KIRBY J:   Equity has been throwing around “unconscionable” for centuries.  I would hate to think the judges were dealing in slogans.

MR McKERRACHER:   Your Honour, our submission is that the section embraces any conduct which is contrary to conscience and in that meaning which has been recognised in equity.

GUMMOW J:   On one view of it, that is the whole of the equity jurisdiction.

MR McKERRACHER:   Therefore, a variety ‑ ‑ ‑

GUMMOW J:   A lot of which on no footing would have anything to do with this case.

MR McKERRACHER:   Quite so, your Honour, but the case was run on a limited basis, but we do not for a moment suggest that 51AA is so confined in its operation.  It is, on its face, at large.  There are some indicia in explanatory memoranda and other analyses which suggest that it might be best suited to the Amadio‑type of cases, but those would not guide this Court in the appropriate case in any limited fashion.

GLEESON CJ:   What is the relevant form of unconscionability you rely on?

MR McKERRACHER:   We rely upon the unconscionable dealing as identified in Amadio and Blomley v Ryan, that is to say, the knowing exploitation by one party of the special disadvantage of another.

GUMMOW J:   Special economic disadvantage in this case. 

MR McKERRACHER:   In our submission, it is not exclusively confined ‑ ‑ ‑

GUMMOW J:   Just a minute, it is put against you there is not real finding on the family situation at the trial.

MR McKERRACHER:   Yes.  I understand that submission, your Honour.  In our respectful submission, the portion of the reasons of the learned trial judge where he analysed the issue made it clear that he did in terms regard the stress and problems arising from the serious illness of the daughter as being irrelevant.  He then went on to say, “even with out that, I would regard the conduct in imposing the term as being in breach of the Act”.  Now, when one sees ‑ ‑ ‑

KIRBY J:   Does Mr Hutley say that it is not shown that his clients knew of the ‑ ‑ ‑

MR McKERRACHER:   Yes, yes, your Honour.

KIRBY J:   Do you accept that?

MR McKERRACHER:   Yes, we do, your Honour.

KIRBY J:   So that, vis-à-vis, the seventh respondents, we can put that factor out of mind.

MR McKERRACHER:   That is correct, your Honour.

KIRBY J:   But you say in respect of the first to sixth, there is a sufficient finding that they were aware and that the evidence of the conversations with Ms Clapp supports that finding?

MR McKERRACHER:   Absolutely, your Honour, and I do not understand that to be disputed.  What is put against us ‑ ‑ ‑

GUMMOW J:   Wait a minute, what about paragraph 123 of the trial judge’s judgment, the last couple of sentences:

“situational” as distinct from “constitutional” disadvantage.  That is to say it did not stem from any inherent infirmity or weakness or deficiency.  It arose out of the intersection of the legal and commercial circumstances ‑ ‑ ‑

MR McKERRACHER:   That is certainly the confined manner in which his Honour was prepared to reach that conclusion.  But his Honour also made the point that the special personal circumstances were relevant and we would ask if his Honour is observing that they are relevant.  They have to be relevant too in the context of the reasons for determination of unconscionability, but he was prepared to confine his conclusion to the economic circumstances.  But the conclusion which was repeatedly stated about the personal circumstances were said to be relevant and we submit that it was obviously taken into account by his Honour.

KIRBY J:   Here is this word used in a federal statute that has been used for a long time and it is used in the context of:

within the meaning of the unwritten law, from to time; of the States and Territories.

So that rather implies that there is a reference out to what that law says now and in the future, “from time to time”, so we have to give meaning to an ordinary word, refer out to the unwritten law and then look at all the facts and see whether out of the facts it was open to the trial judge to conclude unconscionability.  Is there anything more to it than that?

MR McKERRACHER:   No, your Honour, I do not believe there is.

KIRBY J:   I do not think we should encrust the federal parliamentary law with unnecessary learning unless it is brought in by “within the meaning of the unwritten law, from time to time”.  It is just an ordinary word, is it unconscionable?

MR McKERRACHER:   Yes, yes.

GUMMOW J:   It is not an ordinary word, it is a technical word.

KIRBY J:   You say it is an ordinary word in your submission, paragraph 35(a).

GUMMOW J:   Why are you worried about Blomley v Ryan and Amadio if it is not a technical word?

MR McKERRACHER:   Even those cases which ‑ ‑ ‑

GUMMOW J:   This is why Law students get taught about the subject.

MR McKERRACHER:   Even those cases, your Honour, which reach the technical conclusion which is the basis upon which we advanced it look at the dictionary definition of “unconscionable”.

KIRBY J:   But this is what led me to ask you the constitutional question at the outset because this is a law of the Federal Parliament of Australia and it is to be given meaning by this Court as such.  Curiously, in this case, they have referred out to the unwritten law so that presumably that is what they intended the Court to do and that supports Justice Gummow’s suggestion to you that is used in a technical meaning in this case, whatever might have been the meaning if it had not used those words within the meaning of the unwritten law.

MR McKERRACHER:   I certainly accept that, that it is used formally in the Ryan and Amadio sense in this case.

GUMMOW J:   Only in that sense?

MR McKERRACHER:   That is the only basis on which we put the case, your Honour.

KIRBY J:   Is that what the Minister said introducing the Bill that included this section ‑ ‑ ‑

MR McKERRACHER:   It was not as confined as that.  Those two cases were given as examples of the sort of conduct which the section might address but I would be very cautious about suggesting that that speech should limit the Court in its construction of the section.  But that broader question does not arise on the case we put or the appeal we put.  We have put the case, for better or worse, on the narrow basis.

GLEESON CJ:   Has it ever been argued against you at any stage of the proceedings that the knowing exploitation by one party of the special disadvantage of another cannot be or might not be unconscionable?

