Commissioner for Consumer Affairs v Pitt - [2020] SASC 72

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
COMMISSIONER FOR CONSUMER AFFAIRS v PITT
[2020] SASC 72
Judgment of The Honourable Auxiliary Justice David
7 May 2020
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - UNCONSCIONABLE CONDUCT - WHAT CONSTITUTES
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION - STATEMENTS AS TO FUTURE MATTERS AND PROMISES
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - PARTICULAR CASES - REAL ESTATE TRANSACTIONS
Appeal against a decision of a Magistrate dismissing the appellant’s claim as to the respondent’s alleged unconscionable conduct, false or misleading statements and misleading and deceptive conduct.
The appellant alleged that the respondent breached ss 18(1), 21(1) and 30(1)(f) of the Australian Consumer Law in his real estate dealings with Mr Hartwig, an aged pensioner. In 2012, the respondent undertook a business of acquiring property where he would enter into an Option Agreement to enable the property to be purchased at a fixed price by him sometime in the future. The respondent and Mr Hartwig entered into an Option Agreement, whereby the respondent could elect to purchase the property at any time until 1 June 2016, for the agreed price of $200,000. They subsequently entered into an Addendum Agreement where the purchase price was reduced to $175,000 and statements were made in relation to the property. The appellant’s allegations concerned both the Option Agreement and the Addendum Agreement.
Held by David AJ, allowing the appeal on grounds 1 and 2 but dismissing grounds 3, 4 and 5:
1. The respondent’s conduct was unconscionable contrary to s 21(1) of the Australian Consumer Law, on both the ‘narrow’ and ‘broad’ approaches as set out in Australian Securities and Investments Commission v Kobelt (2019) 368 ALR 1.
2. The respondent’s representation in the Addendum Agreement that the home required ‘a massive amount of work’ was not false or misleading, pursuant to s 30(1)(f) of the Australian Consumer Law.
3. The respondent’s representation in the Addendum Agreement as to the repair work possibly costing more than the home was worth was not misleading or deceptive, pursuant to s 18 of the Australian Consumer Law.
4. The matter be remitted to the Magistrates Court as to what orders should be made pursuant to ss 224 and 237 of the Australian Consumer Law.
Competition and Consumer Act 2010 (Cth) Sch 2, cls 4, 18, 21, 22, 30, 224, 237; Fair Trading Act 1987 (SA) s 14, referred to.
Australian Securities and Investments Commission v Kobelt (2019) 368 ALR 1, discussed.

COMMISSIONER FOR CONSUMER AFFAIRS v PITT
[2020] SASC 72
Magistrates Appeal: Civil

DAVID AJ: This is an appeal by the Commissioner for Consumer Affairs (the appellant) against a decision of a Magistrate (the Magistrate) dismissing a claim brought against Mr Zane Pitt (the respondent) for breaches of the Australian Consumer Law (the ACL). The alleged breaches concerned the respondent’s dealings with a Mr Hartwig in 2012 and involved the purchase of Mr Hartwig’s property at that time. Mr Hartwig was an aged pensioner and the respondent was a qualified real estate agent running his own business.
The appellant is a regulator responsible for administering the ACL, which applies to South Australia pursuant to s 14(1)(a) of the Fair Trading Act 1987 (SA). By statement of claim, the appellant alleged that the respondent contravened ss 18(1), 21(1) and 30(1)(f) of the ACL. The respondent denied any breach of the ACL and after a trial, the Magistrate dismissed the claims. It is against that order of dismissal that the appellant now appeals.
Relevant legislation
I set out below the relevant parts of the ACL which apply to this matter:
18Misleading or deceptive conduct
(1)     A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2)     Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1).
Note:For rules relating to representations as to the country of origin of goods, see Part 5 3.
