GASPOWER Australia Pty Ltd v KALAUI Pty Ltd
[2008] WASC 88
•14 MAY 2008
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: GASPOWER AUSTRALIA PTY LTD -v- KALAUI PTY LTD [2008] WASC 88
CORAM: BEECH J
HEARD: ON THE PAPERS
DELIVERED : 14 MAY 2008
FILE NO/S: CIV 1252 of 2008
BETWEEN: GASPOWER AUSTRALIA PTY LTD (ACN 109 442 882)
Plaintiff
AND
KALAUI PTY LTD (ACN 008 982 929)
Defendant
Catchwords:
Practice and procedure - Pleadings - Application to strike out statement of claim - Turns on own facts
Legislation:
Trade Practices Act 1974 (Cth), s 51AC
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: No appearance
Defendant: No appearance
Solicitors:
Plaintiff: Deacons
Defendant: Solomon Brothers
Case(s) referred to in judgment(s):
Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491
Australian Competition and Consumer Commission v Simply No‑Knead (Franchising) Pty Ltd [2000] FCA 1365; (2000) 104 FCR 253
Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286
Cameron v Qantas Airways Ltd (1995) 55 FCR 147
Hurley v McDonald's Australia Ltd [1999] FCA 1728; [2000] ATPR 41‑741
Lam Kee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247
BEECH J:
Introduction
The defendant applies to strike out par 8, par 14 and par 16 of the plaintiff's statement of claim.
The defendant owns land situated at Unit 1, 9 Carr Place, Myaree, being Lot 1 on Strata Plan 1555 and being the whole of the land comprised in Certificate of Title vol 1957 fol 576 (the Premises).
By a written lease (the Lease) made on 1 September 2007 between the plaintiff and the defendant, the defendant leased to the plaintiff the Premises on the terms set out in the Lease.
The Lease provided for a term of three years commencing on 1 September 2007 with an option for the plaintiff to renew for a further term of three years commencing on 1 September 2010. Clause 3.34.1 provided (so far as is relevant) as follows:
The Lessee shall not assign sublet transfer or part with possession of or mortgage charge or otherwise encumber the Premises or any part thereof or the benefit of this Lease or any estate or interest therein or herein without obtaining the prior written consent of the Lessor and the provisions of Sections 80 and 82 of the Property Law Act 1969 shall not apply to this Lease …
The plaintiff pleads that it is the franchisor of a franchise business (the Franchise Business) which trades as 'Gas Power Australia', and that from 20 August 2007 a company called Archibald Conversions Pty Ltd (Archibald) has been a franchisee of that business.
It is pleaded by the plaintiff in par 6 of the statement of claim, and admitted by the defendant, that from about 1 September 2007 and thereafter the plaintiff permitted Archibald to use and occupy the Premises for the purpose of carrying on Archibald's business as a franchisee of the Franchise Business.
On 5 March 2008, the defendant purported to terminate the Lease without notice on the ground that the plaintiff had allegedly parted with possession of the Premises without obtaining the defendant's prior written consent, contrary to cl 3.34.1 of the Lease.
Paragraph 8 of the statement of claim pleads that at all times the plaintiff retained the legal possession of the Premises and did not, by virtue of permitting Archibald to use and occupy the Premises, part with possession of the Premises within the meaning of cl 3.34.1 of the Lease. The defendant seeks an order that par 8 be struck out.
Paragraph 14 pleads, further or in the alternative, that the defendant purported to terminate the Lease for reasons other than any genuine concern that the plaintiff had parted with possession of the Premises. The plaintiff says that the defendant purported to terminate as a result of an altercation with Mr Sharland, an agent of Archibald, in about mid‑February 2008. Paragraph 16 pleads that the defendant's purported termination of the Lease was unreasonable and capricious, and constituted unconscionable conduct within the meaning of s 51AC of the Trade Practices Act 1974 (Cth).
The defendant seeks to strike out par 14 and par 16.
I commence with the defendant's contentions as to par 8 of the statement of claim.
Paragraph 8 of the statement of claim
The defendant puts its attack on par 8 on two alternative bases. First, it is submitted that cl 3.34.1 means, on its proper construction, that the plaintiff was prohibited from parting with physical possession of the Premises, and that it is clear from the plaintiff's pleading that it has parted with physical possession of the Premises. Secondly, to the extent that cl 3.34.1 is construed as a prohibition against parting with legal possession of the Premises, the defendant submits that by reason of the matters pleaded in par 6, par 9(3) and par 11(2) of the statement of claim, it is clear that the plaintiff has parted with legal as well as physical possession of the Premises.
I do not accept that par 8 of the statement of claim should be struck out on either of these bases.
