Port Kennedy Shopping Centre Pty Ltd v Falkingham
[2013] WADC 98
•19 JUNE 2013
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: PORT KENNEDY SHOPPING CENTRE PTY LTD -v- FALKINGHAM [2013] WADC 98
CORAM: PRINCIPAL REGISTRAR GETHING
HEARD: 29 MAY 2013
DELIVERED : 19 JUNE 2013
FILE NO/S: CIV 1800 of 2012
BETWEEN: PORT KENNEDY SHOPPING CENTRE PTY LTD
Plaintiff
AND
ANDREW FALKINGHAM
TRACEY MARIE FALKINGHAM
Defendants
Catchwords:
Summary judgment - Lease - Unconscionable conduct - Illegality
Legislation:
Commercial Tenancies (Retail Shops) Agreement Act 1985 (WA) s 6
Result:
Judgment awarded
Representation:
Counsel:
Plaintiff: Mr I Tait
Defendants: Mr M Khosa
Solicitors:
Plaintiff: Tait & Co
Defendants: Angove Law
Case(s) referred to in judgment(s):
Adelaide Development Co Pty Ltd v Pohlner [1933] HCA 13; (1933) 49 CLR 25
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209
Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Australian Competition and Consumer Commission (ACCC) v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51
Australian Competition and Consumer Commission (ACCC) v Samton Holdings Pty Ltd [2000] FCA 1725; (2000) ATPR 41-791
Bank of Western Australia v Stein [2005] WASC 43
Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256
Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362
Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457
Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447
Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394
Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27
Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215
Fitzpatrick v Garvey [2012] WADC 42
Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 25; (1964) 112 CLR 125
Great City Pty Ltd v Kemayan Management Services (Australia) Pty Ltd [1999] WASC 70
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216
Heathersage Nominees Pty Ltd v Pineview Holdings Pty Ltd (Unreported, WASC (Wallwork J), Library No 8478, 14 September 1990)
Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365
Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd (Unreported, WASC, Library No BC9200989, 12 October 1992)
Jenyns v Public Curator (Qld) [1953] HCA 2; (1953) 90 CLR 113
Morgan v Pallister [2004] WASC 188
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538
Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353
Tanzone Pty Ltd v Westpac Banking Corp [1999] NSWSC 478
Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598
Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; (1978) 139 CLR 410
PRINCIPAL REGISTRAR GETHING:
Overview
Between February 2010 and April 2012 Cane Fire Café and Grill Pty Ltd leased premises at the Port Kennedy Shopping Centre. The owner of the Shopping Centre, Port Kennedy Shopping Centre Pty Ltd, alleges that Cane Fire abandoned the premises on 22 April 2012. It sues the directors of Cane Fire, Andrew and Tracy Falkingham, who it says executed a guarantee and indemnity in its favour with the lease. Port Kennedy claims outstanding rent, reimbursement of an up-front payment and damages flowing from what it says is a repudiation of the lease.
It is common ground that Port Kennedy is, and was at all material times, the registered proprietor of shop 3 at the Port Kennedy Shopping Centre in Port Kennedy ('Premises'). It is also common ground that by a written agreement dated 24 February 2010, Port Kennedy, as lessor, and Cane Fire, as lessee, entered into a lease of the Premises ('Lease'). The term of the Lease was 60 months commencing 15 February 2010. It is also not in issue that the Falkinghams are guarantors of the obligations of Cane Fire under the Lease.
The main ground on which the Falkinghams are defending the action is that they assert that they were not provided with the disclosure statement required by the Commercial Tenancies (Retail Shops) Agreement Act 1985 (WA) (CTRSA). They say that by reason of this the Lease, and the guarantees it contains, is unenforceable due to illegality. They also say that the failure to provide the disclosure statement in the circumstances meant that Port Kennedy engaged in unconscionable conduct. They seek orders on this basis setting aside the guarantee contained in the Lease. They also challenge the entitlement of Port Kennedy to damages in the amounts claimed.
The Falkinghams sought unsuccessfully to have question of whether Port Kennedy was required to provide Cane Fire with a disclosure statement pursuant to CTRSA s 6 transferred to the State Administrative Tribunal. There is a right in CTRSA s 6(1)(b) for a lessee to seek compensation from SAT (but not the Court) for pecuniary loss suffered by the lessee as a result of the omission of a lessor to provide the required disclosure statement. Had this issue been transferred, the Falkinghams sought orders that the present action be stayed.
The Falkinghams have filed and served six versions of their defence in response to issues raised by Port Kennedy. The current version is an amended substituted defence dated 2 April 2013 (Defence).
By application dated 9 April 2013, Port Kennedy sought orders striking out pars 17 to 25 of the Defence. These are the paragraphs that plead the unconscionable conduct defence. Port Kennedy also seeks leave to bring a summary judgment application out of time and then judgment on certain liquidated amounts totalling $80,123.98 and damages for loss of future rent which is says can be assessed at $85,407.27.
What issues need to be determined?
On the materials before me and submissions, eight issues arise for determination:
1.Should Port Kennedy be given leave to bring its application for summary judgment out of time?
2.Is Port Kennedy entitled to summary judgment on its claim for outstanding rent?
3.Is Port Kennedy entitled to summary judgment on its claim for reimbursement of the upfront payment?
4.Is Port Kennedy entitled to summary judgment on its claim arising from the repudiation?
5.Is there an arguable defence that the guarantee is illegal and thus unenforceable?
6.Is there an arguable defence of unconscionable conduct?
7.Should the plea of unconscionable conduct be struck out?
8.What final orders are appropriate?
Should Port Kennedy be given leave to bring its application for summary judgment out of time?
Port Kennedy filed its application on 12 April 2013, more than 21 days after the Falkinghams filed their respective appearances (4 July 2012). Accordingly, pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 14 r 1(1), Port Kennedy is required to seek, and has sought, leave to bring the application.
In support of its application for summary judgment, Port Kennedy filed an affidavit sworn by its secretary Travis French, dated 12 April 2013. In his affidavit, Mr French states that the reason for the delay in bringing the application was due to ongoing conferral with the lawyer for the Falkinghams about the defence. He deposes that the Falkinghams have served six version of the defence. The extent of the conferral is set out in a certificate of conferral filed by Port Kennedy with its application, dated 12 April 2013.
