Randazzo Investments (Mitchell Centre) Pty Ltd v Chatime Leasing Pty Ltd
[2023] NTSC 70
•17 August 2023
CITATION:Randazzo Investments (Mitchell Centre) Pty Ltd v Chatime Leasing Pty Ltd [2023] NTSC 70
PARTIES:RANDAZZO INVESTMENTS (MITCHELL CENTRE) PTY LTD
(ACN 095 882 090)
v
CHATIME LEASING PTY LTD
(ACN 154 866 903)
TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION: SUPREME COURT exercising Territory Jurisdiction
FILE NO:2022-01107-SC
DELIVERED: 17 August 2023
HEARING DATES: 22 March and 18 April 2023
JUDGMENT OF: BROWNHILL J
CATCHWORDS:
CIVIL PROCEDURE – Summary disposal – Judgment for plaintiff – Principles to be applied in summary judgment applications – Where defence on basis of failure to mitigate loss – Where plea of unconscionable conduct – Where counterclaim alleging misleading and deceptive conduct causing sublease to be entered – Whether reasonable prospects of success – Not satisfied the defences and counterclaim have no reasonable prospects of success – Application for summary judgment dismissed
Agar v Hyde (2000) 201 CLR 552; Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; Boyer v Warbey (1953) 1 QB 234; Brooks v Young (2018) 131 SASR 365; Civil & Civic Pty Ltd v Pioneer Concrete (NT) Pty Ltd (1991) 1 NTLR 43; De Landgrafft v Brown (1993) 9 SR (WA) 236; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; General Steel Industries Inc v Commissioner for Railways (N.S.W) (1964) 112 CLR 125; Hibiscus Shoppingtown Pty Ltd v Woolworths (Q’Land) Ltd (1993) 113 FLR 106; House v Diamond Leisure Pty Ltd [1987] NTSC 6; Hurley v McDonald’s Australia Ltd (2000) ATPR 41-741; Kiddle Investments Pty Ltd v YAJM Vegan Pantry Pty Ltd [2022] QDC 082; Kiranou v Black [2020] NTSC 60; Maridakis v Kouvaris (1975) 5 ALR 197; Mills v Walsh [2022] NSWCA 255; Musca v Astle Corporation Pty Ltd (1988) 80 ALR 251; Papale v Wilmar Sugar Australia Ltd [2017] QSC 72; Progressive Mailing House v Tabali (1985) 157 CLR 17; Sportsbet Pty Ltd v Moraitis [2010] NTSC 24; Stacks Managed Investments Ltd v Tolteca Pty Ltd [2015] QSC 276; Territory Loans Management v Turner (1992) 110 FLR 341; Vickers & Vickers v Stichtenoth Investments Pty Ltd (1989) 52 SASR 90; White and Carter (Councils) Ltd v McGregor [1962] AC 413; Wilson v Union Insurance Company (1992) 112 FLR 166, referred to
Australian Consumer Law (NT) ss 2, 4, 18, 238, 243
Business Tenancies (Fair Dealings) Act 2003 (NT) ss 79, 134
Competition and Consumer Act 2010 (Cth) s 139G, sch 2
Consumer Affairs and Fair Trading Act 1990 (NT) ss 26, 27, 31
Supreme Court Rules 1987 (NT) rr 22.01, 22.06
REPRESENTATION:
Counsel:
Plaintiff:R Sanders
Defendant:S Temby
Solicitors:
Plaintiff:HWL Ebsworth Lawyers
Defendant:Maddocks Lawyers
Judgment category classification: B
Judgment ID Number: Bro2313
Number of pages: 26
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINRandazzo Investments (Mitchell Centre) Pty Ltd v Chatime Leasing Pty Ltd [2023] NTSC 70
No. 2022-01107-SC
BETWEEN:
RANDAZZO INVESTMENTS (MITCHELL CENTRE) PTY LTD
(ACN 095 882 090)
Plaintiff
AND:
CHATIME LEASING PTY LTD
(ACN 154 866 903)
Defendant
CORAM: BROWNHILL J
REASONS FOR JUDGMENT
(Delivered 17 August 2023)
There are two interlocutory applications before the Court. They are:
(a)an application by the defendant (‘Chatime Leasing’) filed on 31 August 2022 seeking:
(i)leave to extend the time for Chatime Leasing to file and serve a defence and counterclaim in the form served on 21 March 2023 to that date; and
(ii)leave to add Chatime Australia Pty Ltd (ACN 136 677 453) (‘Chatime Australia’) as the second plaintiff to the counterclaim; and
(b)an application by the plaintiff (‘Randazzo’) filed on 9 September 2022 seeking summary judgment[1]:
(i)for a liquidated debt in the amount of $223,962.45 plus pre-judgment interest (to the date of the first tranche of the hearing, the amount of interest claimed was $71,235.47), as claimed in paragraph 26 of the statement of claim;
(ii)for damages to be assessed under the heads of costs to make good the premises, lost rent, lost outgoings and lost promotional levies, as claimed in paragraphs 21 and 23 of the statement of claim; and
(iii)for post-judgment interest at 14.99% per annum, as claimed in paragraphs 7.11, 15, 16 and paragraph 5 of the prayer for relief of the statement of claim.