MR McKERRACHER:   No, your Honour, I do not believe so, no ‑ ‑ ‑

GLEESON CJ:   So the parties have been at one at all stages of these proceedings on the form of unconscionability if it is relevant.

MR McKERRACHER:   Precisely.  When there is a departure or at least an important area of inquiry, is application of the doctrine in the commercial setting which would be something of a departure from the factual situation, at least, in the cases previously considered by this Court and also the inquiry as to whether the inclusion of the doctrine in trade and commerce invites exploration as to what special disadvantage in trade and commerce might mean as distinct from one‑to‑one dealings between other people.

KIRBY J:   There is a legal argument as to what the words mean.  I mean, there is a factual argument which divides as between the respondents, but even as between you and the first to sixth respondents, there is an argument that even if they knew of the vulnerability of the daughter, that was not causally relevant.

MR McKERRACHER:   Yes.

KIRBY J:   So you will have to meet that in due course.

MR McKERRACHER:   Yes, that is correct, your Honour.  But may I hasten to add that we would seek to support the learned trial judge’s conclusion without reliance on that personal factor that the difference we draw and the distinction we make is that we contend it is very clear that his Honour did construe those factors as being relevant, even though he was prepared to reach the conclusion on a more narrow basis.  But, of course, if one factors back in the personal circumstances as well, it is a further reason why the original decision should be upheld.

GLEESON CJ:   Mr McKerracher, this may take you back to the question about the form of the text at the original time, but in section 51AB and section 51AC there is an elaborate statutory recitation of circumstances that might be relevant to whether conduct is unconscionable.  Is that of any assistance in the present case, either positively or negatively?

MR McKERRACHER:   Your Honour, we would say that on the current structure of Part IVA of the Trade Practices Act there is an intention designed to cover the field of unconscionable conduct in the broadest sense. Section 51AA clearly confines itself to the unwritten law and, in that sense, is not in a broad sense. As matters stand now, 51AA is also not applicable in those circumstances where 51AB and 51AC would apply but 51AB deals with domestic types of goods, consumer goods, and provides that short list to which your Honour refers. Section 51AC actually deals with small business transactions, albeit that it is up to a figure of $3 million and it precludes involvement of that section in circumstances where there is a limited company.

Now, although there is the limitation of equity in relation to 51AA in one sense, it is otherwise unencumbered by those specific statutory ‑ ‑ ‑

GLEESON CJ:   I just wondered whether in your argument the provisions of 51AB and 51AC throw any light or at least any light that has any relevance to this case on 51AA.

MR McKERRACHER:   They do in this sense, with respect, your Honour:  it would appear clear from the circumstances in which those sections were introduced and their content that they were designed to provide for a broader range of statutory remedies in unconscionable conduct than might be thought to be available at equity.  But as there was and has been no authoritative decision of this Court in relation to 51AA, it rather begs the question of what circumstances will apply in trade and commerce for application of equitable doctrine under 51AA.

GLEESON CJ:   What is the provision under which your client was seeking remedies here?

MR McKERRACHER: Section 51AA.

GLEESON CJ:   No, no, the remedies.

MR McKERRACHER:   I beg your pardon, your Honour.  Originally, section 84 injunctive remedies and section 87 for additional remedies.  As the Court will be aware, the remedies were limited in nature to a declaration and an order that ‑ ‑ ‑

GLEESON CJ:   They would go off for re‑eduction.

MR McKERRACHER:   That is right and those remedies are available under that section.  Injunctive relief was also sought but not provided.

GUMMOW J:   Injunctive relief to do what?

MR McKERRACHER:   To restrain from repetition of the conduct.

GUMMOW J:   I see.

MR McKERRACHER:   Would it be convenient, your Honours, if I focused on some of the facts?  Your Honours, the shopping centre is a medium size ‑ ‑ ‑

KIRBY J:   Just before you do, do you challenge any findings by the Full Court of the facts, because we are hearing an appeal from them?  They have a very lengthy elaboration of the facts which I have read and then there is a relatively short two‑and‑a‑half page statement of their conclusions.  Now, can we accept their findings of fact, so far as they ‑ ‑ ‑

MR McKERRACHER:   With two minor exceptions, your Honour, yes, and with one general observation.  The general observation is this, that there were about a dozen matters on which the Full Court did not comment.  We do not raise that for a moment as criticism because that is consistent with a general approach that they took, that the Full Court took a general approach that no tenant in this position could ever be in a special disadvantage.  Accepting that that is the view one takes, one would not necessarily go into the variety of matters examined by the learned trial judge.  The only point that we have made in the course of our submissions in footnotes, really, is that the Full Court did not comment on those particular matters and, of course, the Full Court was not asked by either party to upset any finding of fact.

The only additional observations are minor matters and they are that the Full Court has made the point that there appeared to be no explanation as to why an offer which was presented to the Roberts in June was not accepted.

KIRBY J:   Was that the one where there was no insistence upon any release? 

MR McKERRACHER:   There were several in which there was no insistence and that was one of them.  There was, in fact, evidence – it is covered in our submissions and it arose in the course of cross‑examination – she explained that she was dissatisfied with the term of the lease, the length of the lease, the rental under the lease; she was dissatisfied with the content of the disclosure statement because that statement wrongly reflected the number of tenancies and, therefore, the traffic in the shopping centre.  She explained those to Mrs Clapp and she wanted to have the opportunity to negotiate.

So there was an explanation there.  The Full Court was not taken to that in the course of argument.  Equally, in August there was a re‑presentation of another offer which, once again, did not contain a mutual release clause.  But when that was offered, it was accepted by the Roberts and the Roberts sent back a letter to the owners.  The owners apparently signed it as well but then nothing happened.  The suggestion is that that is unexplained and that is certainly correct but clearly it is not for the Roberts to explain that because they would be expecting to receive from the owners a lease as they had on previous occasions.  The owners always prepared leases and that is standard practice in shopping centres.  That just did not happen and what happened was that in the October offer by Mr Holland, the documentation, the agreement to lease which had been sent back to the owners in August was referred to in that communication and understood by the Roberts to be the binding agreement as, on one point of view, it may well be.