The policy rationale for the time limit is set out in the judgment of Master Adams in Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd (Unreported, WASC, Library No BC9200989, 12 October 1992) in the following terms:
Summary judgment applications can involve a good deal of preparation and a substantial volume of affidavit evidence. The time limit reflects the policy of the rules requiring summary judgment applications to be brought at an early stage of the proceedings before too much expense has been incurred.
The discretion to extend time is given for the sole purpose of enabling the court to do justice between the parties: Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458, 459; Bank of Western Australia v Stein [2005] WASC 43 [53].
In my view was understandable and indeed appropriate for Port Kennedy to defer making this application while the defence was under challenge. Until the case it had to meet was made plain in the defence, it could not properly consider whether to apply for summary judgment. It has previously obtained an order striking out the defence and another order striking out parts of the defence. The Falkinghams have not identified any specific prejudice they have suffered, or will suffer, by reason of the delay in bringing the application.
Port Kennedy ought to have leave to bring the application.
Is Port Kennedy entitled to summary judgment on its claim for outstanding rent?
In its amended statement of claim, Port Kennedy asserts that:
(a)as at 1 April 2012, Cane Fire was in arrears for rent and outgoings in the amount of $32,839.99 plus GST, being $36,123,98;
(b)on or about 22 April 2012, Cane Fire abandoned the Premises and thereby repudiated the Lease;
(c)on or about 23 April 2012 and by reason of Cane Fire's non‑payment of rent and outgoings and / or abandonment of the Premises, Port Kennedy determined the Lease and re-entered upon and resumed the Premises; and
(d)Cane Fire has, despite demand, failed to pay the outstanding rent and outgoings.
In his affidavit, Mr French relevantly:
(a)verifies the facts set out in the amended statement of claim;
(b)confirms that the amount of outstanding rent of $36,123,98 is exclusive of the application of a bank guarantee provided by Cane Fire;
(c)confirms that the rent remains outstanding; and
(d)states that he believes that the Falkinghams have no defence to the action or the claims made in the action.
I am satisfied that Mr French has verified the facts on which this claim is based as required by O 14 r 2(1). Mr French also deposes that he believes that the Falkinghams have no defence to the claim brought by Port Kennedy, as required by O 14 r 2(1). An applicant for summary judgment who complies with the requirements of RSC O 14 r 2 establishes a prima facie right to summary judgment: Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71, 74. I am satisfied that Port Kennedy has established a prima face right to summary judgment in relation to its claim for outstanding rent and outgoings.
Where a plaintiff has satisfied all the requirements of RSC O 14 so as to give it prima facie the right to an order in the terms asked, the burden shifts to the defendant to satisfy the court why judgment should not be given against it: Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110; Westwind[74]. The defendant must satisfy the court 'with respect to the claim … that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim': RSC O 14 r 3(1). A defendant does not have to show a defence on the balance of probabilities, but must at least show cause why there is an arguable defence: Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27 [4]. This is an evidentiary burden, the overall legal burden of persuasion remaining on the plaintiff as applicant: Morgan v Pallister [2004] WASC 188 [4].
In the Defence, the Falkinghams do not admit the pleas going to the amount of arrears of rent and outgoings, abandonment of the Premises and repudiation of the Lease. They plead that they cannot say exactly when Port Kennedy determined the Lease and re-entered upon, and resumed possession of, the Premises. Neither of them add to these facts in their affidavits filed in opposition to the summary judgment application.
Subject to one caveat, the Falkinghams have not discharged the evidential burden upon them to show that with respect to Port Kennedy's claim for outstanding rent and outgoings 'that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim' as required by RSC O 14 r 3(1). The caveat is whether their claim that the Lease and guarantee it contains ought to be set aside either on the ground of illegality or the ground of unconscionability.
Is Port Kennedy entitled to summary judgment on its claim for reimbursement of the upfront payment?
It is common ground between the parties on the pleadings that:
(a)pursuant to item 13.6 of the Schedule to the Lease, Port Kennedy would contribute $44,000 (being $40,000 plus GST);
(b)it was a term of the Lease that if the Lease is terminated during the initial term due to the default of Cane Fire, it must repay the $44,000; and
(c)Port Kennedy contributed the $44,000 to Cane Fire.
In its amended statement of claim, Port Kennedy further says that:
(a)Cane Fire defaulted on the Lease within the initial term, entitling Port Kennedy to the return of the $44,000; and
(b)despite demand, this amount has not been repaid.
I am satisfied that Mr French has verified the facts on which this aspect of Port Kennedy's claim is based as required by O 14 r 2(1). Mr French also deposes that he believes that the Falkinghams have no defence to the claim brought by Port Kennedy, as required by O 14 r 2(1). I am satisfied that Port Kennedy has established a prima face right to summary judgment in relation to its claim for outstanding for the refund of the $44,000 payment: Westwind Air Charter [74].
In the defence, the Falkinghams do not admit plead to the allegation that Port Kennedy is entitled to the refund of the $44,000. They are deemed to have admitted it: RSC O 20 r 14(1). Neither Mr nor Mrs Falkingham make any reference to this payment in their affidavits filed in opposition to the summary judgment application.
Again, subject to the caveat of whether the Lease and guarantee it contains ought to be set aside, the Falkinghams have not discharged the evidential burden upon them to show that with respect to Port Kennedy's claim for reimbursement of the $44,000 'that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim' as required by RSC O 14 r 3(1).
Is Port Kennedy entitled to summary judgment on its claim for lost future rental?
In its amended statement of claim, Port Kennedy pleads that it entered into a lease with a replacement tenant commencing 15 September 2012. It claims damages in the sum of $85,407.27 calculated as follows (all amounts include GST):
(a)$224,983.73, being the amount of rent that Port Kennedy would have received from Cane Fire from 1 May 2012 until the expiry of the Lease on 14 February 2015, less the amount of rent to be received pursuant to the new lease $163,669.59 for the same period;
(b)$3,529.94 being the amount of outgoings that Port Kennedy would have received from Cane Fire from 1 May 2012 until 14 September 2012; and
(c)$20,563.19 being costs associated with trying to mitigate the Plaintiff's loss by way of re-letting the Premises.
These totals are supported by calculations in the amended statement of claim and in Mr French's affidavit which counsel for the Falkinghams did not challenge. Mr French also annexes a copy of an invoice from Norfolk Commercial in the amount of $20,563.19 for its costs of finding the new lessee.