Randazzo’s summons also seeks an opportunity to be heard in relation to its claim for indemnity costs. It is proposed for that to occur after the assessment of damages.
Brief background and procedural history
The following facts are not in dispute.
Randazzo is the lessee of the Mitchell Centre, a retail and commercial building in Mitchell Street which includes Coles, various specialty stores and other tenancies. On around 11 April 2018, Randazzo and Chatime Leasing entered into a written sublease (‘Sublease’) of a shop in the Mitchell Centre known as Shop T32 (‘Premises’). On 9 May 2018, the Sublease was registered. The Sublease was for a term of seven years commencing on 1 April 2017. The Sublease contains terms obliging Chatime Leasing to:
(a)pay rent in monthly instalments on the first day of each month, with the base rent being $43,000 per annum, and the rent increasing by 5% on 1 May each year of the term;
(b)pay Randazzo’s estimate of the amounts to be contributed by Chatime Leasing in respect of outgoings to be incurred by Randazzo in operating the Mitchell Centre by monthly payments on the first day of each month, with an adjustment at the end of each accounting period to reflect the operating expenses actually incurred in that period;
(c)pay outgoings associated with Chatime Leasing’s occupation and use of the Premises;
(d)keep the Premises open for trade during specified trading hours;
(e)become a member of a promotional fund established by Randazzo and pay each year a financial membership amount equal to or less than 5% of the rent payable by Chatime Leasing;
(f)pay to Randazzo the GST payable on any taxable supply under the Sublease; and
(g)pay interest on demand on any monies not paid to Randazzo within five business days of the due date, the interest being 2% above the highest credit card rate charged by the NAB.
The Sublease provided that:
(a)Chatime Leasing was in default of an essential term if: (i) it failed to pay any money due to Randazzo within five business days of the due date; or (ii) it failed to carry on business at the Premises or open the Premises for trade during the specified trading hours.
(b)If Chatime Leasing was in default of an essential term of the Sublease, it was deemed to have repudiated the Sublease and Randazzo could: (i) terminate the Sublease and re-enter and take possession of the Premises; and/or (ii) sue Chatime Leasing for damages, notwithstanding that Chatime Leasing may have abandoned or vacated the Premises.
(c)For the purpose of assessing damages, Randazzo was entitled to receive the rent for the whole of the term of the Sublease, after deducting any rent received from any other sublease of the Premises during the remaining period of the term.
(d)On termination of the Sublease, Chatime Leasing must remove from the Premises all fixtures, fittings and stock-in-trade and make good any damage to the Premises by such removal.
(e)On termination of the Sublease before expiry of the term, Chatime Leasing must repay Randazzo a proportion of the fit out costs on a pro rata basis for the proportion of the term left to run.
Chatime Leasing took possession of the Premises and a retail bubble tea outlet was operated at the Premises. In about October 2018, without giving notice to Randazzo, the business ceased trading from the Premises, rent was no longer paid and the other obligations under the Sublease were no longer performed. Randazzo continued to issue invoices to Chatime Leasing for the amounts falling due under the Sublease.
On 28 March 2022, Randazzo issued Chatime Leasing with a notice of termination and notice to quit, citing Chatime Leasing’s repudiation of the Sublease by breaches of essential terms. The notice to quit required Chatime Leasing to remove its chattels, fixtures and fittings and make good any damage within 10 business days. Chatime Leasing did not do so.
On 29 April 2022, Randazzo filed a writ and statement of claim seeking damages from Chatime Leasing for breach of the terms of the Sublease. Liquidated damages claimed are amounts of unpaid rent, outgoings and promotional fund contributions, plus interest, for the period from 1 May 2019 to 1 March 2022, and the pro-rata fit out costs contribution. Unliquidated damages claimed are unpaid rent, outgoings and promotional fund contributions for the remainder of the term of the Sublease from the time Randazzo issued the notice of termination, and make good costs.
