The Corporation of the City of Adelaide v India Pty Ltd (ACN 081 406 680)

[2018] SASC 154

Supreme Court of South Australia

(Civil)

THE CORPORATION OF THE CITY OF ADELAIDE v INDIA PTY LTD (ACN 081 406 680) & ANOR

[2018] SASC 154

Judgment of The Honourable Justice Hinton

28 September 2018

LANDLORD AND TENANT - RENT - PROVISIONS AS TO RENT IN AGREEMENT FOR LEASE OR LEASE - RENT REVIEW CLAUSES - DETERMINATION BY REFERENCE TO PRICE INDEX, INCREASE IN BASIC WAGE ETC

LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION

TRADE AND COMMERCE - TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION

A preliminary trial regarding the construction and enforceability of a lease executed between the plaintiff as lessee and first defendant as lessor.

Since 1995 the lease has contained a rent review clause, clause 4(3), which required the annual rent payable to be reviewed annually applying a CPI escalator.

The plaintiff contended that with the introduction of the goods and services tax in 2000 there occurred a spike in the CPI in part due to price exploitation that took place contrary to s 75AU(1) of the Trade Practices Act 1974 (Cth). The consequence was that to apply the escalator was to engage in price exploitation.

Against this background, the plaintiff submitted that clause 4(3) was open to the following constructions:

1. That clause 4(3) be understood as permitting the rent review so far as s 75AU of the Trade Practices Act 1974 (Cth) permitted.

2.      That reference to the “rent payable” in clause 4(3) be read as referring to that which the lessee was lawfully obliged to pay, or, so as not to permit the lessor to take advantage of its own wrong (such wrong being the charging of a rent in contravention of s 75AU);

The plaintiff also contended that, applying the prevention principle, namely, that a party is not to be permitted to take advantage of its own wrong, the lease was illegal and unenforceable.

The first defendant submitted that clause 4(3) must be given its plain, ordinary meaning, and that the consequences of any breach of s 75AU(1) were exhaustively provided for by the Trade Practices Act 1974 (Cth) with the consequence that the prevention principle was inapplicable.

Held:

1.      Clause 4(3) of the lease should be afforded its plain, ordinary meaning.

2.      The prevention principle does not apply to prevent the enforcement of the lease. 

A New Tax System (Trade Practices Amendment) Act 1999 (Cth); A New Tax System (Trade Practices Amendment) Bill 1998 (Cth); A New Tax System (Goods and Services Tax Transition) Act 1999 (Cth); A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 (Cth); Crown Lands Act 1884 (NSW); Mining on Private Lands Act 1894 (NSW); Real Property Act 1886 (SA); Supreme Court Civil Rules 2006 (SA); Trade Practices Act 1974 (Cth), referred to.
Australian Competition and Consumer Commissioner v Baxter Healthcare Pty Ltd (2007) 232 CLR 1; Bradken Consolidated Ltd v Broken Hill Pty Co Ltd (1979) 145 CLR 107; Carlton & United Breweries v Castlemaine Tooheys Ltd (1986) 161 CLR 543; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2014) 251 CLR 640; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; Gnych v Polish Club Ltd (2015) 255 CLR 414; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; Kimberley Securities Ltd v Esber [2008] NSWCA 301; Langley v Foster (1906) 4 CLR 167; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516; Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93; Waugh v Morris [1873] LR 8 QB 202; Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410, considered.

THE CORPORATION OF THE CITY OF ADELAIDE v INDIA PTY LTD (ACN 081 406 680) & ANOR
[2018] SASC 154

Civil

HINTON J.

1. This case concerns the construction of a rent review clause in a lease. The relevant clause provides for a Consumer Price Index (CPI) based review. With the introduction of the Goods and Services Tax (the GST) in 2000 and consequential changes to the taxation system, an opportunity arose for an unscrupulous supplier of goods and services to which the GST applied to exploit those changes by raising prices unreasonably. The Trade Practices Act 1974 (Cth) (TPA) was amended to make such price exploitation unlawful. In this case it is contended that, nonetheless, price exploitation did occur and, further, contributed to a spike in the CPI. The consequence of this, it is said, is that the subsequent CPI-based rent review conducted under the lease has seen that share of the increase in the CPI caused by price exploitation flow on into an increase in rent and has thereafter resulted in a distortion in the calculation of the rent payable under the lease. In such circumstances it is said that the lessor has benefitted, and continues to benefit, from the unlawful price exploitation that contributed to the spike in the CPI. The question that arises is whether, as a matter of construction, the lease permits the lessor to do so, or, the law prevents the lessor from realising such benefit in the application of the rent review clause.