…
21Unconscionable conduct in connection with goods or services
(1)     A person must not, in trade or commerce, in connection with:
(a)the supply or possible supply of goods or services to a person; or
(b)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:
(a)institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or
(b)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):
(a)the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and
(b)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:
(a)this section is not limited by the unwritten law relating to unconscionable conduct; and
(b)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
(c)in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may include consideration of:
(i)the terms of the contract; and
(ii)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.
22Matters the court may have regard to for the purposes of section 21
(1)     Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to:
(a)the relative strengths of the bargaining positions of the supplier and the customer; and
(b)whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and
(c)whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and
(e)the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and
(f)the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; and
(g)the requirements of any applicable industry code; and
(h)the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and
(i)the extent to which the supplier unreasonably failed to disclose to the customer:
(i)any intended conduct of the supplier that might affect the interests of the customer; and
(ii)any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and
(j)if there is a contract between the supplier and the customer for the supply of the goods or services:
(i)the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and
(ii)the terms and conditions of the contract; and
(iii)the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and
(iv)any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and
(k)without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and
(l)the extent to which the supplier and the customer acted in good faith.
…
30False or misleading representations about sale etc. of land
(1)     A person must not, in trade or commerce, in connection with the sale or grant, or the possible sale or grant, of an interest in land or in connection with the promotion by any means of the sale or grant of an interest in land:
(a)make a false or misleading representation that the person making the representation has a sponsorship, approval or affiliation; or
(b)make a false or misleading representation concerning the nature of the interest in the land; or
(c)make a false or misleading representation concerning the price payable for the land; or
(d)make a false or misleading representation concerning the location of the land; or
(e)make a false or misleading representation concerning the characteristics of the land; or
(f)make a false or misleading representation concerning the use to which the land is capable of being put or may lawfully be put; or
(g)make a false or misleading representation concerning the existence or availability of facilities associated with the land.
Note:A pecuniary penalty may be imposed for a contravention of this subsection.
(2)     This section does not affect the application of any other provision of Part 2-1 or this Part in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land.
Background facts
The Magistrate found that the facts and circumstances giving rise to the claim were generally not in dispute.
The respondent was a qualified and experienced real estate agent. He had operated his business in the Grange area for many years, which in 2012, traded as ‘Pitt Real Estate’. The respondent’s daughter, Ms Tarnia Pitt, worked in the business as a property manager and licensed real estate agent. Also in 2012, the respondent undertook a business of acquiring property which he advertised as ‘We Buy Houses’. The object of that business was to apply a strategy whereby he would locate someone who was struggling to sell their property through traditional methods. As part of the strategy, the respondent would enter into an Option Agreement which would enable the property to be purchased at a fixed price by him sometime in the future, by which time, the value of the property was expected to have increased.
In approximately March or April of 2012, the respondent sought to implement this strategy by setting up a dedicated mobile telephone number. He displayed signs on vehicles parked on the side of the road, reading ‘We Buy Houses’ and ‘Can’t sell your house? Don’t want your house?’. Advertisements were also placed in newspapers, stating ‘We Buy Houses. Any location, any condition, anywhere’.
At the time, Mr Hartwig was about 70 years of age, being 76 years old at the time of trial. He retired in August 2011, having worked for most of his adult life as a labourer. His education was limited and his knowledge of commercial or property transactions was negligible.
In 2012, Mr Hartwig was the sole registered proprietor of 87 Gedville Road, Taperoo (the property). He had lived there for many years and had owned the property with his wife, who died in 2003. The property was subject to a mortgage to the ANZ Bank registered in 2004. In 2012, the property was in a state of very bad disrepair. Mr Hartwig also had a serious gambling problem and there was agreed evidence that a redundancy payment that he had received on his retirement in 2011 had been expended quickly. He was in financial difficulty having exceeded his credit account limit and expended his savings. He had also extended his mortgage. The ANZ Bank had agreed to place him on a hardship program which allowed him to pay his mortgage at a reduced rate of $50 per week. Mr Hartwig had been considering, and wanted, to move to a nearby retirement village but did not have the means to do so without selling his property.