Chatime Leasing was required to file and serve its defence and any counterclaim by 27 July 2022. On 31 July 2022, Chatime Leasing’s solicitors provided a draft of its defence and counterclaim to Randazzo’s solicitors, seeking Randazzo’s consent to a further extension of time to file and serve it. That version of the defence and counterclaim did not refer to Chatime Australia or include it as a party. Randazzo’s solicitors declined that consent on the basis of defects in the proposed pleading. On 12 August 2022, Chatime Leasing’s solicitors sought consent from Randazzo for a further extension of time on the basis that it had only just become aware that the trading entity in the Premises was not Chatime Leasing, but Chatime Australia. On 19 August 2022, Chatime Leasing’s solicitors provided a further draft of the proposed defence and counterclaim, which added Chatime Australia as a plaintiff to the counterclaim, seeking Randazzo’s consent to an extension of time for it to be filed. Randazzo did not consent.
The parties then filed their respective summonses.
By the proposed defence and counterclaim, Chatime Leasing essentially admits that it entered the Sublease, that the Sublease contained the pleaded obligations, that Chatime Leasing did not comply with those obligations, that it did not pay the amounts claimed by Randazzo and that it vacated the Premises as Randazzo alleges. However, on the basis of what is pleaded in the counterclaim, Chatime Leasing denies that it was bound by the obligations in the Sublease, denies that it owes any of the amounts claimed and says, if it does, those are to be set-off by the amounts claimed in the counterclaim. It also pleads that: (a) Randazzo failed to mitigate its losses by failing to terminate the Sublease from the time it became aware that Chatime Leasing abandoned the Premises in October 2018; and (b) alternatively, by failing to terminate the Sublease in October 2018, and not doing so until March 2022, it engaged in unconscionable conduct in breach of s 79 of the Business Tenancies (Fair Dealings) Act 2003 (NT).
By the proposed counterclaim, Chatime Leasing and Chatime Australia (together ‘Chatime’) allege that:
(a)Chatime Leasing and Chatime Australia were part of the Chatime corporate group and were jointly managed and operated.
(b)The property manager for the Mitchell Centre, with actual or apparent authority to act as Randazzo’s agent in relation to subleasing the Premises, represented to Chatime in June to November 2016 that ‘major retail food brand’ businesses, including Grill’d, Schnitz and Soul Origin, would be tenants at the Mitchell Centre.
(c)In reliance on those representations, Chatime Leasing made an offer to sublease the premises, granted Chatime Australia a licence to operate a business at the Premises, and Chatime Australia carried out fit out works and commenced trading at the Premises.
(c)Thereafter, the property manager for the Mitchell Centre made a further representation that Soul Origin would be a tenant at the Mitchell Centre.
(d)In reliance on the representations, Chatime Leasing entered into the Sublease.
(e)The representations were made in trade or commerce within ss 2 and 18 of the Australian Consumer Law (NT)[2] (‘ACL’), were with respect to a future matter within s 4 of the ACL, and were made without reasonable grounds in that none of the identified prospective tenants became tenants of the Mitchell Centre.
(f)The representations constituted misleading and deceptive conduct in contravention of s 18 of the ACL.
(g)If not for the misleading and deceptive conduct, Chatime Leasing would not have offered to sublease the Premises or entered into the Sublease and Chatime Australia would not have carried out the fit out works or commenced trading.
(h)The misleading and deceptive conduct caused Chatime to suffer loss and damage, particularised as trading losses incurred by Chatime Australia, and fit out costs incurred by Chatime Australia, totalling $537,120.26.
Chatime claims an order setting aside the Sublease pursuant to s 238 of the ACL and/or damages, interest and costs.
The application for summary judgment
It is convenient to deal first with the application for summary judgment. However, it is convenient to do so on the assumptions that the proposed defence and counterclaim is filed and Chatime Australia is joined as the second plaintiff to the counterclaim. That is because Randazzo’s opposition to the late filing and service of the proposed defence and counterclaim and the addition of Chatime Australia as a party was founded on its position in relation to its summary judgment application.
Summary judgment is provided for in Rule 22.01 of the Supreme Court Rules 1987 (NT) (‘SCR’), which provides that the Court may give judgment for one party against another in relation to the whole or any part of a proceeding if (relevantly) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of it. SCR 22.06(1) permits the Court to dismiss the application, or give such judgment for the plaintiff as is appropriate having regard to the nature of the relief claimed, unless the defendant satisfies the Court that (relevantly) a question ought to be tried or there is some other reason to proceed to trial.