   Background

2. The plaintiff, The Corporation of the City of Adelaide (the Council), is the registered proprietor of land at 7-19 Gawler Place, Adelaide. On that land stands a building comprised of a retail shopping arcade and a multi-storey car park.

3. On 24 August 1973 the Council granted a lease over the land and building to City Development Corporation Pty Ltd for 99 years (the head lease) from and including 1 November 1972.[1] The rent was fixed at $80,000 per annum payable in quarterly instalments for the first 10 years of the lease. On the expiration of the tenth year and thereafter at five-yearly intervals the rent was to be reviewed using a formula set out in the lease the outcome of which turned on the lessee’s net income in the year of review.

   [1]    By reason of subsequent extensions the term of the head lease is 99 years and three days from and including 1 November 1972.

4. On 27 August 1973 City Development Corporation Pty Ltd subleased its interest in the carpark back to the Council for a period of 50 years from and including 1 November 1972 with two options to renew, one for 10 years and the other for 39 years (the carpark under-lease). The rent payable was fixed for the first five years at $200,000 per annum payable in equal monthly instalments each in advance. On the expiration of the fifth year, and thereafter at five-yearly intervals, the rent was to be reviewed on a basis that, similar to the head lease, turned on the lessee’s net profit from the operation of the parking station in the year of review. Further, under the carpark under-lease the Council as sub-lessee was entitled to set off the rent due under the head lease against the rent payable. 

5. As sub-lessee of the car park the Council has at all material times operated the carpark under the registered business name, “UPark”.

6. The Motor Accident Commission was the successor in title to City Development Corporation Pty Ltd in respect of the leasehold interest under the head lease and as sub-lessor under the carpark under-lease.

7. By a Memorandum of Extension of Lease dated 25 September 1995 the carpark under-lease was varied as between the Council and the Motor Accident Commission by, amongst other things, setting the rent at $1.1 million per annum from 1 July 1995 and substituting a new clause 4(3) which required that the rent payable under the car park under-lease be reviewed on 1 July 1996 and thereafter annually on the anniversary of that date. Further the annual rent to be paid for each successive year was to be determined by multiplying the amount of the annual rent payable immediately prior to the review by a fraction the numerator of which was to be the CPI (All Groups) Adelaide index in respect of the previous concluded quarter as at the date of review and the denominator, the same index so published in respect of the equivalent quarter of the immediately preceding year. Thereafter clause 4(3) provided for an alternate method of review and calculation that would only be triggered by the Commonwealth Government ceasing to publish the Consumer Price Index (All Groups) Adelaide index or “if the basis of calculating that Index is changed substantially”. Lastly, the clause contained a proviso requiring that the annual rent determined may not be less than the annual rent paid or payable immediately prior to the review date.

8. In a further Memorandum of Extension of Lease also dated 25 September 1995 the head lease was varied increasing the rent to $220,000 per annum from 1 July 1995 and substituting clause 6 with a rent review provision similar in operation to the new clause 4(3) inserted into the carpark under-lease.

9. On 29 February 2000, with the consent of the Council, the Motor Accident Commission assigned its interest in the head lease and the carpark under-lease to the first defendant, India Pty Ltd (India).[2] India paid $200,000 to the Council in consideration for the Council’s agreement to the assignments.

   [2]    By reason of subsequent extensions the term of the carpark under-lease is 50 years and three days from and including 1 November 1972.

10. That same day, 29 February 2000, the Council, India and Macquarie Australia Securities Limited (Macquarie) executed a consent deed. That deed facilitated the grant of a mortgage to Macquarie by India over the whole of the interest held by India in the head lease and carpark under-lease for the purpose of securing the repayment of money advanced by Macquarie to India.