Mr Hartwig contacted the respondent after seeing one of the ‘We Buy Houses’ advertisements. He then met with the respondent and there was discussion to the effect that the respondent was willing to pay $200,000 for the property. The Magistrate found that it was not clear on the evidence whether, at that stage, Mr Hartwig understood the respondent was not offering a straight sale but rather an option on the sale of the property. Following that initial meeting, there was a meeting held between the respondent, Mr Hartwig and the respondent’s solicitor, Mr Tarbotton at Mr Tarbotton’s office on 25 May 2012. Mr Hartwig’s recollection of the meeting was extremely vague, as was most of his evidence. The Magistrate found that Mr Tarbotton’s evidence was that he explained to Mr Hartwig the effect of the Option Agreement, namely, that the respondent could elect to purchase the property at any time up until a later date, for the agreed price. There was no dispute that Mr Hartwig was then given the opportunity to seek independent legal advice but declined to do so.
Following this meeting, an Option Agreement was prepared by Mr Tarbotton and sent to the respondent. At a meeting in a café on 1 June 2012, the respondent and Mr Hartwig signed the Option Agreement. The terms of the Option Agreement included:
a)The respondent had the option to purchase the property for $200,000 at any time until 1 June 2016.
b)An initial option fee of $250 was payable to Mr Hartwig by the respondent. Further initial option fees of $250 and $2,500 were payable on conditions.
c)An ongoing option fee equivalent to the repayments due to Mr Hartwig’s mortgage together with all rates and taxes was payable.
d)If the respondent exercised the option, 100 per cent of all option fees were to be treated as a non-refundable payment towards the purchase price.
On 2 June 2012, (the day after the signing of the Option Agreement) the respondent entered into a residential tenancy agreement with Mr Hartwig. This agreement was to lease the property from 1 July 2012 to 1 July 2016 at $100 per week with a rent-free period of three months.
On 4 July 2012, Mr Hartwig moved out of the Taperoo property and leased a property from a company controlled by the respondent at $250 per week. The rental payments were to be accounted for upon sale of the Taperoo property. That lease was for an initial term of three months, which was extended with Mr Hartwig remaining at the property until moving into a retirement village in early 2013.
The respondent arranged for some work at the Taperoo property. From 28 July 2012, he advertised it for sale in the range of $255,000 to $275,000.
In early August 2012, a potential purchaser from interstate expressed interest in the property and, as a result, obtained a building inspection report dated 13 August 2012 from Mr Steve Duckworth of Inspections SA Pty Ltd. In that report, which listed 25 issues requiring ‘urgent attention’, Mr Duckworth stated:
I am of the opinion that this house is not fit for human habitation. I believe it could easily be subject to a Housing Improvement Act Order restricting the amount of rent monies that could be received. House should be demolished & the site redeveloped.
As a result, the interstate prospective purchaser did not express further interest in the property.
At trial, the respondent gave evidence that he was unable to obtain finance to exercise the option and purchase the property himself. His evidence was to the effect that it would be difficult to find a purchaser who was prepared to pay at least $200,000. Mr Hartwig wanted to sell the property as soon as possible so he could move into a retirement village. The respondent told Mr Hartwig that because of the building report, the house was not worth $200,000. The respondent advised Mr Hartwig that he was prepared to exercise the Option Agreement immediately if the price was dropped to $175,000. This was agreed to by Mr Hartwig.
An Addendum to the Option Agreement (the Addendum Agreement) was prepared by the respondent, which included a reduction in the sale price before exercise of the option to $175,000. It is important that the Addendum Agreement be set out in full:
Addendum to Option Agreement Dated 1^st June 2012
It is further agreed between the Grantor Terry Hartwig of 87 Gedville Road, Taperoo and the Grantee Zane Pitt 9 Jetty Street, Grange that the Option Agreement for the whole of the land known volume 5152 Folio 215, being more particularly known as 87 Gedville Road Taperoo, SA, 5017.