The authorities in relation to applications for summary judgment are well known.[3] In Sportsbet Pty Ltd v Moraitis, Southwood J summarised the principles as follows:[4]
The substance of the criterion to be applied is that, after the matter involved has been explained to the Judge, there must be a real uncertainty as to the plaintiff’s right to judgment. The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.
A burden is cast on the defendant of satisfying the Court that there ought to be a trial and, if not, judgment. The provisions of O 22 of the Supreme Court Rules apply to cases where there can be no reasonable doubt that a plaintiff is entitled to judgment.
His Honour went on (at [12]) to elaborate on the relevant principles. Those that are relevant to this case are as follows:
1.The Court will give the plaintiff judgment unless the defendant shows cause against the application to the satisfaction of the Court, by affidavit or otherwise.
2.A defendant will be granted leave to defend if there are facts which, if true, would constitute a defence to the plaintiff’s claim. The Court is reluctant to try a case on affidavit where there are facts in dispute.
3.An important issue is whether the defendant’s account of the facts has sufficient prima facie plausibility to merit further investigation, whether of fact or law.
4.The Court will normally require an affidavit by or on behalf of a defendant before a defendant will be granted leave to defend. The defendant is required to use such diligence as is reasonable in the circumstances to put before the Court in a summary form all of the evidence relied on by the defendant in defence of the plaintiff’s claim.
5.A defendant should condescend into particulars. The evidence of the defendant must deal specifically with the facts relied upon by the plaintiff in support of its application. The affidavit of the defendant should state clearly and concisely what facts are relied on as supporting the defence.
In Brooks v Young (2018) 131 SASR 365, Doyle J stated (at [35]):
The nature of the test is such that it will not ordinarily be appropriate to determine a matter summarily where the outcome is likely to turn upon contested issues of fact. Similarly, it will not ordinarily be appropriate to resolve complex or unsettled issues of law on a summary judgment application, at least not where their determination may be bound up in contested issues of fact.
As set out above, Chatime defends Randazzo’s claims essentially on the bases of Randazzo’s failure to mitigate its loss and the counterclaim, which alleges misleading and deceptive conduct causing Chatime to enter into the Sublease and trade from the Premises. Randazzo argues that Chatime’s defences have no reasonable prospect of success.
Duty to mitigate loss
Traditionally at common law, a landlord’s duty to mitigate loss does not arise until the lease is terminated, and does not require the landlord to terminate the lease.[5]
Chatime relies on s 134 of the Business Tenancies (Fair Dealings) Act 2003 (NT) (‘BTFDA’), which provides as follows:
134 Mitigation of damages for breach of lease
The rules under the law of contract relating to mitigation of loss or damage upon breach of a contract apply in relation to a breach of a business lease.
Randazzo argues that s 134 simply preserves the traditional common law position as it relates to a landlord’s duty to mitigate loss. Chatime argues that s 134 should be construed as importing, not the common law duty to mitigate as it relates to landlords, but the common law duty to mitigate as it relates to contracts generally, so as to have the effect that, in relation to business leases, a landlord’s duty to mitigate loss arises on a tenant’s abandonment of the Premises rather than on termination of the lease as the traditional common law rule provides.
Chatime referred to the decision of the Supreme Court of South Australia in Vickers & Vickers v Stichtenoth Investments Pty Ltd (1989) 52 SASR 90 (‘Vickers’), in which Bollen J held that the ordinary common law duty of a contracting party to mitigate loss upon a breach of that contract by the other party applied, by operation of the common law, to the landlord of a commercial lease once the tenant had abandoned the lease. Bollen J relied on observations by members of the High Court in Progressive Mailing House v Tabali (1985) 157 CLR 17, which his Honour construed as the Court expressing the opinion that the ordinary principles of contract law apply generally to leases, notwithstanding that leases are interests in land (that being the rationale for the traditional common law rule about mitigation of loss by a landlord). His Honour also cited an article advocating legislative intervention to remove ‘the injustices caused to tenants’ by the traditional common law rule that there is no duty on a landlord to mitigate loss. His Honour held that it follows from that High Court decision that all ordinary principles of contract law, including mitigation of damage, apply to leases with the effect that when a tenant abandons the leased premises, the landlord is under a duty to take reasonable steps to mitigate his loss by seeking another tenant (noting that circumstances may make it impossible or impractical for the landlord to do that).