I am satisfied that Mr French has verified the facts on which this aspect of Port Kennedy's claim is based as required by O 14 r 2(1). This includes that facts going to the termination of the Lease set out above [14]. Mr French also deposes that he believes that the Falkinghams have no defence to the claim brought by Port Kennedy, as required by O 14 r 2(1). I am satisfied that Port Kennedy has established a prima face right to summary judgment in relation to its claim for damages for lost rental: Westwind Air Charter [74].
In the Defence, the Falkinghams assert a failure to mitigate by Port Kennedy. Neither Mr nor Mrs Falkingham deal with this issue in their affidavits in opposition to the application for summary judgment.
The time between when Port Kennedy says it re‑entered the Premises (23 April 2012) to the date the new lease commenced (15 September 2012) is some five months. The Falkinghams have not placed before the court any evidence to suggest that this was an unduly or unreasonably long period of time or that there were steps which Port Kennedy ought to have, but didn't, take to secure a lessee at an earlier date.
Again, subject to the caveat of whether the Lease and guarantee it contains ought to be set aside, the Falkinghams have not discharged the evidential burden upon them to show that with respect to Port Kennedy's claim for outstanding rent and outgoings 'that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim' as required by RSC O 14 r 3(1).
Is there an arguable defence of illegality?
The Falkinghams say that they were not provided with the disclosure statement required to be given by a lessor pursuant to CTRSA s 6. In the Defence, they say that 'it would be contrary to public policy that [Port Kennedy] be allowed to obtain a benefit that resulted from their failure to provide the prescribed Disclosure Statement pursuant to the Act'. In the course of submissions, this developed into an argument that the guarantee under the Lease is illegal and thus unenforceable because of the failure of Port Kennedy to provide the prescribed disclosure statement.
The requirement on Port Kennedy to give a disclosure statement to Cane Fire arises pursuant to CTRSA s 6:
6. Disclosure statement, tenant's rights if not given by landlord etc.
(1)Where a retail shop lease is entered into and the tenant has not, at least 7 days before the entering into of the lease, been given a disclosure statement in accordance with subsection (4) or the disclosure statement given is incomplete or contains false or misleading information, the tenant may, in addition to exercising any other right, do either or both of the following -
(a)within 6 months after the lease was entered into give to the landlord written notice of termination of the lease, unless subsection (3) prevents termination;
(b)apply in writing to the Tribunal for an order that the landlord pay compensation to the tenant in respect of pecuniary loss suffered by the tenant as a result of -
(i)the omission of the landlord to give a disclosure statement in accordance with subsection (4); or
(ii)the giving of an incomplete disclosure statement by the landlord; or
(iii)the giving of false or misleading information by the landlord in the disclosure statement.
(2)Where the tenant under a retail shop lease gives to the landlord a notice of termination under subsection (1) the lease terminates upon the expiry of a period of 14 days after the notice was given.
(3)A tenant cannot terminate a lease under this section on the ground that the tenant has been given a disclosure statement that is incomplete or contains false or misleading information if -
(a)the landlord has acted honestly and reasonably and ought reasonably to be excused for the failure concerned; and
(b)the tenant is in substantially as good a position as the tenant would have been if the statement had been complete or had not contained the false or misleading information.
(4)A disclosure statement given for the purposes of this section shall be in the prescribed form duly completed and signed by or on behalf of the landlord and the tenant and shall contain a statement notifying the tenant that he should seek independent legal advice.
(5)Where the tenant under a retail shop lease (in this subsection referred to as the outgoing tenant) assigns the lease to another person (in this subsection referred to as the incoming tenant), nothing in this section gives to the incoming tenant a right to terminate the lease that the outgoing tenant would not have had if he had continued as the tenant under the lease.
(6)A disclosure statement is not required to be given -
(a)on the renewal of a retail shop lease under an option (including the option arising by reason of section 13(1)); or
(b)on the assignment of a retail shop lease.
The affidavits of Mr and Mrs Falkingham disclose the following facts:
(a)the Falkinghams' dealings in relation to the lease were with one Mickey Janssen, a representative of CB Richard Ellis;
(b)the documentation given by Mr Janssen to the Falkinghams with the Offer to Lease accepted by Port Kennedy on around 10 November 2009 did not include a disclosure statement pursuant to CTRSA s 6;
(c)at a meeting between them and Mr Janssen in or around February 2010 Mr Janssen asked if they had obtained legal advice regarding the proposed lease to which they informed him that they had not;
(d)the lease was signed at the meeting in par (c) after this discussion took place;
(e)from an email, it appears that the documents in par (b) were sent to by Mr French to Mr Janssen to forward to the Falkinghams; and
(f)neither of them has ever received a disclosure statement in the form of Form 1 to the CTRSA.
Mr Falkingham further states at pars 26 and 27:
As a result of not having being given the prescribed Disclosure Statement in either our capacities as directors of the Lessee or as Guarantors under the Lease, we entered into the Lease without all the necessary information we should have been given and therefore, did not fully understand the nature of the obligations that we were agreeing to assume under the Lease, both as directors of the Lessee and more particularly, as Guarantors under the Lease.
I further say that the Plaintiff, knowing that we did not have the benefit of being given all the relevant information which could have resulted in us not proceeding with the letting of the premises the subject of the Lease and were therefore at a disadvantage, proceeded with the transaction thus taking unfair advantage of the situation created by their not having given the Lessee a Disclosure Statement.
Mrs Falkingham states at pars 7 and 8:
I say that not having received the prescribed Disclosure Statement, the decision to enter into the Lease and providing the required Guarantee under the Lease was based on incomplete information and was therefore not a fully informed decision.
I say that the Plaintiff, knowing that we did not have the benefit of being given all the relevant information which could have resulted in us not proceeding with the letting of the premises the subject of the Lease and were therefore at a disadvantage, proceeded with the transaction thus taking unfair advantage of the situation created by their not having given the Lessee a Disclosure Statement.
An application for summary judgment is to be determined on the basis that the defendant's version of the facts, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action: Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, 608. If after argument there remains real uncertainty as to the plaintiff's right to judgment without further investigation of the facts, summary judgment must be refused: Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184 [28]; Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332, 335.