KIRBY J:   Now, hidden away in a footnote you make a point with which I have a bit of sympathy, that the question of unconscionability is an evaluative judgment – I think Professor Finn called it that – and, therefore, the more facts you have, the more you may be led to a conclusion of unconscionability; and that the primary judge had certain advantages which I think the Full Court acknowledged that he had longer time with it and he could see the nuances of the evidence and so on.  Now, is your point that in so far as there is a disparity between the findings of the Full Court and the findings of the primary judge, you want to bring all the facts in?

MR McKERRACHER:   Yes, that is correct, your Honour.

KIRBY J:   Taken in isolation, questions about the through traffic and so on do not seem to enliven issues of unconscionability, but taken in the context with all of the material, they might add some little weight to it.

MR McKERRACHER:   Yes and, your Honour, that is the first ground which ‑ ‑ ‑

HAYNE J:   You answer “yes”?  How?

MR McKERRACHER:   Your Honour, there is a whole context in which the conduct occurs and that ‑ ‑ ‑

HAYNE J:   I understand that but, at some point, I would be much assisted if you would identify in summary form what exactly you say is unconscionable about what was done.  I understand your recitation and reference to knowing exploitation of special disadvantage, but at some point I would be assisted by knowing what is it, either as a single fact or combination of facts, that gave rise to the unconscionability here.

MR McKERRACHER:   Your Honour, I could do that now or I will develop it in the course of argument.  I am conscious that that is ‑ ‑ ‑

HAYNE J:   Take what course as seems appropriate to you.

MR McKERRACHER:   If your Honour pleases.  In response to your Honour Justice Kirby’s observations, in our respectful submission, although there may be debate about whether discretionary judgments are the same as evaluative judgments and, indeed, such debate has expressly arisen in the context of this section in the Full Federal Court, when one looks at the comprehensive analysis by the learned trial judge and who had the benefit of hearing the continuity of the proceedings and evaluating attitudes and the nuances of the entire litigation, in our respectful submission, an intermediate court would be slow to interfere with an evaluation of that nature.  That is the first point that we run.

Your Honours, the exchanges so far this morning have covered a significant portion of the facts on which we would wish to rely.  They are recited in the written submissions and I will only touch on additional matters that have arisen that have been ‑ ‑ ‑

KIRBY J:   They are very detailed and they are very complicated and they go over a very long period and I think ultimately you are going to have to answer Justice Hayne’s question because, in the end, you have to draw the threads together and say, “Well, this was this long course of dealing.  On the face of it, it seems a very pedestrian and ordinary dealing between an owner of a shopping centre and a shop owner who wants out and wants to assign the lease.  It seems very ordinary.  There is the business about the daughter and there is the need for them to get out, but it seems very ordinary.”  Now, you have to, as it were, lift it up to something special and unconscionable and ‑ “grossly”, the word that has been used.

MR McKERRACHER:   Yes.  I do not know, with respect, that we necessarily have to put a tag of “grossly unfair” on it but I accept that that most certainly is the conclusion drawn by the trial judge.  There are certain factors on which we would put emphasis which were not considered to be of same importance by the Full Federal Court.  They include the personal factors which were known to the owners.  They include the fact that in all the communications up until immediately prior to settlement on each occasion there had been no indication of any intention to insist upon giving up the litigation.

We also focus on the fact that the right to litigate and the nature of the litigation itself was regarded as being of real importance to the Roberts.  It is put against us that it was not worth much but in fact there is no evidence at all as to what the dollar value of the litigation was.  The only evidence is that had they participated in some settlement a year or so later, organised by other people without their knowledge, then they would only have received a modest amount of money.

GUMMOW J:   It was your task to show the contrary, was it not, that it would have been much more?

MR McKERRACHER:   There is two aspects ‑ ‑ ‑

HAYNE J:   Or at least they thought it might be worth much more.

MR McKERRACHER:   There is certainly evidence of that.

HAYNE J:   How are you going to prove that?

MR McKERRACHER:   There is certainly evidence that Mrs Roberts was of the view the litigation was worth $50,000.

GUMMOW J:   Yes, that is right.

KIRBY J:   Mr Jackson says that is grossly over value.

MR McKERRACHER:   There is no conclusion to that effect.

KIRBY J:   “Grossly” is thrown around in this case.

MR McKERRACHER:   My learned friend makes that submission on the premise of what the settlement would ultimately have been for a year later by other people had the Roberts participated.

GLEESON CJ:   We are not concerned with the conscience of the Roberts, we are concerned with the conscience of the owners.  Would it not be more relevant to ask what the owners thought it was worth?

MR McKERRACHER:   Yes.  Your Honour, the owners, again, were not concerned simply with the dollar value of the litigation, although that was of a concern to them.  They were seriously concerned about media adverse remarks.  They went to the extent of engaging or seeking to engage a talkback radio person to try to persuade public opinion in their favour.  The whole role ‑ ‑ ‑

CALLINAN J:   They were probably fighting fire with fire in that regard.

MR McKERRACHER:   Yes, that may well be, with respect, your Honour, but what is clear is that the owners regarded the litigation very seriously and saw the opportunity which would not otherwise arise at the stage of sale of the business and the need for a new lease to impose this condition.  It was described by Mr Sullivan in the course of internal communications as being “a bonus”, that is to say, a bonus which would not otherwise arise to get rid of the litigation.  Tenants have a statutory right to litigate and the Roberts were entitled to regard that right jealously.