Chatime argues that, properly construed, consistently with its objects of enhancing the certainty and fairness of retail shop leasing arrangements between landlords and tenants, s 134 of the BTFDA has the effect of removing the ‘injustices caused to tenants’ from the traditional common law position that landlords have no duty to mitigate loss, by applying all ordinary principles of contract law, including mitigation of loss, to the leases the subject of the BTFDA.
Randazzo argues that subsequent decisions show that the decision in Vickers has been doubted and not followed,[6] or have held it to have been wrongly decided.[7] Randazzo also argues that the BTFDA provides other remedies to a tenant, such as assignment of the lease which a landlord cannot unreasonably refuse, and this indicates that Chatime’s construction of s 134 is wrong.
In its terms, s 134 of the BTFDA contains a constructional choice. Its terms can be read both of the ways pressed by the parties. None of the authorities referred to by the parties dealt with the effect of a statutory provision the terms of which could be read as applying to leases the ordinary principles of general contract law, including the principles relating to mitigation of loss or damage upon breach.
Chatime argues that there is no decision from this Court which addresses the operation and effect of s 134 of the BTFDA. Given the constructional choices s 134 provides, its operation and effect is an unsettled issue of law involving the proper construction of that provision. To my mind, it is not clear that there is no real question to be tried on this issue. Cognizant of the great care required when exercising the power to grant summary judgment, I am not satisfied that Chatime Leasing’s defence based on Randazzo’s duty to mitigate loss has no reasonable prospect of success.
Unconscionable conduct
Randazzo argues that Chatime Leasing’s claim of unconscionable conduct has no reasonable prospect of success because there is nothing unfair in a landlord requiring a tenant who has abandoned the leased premises to comply with the obligations under the lease, let alone anything which reaches the threshold of unconscionable conduct, which requires a high level of moral obloquy, something clearly unfair or unreasonable, or actions showing no regard for conscience or irreconcilable with what is right or reasonable, importing a pejorative moral judgment.[8]
Chatime argues that the test for unconscionable conduct under the BTFDA is the same as that under the ACL, and that it does not involve the very high threshold which the authorities relied on by Randazzo might suggest.
In Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133, the Full Court of the Federal Court undertook a review of recent authority as to the concept of ‘unconscionability’ under the ACL. Their Honours observed (at [87]-[89]) as follows:
… As the Full Court said in National Exchange 148 FCR 132 at [33], unconscionable conduct ‘on its ordinary and natural interpretation, means doing what should not be done in good conscience’. The words ‘unconscionable’ and ‘conscionable’ may not be frequently used in everyday parlance, but they have an ordinary meaning, derived from the inner human sense of doing right. At least some of the human values that inform an Australian business conscience were set out in Paciocco 236 FCR 199 at [296]. …
As the Full Court said in Unique 266 FCR 631 at [155], an allegation of unconscionability is a serious allegation. It is sufficient to warrant censure for the purpose of deterrence by the imposition of a civil penalty. Being penal in character tends against too loose or diffuse a construction … That assists in recognising an element of seriousness of the finding and the quality of the departure from the relevant standards of conduct that is required. As the Full Court said in Unique at [155]:
… To behave unconscionably should be seen, as part of its essential conception, as serious, often involving dishonesty, predation, exploitation, sharp practice, unfairness of a significant order, a lack of good faith, or the exercise of economic power in a way worth [sic] of criticism. None of these terms is definitional. The Shorter Oxford Dictionary on Historical Principles (1973) gives various definitions including ‘having no conscience, irreconcilable with what is right or reasonable’. The Macquarie Dictionary (1985) gives the definition ‘unreasonably excessive; not in accordance with what is just or reasonable’. (The search for an easy aphorism to substitute for the words chosen by Parliament (unconscionable conduct) should not, however, be encouraged: see Paciocco at [262]). These are descriptions and expressions of the kinds of behaviour that, viewed in all the circumstances, may lead to an articulated evaluation (and criticism) of unconscionability. It is a serious conclusion to be drawn about the conduct of a business person or enterprise. It is a conclusion that does the subject of the evaluation no credit. This is because he, she or it has, in a human sense, acted against conscience. The level of seriousness and the gravity of the matters alleged will depend on the circumstances. Courts are generally aware of the character of a finding of unconscionable conduct and take that into account in determining whether an applicant has discharged its civil burden on proof. [Emphasis added by the Court in Quantum Housing]
As the Chief Justice sought to explain in Paciocco 236 FCR 199 especially at [296]-[299] and [304]-[306] the values and considerations that inform the answer to a question whether conduct is against business conscience will be drawn from the values and considerations that one finds in the text, structure and context of the statute, in particular those in s 22, from statutes relevant to consider in the context of the conduct in question …, and from the informing norms of equity and the common law, many of which need no restating by any Parliament, nor by any honest business person to another in their dealings. The Chief Justice sought to set some of these out in Paciocco 236 FCR 199 at [296]-[298]. These are not considerations outside the statute. They are basal values and considerations of equity and the common law in which the statute sits. Most are matters which honest business people understand and do not need expressly to require of each other (Paciocco at [296]):
The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing …
Randazzo relied on the decision of the Full Court of the Federal Court in Hurley v McDonald’s Australia Ltd (2000) ATPR 41-741 (‘Hurley v McDonald’s’), in which the Court dismissed an application for leave to appeal from a decision refusing leave to the applicants to amend their statement of claim to add a claim of unconscionable conduct. The Court held that the proposed claim could not succeed because it involved nothing more than an allegation that the respondent relied on the terms of the contract. The Court acknowledged (at [29]) that, having regard to particular circumstances, it would be unconscionable for one party to insist upon the strict enforcement of the terms of a contract, but held there was no allegation of any such circumstances in the proposed pleading.