Counsel for Port Kennedy accepted that it was under an obligation to give Cane Fire a disclosure statement. Mr French does not give evidence as to whether Port Kennedy gave Cane Fire a disclosure statement. In any event, I am obliged for present purposes to determine whether the defence of illegality is arguable on the basis that the trial Judge will accept the evidence of the Falkinghams that no disclosure statement was given.
Counsel for the Falkinghams sought to draw an analogy with the situation that arises when a building contract is entered into by an unregistered builder. Section 4 of the now repealed Builders Registration Act 1939 (WA) prohibited (among other things) an unregistered builder from entering into any contract or engagement to construct any building (the equivalent obligation is now in Building Services (Registration) Act 2011 (WA) s 7). A contract entered into in breach of BRA s 4 was illegal and unenforceable: Heathersage Nominees Pty Ltd v Pineview Holdings Pty Ltd (Unreported, WASC (Wallwork J), Library No 8478, 14 September 1990); Great City Pty Ltd v Kemayan Management Services (Australia) Pty Ltd [1999] WASC 70 [97]; Fitzpatrick v Garvey [2012] WADC 42 [339].
In my view, the analogy does not hold. The nature of the obligation in CTRSA s 6 to provide a disclosure statement is materially different from the prohibition in BRA s 4. The obligation in CTRSA s 6 is not framed in terms of a prohibition on entering into a lease unless a disclosure statement is given. Rather, the section gives a lessee certain rights if a disclosure statement is not given (or is incomplete or contains false or misleading information). Those rights include the right to terminate, but with a time limit on the exercise of the right (s 6(1)(a)). \If the right is not exercised within the time limit, then the lease will continue, subject to any other legal rights the lessee may have. If the disclosure statement is given, but is incomplete or contains false or misleading information, the lessor has a defence (s 6(3)). If the lessee suffers any pecuniary loss as a result of the omission of the lessor to give a disclosure statement, it can apply for compensation from the SAT. In this context, I do not consider that it is arguable that the failure to provide a disclosure statement in compliance with CTRSA s 6 renders the lease illegal (and thus a guarantee it contains) and thus unenforceable.
At a more general level, in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] HCA 42; (1978) 139 CLR 410, 430 Gibbs ACJ stated that:
[t]here are four main ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful: (1) The contract may be to do something which the statute forbids; (2) The contract may be one which the statute expressly or impliedly prohibits; (3) The contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful; or (4) The contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits.
This statement was approved of in Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215, 218 ‑ 219.
The question of whether a statute, on its proper construction, invalidates a contract made in breach of its provisions is one which must be determined in accordance with the ordinary principles that govern the construction of statutes: Yango 413; Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216 [145], [232], [324].
The CTRSA in s 6 does not expressly prohibit, or render unlawful, the making of a lease unless a disclosure statement is given. Rather, as I have already observed [39], the right of a lessee to terminate the lease for non-compliance presumes that the lease is valid until terminated, as does the ability of the lessee to seek compensation for pecuniary loss. For the same reason, neither does CTRSA s 6 impliedly prohibit the making of a lease unless a disclosure statement is given. In my view, it is not arguable that the Lease, with the guarantees, falls within any of the categories set out by Gibbs ACJ in Yango.
Even if a contract is not unenforceable on the ground of illegality, it may nonetheless be 'void on the basis of public policy, because it is tainted with illegality': Cheshire & Fifoot Law of Contract (N Seddon, R Bigwood, M Ellinghouse, 10th Aust ed, LexisNexus Butterworths, 2012), 963, citing Adelaide Development Co Pty Ltd v Pohlner [1933] HCA 13; (1933) 49 CLR 25, 35. See also: Fitzgerald, 227.
In Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 McLure JA (with whom Roberts‑Smith JA [1] and Buss JA [66] agreed) summarised the relevant principles in the following terms ([49] ‑ [52]):
49The legal principles that apply in these circumstances were considered by the High Court in Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215. In that case, a driller claimed monies owing under a contract with a landowner for the drilling of bores to obtain water. It was an offence under the Water Act 1992 (NT) to construct a bore unless it was authorised. The landowner had failed in his obligation to obtain permits under the Water Act. The High Court held that the formation or performance of the drilling contract was not expressly or impliedly prohibited by the Water Act. The only question was whether the drilling contract was unenforceable on public policy grounds. Dawson and Toohey JJ (at 220) said no because the driller did not have to rely upon an unlawful transaction to establish his cause of action. Neither does the respondent in this case. The Local Government Act renders the conduct, not the transaction, an offence. Kirby J said no because the illegality was committed incidentally in the course of the contract, although the result would have been different if the parties had "a specific agreement deliberately to breach the Act".
50McHugh and Gummow JJ took a different approach. They noted (at 227) that the refusal of courts to enforce a contract tainted by illegality on grounds of public policy does not stem from express or implied legislative prohibition but that "[r]egard is to be had primarily to the scope and purpose of the statute to consider whether the legislative purpose will be fulfilled without regarding the contract as void and unenforceable". They identify (at 229) four exceptions or qualifications where relief is granted despite the presence of illegality. They are where:
1.the claimant was ignorant or mistaken as to the factual circumstances which render an agreement or arrangement illegal;
2.the statutory scheme rendering the contract or arrangement illegal was enacted for the benefit of a class of which the claimant is a member;
3.an illegal agreement was induced by the defendant's fraud, oppression or undue influence; and
4.the illegal purpose has not been carried into effect.
51These exceptions correspond with the narrow range of categories when parties are not in pari delicto. However, those exceptions are not exhaustive. McHugh and Gummow JJ approve (at 230) the statement of McHugh J in Nelson v Nelson (1995) 184 CLR 538 at 613 as follows:
Accordingly, in my opinion, even if a case does not come within one of the four exceptions … to which I have referred, courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies.
52I accept the observation in Cheshire and Fifoot's Law of Contract 8th Australian Edition at [18.16] that under this approach, the statute is the primary determinant of the nature of the public policy in any given case and that factors which tend against implying a prohibition also tend to preclude non-enforcement on the ground of public policy.
In the present case, CTRSA s 6 expressly provides that the rights in s 6(1) are 'in addition to exercising any other right'. However, for the reasons set out in above relation to illegality [39] and [42], the CTRSA does not disclose an intention that a lease entered into in non-compliance with s 6 'should be unenforceable in all circumstances', to quote from the comments of McHugh J in Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, 613 quoted above [44].