11. In the light of the consent deed consequential amendments were made to the head lease and carpark under-lease. One such amendment was to change the index subject of clause 4(3) from the CPI (All Groups) Adelaide index to the CPI (All Groups) Eight Capital Cities index.

12. At all material times since 1 March 2000 India has been the sub-lessor of the building and car park and the Council the sub-lessee. India is also the trustee of the Jade Investment Trust and it is in that capacity that it has carried on business as sub-lessor of the carpark and lessor of the tenancies in the building.

13. In March 2016 Macquarie assigned all its right, title, estate and interest in the consent deed and the related mortgage to the second defendant, the Commonwealth Bank of Australia. The Court has been advised that the second defendant does not wish to participate in these proceedings and will abide the event. 

14. On 8 July 1999 the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) received assent. The GST Act and the GST came into operation on 1 July 2000.[3] The changes made to the taxation system that included and accompanied the introduction of the GST[4] meant that prices for some goods and services would fall, whilst for others they would rise.

    [3]    The A New Tax System (Goods and Services Tax) Act 1999 (Cth) received assent on 8 July 1999 and was, by s 1-2, fixed to commence on 1 July 2000.

    [4]    The GST commenced 1 July 2000. As at 29 July 1999 the Wholesale Sales Tax rate of 32 per cent was reduced to 22 per cent. The following year on 1 July 2000 the Wholesale Sales Tax was abolished. Changes were also made to the excises on petrol, diesel, alcohol and cigarettes and to the Diesel Fuel Rebate Scheme effective 1 July 2000. Further bed taxes were abolished and changes to States taxes such as the financial institutions duty and debits tax and stamp duty on business relations were foreshadowed.

15. In advance of the commencement of the GST amendments were made to the TPA intending to prevent profiteering from price exploitation in relation to the introduction of the GST. The aim was to ensure that the changes to Australia’s taxation system were properly reflected in prices and, in particular, that suppliers of goods and services did not simply add the GST to their prices without adjusting the same for any reduction in, or repeal of, other taxes. Put slightly differently, net dollar margins were not to change as a result of the new tax system changes alone. In this connection the A New Tax System (Trade Practices Amendment) Act 1999 (Cth) inserted Part VB into the TPA and made other consequential amendments. Later in these reasons it will be necessary to analyse the amendments to the TPA in some detail. For immediate purposes it is enough to record that Part VB contained s 75AU which prohibited a corporation from engaging in price exploitation. The States and Territories were responsible for legislation ensuring that the prohibition on price exploitation extended to businesses other than corporations. Price exploitation occurred where the price for a regulated supply was unreasonably high having regard to, amongst other things, the changes in the taxation system.

16. The Jade Investment Trust is and was at all material times an entity for the purposes of the GST Act and has been registered under that Act for GST purposes since 1 July 2000. Whilst the carpark under-lease was GST free until 30 June 2005 the Council contends that had it been otherwise the provision of the carpark under the carpark under-lease would have amounted to a taxable supply within the meaning of the GST Act and a regulated supply to which Part VB TPA applied. The Council further contends that the introduction of the GST resulted in a spike in the Consumer Price Index (All Groups) Eight Capital Cities index due in part to price exploitation. Consequently, India and the trust of which it is trustee benefitted from such price exploitation in that India calculated and charged rent under the car park under-lease on the basis of the Consumer Price Index (All Groups) Eight Capital Cities index without any adjustment being made to account for the inflationary impact of price exploitation upon that index. So doing India has charged an unreasonably high price for a regulated supply within the meaning of Part VB TPA. In short, in applying the CPI-based rent review contained in clause 4(3) of the carpark under-lease India has, in effect, engaged in price exploitation that has resulted in an increase in the rent payable and continues to distort the calculation of the rent payable.

17. On the assumption that these contentions are correct, the Council submits that the proper construction of clause 4(3) of the carpark under-lease could not be one that amounted to, involved or constituted “price exploitation” as doing so would see India benefit from wrongdoing. Consequently, the Council has instituted these proceedings seeking a declaration as to the base rent payable for 2014-15 under the carpark under-lease reflecting an adjustment to account for the impact of price exploitation on the Consumer Price Index (All Groups) Eight Capital Cities index and the recovery of past overpayments of rent paid where such similar adjustment was not made.