KIRBY J:   Yes, but the point being made is that the owners did not have to give an extension.  They did not have to give it at all.  In that sense what they were offering was a bonus to your client and a quite considerable bonus for their dealings with the assignee.

MR McKERRACHER:   That is a point at which we differ once again with both the Full Court in terms of construction, not a factual matter but in terms of the construction and emphasis played on it.  The approach taken by the Full Court and by my learned friends is that something of a benefit is given to tenants by the granting of this lease.  The position in relation to the Roberts and in relation to Mr Holland was that if we put the litigation to one side the owners would have been very happy to have the tenants in the centre because in their particular case they had been tenants who had performed very well.

CALLINAN J:   Is that not an overstatement?  They would only be happy to have them there if they were not litigating against them and if they were not repeatedly or persistently complaining about the charges.  They were troublesome tenants in that respect.

MR McKERRACHER:   I do not believe there is a finding that institution of proceedings on one occasion made them troublesome tenants.

CALLINAN J:   You would not need a finding.  The relationship between a landlord and a tenant who is suing the landlord is hard to be an amicable one and it would not be something that you would want to see perpetuated.

MR McKERRACHER:   The owners were certainly keen that the litigation would not be perpetuated but this opportunity came to them as something of a windfall or a bonus.  They would not have had that opportunity had it not been for the need to sell the business.  What is important in examining the conduct of the owners is that they were seriously concerned themselves at the time about what they were doing.  Both the managing agents, Ms Clapp and Mr Wilson, had put it to the owners and to Mr Sullivan that they were not entitled to do what they were doing.

GUMMOW J:   They were worried about key money.

MR McKERRACHER:   Not exclusively, with respect, your Honour, but certainly key money was part of it and the other ‑ ‑ ‑

GUMMOW J:   To be precise, that statutory expression in the commercial tenancy legislation.

MR McKERRACHER:   Yes, but also at about the same time, advice was sought from one of the three solicitors used by the owners who said, “Why do you not put it all in a separate document so no one can say that the two are connected?”  Mr Sullivan was concerned about that sort of approach, understandably, sought advice from another solicitor who told him, amongst other things, as well as key money that the conduct may be unconscionable if there was an inequality of a bargaining position between the parties.  So, this occurs in January, very shortly after the conduct with the Roberts which was examined by the trial judge.

KIRBY J:   That cannot be a true criterion, inequality of bargaining power alone, otherwise this section will ride a whole team of elephants through the market economy. 

MR McKERRACHER:   I totally accept that, with respect, your Honour.  The only point I make is that in examining the conduct of the owners they themselves were concerned about what they were doing at the time, so that to view in hindsight with the benefit of removal from the heat of the situation the circumstances as being perfectly normal is not even how the owners saw it themselves at the time.

GLEESON CJ:   What is the best evidence you can take us to as to their concern?  What is the high point of your case in this regard?

MR McKERRACHER:   At page 338 of the appeal book, your Honour, Ms Clapp gave evidence which was accepted by his Honour about their “unchallenged recollection” at a meeting at which Mr Sullivan said:

We want to include a “Deed of Mutual Release” in all new leases for existing tenants who had claims before the Commercial Tribunal.  If an existing tenants wants a new lease there will be a trade off; the tenants drop their claims, the Owners make no claims against the tenants and they get a new lease.

Wilson:  Why would you want to do this with good tenants you don’t want to lose them.  Also, I am not sure it is even legal to get tenants to drop their case at the Commercial Registrar.

Sullivan:  There are some problems at Farrington Fayre at the moment and we want to get rid of those problems.  It doesn’t matter if they have been a good tenant or not.

Wilson: Yeah, but is it legal.  It’s contracting out of law and you can’t do that.  You should get legal advice first.

Sullivan:  We’re going to get some legal advice.

Clapp:  But it is the tenant’s right to go to the Commercial Registrar.  I don’t believe you should stop them.

KIRBY J:   I just cannot get out of my head, and you will have to get it out of my head, Mr Jackson’s submission.  This is just an ordinary – they were in dispute, they had this dispute with the litigation and they were asking a favour, and they were standing to gain a very big bonus, $60,000, which they did not have to get and as a price of getting that very big bonus they were being asked to give away a claim they had against the party that they were actually asking to give them this very big bonus.  What is so odd in a commercial arrangement when that party is saying – and what is so unconscionable, more to the point – “Tit for tat.  We settle with you and we will settle and give you this benefit.”  It happens all the time, it has happened for millennia in the marketplace.  This has to work in the marketplace, this section.

MR McKERRACHER:   No one would try to discourage people settling disputes but the $65,000 that the Roberts were to receive, (a) was necessary to deal with medical expenses and such like and to repay a variety of other expenses, but ‑ ‑ ‑

KIRBY J:   But it is not known to some of the parties before us and it is said by the other parties it did not cause the arrangements, it is not causally relevant.

MR McKERRACHER:   I am not sure that that “causally relevant” approach is one that we would respectfully accept as the approach they have taken.

KIRBY J:   You can come to that in due course.

GLEESON CJ:   Would it make any difference if the reason they needed the money was to pay medical bills or if the reason they needed the money was to pay their income tax bills?

MR McKERRACHER:   In our submission, in either event his Honour was right in reaching the conclusion he drew, so the answer to your Honour’s question is no, except that it just compounds the difficult circumstances.

Could I return to your Honour Justice Kirby’s question about the large amount of money that the Roberts were to receive.  That, of course, was the goodwill from their business derived from building up successful trading as a good tenant over a long period.  It is their property.

KIRBY J:   But they had no right to extension and they were getting something.  They may have had all the goodwill in the world but they had no right to an extension of the lease, so they were getting a bonus.