Counsel for the Falkinghams did not provide me with any authority in relation to CTRSA, any equivalents in other Australian jurisdictions or other statutory regimes, in which the failure to give a prescribed disclosure document renders the contract to which the disclosure relates either unenforceable as a result of illegality or void on the basis of public policy.
In my view, on the evidence and submissions before me, the defence of illegality raised by the Falkinghams is not arguable. Neither is it arguable that the Lease is void on the basis of public policy.
I am conscious of the principle that a court at first instance should be careful not to risk stifling the development of the law by summarily rejecting a defence where there is a reasonable possibility that, as the law develops, it will be found that a defence will lie: Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365, 373. However, on the evidence and submissions before me I do not consider that there is even a reasonable possibility that, as the law develops, the failure to provide a disclosure statement, in the context of CTRSA s 6, will render the Lease unenforceable or void at common law.
Is there an arguable defence of unconscionable conduct?
The defence of unconscionable conduct is pleaded in pars 17 to 23 of the Defence in the following terms:
17.The Plaintiff was aware that the Defendants were the directors of the Lessee under the Lease Agreement were also the Guarantors under clause 22 of the same agreement.
18.The Plaintiff, through its agent, CB Richard Ellis, was aware that the Lessee was not provided a Disclosure Statement as required by the Commercial Tenancies (Retail Shops) Agreement 1985 (the 'Act') and accordingly, the Defendants, as the directors of the Lessee had no knowledge of all of the matters that the prescribed Disclosure Statement sets out.
19.As a result of the Plaintiff's failure to provide the prescribed Disclosure Statement, the Defendants did not have the benefit of the warnings and advice to the Tenants as contained in Part 13 of the prescribed Disclosure Statement that would have resulted in the Defendants turning their attention to the particular matters raised therein.
20.In particular, the Defendants were not aware of the advice to Tenants in general and to them, in particular, to seek independent legal and financial advice on the matters contained within the Prescribed Disclosure Statement.
21.Accordingly, as the Defendants in their capacity as directors of the Lessee had no knowledge of the matters set out in paragraph 19 and 20 above, they did not have that knowledge as Guarantors under the Lease Agreement.
22.Following the Plaintiff's failure to provide the prescribed Disclosure Statement, in or around February 2010, the Plaintiff, through its agent, required the Defendants to execute the Lease Agreement immediately on learning that the Defendants had not had the benefit of such independent advice and were therefore at a disadvantage.
23.The Defendants say that the Plaintiff, knowing of the disadvantage that the Defendants were under, took unfair or unconscientious advantage of the situation created.
24.The Defendants further say that it would be contrary to public policy that the Plaintiff be allowed to obtain a benefit that resulted from their failure to provide the prescribed Disclosure Statement pursuant to the Act.
23. [sic]For the matters pleaded in paragraphs 17 to 24 above, the Defendants seek the following Orders:
(A)That the guarantee contained in clause 22 of the Lease Agreement be set aside;
(B)That this proceedings be dismissed; and
(C)That the Plaintiff pay the Defendants costs.
The equitable doctrine of unconscionable conduct is an independent cause of action or defence. The Court may set aside a contract pursuant to this doctrine 'whenever one party by reason of some condition [or] circumstance is placed at a special disadvantage vis‑a‑vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created': Commercial Bank of Australia v Amadio [1983] HCA 14; (1983) 151 CLR 447, 462. The principles by which a Court will determine whether a contract may be set aside on the ground of the unconscionable conduct of one of the parties are conveniently summarised by Murphy JA in Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [219] ‑ [233]:
219 Equity's jurisdiction to set aside a transaction for unconscionable dealing is invoked where one party to the transaction is under a special disadvantage or disability in dealing with the other party, and that special disadvantage or disability was sufficiently evident to the other party to make it prima facie unfair or unconscionable for that other party to accept or retain the benefit of the transaction: Commercial Bank of Australia v Amadio; Louth v Diprose (1992) 175 CLR 621, 637.
220The underlying equitable principle may be invoked 'whenever one party by reason of some condition or circumstance' is placed at a special disadvantage of which unfair and unconscientious advantage is taken by the other party: Commercial Bank of Australia v Amadio (462).
221The special disadvantage will be sufficiently evident to the other party if the other party knows facts which would raise the possibility of the special disadvantage in the mind of a reasonable person: Commercial Bank of Australia v Amadio (467 ‑ 468, 479).
222Where such circumstances are shown to exist, the onus is on the other party to establish that the transaction was fair, just and reasonable: Commercial Bank of Australia v Amadio (474).
223The special disadvantage need not have been created by the party taking the benefit of the transaction: Louth v Diprose (629).
224The special disadvantage alleged must be one 'which seriously affects the ability of the innocent party to make a judgment as to his own best interests'; mere difference in bargaining power is insufficient: Commercial Bank of Australia v Amadio (462). The 'essence of such weakness is that the party is unable to judge for himself': Blomley v Ryan (1956) 99 CLR 362, 392; or 'to conserve his own interests': Blomley v Ryan (415); ACCC v C G Berbatis Holdings [12], [46], [55].
225In this regard care must be taken not to 'eviscerate unconscionability of its meaning': NZI Capital Corporation v Fulton [1998] FCA 667 Black CJ & Lehane J, quoting Mason CJ in Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489, 503.
226In ACCC v C G Berbatis Holdings, Gleeson CJ [14] said:
Unconscientious exploitation of another's inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position. There may be cases where both elements are involved, but, in such cases, it is the first, not the second, element that is of legal consequence ...
227In ACCC v C G Berbatis Holdings, Gummow & Hayne JJ [56] also said that even a person in a 'greatly inferior bargaining position' may nevertheless not lack capacity to make a judgment about that person's own best interests.