18. Pursuant to rule 211 of the Supreme Court Civil Rules 2006 (SA), with the consent of the Council and India, a Judge of this Court ordered that the following two issues be determined by way of preliminary trial:

    1. Whether on the proper construction of clause 4(3) of the car park under-lease as amended, the annual rent payable immediately prior to 1 July, the review date, in respect of the regulated supply pleaded in paragraph 31 of the plaintiff’s Third Statement of Claim, could not be such as to amount to, involve or constitute “price exploitation” within the meaning of s 75AU TPA.

    2. Whether there exists a rule of law (as opposed to a rule of contractual construction) that precludes a party to a contract from taking advantage of its own wrong which may operate to prevent India from taking advantage of any contravention of s 75AU TPA.

19. If the second question is answered in the affirmative, a question arises as to whether the rule of law is automatically engaged by reason of contravention of s 75AU TPA by India, or whether the application of the rule depends upon additional facts.

20. The preliminary trial proceeded on agreed facts.[5] In addition one witness, Mr Peter Verwer, was called by the Council to give evidence. His evidence is dealt with below.

    [5]    I admit into evidence MFI P2 (the Statement of Agreed Facts and Annexures 1-9) and designate it Exhibit P2. I exclude paragraph [33] of the Statement of Agreed Facts and Annexure 10. In my view paragraph 33 is irrelevant as are the guidelines (Annexure 10). The guidelines replaced a previous iteration released on 14 July 1999. I do not know to what extent Annexure 10 is identical to that previous iteration. Because the guidelines were produced after the 2000 Extension of Lease and Extension of Underlease were made they are of no assistance in construing the lease and under-lease as amended.

    The carpark under-lease and clause 4(3)

21. It is necessary to deal first with the terms of the carpark under-lease in greater detail before turning to consider the arguments advanced.

22. At the outset it should be noted that each of the head lease and carpark under-lease and the related extensions to each made in 1995 and 2000 were registered.

23. As mentioned, the carpark under-lease was granted on 27 August 1973 for a term of 50 years from and including 1 November 1972 for the “clear annual rental” of $200,000 during the first five years of the lease, such rent to be paid in equal calendar monthly instalments each in advance. For the balance of the lease the annual rental was to be calculated in the manner provided by the lease subject to those powers, provisos, conditions, covenants, agreements and restrictions contained in the lease and any implicitly conferred on either the lessee or the lessor by the Real Property Act 1886 (SA). Clause 1(1) of the lease then provided that the rent be paid “free and clear of all deductions and abatements whatsoever”, although the lessee reserved the right to set off against the rent any amount owing under the head lease so long as the lessee was the head lessor under the head lease. Thereafter clause 1 dealt with covenants given by the lessee including covenants dealing with such things as the payment of utilities, the maintenance and repair of the demised premises, the insurance of those premises, responsibility for interior decoration, structural alteration, recovery for any hurt caused to the walls, floor, ceiling or roof of the premises, the alteration or removal of fixtures, signage, the right of inspection and cleaning and the maintenance of the premises in a neat, tidy and sanitary condition. Specific reference should be made to clause 1(5). That clause dealt with the insurance of the building and any improvements made to it. The clause included agreement that the lessee could not require the abatement or suspension of payment of the rent during or in respect of the period of one year following the date of the destruction of the building or the building sustaining damage rendering it unfit for occupation. By clause 1(14) the Council was constrained to using the premises to conduct the business of a parking station “together with other facilities and services incidental thereto”.

24. Clause 2 contained covenants given by the lessor including that the lessor would punctually pay the rent reserved under the head lease. Clause 2(4) contained an obligation to grant a 10-year extension on the same terms as contained in the lease and in return for a rental to be calculated in accordance with the lease, provided that the request was made prior to the last nine months of the lease.