The present proposed pleading refers to Randazzo’s awareness in October and November 2018 that trading had ceased at the Premises, and Randazzo’s failure to terminate the Sublease or seek to resume possession of the Premises until March 2022, and says further particulars may be provided prior to trial. Chatime argues that it is not presently in a position to know what steps, if any, Randazzo took to seek out other tenants for the Premises. It argues that, if none were taken, over that extensive period of time, with the intention of simply keeping Chatime Leasing to its obligations under the Sublease, it is at least arguable that this constituted unconscionable conduct. Chatime further argues that it should have the opportunity, through the usual pre-trial processes of discovery, etc, to obtain evidence about Randazzo’s actions and motivations in relation to re-letting the Premises and terminating the Sublease when it did.
While Randazzo seeks to rely on the terms of the Sublease in its case against Chatime, which appear to oblige Chatime Leasing to pay rent, outgoings and other costs up to the end of the seven year term, the period between Randazzo’s awareness that the Premises had been abandoned and Randazzo’s termination of the Sublease was three years and four months. That circumstance distinguishes the present case from the circumstances in Hurley v McDonald’s. Given that period of time, that the steps (if any) taken by Randazzo to re-let the Premises are not within the knowledge of Chatime, and the nature of the concept of unconscionable conduct as set out in paragraph [30] above, to my mind, it is not clear that there is no real question to be tried about the allegation of unconscionable conduct. I am not satisfied that Chatime’s proposed plea of unconscionable conduct has no reasonable prospect of success.
Chatime’s counterclaim
Randazzo argues that the action pleaded on the counterclaim is an action that belongs to Chatime Australia so it cannot provide a defence to the action against Chatime Leasing.
Chatime argues that the plea on the counterclaim includes that Chatime Leasing relied on the alleged misleading and deceptive conduct by Randazzo’s agent when it entered into the Sublease, which it would not have done but for that misleading and deceptive conduct, that the counterclaim seeks a declaration that the Sublease be set aside pursuant to s 238 of the ACL, and that if the Sublease was set aside, Chatime Leasing would have no liability to Randazzo under its terms.
Section 238 of the ACL provides as follows:
238 Compensation orders etc. arising out of other proceedings
(1) If a court finds, in a proceeding instituted under a provision of Chapter 4 or this Chapter (other than this section), that a person (the injured person) who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of the conduct of another person that:
(a)was engaged in a contravention of a provision of Chapter 2, 3 or 4; or
(b)constitutes applying or relying on, or purporting to apply or rely on, a term of a contract that has been declared under section 250 to be an unfair term;
the court may make such order or orders as it thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
Note:The orders that the court may make include all or any of the orders set out in section 243.
(2)The order must be an order that the court considers will:
(a)compensate the injured person in whole or in part for the loss or damage; or
(b)prevent or reduce the loss or damage.
Section 243 permits orders to be made (relevantly) declaring the whole or any part of a contract made between the respondent and an injured person to be void and, if the Court thinks fit, to have been void ab initio.
Randazzo argues that only Chatime Australia can be the injured person in s 238(1), and s 238(2) requires that the Court’s order will compensate the injured person (Chatime Australia) or prevent or reduce the injured person’s (Chatime Australia’s) loss or damage. Randazzo argues that only Chatime Leasing was bound to the Sublease, not Chatime Australia, so an order setting aside the Sublease could not compensate Chatime Australia for its loss or damage, or prevent or reduce that loss or damage as required by s 238(2).