MR McKERRACHER:   Yes.  From a legal perspective, with great respect, your Honour is quite right.  If one looks at the chain of events though, one sees that from 1995 the owners were keen to offer the Roberts a new lease of five, seven or ten years.  They were good tenants.  They wanted them to stay on.  The Roberts treated that as an open offer and actually incorporated that offer into the sale with Mr Holland at the outset.  One then has for the first time the suggestion that because shortly prior to that they had instituted these proceedings that it was not possible to get a new lease unless they dropped the proceedings.

Then one sees things fall away.  Mr Holland says he is not prepared to go ahead with a transaction like that where the Roberts have to give up their right to litigate and over a period of time the owners then come back to the Roberts saying, “Here is your new lease.  Here, you can have a new lease.”  The Roberts accept that and then again, right at the death knock on the Friday evening before settlement due on the Monday, a new lease was sprung on them but with the mutual release clause in a circumstance in which they had no reasonable basis for expectation ‑ ‑ ‑

GUMMOW J:   No, Mrs Roberts received legal advice, did she not?

MR McKERRACHER:   The legal advice was totally neutral in this situation, your Honour, because although the lawyer said “do not sign” she felt she had absolutely no option.  That is the distinction between this and a real commercial situation.  The Roberts had no option.  They were, in consequence of what had happened after the first sale falling down, in a very serious predicament.  Personally, financially and emotionally, she was at her wits end, greatly stressed, greatly upset by the situation and she felt she had not option.

GLEESON CJ:   That is the problem, she had no option, literally.  If she had had an option, that is an option to renew her lease, she would not have been in this vulnerable situation.

MR McKERRACHER:   From a legal perspective, with great respect, that is absolutely so.

HAYNE J:   What other perspective are we to look at?  You say from a legal perspective as if that is foul expression.

MR McKERRACHER:   The perspective the Court is invited to approach it is the perspective equity would adopt which would not permit the unconscionable reliance upon a legal right and that is precisely what occurred in this situation.

GLEESON CJ:   Is it the corollary of your argument that the Roberts could have set a transaction aside in equity?

GUMMOW J:   You have to say yes, do you not?

GLEESON CJ:   Yes, but we know that the last thing in the world the Roberts would want to have done was to have the transaction set aside, do we not?

MR McKERRACHER:   I have to accept that too, your Honour, that they would not want that.

KIRBY J:   I sat in the special leave and my recollection was the thing that was concerning you, the Commission, was the reasoning of the Full Court, in particular language in the Full Court reasons that suggested that this section did not operate in this commercial setting with small business, whereas you were saying that precisely one of the ‑ and secondly that you had to have an overbearing of the will of a party which was the key to the Full Court’s upsetting the primary judge’s conclusion.

At some stage, if they are the errors that you assert on the part of the Full Court, that is you gateway into our looking at the matter ourselves.  You are going to have to come to that because you will remember Justice Gummow honed in on especially the second point in the special leave, that is the thing that made this something more than just a factual case but in the end even when we look at it we are going to have look at whether our conscience is pricked by these events and that is where I have real difficulties but you may, nonetheless, demonstrate to the Full Court took too narrower a view of the section.

MR McKERRACHER:   Yes.  Your Honour, those were the special leave points and I am content to leave the facts for present purposes and to move on to those submissions.

GLEESON CJ:   Have you said everything you wanted to say about the high point of the evidence in support of your submission that the owners were troubled by their own conduct?

MR McKERRACHER:   No, your Honour.  There was also the communications reflected in the appeal book at page 233, 234 to 235, and around those pages.  Page 233 is where Mr Sullivan talks about the bonus that this opportunity presents the owners to knock on the head any pending claim.  Shortly after that he seeks advice from a different solicitor in relation to the matter and that advice is reflected at page 242.  Perhaps, starting at page 240:

Circumstances surrounding the arrangement which may suggest undue influence by the Lessor over the Lessee, duress or unconscionable conduct on the part of the lessor, may render such an arrangement unenforceable, both at law and in equity.

So, I do not think it matters in consideration at the time.

CALLINAN J:   What weight do we give then ‑ sensible, conservative advice by a solicitor.  What do we get from that apart from ‑ ‑ ‑

MR McKERRACHER:   Your Honour, we submit that this was not a simple commercial transaction but rather a circumstance where the owners were trying to adopt a special tactic across the board with all ‑ ‑ ‑

CALLINAN J:   I understand that but what is the relevance and significance, of the solicitor’s advice?  The solicitor was just giving prudent, conservative advice.

MR McKERRACHER:   The relevances are that the advice was being sought because of the concern Mr Sullivan had as to what was being done and the concern being reiterated to him by other people on the ground at the time long before these events occurred.

CALLINAN J:   The fact of his solicitor seeking advice….his state of mind, I understand.

MR McKERRACHER:   But, your Honour, if the advice had been, “There is nothing wrong with it at all, just go ahead and do it”, that is material which we would be put before the Court as well but, interestingly, that is not the advice.  It is the fact of seeking advice on several occasions against a background of the concern by the managing agents as to what was proposed to be done.

Your Honours, if I can move to the grounds of appeal under submissions. We have touched at paragraphs 35 to 38 in our outline of the meaning of section 51AA of the Act wanting really to stress that we do not seek by anything in this appeal to attempt to limit the proper application of that section to the limited and narrow Amadio basis on which the case was pursued.

We then move to the evaluation argument and I do not wish to dwell on this at length other than to say that the primary judge did make detailed findings in respect of all of the facts, including the general strategy of the owners, and it was only after considering those matters to the exercise the discretion identified as being consistent with and pursuant to the principles which he clearly and correctly articulated.  It is also significant in this context that he exercised the discretion adversely to the Commission in respect of two other tenants.  It is not as though he was moving lightly to adopt a general approach but indeed the judgment reveals, with respect, a very disciplined application of the principles, in our submission, and we say that in the exercise of ‑ ‑ ‑

KIRBY J:   What is the point of differentiation he accepted in respect of the other tenants?  No daughter?  Anything else?