1. Clause 3 empowered the lessor to re-enter and re-possess the premises if the rent “shall be in arrear and unpaid for the space of one (1) calendar month” or if the lessor failed to observe the terms of the lease.

2. Clauses 4(1) and 4(2) may be passed over. Clause 4(3) provided for the review of the rent payable at five-yearly intervals after the first five years of the lease and prescribed a detailed method for the calculation of future rent being the sum of $200,000 plus 50% of the net profit generated by the parking station exclusive of the first $5000.

3. Clause 4(4) made clear that operational control of the parking station, including the setting of parking fees and charges, was a matter for the lessee unless such fees and charges were, in the opinion of the lessor, unreasonable resulting in a profit less than could reasonably be expected for any one year, in which case the dispute resolution process in clause 4(6) may be triggered. In the light of clauses 4(3) and (4) provision was made in clause 4(8) for the maintenance of records of income and expenditure by the lessee in respect of the car parking station and for the provision of a statement of account to the lessor at five-yearly intervals.

4. Clause 4(12) was a specific provision reserving space for a vehicle belonging to the Onkaparinga Woollen Company Limited, to stand, load and unload.

5. The balance of the carpark under-lease is not presently relevant.

6. As mentioned, by a Memorandum of Extension of Lease dated 25 September 1995 (the 1995 Extension) the carpark under-lease was varied. Clauses 4(3), (4), (8) and (12) were deleted. Clause 1(a) of the 1995 Extension provided that from 1 July 1995 the rent was to be $1.1 million per annum “payable at the times and in the manner provided in the Lease”, meaning “by equal calendar monthly instalments each in advance”, and, in accordance with clause 1(1), “free and clear of all deductions and abatements whatsoever” save that the right to set off the rent payable against rent owed under the head lease remained. Clause 1(a) of the 1995 Extension of Lease also provided that from 1 July 1995 the rent was to be reviewed in the manner referred to in clause 4(3) of the lease. As indicated clause 4(3) was deleted. In its place a new clause 4(3) was inserted. It provided:

   4(3)The annual rent hereby reserved will be reviewed on 1 July 1996 and on each anniversary of that date (each such date being called a “Review Date”) whereupon the annual rent to be paid for the following year will be an amount calculated by multiplying the amount of the annual rent payable immediately prior to the relevant Review Date by a fraction the numerator of which fraction will be the Consumer Price Index (All Groups) Adelaide Index Number (“Index”) published by the Australian Bureau of Statistics in respect of the last concluded quarter for which such Index has been published as at the relevant Review Date and the denominator of which fraction will be the same Index so published in respect of the equivalent quarter of the immediately preceding year PROVIDED THAT if the Commonwealth Government ceases to publish the Consumer Price Index for Adelaide (All Groups) or if the basis of calculating that Index is changed substantially the amount of the reviewed annual rent will be determined by a licensed valuer acting as an expert and not as an arbitrator to be agreed upon by the parties or failing agreement to be appointed on the application of either party by the President for the time being of the Australian Institute of Valuers and Land Economists (South Australian Division) (or should that institute then have ceased to exist the President or other principal officer for the time being of such body or association as then serves substantially the same objects as that Institute) having regard to what would have been the increases in the Consumer Price Index for Adelaide (All Groups) had it continued or had it continued to be determined on the same principles as at the date of this Lease as the case requires (the cost of which determination will be borne in equal shares by the Sub-Lessor and the Sub-Lessee) and FURTHER PROVIDED that the annual rent determined as at any particular Review Date will not in any event be less than the annual rent paid or payable immediately prior to such Review Date.

7. It can be seen that this clause has three parts. The first deals with when a rent review is to be conducted and how. The method prescribed, described by counsel as a CPI escalator method, seeks to ensure that the real value of the income constituted of the rent keeps pace with the value of money as reflected in the difference between the CPI (All Groups) Adelaide index for the immediately preceding March quarter and the same index for the March quarter of the preceding year. The second, constituted of the first proviso, provides an alternate method for the calculation of the rent in the conduct of the annual review that is triggered by the Commonwealth Government ceasing to publish the CPI (All Groups) Adelaide index or changing substantially the basis for calculating that index. The third, constituted of the second proviso, makes plain that no review can result in the annual rental for the forthcoming year being less than the preceding year.