Because of a property report prepared on 13/08/12 indicating that the home needs a massive amount of work to bring the home up to the housing industry standard and therefore to be able to be rented out and further stating
It was the opinion of the inspector that the house was not fit for human habitation and the house should be demolished.
This possibly costing more than the home is worth and that the Grantor being in no position to remedy the issues and he would prefer that Grantee try and settle the property as soon as possible, both parties have agreed to vary the agreement from the original option price of $200,000 to a new price of $175,000.
In all other conditions the agreement remains the same.
Signed and
Dated 28/08/12
It is that Addendum Agreement which is the basis of the appellant’s allegations that the reduction of the purchase price from $200,000 to $175,000 amounted to unconscionable behaviour.
After the Addendum Agreement was signed, a contract of sale for the property for a price of $175,000 subject to finance, was also signed. It is also noted that the settlement date was to be 1 June 2016, which coincided with the end of the option period.
On 11 September 2012, the respondent advertised the property for rent, which was subleased shortly thereafter. The rent was paid to the respondent. On 5 December 2012, the respondent’s daughter, Ms Pitt, obtained approval for subdivision of the property. On 20 December 2012, settlement took place whereby the property was sold for the sum of $300,000 to Ms Pitt pursuant to a Deed of Assignment. Mr Hartwig was then paid $175,000 (less amounts owed to the respondent including rent) and $125,000 was notionally paid to the respondent by way of a fee.
The property was subsequently redeveloped. On 18 December 2012, an application to the local Council to demolish the house on the property and construct two new buildings, was made on behalf of Ms Pitt, with approval being granted on 24 April 2013. Building contracts for two new houses were signed by Ms Pitt in early May 2013. Construction took place over the remainder of that year and January 2014. The new houses were advertised for sale from 24 January 2014, one house was sold on 12 May 2014 for $385,000 and the other in January 2015 for $380,000. The redevelopment was funded partly by a company of the respondent and partly by Ms Pitt.
The statement of claim

In the statement of claim brought against the respondent, the appellant alleged three breaches of the ACL. In short, those allegations were:
a)A breach of s 21 of the ACL in that the behaviour of the respondent was unconscionable.
b)The respondent beached s 30 of the ACL in that he made false or misleading representations when in the Addendum Agreement he claimed the property needed ‘a massive amount of work’ in order to be rented out.
c)It was alleged that the respondent also breached the ACL by misleading and deceptive conduct contrary to s 18(1), when in the Addendum Agreement it was said that in relation to the work that needed to be done on the house ‘this possibly costing more than the home is worth and that the Grantor being in no position to remedy the issues…’. The appellant alleges that amounts to misleading and deceptive conduct.
The first breach concerned the behaviour of the respondent which resulted in the signing of the Option Agreement and the Addendum Agreement whereby the price of the property was reduced from $200,000 to $175,000. Whereas, the second and third breaches concerned the behaviour of the respondent in relation to the Addendum Agreement.
The respondent denied the allegations in his pleadings and at trial.
The Magistrates reasons – Unconscionability
The Magistrate dealt with the law in relation to s 21 of the ACL and in particular, carefully analysed the High Court decision of Australian Securities and Investments Commission v Kobelt[1] (Kobelt). It is unnecessary to go into the facts of Kobelt, but the Magistrate set out the division of the High Court in that case as to whether the statutory prohibitions against an unconscionable conduct are limited by the requirements for a conclusion of unconscionable conduct as at equity, which is referred to as the ‘narrow’ approach, or the ‘broad’ approach, which involves, among other things, a consideration of the non-exhaustive matters as set out in s 22 of the ACL.
[1] (2019) 368 ALR 1.
In essence, the ‘narrow’ approach demands that there be a special disadvantage to the innocent party which affects that person’s ability to make a judgment in their own best interests. The other party must also unconscientiously take advantage of that special disadvantage.