228In all cases, the court's equitable jurisdiction is to be exercised according to recognised principles, and the courts are not armed with a general power to set aside transactions which in the eyes of the judges appear unfair, harsh or unconscionable: Louth v Diprose (654) (Toohey J, although in dissent in the result). See also the observations of Sir Anthony Mason in 'The Impact of Equitable Doctrine on the Law of Contract', (1998) 27 Anglo-American Law Review 1, 12 cited by Debelle & Wicks JJ in Micarone v Perpetual Trustees Australia Ltd [1999] SASC 265; (1999) 75 SASR 1 [648]:
There is a strong objection to simply equating the concept to what is unreasonable and unfair. The object of the doctrine is not to protect people from the consequences of their own mistakes. Because our contract law, unlike that of the United States, does not impose a general obligation of good faith and fair dealing, it is preferable to think of unconscionable conduct in terms of that which shocks the conscience, something which is harsh or oppressive in that it involves taking advantage of another's special disability or disadvantage. So understood, the concept is not one which is open-ended, to be applied according to the subjective whim of the Judge, though like other standards, such as that of 'the reasonable person', borderline applications will require an element of value judgment.
229In Bridgewater v Leahy [76], Gaudron, Gummow & Kirby JJ referred with approval to the Privy Council's observations in Hart v O'Connor [1985] AC 1000, in which unconscionable conduct was described as:
[V]ictimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances.
230In The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 225 FLR 1 [4924], Owen J said that it is not enough for there to be unequal bargaining power - the conduct of the stronger party has to be exploitative or oppressive.
231Whilst the categories of disability are not closed, the requisite special disadvantage often involves poverty, need, sickness, age, infirmity of body or mind, sex, drunkenness, illiteracy, lack of education and lack of assistance or explanation when assistance or explanation is necessary: Blomley v Ryan (405, 415); lack of or limited comprehension of the English language: Commercial Bank of Australia v Amadio; impaired intelligence: Wilton v Farnworth (1948) 76 CLR 646; or infatuation with or emotional dependence upon another person: Louth v Diprose.
232Absence of independent legal advice may in a given case be a circumstance of factual importance in determining whether a special disability exists: Bridgewater v Leahy [41].
233Physical frailty and enfeeblement, with diminished knowledge by the party in question of that party's property and affairs generally, are not necessary elements of a special disadvantage: Bridgewater v Leahy [116].
The question of whether conduct amounts to unconscionable conduct depends upon a close analysis of the facts of the case: Permanent Mortgages [216]. In Permanent Mortgages Murphy JA approved of the following comments of the High Court in Jenyns v Public Curator (Qld) [1953] HCA 2; (1953) 90 CLR 113, 118 ‑ 119:
The jurisdiction of a court of equity to set aside a gift or other disposition of property as, actually or presumptively, resulting from undue influence, abuse of confidence or other circumstances affecting the conscience of the donee is governed by principles the application of which calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the donor. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition. Indeed no better illustration could be found of Lord Stowell's generalisation concerning the administration of equity: 'A court of law works its way to short issues, and confines its views to them. A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case'...
The issue of whether a commercial lessee can be under the kind of special disadvantage necessary to give rise to unconscionable conduct was considered in Australian Competition and Consumer Commission (ACCC) v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51, Australian Competition and Consumer Commission (ACCC) v Samton Holdings Pty Ltd [2000] FCA 1725; (2000) ATPR 41‑791 and Tanzone Pty Ltd v Westpac Banking Corp [1999] NSWSC 478. Each of these cases was decided pursuant to Trade Practices Act 1974 (Cth) s 51AA(1) which refers to conduct which is 'unconscionable, within the meaning of the unwritten law from time to time'. The equivalent obligation is now contained in Australian Consumer Law cl 20. The reference to unconscionable conduct in the unwritten law is a reference to conduct that is within the equitable concept of unconscionable conduct: Berbatis [7], [38], [156] ‑ [160].
In Berbatis the ACCC took action in relation to a situation in which a lessee wishing to sell its business near the end of a lease had to agree to give up past claims against the lessor in order to secure a new lease term from the lessor which it could then assign to the purchaser of the business. The lessees had no option to renew their lease. As Gleeson CJ observed, their 'prospects of making an advantageous sale of their business depended upon the co‑operation of the lessors, which they were not obliged to give' [2]. The lessors thought that their past claims could have been worth up to $50,000. The business was sold for $68,000. The High Court found that, considered objectively, the past claims were worth around $3,000: [2], [59], [147]. The lessees did not seek to have the deed of assignment set aside [3]. The majority (Gleeson CJ, Gummow, Hayne and Callinan JJ, Kirby J dissenting) held that the conduct did not amount to unconscionable conduct.
The majority was of the view that there was nothing relevantly 'special' about the disadvantage which the lessees were under: [15] [55] ‑ [56], [170], [184] ‑ [185]. For example, Gleeson CJ stated [15], [17]:
In the present case, there was neither a special disadvantage on the part of the lessees, nor unconscientious conduct on the part of the lessors. All the people involved in the transaction were business people, concerned to advance or protect their own financial interests. The critical disadvantage from which the lessees suffered was that they had no legal entitlement to a renewal or extension of their lease; and they depended upon the lessors' willingness to grant such an extension or renewal for their capacity to sell the goodwill of their business for a substantial price. They were thus compelled to approach the lessors, seeking their agreement to such an extension or renewal, against a background of current claims and litigation in which they were involved. They were at a distinct disadvantage, but there was nothing “special” about it. They had two forms of financial interest at stake: their claims, and the sale of their business. The second was large; as things turned out, the first was shown to be relatively small. They had the benefit of legal advice. They made a rational decision, and took the course of preferring the second interest. They suffered from no lack of ability to judge or protect their financial interests. What they lacked was the commercial ability to pursue them both at the same time …
Reference was earlier made to counsel's submission that there was here a disabling circumstance affecting the ability of the lessees to make a judgment in their own best interests. In truth, there was no lack of ability on their part to make a judgment about anything. Rather, there was a lack of ability to get their own way. That is a disability that affects people in many circumstances in commerce, and in life. It is not one against which the law ordinarily provides relief.
In Samton the ACCC took action in relation to a situation in which a lessee who failed to exercise an option to renew a lease was required to pay $70,000 for the assignment of a lease for the same extended term. The lessee had recently acquired the business conducted at the leased premises. With the approval of the lessor it had been assigned the lease. Settlement of the sale of the business took place a few days before the last date on which an option to renew the lease could be exercised. The lessee purported to exercise the option about a fortnight after the final date. It was common ground that the lessee had not validly exercised the option to extend the term of the lease. In order to get around a statutory prohibition on the payment of key money, the deal was structured so that a new lease to the vendor of the business for the same extended term was assigned to the lessee in return for the payment of the $70,000.