8. The 1995 Extension inserted into the carpark under-lease two additional clauses, clauses 1(21) and 4(14), and amended clause 5(a)(1). None of these are presently of significance. In clause 6 the 1995 Extension confirmed:

   Save as aforesaid, the parties acknowledge and agree that the rights and obligations of the Sub-Lessor and the Sub-Lessee under the Lease remain in full force and effect as if the same were repeated here at length and accepted by the parties as being binding upon them.

9. As mentioned, on 28 February 2000 the under-lease was extended a second time by one day and varied further (the 2000 Extension). It is to be recalled that the 2000 Extension was executed the day before the Motor Accident Commission assigned its interests in the head lease and carpark under-lease to India and the Council, India and Macquarie executing the consent deed of 29 February 2000 (the consent deed).

10. The recitals to the consent deed included:

    D.India proposes to grant a mortgage to Macquarie over the whole of the estate and interest of India in the Lease and the Underlease (and the Premises and the Underlease Premises) for the purposes of securing the repayment of certain money to Macquarie (the Mortgage).

    E.India and Macquarie have requested the consent of the Corporation to the granting of the Mortgage.

    F.The Corporation and Macquarie have reached certain agreements in respect of the consent by the Corporation to the granting of the Mortgage and wish to record those agreements in this Consent Deed.

11. Clause 1 of the consent deed recorded the Council’s consent to the grant of the mortgage by India to Macquarie “on the terms and subject to the conditions provided in this Deed.” Clause 2 referred to amendments made to the head lease and carpark under-lease as effected by an extension of lease and an extension of under-lease, copies of which were annexed to the consent deed.

12. In clause 3(1) of the consent deed India directed the Council as and from 29 February 2000 until otherwise directed to pay the rent due and payable under the carpark under-lease direct to Macquarie “without abatement or deduction whatsoever in place of payment to India as underlessor”.  In clause 3(2) the Council agreed to comply with clause 3(1). In clause 3(3) India agreed that the payment of the rent under the carpark under-lease by the Council direct to Macquarie constituted and represented satisfaction of the Council’s obligation to pay rent to India under the carpark under-lease and, consequently, payments made to Macquarie would be set off against the amounts otherwise due to India. Clause 3(4) recorded that the direction given in clause 3(1) was irrevocable during the lifetime of the carpark under-lease “unless first agreed to in writing by Macquarie which agreement Macquarie may give or refuse in its absolute unfettered discretion.”

13. Clause 4 of the consent deed is headed, “The Underlease”. It records a number of agreements reached between the Council and Macquarie. Clause 4.1 provided that if the rent ceased to be paid in accordance with the carpark under-lease in clear funds, or is paid but is subject to any claim of priority or preference, or the carpark under-lease terminates or is terminated in accordance with clause 11 of the consent deed, or the head lease is terminated and consequently the carpark under-lease is likewise terminated, the Council agreed to pay to Macquarie from the date of any of the aforesaid events occurring an amount to be calculated in accordance with clause 4.2. The effect of clause 4.2 was that the Council paid an amount equal to the rent as if the obligation to pay Macquarie in accordance with the lease continued, including that such amount be reviewed annually in a manner identical to that provided for in clause 4(3) of the carpark under-lease as amended in September 1995. This arrangement was to continue until 2 November 2022 being the date on which the carpark under-lease ended unless the options to renew were invoked. Clause 4.4 of the consent deed required that an amount payable under clause 4.2 of the consent deed be paid monthly in advance, the first instalment being due and payable on the date of the event triggering clause 4.1.

14. In clause 5 of the consent deed Macquarie agreed that if the carpark under-lease were terminated it had no rights in the under-lease or the premises subject to the under-lease, but only had such rights as provided for by the consent deed. Further, in the event of termination, provided the Council continued to pay Macquarie an amount equal to the rent that would be payable, the Council was at liberty to deal with its right, title, estate and interest in the under-lease without reference to Macquarie.

15. In clause 6 of the consent deed the Council agreed that its obligations under that deed in favour of Macquarie could not be set off against any other obligation that may exist or arise between the Council and Macquarie.