MR McKERRACHER:   The main point of distinction was that they were not good tenants.

KIRBY J:   Were not?

MR McKERRACHER:   Were not as good as the Roberts and the reason that arises is in this context:  if one evaluates what might happen in the normal commercial scenario one can see that if the tenants were not particularly attractive to the owners, there is no reason why the owners should either renew or no reason why they should not renew on conditions.  But if it is a good tenants, and the Roberts were good and the Hollands were regarded as being good tenants, it is nothing but an “opportunistic bonus”, as Mr Sullivan described it, to invoke this condition in conjunction with the application for the new lease.

KIRBY J:   They might have been good tenants but ‑ ‑ ‑

HAYNE J:   There is a chain of logic in there which is simply not apparent to me.  You say that if to the landlord the tenant is a good tenant, what then follows?

MR McKERRACHER:   We are simply saying that in the ordinary course of events the landlords, the owners, would have been keen to provide this lease.  That is shown on the evidence, they were good tenants.

HAYNE J:   What is it then that flows by way of conclusion about the conscionability of what the landlord does?

MR McKERRACHER:   That despite that in ordinary commercial circumstances it would have been attractive to the landlords to have these tenants, they were able to use this particular intersection of events, namely, the need for a new lease to sell the business, to impose the condition.

HAYNE J:   So, things were as they were.  What follows from that fact?

MR McKERRACHER:   The point about that, your Honour, is that one would not expect to see in the ordinary commercial environment an attempt to impose a condition of this nature if one wanted to retain a good tenant.

KIRBY J:   But people have a battle on and one is asking a favour that the other would not say “Tit for tat.”  I just cannot get that out of my head because that has happened – you know, all those settlements you have done on the door of the court over the years.  It is tit for tat.  It goes on every dealing that parties have whether they are litigious or commercial or personal.

MR McKERRACHER:   And in most cases there could be no suggestion of any unconscionability of the conduct but when one looks at the backdrop that I have identified, that is to say effectively the expectation engendered on the part of the Roberts that there would not be a difficulty of that nature by the communications which preceded this not containing the clause, an awareness of the owners ‑ ‑ ‑

HAYNE J:   And that expectation did not give rise to any section 52 relief, did it?  There is no misleading or deceptive conduct constituted by this “inducing of an expectation”?

MR McKERRACHER:   No, that is so, but the case has always been pursued on the basis of identifying the conduct in the context in which is occurs and the context was ‑ ‑ ‑

HAYNE J:   Could I make it quite plain to you, Mr McKerracher, the reference to taking account of all of the factors appears at times in the course of argument to be an excuse to avoid articulating the underlying principle.  It is simply to say, “You take account of the lot and form a conclusion”, but it does not tell you how you form the conclusion.  What does it matter if they thought that they would get a renewal without – what is the chain of steps that you then take that lead to the conclusion, “Therefore, it is unconscionable.”?

MR McKERRACHER:   One does not proceed in a form of logic of that nature necessarily, with respect, your Honour.  One, as a trial judge, has the opportunity to evaluate all the matters which are relevantly in evidence and to draw a conclusion about conscience which is a conclusion against one’s experience and background in life generally.

GUMMOW J:   Yes, but what should a conscientious party in the place of Mr Jackson’s clients have done?

MR McKERRACHER:   There would be two options.  One would be to grant the new lease without imposing the condition; one would be not to grant the new lease, but to grant the new lease only on the terms that the litigation is discontinued against the backdrop of what had preceded this ‑ ‑ ‑

GUMMOW J:   But why should they give up the first?  I do not understand  Why should they have to forego a requirement to assist their position?

MR McKERRACHER:   They could simply decline to grant a new lease.

GUMMOW J:   That would not have helped your client.

MR McKERRACHER:   And it would not have helped them either because they actually wanted the tenant.

HAYNE J:   Therefore, the two extremes are permissible but the middle ground is not.  That seems an intuitively unusual answer, does it not?  The middle ground is described as unconscientious.

MR McKERRACHER:   Taken in isolation, yes, it may be.  But against the background of the parties dealings, communications, and the knowledge of the circumstances, it is not, in our respectful submission, unusual.

HAYNE J:   Do you say that the release or termination of the litigation was relevantly unconnected with the subject matter of the deal?

MR McKERRACHER:   Relevantly unconnected, we say it was, but it is obviously ‑ ‑ ‑

HAYNE J:   What do you mean by that?  You have a negotiation for a new tenant, correct?

MR McKERRACHER:   Yes.

HAYNE J:   Why is it unconnected with that to say we draw the line about what has happened in the existing tenancy?

MR McKERRACHER:   Because it was simply an opportunistic bonus as seen by Mr Sullivan.  It was something which would not arise in the ordinary course of events.  It was not that which would have happened in commerce generally because the owners wanted to keep the Roberts there or they wanted Mr Holland there.

KIRBY J:   I may be wrong about what happens in commerce generally but I would have thought that trading off advantage is something that happens in commerce all the time.  I cannot really overlook this.

MR McKERRACHER:   I accept that entirely, with respect, your Honour, but what the section contemplates is that when the circumstances of trading off in commerce, as your Honour puts it, give rise to an unconscionable exploitation of another’s weakness, then there is a contravention.  That, and the preceding questions the Court have asked me do invite consideration of how the section operates in trade and commerce because the circumstances in trade and commerce will almost always be a commercial intersection of events.  There may be overlaying constitutional factors but this is a section which finds its place in trade and commerce.  In our outline of submissions we listed ‑ ‑ ‑

KIRBY J:   It seems to me you are right, the section has to be operating in trade and commerce and therefore it contemplates that some things which in the past we would have just said, “That is the market”, that is not to be accepted because the Federal Parliament says it is not, but it still has to be unconscionable which is a word both technically and in the ordinary language a rather strong content, hence the word “grossly” unfair.