This is to be contrasted to the ‘broad’ approach set out by Nettle and Gordon JJ in Kobelt’s case, namely ‘the evaluation of facts by reference to the values and norms recognised by the statute, and thus … a normative standard of conscience which is permeated with accepted and acceptable community standards’.[2]
[2] Australian Securities and Investments Commission v Kobelt (2019) 368 ALR 1 at [234].
It is to be seen that the ‘narrow’ approach is a more difficult hurdle for the appellant to overcome and demands a situation where there is special disadvantage suffered by Mr Hartwig, of which the respondent took an unconscientious advantage.
The Magistrate understandably did not choose between either approach but thoroughly applied both to the factual situation. The Magistrate said:
On the narrower approach, as preferred by Kiefel CJ and Bell JJ in the plurality in Kobelt, it is apparent that the pleaded case as presented by the Commissioner, cannot support a finding that Mr Pitt contravened s 21 of the ACL, due to the absence of the requisite special disadvantage and unconscientious taking advantage of that special disadvantage. The Commissioner has not demonstrated to this Court that Mr Hartwig was at any special disadvantage vis-à-vis Mr Pitt. The Commissioner’s relevant Supplementary Submissions do not provide any basis upon which a conclusion can be made that Mr Hartwig was under any special disadvantage. Mr Hartwig was clearly in a weaker bargaining position than Mr Pitt in the course of their dealings, by reason of his age and relative inexperience in commercial dealings, but that is not enough to establish a special disadvantage.
She also added:
Notwithstanding that Mr Hartwig was in a relatively weaker bargaining position than Mr Pitt in their dealings, due to, amongst other things, his age and lack of experience in real property transactions, this did not amount to a special disadvantage. There is no “special” character to this inequality in bargaining power. I find that Mr Hartwig was not at any “special disadvantage” vis-à-vis Mr Pitt in a way that “…seriously affect[ed]” his ability to safeguard his own interests in entering into the Option Agreement and the Addendum.
The Magistrate then went on to consider the question applying the broader approach. She went through the non-exhaustive factors set out in s 22 of the ACL. Her Honour concluded that:
On the broad approach to s 21, I have considered above the factors outlined in s 22(1) of the ACL against the background of the ambit of unconscionability at equity. On balance, after weighing these factors up, I am not satisfied that Mr Pitt engaged in conduct in his dealings with Mr Hartwig that was “…so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as conduct that is offensive to conscience.” No evidence was tendered by the Commissioner as to how the court may determine the conduct was far outside the societal norms of acceptable commercial behaviour. No evidence was tendered regarding the concept of the acceptable commercial behaviour in the context of transactions of this type. Nevertheless, I consider that evidence, as a whole, establishes that whilst Mr Pitt’s conduct was of a business and commercial nature intended to achieve a profit, there is no basis for a finding that the conduct was ‘so far outside societal norms’. Accordingly, I find that the Commissioner has failed to establish that Mr Pitt, in his dealings with Mr Hartwig, beached s 21 of the ACL.
[Footnotes omitted]
Her Honour then dealt with the question of whether the respondent engaged in misleading or deceptive conduct and/or whether he made false or misleading representations. She held that the determination of an alleged contravention of either s 18 or s 30 of the ACL requires a two-stage process. The first stage being whether the alleged misrepresentation has been made by the statement or conduct alleged (in this case, what was in the Addendum Agreement) and secondly, whether the representation is misleading or deceptive.
The Magistrate found that the representation in the Addendum Agreement that the property ‘needs a massive amount of work’ before it can be rented out was not misleading. That representation was made in relation to a future matter. As a result, the representation will be false or misleading if the respondent did not have reasonable grounds to make it (s 4(2) of the ACL). The Magistrate found that there was no evidence that the respondent did not have reasonable grounds to make the representation.
The Magistrate also found that the statement in the Addendum Agreement that the cost of the work possibly exceeded the value of the property was not misleading. In essence, she found that there was no evidence tendered at trial to suggest that the statement in the Addendum Agreement was false or misleading. There is a further complication with that alleged false statement regarding the interpretation of whether the word ‘home’ in the Addendum Agreement. The complication is whether the word ‘home’ applies to the structure of the house itself or the whole property. I will refer to this again when I discuss the merits of the appeal.