Carr J declined to find that the conduct of the lessor was unconscionable within in TPA s 51AA. His Honour found that the owners of the lessee had 'mortgaged themselves to the hilt' to purchase the business [63]. They were 'dependent upon either the income of the Business or its sale for their financial security and their livelihood to a very substantial extent' [64]. The lease was shortly due to expire [65]. It would have been difficult or impossible to sell the business at a fair or market price or at all without an extended or new lease of the premises for an extended term [66]. It was not practical to relocate the business to different premises and the costs of relocating the business at different premises would, in any event, have been substantial [67]. Had the lease been surrendered there would have been significant adverse financial consequences for the owners of the lessee [69].
Carr J found that the fact that the owners of the lessee had no real choice but to meet the demanded payment or suffer a far greater loss, put them in a position of special disadvantage [72]. His Honour further found that the lessors 'had a particularly good appreciation of all the main circumstances which gave rise' to the lessees special disadvantage [76]. The question of whether the conduct of the lessor was unconscionable had to be judged in its context, which includes matters which bear on the question of the degree of special disability [89]. His Honour observed that 'it is helpful, when assessing particular conduct in particular circumstances, to keep in mind that if there is a scale by which to measure unreasonable behaviour by one person towards another, unconscionability is towards the extreme end of that scale' [83].
Carr J declined to find that unconscionable conduct had been established. In forming this view, the factors considered by his Honour included [90] ‑ [99]:
(a)that the owner of the lessee was 'reasonably well versed in commercial matters';
(b)that both sides had legal advice;
(c)that each side knew that the lessor was in a far stronger position legally than the lessee;
(d)that it was the lessee's neglect to exercise the option which brought about the situation; and
(e)the fact that a refusal to permit an option to be exercised out of time would not in itself be the subject of a complaint at law or in equity in the absence of other conduct.
Another factor considered was the fact that the lessor structured the deal to defeat the object of the CTRSA prohibition on demanding 'key money'. On this, Carr J stated [93]:
The applicant relied to some extent on the fact that the respondents adopted the device of substituting the first respondent for them as a 'statutory vehicle to overcome the unlawful conduct in the imposition' of the requirement to pay $70,000. That is, they took measures to defeat the object of the State Act which was designed to protect tenants from what the applicant described as 'this form of predatory conduct'. I accept that this is a relevant factor i.e. that initially the respondents made an agreement which was illegal under the State Act. They re-structured the arrangement in a manner which suited their purposes, but the extraction of the $70,000 payment was the sort of mischief which the State Act was intended to prohibit. The circumstance that the scheme was probably not in contravention of the State Act does not, in my view, preclude the Court from having regard to its character as a device to achieve legally what they had previously bargained to obtain illegally. I take this factor into account as a matter weighing against the respondents, but in my opinion, it does not sufficiently tip the scales on the question of unconscionability.
In Tanzone the lessee was the Westpac Banking Corporation. The lease to Westpac contained an error in the rent review clause that was significantly in favour of the lessor. The then current lessor acquired the premises some eight years after the lease with the error was initially executed with a predecessor in title. At the time of acquisition it knew of the mistake. The essence of the unconscionable conduct alleged was the lessor taking title with notice of the mistake then taking advantage of the mistake by seeking to strictly enforce the lease against Westpac. Windeyer J observed that it is 'very difficult to conceive how a major financial institution can be in a position of special disadvantage of the sort generally required to bring entitlement to relief for unconscionable conduct' [55]. His Honour was not persuaded that there was unconscionable conduct. His Honour did observe that unconscionable conduct often involves the insistence upon legal rights 'to take the benefit of another's vulnerability in a way that is unreasonable and oppressive to an extent that offends ordinary minimum standards of fair dealing': [55] quoting from Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, 441. However, this was not established on the facts of the case.
Counsel for the Falkinghams submitted that the special disadvantage that they were under would have been sufficiently evident to raise the possibility of their being under a special disadvantage in the mind of a reasonable person. That being so, it was said that the onus shifts to Port Kennedy to establish that the transaction was fair, just and reasonable.
This submission relies on two passages from the decision in Amadio. The first is from the reasons of Mason J (467 ‑ 468):
… if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same.
The knowledge of Mr. Virgo [the relevant bank manager] was the knowledge of the bank. Whether we treat Mr. Virgo as having knowledge of the possibility already discussed or as having knowledge of facts which would raise that possibility in the mind of any reasonable person the inevitable conclusion is that the bank was guilty of unconscionable conduct by entering into the transaction without disclosing such facts as may have enabled the respondents to form a judgment for themselves and without ensuring that they obtained independent advice.
The second is from the reasons of Deane J ((474), references omitted):
The jurisdiction of courts of equity to relieve against unconscionable dealing developed from the jurisdiction which the Court of Chancery assumed, at a very early period, to set aside transactions in which expectant heirs had dealt with their expectations without being adequately protected against the pressure put upon them by their poverty …. The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: 'the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract' …
The Falkinghams do not have to show a defence on the balance of probabilities, but it must at least show cause as to why there is an arguable defence: Field Camp Services [4]. In my view, for six reasons the defence of unconscionable conduct pleaded, and supported in the affidavits before me, is not arguable.
The first reason is that there is no evidence (nor submission) in the materials before me to the effect that the Falkinghams were under any commercial pressure or imperative to enter into either the offer to lease or the Lease. This was a significant, though ultimately insufficient, factor in both Berbatis and Samton. The Falkinghams were entirely free to either enter the agreement to lease the Premises or not.
The second reason is that this is not a case in which the 'special disadvantage' required to found unconscionable conduct is based on the prior relationship between the parties. The parties were at arms‑length in a commercial transaction. There were none of the characteristics of vulnerability identified in Amadio, in which Deane J summarised the position of the Amadios in the following terms (477):
… the result of the combination of their age, their limited grasp of written English, the circumstances in which the bank presented the document to them for their signature and, most importantly, their lack of knowledge and understanding of the contents of the document was that… they lacked assistance and advice where assistance and advice were plainly necessary if there were to be any reasonable degree of equality between themselves and the bank.
Neither is there in the present case the emotional attachment and dependency found in Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 [122].