MR McKERRACHER:   Yes.

KIRBY J:   It cannot be everything of an unfairness of inequality because that is very often the case.  Everybody who deals with a bank is vis-à-vis the bank much more vulnerable than the bank is.  We have to find some middle ground where the section bites but nonetheless works in a market where there is a lot of inequality and vulnerability.

MR McKERRACHER:   Your Honour, in our submission, that is what his Honour the trial judge did.  He was not prepared to accept unconscionability in relation to two of the tenants ‑ and a primary reason was that they were not very good tenants, but there were other reasons – but he did in the case of this person.  The matters that he took into account which appear not to have featured prominently in the Full Court’s consideration include the owners’ own concern and anxiety about the legal action, the breadth of the owners’ conduct being a uniform pattern of conduct designed to affect every tenant, the owners’ knowledge through the managing agent as to the emotional stress suffered by the Roberts as a result of their daughter’s illness, that they were good operators and Mr Holland was a suitable tenant, Mr Sullivan’s attitude towards the tenants not being able to obtain legal representation when dealing with the owners and the stress which had been suffered by the Roberts and the significant disruption caused to their lives by the first sale of the business falling through of which the owners through the managing agents were aware and that prior to the imposition of the release clause in November, offers to lease did not include any reference to that sort of a clause coming from the agents, that the Roberts appear to have mistakenly assumed that an agreement to lease was applicable, that they were under the impression that that would apply without a release clause and the inclusion of that release clause in the document at a time when the Roberts were under pressure to complete sale of their business and effectively by virtue of that last minute inclusion, as Mrs Roberts put it, had no option other than to sign.  So it was a combination of those factors which are collected in our submissions at paragraph 74.

KIRBY J:   But does not this view of the section mean that every time parties are negotiating some sort of commercial arrangement and there is some trade‑off, horse trading that does go on, that courts will be invited to come in and second‑guess the commercial settlement that has been reached between parties?

MR McKERRACHER:   There is always a tension between certainty and justice.

KIRBY J:   And is that not an indication that Federal Parliament must have meant that you have to get over quite a big barrier to get into the realm of unconscionability?

MR McKERRACHER:   Indeed, that was the way the learned trial judge approached it.

KIRBY J:   It has to be something that really shocks you or, if not shocks, at least causes a sense of serious disquiet.

MR McKERRACHER:   And the terminology used by his Honour plainly suggests, in our respectful submission, that that was the impact that it had on him at trial.

GLEESON CJ:   You seem to be assuming that if the owners had observed their obligations under the Trade Practices Act, what they should have done was grant a renewal of the lease without the mutual releases.

MR McKERRACHER:   Or decline to grant a renewal.

GLEESON CJ:   Exactly; just walk away.  It would not be very bright of the legislature, would it, to have left the Roberts in the position in the present case where what the owners should have done is just ignore them and walk away from them?  That would not be doing the Roberts any favour, would it?

MR McKERRACHER:   I accept that, your Honour.

GLEESON CJ:   If the owners had been properly legally advised, then presumably, consistently with your argument, the lawyer’s advice would have been, “These people are under a special disadvantage.  Just leave them alone.  When their lease expires, get a new tenant.  Don’t deal with people who under a special disadvantage”.

MR McKERRACHER:   The concession we have made that the owners are not under an obligation is illegal is a concession that as a matter of law that is clearly the case.

GLEESON CJ:   I am just looking at the legislative purpose behind this provision.  It cannot be, can it, the legislative purpose to prevent people dealing in commerce with others who are at a disadvantage in terms of bargaining power?

MR McKERRACHER:   No, clearly not.

GLEESON CJ:   And it certainly would be a surprising outcome of the present case if the proper course for the owners to have taken, consistently with their legislative obligations, was just to have nothing to do with the Roberts.

MR McKERRACHER:   It is difficult to respond to that in a vacuum.  Certainly legally that was their entitlement, but I accept what your Honour says, that it would be a surprising outcome.  Essentially what we have focused on is what did actually occur and the imposition of the clause in those circumstances.

KIRBY J:   But we have to, as it were, look at the section as it is intended to operate on your theory of it.  We just cannot solve this problem and forget about how it is going to operate in the ‑ ‑ ‑

MR McKERRACHER:   No, quite.

KIRBY J:   In a sense, your being here as the Commission is to assist us in thinking through how it is supposed to operate in the – you are not just the Roberts coming up here wanting some more money, you are the Commission.

MR McKERRACHER:   It is difficult to respond with precision to the question as to what the owners would do in every circumstance.  That is to address your Honour Justice Kirby’s observations about the general position, but certainly in the circumstance of this case ‑ ‑ ‑

KIRBY J:   I am just following up the questions the Chief Justice raised.  We have to ask what is the consequence if your theory of the section operates.  The fact of the consequence will be that lawyers will say, “Steer clear of them.  You know Mr Holland.  You know he’s waiting in the wings.  Just wait for the lease to expire and then zoom in on him”.

MR McKERRACHER:   That in itself might constitute an unconscionable dealing.

KIRBY J:   It might.  That is a different question but at least, “Just let it expire and put an ad in the paper.  You know there’s somebody out there who wants it”.  How long did it have to go?

GUMMOW J:   Does “conduct” include refusal to act?

MR McKERRACHER:   Yes, it does, your Honour, under section 4.

KIRBY J:   How long did the Roberts’ lease have to run?

MR McKERRACHER:   It was not a long time, your Honour.

KIRBY J:   No, I gather that.

HAYNE J:   February 1997.