In summary, the Magistrate found that the appellant had failed to establish that the respondent breached the pleaded provisions of the ACL, in particular s 18, s 21 and s 30. Accordingly, no right for civil pecuniary penalties of compensation would arise.
Appeal
There are five grounds of appeal. The first two grounds argue that the respondent engaged in unconscionable conduct, contrary to s 21(1) of the ACL.
The first of the grounds concerning unconscionable conduct deals with the matter on the basis of the application of the narrow interpretation set out in Kobelt’s case. This ground pleads that Mr Hartwig was subject to a special disadvantage which seriously affected his ability to make a judgment as to his own best interest and further, the respondent unconscientiously took advantage of that special disadvantage.
The second ground of appeal is in the alternative to the first ground. It deals with unconscionable conduct applying the broader interpretation set out in Kobelt’s case, namely, an evaluation of all of the circumstances involved in the respondent’s dealings with Mr Hartwig and whether unconscionable behaviour is made out by an ‘evaluation of facts by reference to the values and norms recognised by the statute, and thus, … a normative standard of conscience which is permeated with accepted and acceptable community standards’.[3] In other words, special disadvantage or the taking advantage of any special disadvantage is not a requirement, rather a matter that can be taken into account when considering the broader approach.
[3] Australian Securities and Investments Commission v Kobelt (2019) 368 ALR 1 at [234].
The third ground of appeal maintains that the Magistrate erred by failing to find that the respondent made a false or misleading representation concerning the statement in the Addendum Agreement that the property needed a massive amount of work for it to be rented out.
The fourth ground of appeal is a complaint that the Magistrate failed to find that the respondent had engaged in misleading and deceptive conduct in finding that it was not misleading to suggest that the costs of repairs would exceed the value of the house.
The fifth ground of appeal was that the Magistrate failed to give any or adequate reasons for accepting and acting upon the evidence given by the respondent at the trial. I will deal with each in turn.
Grounds 1 and 2 – Unconscionability
I deal with both alternate grounds together.
The ‘narrow’ approach
I have considered carefully the arguments of both counsel. In essence, the difference is whether there was a ‘special disadvantage’ suffered by Mr Hartwig in his dealings with the respondent which seriously affected his ability to protect his own best interests, and of which the respondent unconscientiously took advantage.
The Magistrate found that although Mr Hartwig was in a relatively weaker bargaining position than the respondent due to his age and inexperience in property transactions, this did not amount to special disadvantage. In my view, I find that the Magistrate has clearly erred in that finding. She has not considered other obvious matters of disadvantage which seriously affected Mr Hartwig’s ability to protect his own best interests in relation to the sale of his land. The Magistrate has not factored in the vulnerability of his position with his dependence on the respondent. Mr Hartwig wanted to move into a retirement village as soon as possible and was in a parlous financial position. He was not only dependent upon the respondent for the sale of his house, but was also renting from him during the period of the time of the Option Agreement. Furthermore, the very nature of the Option Agreement, even before the Addendum Agreement, put Mr Hartwig at a disadvantage. For receiving the mere sum of $250 (the extra $250 and the $2,500 were not paid), he was at the whim of the respondent for four years as to when his house was going to be sold. He was at the disadvantage of not being able to benefit from any inflation. The period of four years could only be to the advantage of the respondent who could wait for an opportune time to execute the Option Agreement, or reject it if he saw fit.
I further find that to then drop the price of the property by $25,000 by virtue of the Addendum Agreement was unconscionable. There was clear evidence before the Magistrate that at the time, the valuation of the property would have been in the vicinity of $260,000. I find that Mr Hartwig was in a totally vulnerable position of disadvantage to which the respondent benefited from by obtaining the property at a reduced price. Further, through a series of transactions as set out above, the respondent then managed to subdivide the property and sell it at a great profit to himself and his daughter. On any version of the law, I find that was unconscionable behaviour.
