O'MALLEY Nominees Pty Ltd v Shawtec Pty Ltd
[2007] WADC 88
•30 MAY 2007
O'MALLEY NOMINEES PTY LTD -v- SHAWTEC PTY LTD & ORS [2007] WADC 88
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WADC 88 | |
| Case No: | CIV:1163/2004 | 19 APRIL 2007 | |
| Coram: | REGISTRAR KINGSLEY | 30/05/07 | |
| PERTH | |||
| 7 | Judgment Part: | 1 of 1 | |
| Result: | Plea under Commercial Tenancy (Retail Shop) Agreements Act struck in part Plea of unconscionable conduct allowed | ||
| PDF Version |
| Parties: | O'MALLEY NOMINEES PTY LTD (008 782 821) SHAWTEC PTY LTD (070 514 966) MICHAEL JOHN SHAW LAURENCE DAVID SHAW |
Catchwords: | Practice Application to amend defence Plea under Commercial Tenancy (Retail Shops) Agreements Act Plea of unconscionable conduct |
Legislation: | Commercial Tenancy (Retail Shops) Agreements Act 1985 |
Case References: | ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) ATPR 41-790 Hurley v McDonalds Australia Ltd (2000) ATPR 41-741 Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SHAWTEC PTY LTD (070 514 966)
First Defendant
MICHAEL JOHN SHAW
LAURENCE DAVID SHAW
Second Defendant
Catchwords:
Practice - Application to amend defence - Plea under Commercial Tenancy (Retail Shops) Agreements Act - Plea of unconscionable conduct
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985
(Page 2)
Result:
Plea under Commercial Tenancy (Retail Shop) Agreements Act struck in part
Plea of unconscionable conduct allowed
Representation:
Counsel:
Plaintiff : Mr A J N Arestei
First Defendant : MrA R MacPherson
Second Defendant : Mr A R MacPherson
Solicitors:
Plaintiff : Bruce Havilah & Associates
First Defendant : Hotchkin Hanly
Second Defendant : Hotchkin Hanly
Case(s) referred to in judgment(s):
ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491
ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253
ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) ATPR 41-790
Hurley v McDonalds Australia Ltd (2000) ATPR 41-741
Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376
(Page 3)
1 REGISTRAR KINGSLEY: The first and second defendants have brought an application seeking leave to amend their defence in terms of a minute of proposed amended defence, set-off and counterclaim dated 31 October 2006 but filed 17 April 2007.
2 The plaintiff's action concerns the leasing of commercial units. The plaintiff was the owner of several industrial and warehouse units, including units 4, 5 and 6. There are two leases, that of units 4 and 5 and of unit 6.
3 By a lease dated 1 July 1991, between the plaintiff as lessor and Ravenscroft Nominees Pty Ltd as lessee, units 4 and 5 were leased to Ravenscroft. In August 1995 Ravenscroft sub-leased the premises of units 4 and 5 to the first defendant. Pursuant to the sub-lease Ravenscroft assigned its right to exercise any options of renewal under the original lease for units 4 and 5 to the first defendants.
4 The first defendant exercised its rights under the sub-lease for units 4 and 5 by renewing the term of the original lease from July 2001 to July 2003. It was an express term of the deed for renewal for units 4 and 5 that the terms and conditions of the original lease applied to the renewed term from July 2001 to July 2003.
5 By deed of lease dated 18 December 2000 the plaintiff leased the premises of unit 6 to the first defendant. Pursuant to an option for renewal under the lease for unit 6 the first defendant executed a deed dated 8 May 2001, effectively exercising its option for renewal of the lease for unit 6 for the period from 1 July 2001 to 1 July 2003. It is common ground between the parties that the documentation referring to unit 6 refers to renewal of a sub-lease; in fact this is the deed of lease dated 18 December 2000 and not a sub-lease.
6 The plaintiff and first defendant were in some disputation in relation to the lease of the units and the first defendant was not paying rental, outgoings and interest. It appears that the first defendant contended that the leases for units 4, 5 and 6 were subject to the Commercial Tenancy (Retail Shops) Agreements Act 1985 (Retail Shops Act) contending the leases in question were "retail shop leases". It is this disputation which is sought to be pleaded in par 16 of the minute of proposed amended defence. The defendant also seeks to plead that the conduct of the plaintiff between 1 January 2003 and 6 June 2003 was such that it amounted to unconscionable conduct and is therefore in breach of s 51AC of the Trade Practices Act 1974.
(Page 4)
The Lease
7 The lease of units 4 and 5 was made on 1 July 1991. This lease was between the plaintiff and Ravenscroft. The offer to sub-lease, which was accepted by the plaintiff on 28 July 1995, describes the premises and at par 3 of the particulars specifies the use of the premises as for the manufacturing of office furniture, the use of oxyacetylene equipment, welding, grinding, powdercoating, woodworking equipment. The defendants contend that the proposed amended statement of claim pleads all relevant material facts to establish that the lease of units 4 and 5 were retail shop leases under the Retail Shops Act.
8 The requirement to come within the Act for a retail shop lease is that a business, not being within a retail shopping centre, be wholly or predominantly carried on for the purpose of the sale of goods by retail and the shop is not otherwise excluded from the operation of the Act by having a floor area in excess of 1,000 square metres (it is common ground that units 4 and 5 did not exceed 1,000 square metres).
9 The defendants' submission in relation to the proposed amendments to draw in the Retail Shops Act is that pursuant to s 12 of the Retail Shops Act the landlord had certain obligations to the tenant in relation to the outgoings. Section 12 of the Retail Shops Act refers only to a retail shop lease. The phrase "retail shop lease" is defined in s 3 to mean "a lease that provides for the occupation of a retail shop". There are two exclusions which are not relevant here. "Retail shop" is defined in s 3 as:
"Any premises situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a business and any premises not situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a business involving the sale of goods by retail or a specified business."