As a matter of principle, if Chatime Leasing was misled or deceived into entering into the Sublease, its obligations to make payments under the Sublease would rationally comprise loss or damage within s 238 of the ACL. As Chatime submits, that must be a purpose of the power in the Court under ss 238 and 243 to declare a contract void ab initio, ie to enable the person subject to the contract to be relieved of their obligations under it. Randazzo did not point to any authority that has held to the contrary.
Chatime relied on the decision of Musca v Astle Corporation Pty Ltd (1988) 80 ALR 251 (‘Musca’). In that case, the Federal Court held that a tenant had entered into a shop lease because of misleading and deceptive conduct by the landlord (regarding, inter alia, other tenants taking up leases in the shopping centre), and would not have done so otherwise. The Court both awarded the tenant damages and declared the lease to be void ab initio pursuant to the predecessor to the ACL. The Court held (at 261) that the loss suffered by the applicants was to be ‘assessed by comparing the positions they were in as a result of the misleading conduct with that in which they would have been had the conduct not occurred’. In that case, given the tenant would not have entered the lease without the misleading and deceptive conduct, the tenant’s loss was the net loss of the business calculated by the total expenditure of the business for the period of occupancy, less the income received from the business during that time. In Mills v Walsh [2022] NSWCA 255, the Court observed (at [110]) that the aim of damages for misleading and deceptive conduct is to put the plaintiff in the position in which it would have been had the misrepresentation not been made, so far as monetary compensation can do so. The Court said (at [111]) that, often the plaintiff changed its position by entering into a transaction because of the misrepresentation and, without the misrepresentation, the plaintiff would not have done so. This is called a ‘no transaction’ case and, in such a case, at least prima facie, the applicable measure of damages is the difference between the price paid by the plaintiff in the transaction and the value it received in return. Here, Chatime’s claim is one similar to the award made in Musca, namely its expenses in the business, including those paid to Randazzo under the Sublease, less its trading income.
Randazzo argues that the counterclaim has no reasonable prospects of success because Chatime’s trading losses are not compensable except insofar as they are attributable to the absence of a Grill’d, Schnitz or Soul Origin outlet in the Mitchell Centre. As Chatime submits, that approach fails to consider that the case put by Chatime is a ‘no transaction’ case.
Randazzo argues that the only loss or damage pleaded in the defence and counterclaim is loss or damage suffered by Chatime Australia. However, the pleadings must be read with an acceptance of the principle just described.
Chatime argues that the pleas in the counterclaim referred to in paragraph [35] above, read with the reliance on those pleas in the defence to Randazzo’s action against Chatime Leasing, constitute a plea that Chatime Leasing suffered loss or damage (being the obligations to pay rent, outgoings and other amounts under the Sublease, which it paid or otherwise incurred during the course of the Sublease). It was said that that loss or damage makes Chatime Leasing an injured person within s 238(1) of the ACL.
There is no specific plea in the defence and counterclaim that Chatime Leasing has suffered loss or damage as a consequence of the alleged misleading and deceptive conduct. The defence pleads denials that Chatime Leasing breached the terms of the Sublease on which Randazzo’s claim is based, which denials are made on the basis of the counterclaim, and a denial that Chatime Leasing owes any amounts to Randazzo as pleaded in the statement of claim. The counterclaim pleads that, by reason of the contraventions of s 18 of the ACL (ie, the misleading and deceptive conduct), Chatime (ie, Chatime Leasing and Chatime Australia) has suffered loss or damage. While that loss and damage is particularised by losses incurred by Chatime Australia, the losses include rent, outgoings and make good payments, presumably being those items payable to Randazzo under the Sublease. By the prayer for relief, both Chatime Leasing and Chatime Australia seek an order setting aside the Sublease.
The case Chatime Leasing seeks to make is founded on the matter of principle referred to in paragraph [39] above, it is a ‘no transaction’ case, and the pleading is sufficient to invoke that case. It is sufficiently clear that the loss or damage alleged to be suffered by Chatime Leasing is the obligations to pay money which it has incurred by reason of the Sublease, and which it seeks to resist by having the Sublease declared void. This case is distinguishable from the decision in Kiranou v Black [2020] NTSC 60 relied upon by Randazzo because here, the related entity is (on the assumption made at the outset) a party to the proceedings and, in any event, it is possible to see how the defendant (Chatime Leasing), rather than the related entity (Chatime Australia), could maintain the claim for relief in the form that the Sublease be set aside.