MR McKERRACHER:   February 1997, yes, your Honour.

KIRBY J:   So it was how many months?

MR McKERRACHER:   This took place in December 1996, so it was imminent.

KIRBY J:   Just a couple of months.

MR McKERRACHER:   Yes.  Your Honours, before I come to the will being overborne point, can I just touch on the law in relation to the evaluation issue and our ‑ ‑ ‑

HAYNE J:   Before you turn to that, among the articles you gave us was an article by Duncan and Christensen entitled “Section 51AC of the Trade Practices Act 1974” (1999) 27 ABLR 280. At page 289 the authors refer to discussion of the Uniform Commercial Code cases and in the second column towards the foot they speak as though the United States Supreme Court had adopted a definition of “unconscionable contract” and then give no case reference to it, the definition adopted being:

“[An unconscionable contract is one] such that no man in his senses and not under delusion would make on the one hand, and no honest and fair man would accept on the other.”

At some point I would be grateful if you could give us the references to the UCC and any United States Supreme Court consideration that bears on it, because the definition there given seems to be much narrower than the one for which you would contend.

If the opposite opinion is formed and if one examines the logical, as it is put, demonstration of options, it is overly simplistic, in our respectful submission, because that enables the imposition of any number or any style of conditions whatsoever and if they are not accepted, then that would be something of which no complaint could be made.

GUMMOW J:   No, that is not what I was asking you.  Looking at 51AA as it stood at the relevant time, it said that the section “did not apply to conduct prohibited by section 51AB”.  Now, to find, as the judge found here, is one thing.  Did he not also have to go on to find whether or not 51AB applied?  If it did, it would cut out 51AA.  In other words, can you determine a 51AA case and ‑ ‑ ‑

MR McKERRACHER:   Section 51AB is a consumer goods type of case, your Honour, so it would not have application.

GUMMOW J:   Right.  That would be right, would it not?

MR McKERRACHER:   That his Honour would have to consider it?

GUMMOW J:   Yes.  I know this case is different but as a matter of structure of the Act ‑ ‑ ‑

MR McKERRACHER:   As a matter of structure of the Act, that is correct, yes.

GUMMOW J:   Right.  As it now stands you would, would you not?

MR McKERRACHER:   Yes, you would look at the appropriate section.  There is a range of options there, then 51AC goes on to look at the different range of small business dealings with a different shopping list, so to speak, and a limit of $3 million for the transaction and excluding a limited company.

GUMMOW J:   Yes, but if this case had been fought today under the Act as it now stands, you could not just look at 51AA(1), could you?

MR McKERRACHER:   No, you would have to consider the whole.  Absolutely.

GUMMOW J:   You have to consider 51AC as well, would you not?

MR McKERRACHER:   Yes, you would, your Honour.

GUMMOW J:   Thank you.  That way you throw a line on the construction of it as Justice Kirby was remarking this morning.

MR McKERRACHER:   Yes, that is certainly so.  Just dealing with the options argument as advanced ‑ ‑ ‑

KIRBY J:   If you are going to send in the explanatory memoranda and second reading speeches in relation to 51AA, we had better have it in relation to these new provisions in the Act as well.

MR McKERRACHER:   Yes, certainly, we will make those available.

KIRBY J:   To see what it was that they thought that they needed to remedy.

MR McKERRACHER:   We will certainly provide those, your Honour.  There are extracts in the submissions that have been handed up as well but the full body will most certainly be provided.

The point which, in our opinion, has maybe been misunderstood in relation to the options in the circumstances of the Roberts case is that his Honour’s observation about the option of the owners to not offer a new lease at all is an observation as to their legal entitlement.  Nothing was canvassed before his Honour, it was not relevant to the case before his Honour, and it would have been obiter to consider whether or not a failure to do that might breach the Trade Practices Act or be otherwise inequitable.  So it is not the position that his Honour was saying that could be done without breaching the Act, he was simply collecting the position at law but it was a position at law which simply did not apply because it was not on the facts before him.  The facts that were before him are those which his Honour analysed at page 378 of the book, after quoting from the passage from Justice Fullagar in Blomley v Ryan and also Justice Deane in Amadio setting out the qualifications to that and observing that the onus is cast on the stronger party to show that the transaction was fair, just and reasonable, observing:

The elements of inequality, disadvantage or disability on the one hand and the unfair conduct of the stronger party taking advantage of them on the other are not, in my opinion, to be weighed up as though independent.  It is conduct in context which has to be judged.  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 inequality is great it may take less to discern unconscientious exploitation of it than in a situation involving less disadvantage or inequality.

And he goes on to apply that approach to the particular circumstances of the case.

What his Honour was considering was not a question of whether or not the owners should have not offered anything at all but rather their conduct in the context of the pleaded facts and the articulated nine points of special disability in the statement of claim and he concluded it in that context that “each case much be considered according to its own circumstances” which comes from many judgments of the Court looking exclusively at this area.  “The personal circumstances of the Roberts are also relevant in so far as they were known to the owners or their agents” and he goes on to talk about the facts of that.  The relevance of those circumstances can go both to the special disability and also to the conduct and the conscionability of the conduct, and I make that point in the context of the agency argument advanced by my learned friend, Mr Jackson.

Your Honours, we make the point that if one in reality does not have a real choice other than to concede and sign then, in reality, one does not have a choice; one cannot exercise the judgment contemplated by Amadio and that is the position as found by the trial judge in all the circumstances of this case.  In our submission, this is a case amongst many in which 51AA will have work to do.

Unless there is anything further, your Honours, those are our submissions.

GLEESON CJ:   Thank you, Mr McKerracher.  We will reserve our decision this matter and we will adjourn for a few minutes to reconstitute.

AT 3.48 PM THE MATTER WAS ADJOURNED