10 Again there are certain exclusions which are not relevant here.
11 In my opinion the preliminary question is whether units 4 and 5 have been leased for the purposes of a retail shop as defined in the Retail Shops Act.
12 Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376 conveniently sets out a number of authorities on the issue of the purpose and structure of the Retail Shops Act and the purpose for which the premises are used. At pars 49-54 Young CJ in EQ considers the relevant
(Page 5)
- authorities. Without referring to those authorities it is clear that Young CJ in EQ was of the opinion:
"When looking for the purpose of a lease, the court looks to the use reasonably contemplated by the parties when they entered into the lease (except when they have varied that intention). Further, if the lease actually states that use, that is conclusive."
"There may be cases where the circumstances of the actual user of the premises with the acquiescence of the lessor may show that there has been some variation of the lease and that the purpose of the letting has changed."
14 Young CJ in EQ comments that there may even be an oral arrangement which operates by way of an estoppel.
15 In my opinion the purpose of units 4 and 5 is clear from the agreement to sub-lease. It is for the purposes of manufacturing of office equipment, the use of oxyacetylene equipment, welding, grinding, powdercoating, woodworking equipment. In my opinion the status of the sub-lease does not show that the premises are to be used wholly or predominantly for the carrying on of the sale of goods by retail. There is no evidence to suggest that there has been a variation of that use and accordingly I am of the opinion that no reasonable cause of action exists in relation to units 4 and 5.
16 Unit 6 falls into a different category in that in the agreement of lease there is a handwritten notation under the heading "Insurance" noting that the lessee was to obtain a public risk policy exonerating the lessor from all activities of retail furniture sales-manufacture. The plaintiff disputes the addition of these words which are handwritten. However, in my opinion with the addition of those words in the lease to unit 6, it is arguable that the lease of unit 6 falls within the definition of "Retail shop" and accordingly amendments to the minute of proposed amended defence relating to unit 6 only will not be struck.
Unconscionable Conduct
17 Paragraphs 27-29 of the minute relate to an allegation that the conduct of the plaintiff was unconscionable and contrary to s 51AC of the Trade Practices Act.
18 Section 51AC(1) provides:
(Page 6)
- "A corporation must not, in trade or commerce, in connection with the supply of goods or services engage in conduct that is, in all the circumstances, unconscionable."
19 The defendants submit that there is no definition as to what is unconscionable. However in Hurley v McDonalds Australia Ltd (2000) ATPR 41-741 the court held in;
"For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable must be demonstrated … the term carries the meaning given by the Shorter Oxford English Dictionary, namely, 'action showing no regard for conscience, or that are irreconcilable with what is right or reasonable'."
20 The defendants' counsel submits that the pleaded facts in par 27 of the minute are capable of grounding an allegation of unconscionable conduct. The defendants' counsel refers to a case of ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) ATPR 41-790 where unconscionable conduct within a franchising relationship included refusal to deliver customer lists, provision of exact stock figures, refusing to meet franchisees, on-selling franchisees within designated territories, and not delivering disclosure documents which are breaches of the franchise code of conduct.
21 On the plaintiff's part, plaintiff's counsel submits that apart from insufficiency of the plea of the separate acts or omissions, there is an indication in case law that these acts or omissions do not constitute unconscionable conduct.
22 The plaintiff's counsel submits that it is clear, citing ACCC v 4WD Systems Pty Ltd (2003) 200 ALR 491 that behaviour would only be described as unconscionable if some moral fault or responsibility were involved requiring a deliberate or at least a reckless act. The plaintiff's counsel submits that the particulars of alleged instances of unconscionable conduct entail only omissions. Further, plaintiff's counsel submits that the substantial part of the incidents of alleged unconscionable conduct relate to actions by the plaintiff based upon its belief (whether found to be legally justified or not) that the defendants had breached their lease by their ongoing failure to pay outgoings required to be paid under the terms of those leases.
(Page 7)
23 It would appear from ACCC v 4WD Systems that s 51AC Trade Practices Act was not limited to equitable or common law notions of unconscionability. As Selway J comments at par 183:
"The word 'unconscionable' bears its ordinary or dictionary meaning and is not limited to the meaning of the word at common law or equity. Thus, evidence that disclosed an overwhelming case of unreasonable, unfair, bullying and thuggish behaviour in relation to a franchisee amounted to unconscionable conduct (ACCC v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 at [51])."
24 Selway J goes on at par 184 to say:
"The ordinary or dictionary meaning of the word 'unconscionable' was explained in Hurley v McDonalds Australia Ltd (2000) ATPR 41-741 at par 22 that unconscionable was serious misconduct or something clearly unfair or unreasonable and carries the meaning given by the Shorter Oxford English Dictionary, namely, 'actions showing no regard for conscience or that are irreconcilable with what is right or reasonable'."
25 Selway J then goes on to say at [185]:
"Normally it might be expected that behaviour would only be unconscionable if some moral fault or responsibility is involved and that mere unreasonableness or unfairness may not be sufficient at least in the absence of some moral fault."
26 The plea of unconscionable conduct is particularised in par 27. Taken in isolation the particulars may not represent unconscionable conduct. Taken as a whole the particulars may show an overwhelming case of unreasonable behaviour. Whether the behaviour could be categorised as mere unreasonableness or unfairness, or goes further to show moral fault is a question of evidence.
27 In my opinion there are matters of issue that need evidence to be given to the trial Judge for the Judge to come to a conclusion whether in all the circumstances there has been unconscionable conduct. That being the case, I am of the opinion there is sufficient issue pleaded to leave the matter to the trial Judge.
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