As to the first, it is, at the very least, arguable that cl 3.34.1 of the Lease is to be construed as a prohibition upon parting with legal possession rather than as a prohibition against parting with physical possession. Indeed, there is high authority to support such a construction. In Lam Kee Ying Sdn Bhd v Lam Shes Tong [1975] AC 247, 256 the Privy Council said that because breach of a covenant such as that contained in cl 3.34.1 of the lease may result in forfeiture, it is construed strictly against the party seeking to rely on it. The Privy Council came to the following conclusions. First, a lessee who retains the legal possession of premises does not commit a breach of a covenant against parting with possession by allowing other people to use the premises. Secondly, a lessee who grants a licence to another to use the premises does not commit a breach of the covenant unless the agreement with the licensee wholly ousts the lessee from the legal possession of the premises. Nothing short of a complete exclusion of the lessee from the legal possession for all purposes amounts to a parting with possession.
The approach taken in Lam Kee Ying has been followed in decisions in Australia.
In support of its second argument, the plaintiff relies upon the matters pleaded in par 6, par 9(3) and par 11(2) of the statement of claim. I have already outlined par 6. Paragraph 9(3) pleads that prior to 1 September 2007 Mr Pizone, for and on behalf of the defendant, gave the keys to the Premises to a person on behalf of Archibald. Paragraph 11(2) pleads that the defendant accepted payments of rent knowing that the rent was paid by Archibald, other than the first two months' rent which was paid by the plaintiff.
I do not accept that these matters establish that the plaintiff has parted with legal possession of the premises and that the position in that respect is so clear that par 8 of the statement of claim should be struck out.
The question whether a lessee has parted with legal possession of the leased premises depends upon all the facts and circumstances of the case: Lam Kee Ying (256).
The pleaded fact that the plaintiff allowed Archibald to use and occupy the premises for the purpose of carrying on its business as a franchisee does not unequivocally establish that the plaintiff had excluded itself from legal possession of the premises.
In my opinion, the payment of rent and the taking possession by a licensee of keys to the premises are not matters which in themselves are decisive of the question of whether a lessee has parted with legal possession. Rather, those matters are each relevant facts and circumstances to be taken into account, together with all the other facts and circumstances, in determining that question. In my opinion, the authorities relied upon by the defendant support that view.
For these reasons I decline to strike out par 8 of the statement of claim.
Paragraphs 14 and 16 of the statement of claim
The defendant makes two submissions in support of its application to strike out par 14 and par 16 of the statement of claim. I will deal with them in turn.
First, it is submitted that the pleading of unconscionable conduct impermissibly focuses on a 'third party', namely the plaintiff, rather than upon the transaction between the supplier of goods and services and the party to whom those goods and services are supplied. The defendant submits that by the time the defendant terminated the lease the plaintiff was not in physical possession of the Premises, was not carrying on a business in the Premises, and was not paying rent in respect of the Premises (referring to par 6 and par 11(2) of the statement of claim). From that, the defendant submits it should be concluded that the plaintiff is a third party for the purpose of the supply of services within the meaning of s 51AC of the Trade Practices Act. That conclusion is said to have the consequence of making the plea invoking s 51AC untenable.
I do not accept that the plaintiff is, on its pleaded case, a 'third party' in the sense referred to. At the time of the purported termination the plaintiff was the lessee of the Premises. It is the Lease which gives rise to the relevant supply of services for the purposes s 51AC of the Trade Practices Act.
Secondly, the defendant submits that the facts pleaded in par 14 are insufficient to arguably support a plea of unconscionable conduct under s 51AC. I do not accept that submission.
The meaning of 'unconscionable' in s 51AC is not limited to cases of equitable or unwritten law unconscionability the subject of s 51AA; nor is it limited to the factors specified in s 51AC(3) or s 51AC(4): Australian Competition and Consumer Commission v Simply No‑Knead (Franchising) Pty Ltd [2000] FCA 1365; (2000) 104 FCR 253, [31] ‑ [32], [35]; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491 [183].
Something 'clearly unfair or unreasonable' must be demonstrated ‑ something 'irreconcilable with what is right or reasonable' ‑ to amount to unconscionable conduct: Cameron v Qantas Airways Ltd (1995) 55 FCR 147, 179; Hurley v McDonald's Australia Ltd [1999] FCA 1728; [2000] ATPR 41‑741 [22]; Australian Competition and Consumer Commission v Simply No‑Knead [30].
The fact that a party might be exercising contractual rights is not in itself a circumstance precluding a finding of unconscionable conduct: see, for example, Automasters Australia Pty Ltd v Bruness Pty Ltd [2002] WASC 286 [367], [395].
Whether conduct is, in a given set of circumstances, unconscionable within the meaning of s 51AC is a fact sensitive evaluative judgment. That seems to me to reinforce the general need for caution in the exercise of the power to strike out such a claim.
For the purpose of this application it must be assumed that the plaintiff establishes the allegation pleaded in par 14 of the statement of claim. I am not satisfied that the plaintiff's claim that the defendant's conduct in terminating the lease in the circumstances pleaded in par 14 was unconscionable within s 51AC is so clearly untenable as to require it to be struck out.
Conclusion
For these reasons, I would dismiss the defendant's application.
Subject to hearing from the parties, I would deal with the costs by ordering that the defendant pay the plaintiff's costs of the application fixed (in accordance with practice direction 5 of 2005) at $1,650. Any party who seeks a costs order different from that which I have proposed has liberty to file written submissions in relation to costs within seven days.
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