The ‘broad’ approach
Having found that to be so, it follows that on the broader view, as articulated in Kobelt’s case, the behaviour of the respondent was unconscionable. Those matters that amount to unconscionable behaviour under the narrow view also apply to the broader view. Mr Hartwig was at a special disadvantage because of his age, inexperience and dependence upon the respondent to sell his house so he could quickly move into a retirement village. The terms of the Option Agreement did not protect his legitimate interests and offered him no material advantage. On any view, the terms of the Option Agreement could only amount to an unfair business tactic which was exploited by the respondent.
I therefore allow the appeal in relation to grounds 1 and 2. I will remit the matter to the Magistrates Court as to what orders should be made pursuant to s 224 and s 237 of the ACL.
Ground 3 – False or misleading representation: s 30(1)(f) of the ACL
The Addendum Agreement included the following words:
Because of a property report prepared on 13/08/12 indicating that the home needs a massive amount of work to bring the home up to the housing industry standard and therefore to be able to be rented out and further stating
As that representation was in relation to a future matter, the Magistrate correctly found that the representation would be false or misleading only if the respondent did not have reasonable grounds to make it. To justify the assertion in the Addendum Agreement, the respondent, both at trial and now, relied upon the building inspection report prepared by Mr Duckworth, which stated:
I am of the opinion that this house is not fit for human habitation. I believe it could easily be subject to a Housing Improvement Act Order restricting the amount of rent monies that could be received. House should be demolished & the site redeveloped.
On appeal, the appellant argues that the fact that the respondent was able to quickly rent out the property without undertaking a massive amount of work, is an indication that to suggest otherwise was false and misleading.
I do not accept that proposition. At the time of the Addendum Agreement, bearing in mind the building report, I find it has not been proved that the statement was false or misleading.
I dismiss this ground of appeal.
Ground 4 – Misleading or deceptive conduct: s 18(1) of the ACL
The respondent engaged in misleading and deceptive conduct in respect of repair costs. Also, in the Addendum Agreement, it is stated that the amount of work would possibly cost more than the ‘home is worth’. If ‘home’ was to be regarded as the actual building as distinct from the whole property, then, as the respondent’s notice of contention pleads, the representation would be true. However, the Magistrate considered that it was meant to apply to the whole of the property. Nevertheless, the Magistrate went on to find:
In my view, the representation of ‘home’ related to the total value of the property, as opposed to the house on it. I conclude that must be the ordinary meaning of the words used in the context. The Commissioner has not established that the representation was understood by Mr Hartwig to mean anything other than that. I accept that there was insufficient evidence to find that the costs of repairs to the house exceeded the value of the house, however I consider it is not controversial that the house had limited value and, in the circumstances, it is not misleading to suggest the cost of repairs would exceed the value of the building.
Unfortunately, the Magistrate appears to confuse a finding she has made that the word ‘home’ relates to the total value of the property, but then goes on to find that the cost of repairs to the house exceeded the value of the house and therefore is not misleading. This is of course contrary to her previous finding that ‘home’ related to the total value of the property, as opposed to the house on it.
The onus is upon the appellant to prove the misleading representation. I therefore find that onus has not be discharged. There is genuine confusion about the meaning of the word ‘home’. Furthermore, if it is clear that ‘home’ meant property, there was no evidence led as to the cost of the work required for it to be rented, compared to the price of the property itself, which was in fact sold for $175,000.
I dismiss this ground of appeal.
Ground 5 – Inadequate reasons
I find the Magistrate’s reasons were detailed and comprehensive and there is no merit in the argument that they were inadequate.
Conclusion
I allow the appeal on grounds 1 and 2 and remit the matter to the Magistrates Court for determination as to what orders should be made pursuant to s 224 and s 237 of the ACL.
I dismiss grounds 3, 4 and 5.