Counsel for the Falkinghams submitted that Port Kennedy was in a superior bargaining position vis-à-vis the Falkinghams. There is no evidence to support this assertion. As I have already observed, the Falkinghams were entirely free to either enter the offer to lease the Premises or not. This gave them at least as much bargaining power as Port Kennedy. There was not even any evidence to the effect that the Falkinghams were relatively inexperienced in business matters compared the experience of agents and officers of Port Kennedy. More significantly, there is also no evidence to the effect that the conduct of the officers or agents of Port Kennedy was 'exploitative or oppressive': Permanent Mortgages [230].
The Falkinghams do say that they did not obtain legal advice regarding the proposed lease. A 'lack of assistance or explanation when assistance or explanation is necessary' may found the necessary 'special disadvantage': Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 405, 415; Bridgewater [38]. However, beyond the requirement in the CTRSA to provide a disclosure statement, there is nothing in the material before me suggesting that other assistance or explanation was necessary. On the Falkingham's own evidence, there was a period of some two months between when the offer to lease was singed and the Lease was signed. During this period there was negotiation around the terms of the Lease (see paragraph 15 of Mr Falkingham's affidavit). It was not suggested that the Falkinghams did not have an opportunity to obtain legal advice during that period. Nor was it suggested the Falkinghams were prohibited in any way from obtaining legal advice prior to executing the offer to lease. Looking at all the material before me, there is no evidence which, if accepted at trial, could found the basis for the conclusion that the Falkinghams were under a weakness which seriously affected their ability to make a judgment as to their own best interests or that they were unable to judge for themselves whether to enter into the offer to lease and ultimately the Lease: Amadio (462); Bridgewater [40]; Permanent Mortgages [224]. It is thus not arguable that they were under a 'special disadvantage'. This being so, it follows that prerequisites identified by Deane J in Amadio (474) and set out above [63] are not established so as to shift the onus to Port Kennedy to show that the transaction was fair, just and reasonable.
The third reason is that the conduct complained of by the Falkinghams in February 2010 – Port Kennedy's agent proceeding to execute the Lease immediately upon finding out that the Falkinghams had not obtained legal advice – occurred after execution of the offer to lease in November 2009. The offer to lease is annexed to Mr Falkingham's affidavit. It contained an obligation on Cane Fire to execute a lease (cl 25) and on the Falkinghams to execute the lease as guarantors (cl 31). There is no evidence, nor any submission, to the effect that there was any conduct of an agent or officer of Port Kennedy which could be said to be unconscionable in relation to the entry into of the offer to lease in November 2009.
The fourth reason is that there is nothing in the evidence (or submissions) before me to the effect that the Lease contained any term that was harsh, unusual or even uncommercial. For example, there is no basis for a conclusion that the Lease was 'an improvident transaction which was neither fair nor just nor reasonable' as was the case in Bridgewater [121]. Even then, in Tanzone [34] the existence of a term which gave rise to 'extraordinary results' due to a mistake was not sufficient to give rise to unconscionable conduct. The practice of requiring the directors of a corporate lessee to guarantee the obligations of the lessee is a very common commercial practice. Even if there was an onus on Port Kennedy to show that the transaction was fair, just and reasonable, on the materials before me, I am satisfied that it would be able to do so.
The fifth reason is that there is nothing in the evidence (or submission) before me stating what information the Falkinghams would have received in the disclosure statement which they were otherwise unaware of. For example, they did not argue that there was a significant piece of information which they would have received in the disclosure statement which would have caused them not to have proceeded with the Lease, having already executed the offer to lease. All that Mr Falkingham states is that the receipt of the relevant information 'could have resulted in us not proceeding with the letting' of the Premises. Mrs Falkingham's evidence is to the same effect. Likewise, neither was it asserted that agents or officers of Port Kennedy deliberately withheld certain materially adverse information which would have otherwise been disclosed in the disclosure statement.
The sixth reason is that the failure by Port Kennedy to provide Cane Fire with the disclosure statement required by CTRSA s 6 gave them the right to terminate the Lease. This right had to be exercised within six months of the date on which the lease was entered into: CTRSA s 6(1)(a). Cane Fire did not exercise this right. I am not told why not. I am not told when the Falkinghams first became aware of the existence of this right. The fact that there is a statutory remedy which was available to Cane Fire (and to the benefit of the Falkinghams) which could have been, but was not, exercised to completely remedy the conduct said to have been unconscionable, is a factor against the finding that the conduct of Port Kennedy was, in all the circumstances, unconscionable. Cane Fire had the benefit of a statutory right to terminate the Lease which could have been used to address any perceived unconscionable, or even unfair or uncommercial, conduct by Port Kennedy.
I am therefore of the view that the defence of unconscionable conduct pleaded, and supported in the affidavits before me, is not arguable. Given this finding, I do not need to deal with the remaining issue, namely whether the manner in which this defence is pleaded is deficient.
What final orders are appropriate?
In my view the Falkinghams have not discharged the evidential burden upon them to show, 'with respect to the claim … that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim': RSC O 14 r 3(1); Morgan [4].
I am satisfied that the defences of illegality and unconscionable conduct are so clearly untenable that they cannot possibly succeed: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 25; (1964) 112 CLR 125, 129 ‑ 130; Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209 [113].I have the high degree of certainty about the ultimate outcome of the case required by the High Court in Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57], where Gaudron, McHugh, Gummow and Hayne JJ observed (reference omitted):
It is, of course, well accepted that a court whose jurisdiction is regularly invoked in respect of a local defendant (most often by service of process on that defendant within the geographic limitations of the court's jurisdiction) should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways ... but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.
These observations were accepted in Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 [46] (Gleeson CJ, Gummow, Hayne and Crennan JJ).
The overall legal burden of persuasion to establish that summary judgment is warranted is on Port Kennedy as applicant: Morgan [4]. It has discharged that burden.
There is nothing in the evidence or submissions before me suggesting that anything less than an unconditional judgment should be entered.
My preliminary view of the appropriate orders is:
1.the plaintiff have leave to bring the application for summary judgment filed 12 April 2013;
2.there be judgment for the plaintiff against the defendants in the amount of $165,531.25; and
3.the defendants pay the plaintiffs' costs of the action to be taxed if not agreed.
I will hear from counsel as to the final form of the orders and costs (including any reserved costs).
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