Randazzo argues that Chatime Australia’s loss or damage could sound in compensation under s 238(2)(a), so there would be no warrant for an order setting aside the Sublease under s 238(2)(b) because the only purpose of that order would be to give Chatime Leasing (a separate and distinct entity) a defence to Randazzo’s claims. Randazzo did not point to any authority which has held that, where compensation is an adequate remedy, an order setting aside a contract will not be made. The submission appears to be inconsistent with the decision in Musca referred to above. In any event, for the reasons just stated, I am not satisfied that Chatime Leasing would not be an injured person within s 238 of the ACL.
Further, if, on the basis of Chatime Australia’s claim of loss or damage, the Sublease were declared void ab initio, it is difficult to see how that would not provide Chatime Leasing with a defence. The only other party to the Sublease is Chatime Leasing. If the Sublease is declared void ab initio, it cannot contain the obligations binding on Chatime Leasing upon which Randazzo relies in its claims.
Consequently, I am not satisfied that it is clear that there is no real question to be tried in relation to Chatime Leasing’s defence based on the counterclaim. I am not satisfied it has no reasonable prospect of success.
The promotional fund
In light of the above conclusions, it is neither necessary nor appropriate to award summary judgment in relation to the claim based on the promotional fund. Essentially, Chatime has put Randazzo to proof about the existence of the promotional fund and payments due under the Sublease in relation to it. There are factual disputes about the reliability of the financial records relied on by Randazzo. There is no basis upon which to award summary judgment to Randazzo, given the other live issues in the case. Issues about the promotional fund obligations under the Sublease will be a matter for evidence at the trial.
Joinder of Chatime Australia and filing the defence and counterclaim
Randazzo’s opposition to the relief sought in Chatime’s summons was founded on its position on its summary judgment application. I have found against that position. Consequently, I will grant Chatime the relief sought in its summons.
Disposition
Chatime Leasing’s summons filed on 31 August 2022 is allowed.
Chatime Leasing has leave to file and serve the defence and counterclaim in the form served on 21 March 2023 by that date and Chatime Australia is joined to the proceedings as the second plaintiff by counterclaim.
Randazzo’s summons filed on 9 September 2022 is dismissed.
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[1]The alternative basis of default judgment set out in the summons was abandoned by Randazzo in its written submissions.
[2]The text of Schedule 2 to the Competition and Consumer Act 2010 (Cth) and the regulations made under s 139G of that Act, as in force from time to time, applies as a law of the Northern Territory, referred to as the Australian Consumer Law (NT): ss 26 and 27 of the Consumer Affairs and Fair Trading Act 1990 (NT). The ACL applies to (relevantly) persons carrying on business within the Northern Territory (s 31(1)(a)).
[3]General Steel Industries Inc v Commissioner for Railways (N.S.W) (1964) 112 CLR 125; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Civil & Civic Pty Ltd v Pioneer Concrete (NT) Pty Ltd (1991) 1 NTLR 43; Territory Loans Management v Turner (1992) 110 FLR 341; Hibiscus Shoppingtown Pty Ltd v Woolworths (Q’Land) Ltd (1993) 113 FLR 106; House v Diamond Leisure Pty Ltd [1987] NTSC 6; Wilson v Union Insurance Company (1992) 112 FLR 166.
[4][2010] NTSC 24 at [10]-[11], citing Agar v Hyde (2000) 201 CLR 552 at [57] per Gaudron, McHugh, Gummow and Hayne JJ; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99 per the Court.
[5]See Maridakis v Kouvaris (1975) 5 ALR 197 at 199 per Ward J, citing Boyer v Warbey (1953) 1 QB 234 at 246-247 per Romer LJ; White and Carter (Councils) Ltd v McGregor [1962] AC 413.
[6]De Landgrafft v Brown (1993) 9 SR (WA) 236; Kiddle Investments Pty Ltd v YAJM Vegan Pantry Pty Ltd [2022] QDC 082.
[7]J and S Chan Pty Ltd v McKenzie [1994] ACTSC 1.
[8]See Papale v Wilmar Sugar Australia Ltd [2017] QSC 72 at [124]-[125] per Daubney J, citing Hurley v McDonald’s Australia Ltd (2000) ATPR 41-741 at [22] per Heerey, Drummond and Emmett JJ and Stacks Managed Investments Ltd v Tolteca Pty Ltd [2015] QSC 276 at [80] per Lyons J.
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