16. In clause 7.1 of the consent deed India agreed not to assign any of its rights and or obligations under the deed without first obtaining the prior written consent of Macquarie which consent could be withheld in Macquarie’s absolute discretion and in relation to which Macquarie was not obligated to provide reasons. In the same clause the Council agreed similarly save that Macquarie was prohibited from withholding consent unreasonably. Clauses 8, 9 and 10 of the consent deed may be passed over. Clause 11 dealt with the question of when the lease and under-lease were to be taken as terminated for the purposes of the consent deed. In clause 12 the Council and India agreed that they would not agree to any variation of the head lease or carpark under-lease without first obtaining the written consent of Macquarie, and in clause 13 all parties agreed that the rent payable under clause 4.1 of the consent deed was exclusive of GST.

17. As mentioned Annexure A to the consent deed was a copy of the Extension of Lease of 28 February 2000 executed in relation to the head lease. In the main by deleting clauses 3 and 13 of the head lease and inserting substitutes the Extension provided a greater degree of proscription as to the types of event that would result in termination and constrained the Council to taking action as permitted by the lease only in those circumstances.

18. Annexure B to the consent deed was a copy of the Extension of under-lease executed on 28 February 2000 (the 2000 Extension). Clause 1 of the Extension of Under-Lease deleted the right to set off contained in clause 1(1) and replaced clause 1(5) with a requirement that the lessor obtain insurance for the rent such insurance to operate for a period of 18 months in the event of the building being destroyed or damaged or rendered wholly or partially unfit for occupation with any money received in respect of the policy to be paid to the lessee. Clause 1.3 of the extension deleted clause 2(3) of the carpark under-lease, whilst clause 1.4 inserted a new clause 6 denying the lessee any right of abatement or suspension of the obligation to pay rent “in any circumstances whatsoever, including without limiting the generality of the foregoing, even if the demised premises are damaged or destroyed in whole or in part or are partly or wholly unusable” by the lessee. Clause 1.5 then amended clause 4(3) of the carpark under-lease changing the relevant index from CPI (All Groups) Adelaide index to CPI (All Groups) Eight Capital Cities index.

19. Clause 1.6 of the 2000 Extension inserted a new clause 14 into the carpark under-lease. New clause 14 provided that the amendments and variations to the carpark under-lease effected by the extension would cease to be of force and effect and the pre-existing provisions would be reinstated and of full force and effect on 1 November 2022 or upon the lessor transferring or assigning its rights, title, estate and interest under the head lease. Clause 1.7 of the 2000 Extension then inserted a new clause 16 prohibiting the lessee and the lessor in the period 1 March 2000 to 1 November 2022 varying the terms of the under-lease without first obtaining the written consent of Macquarie as mortgagee of the under-lease or its successor in title to such mortgage.

    Part VB TPA

20. As mentioned the A New Tax System (Trade Practices Amendment) Act 1999 (Cth) inserted Part VB into the TPA.[6] Part VB contains ss 75AT–75AZ.

    [6]    A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1 cl 5.

21. The Explanatory Memorandum accompanying the A New Tax System (Trade Practices Amendment) Bill 1998 announced:[7]

    The Bill will amend the Trade Practices Act 1974 (TPA) inserting a new Part VB to provide the Australian Competition and Consumer Commission (ACCC) with power to monitor prices, in order to prevent the possibility of consumer exploitation and excessive profit taking in the transition to the new tax system.

    The Bill will prohibit price exploitation, which will occur where a corporation supplies a good or service at a price that is unreasonably high, taking into account the various tax changes (including the implementation of the GST and the removal or reduction of various Commonwealth, State and Territory taxes), and that unreasonably high price is not attributable to the supplier’s costs, supply and demand conditions, or any other relevant matter. There is provision for penalties of up to $10 million for a body corporate, and up to $500,000 for a person other than a body corporate. Actions to have these penalties imposed will be taken by the ACCC in the Federal Court.

    [7]    The Parliament of the Commonwealth of Australia, House of Representatives, A New Tax System (Trade Practices Amendment) Bill 1998, Explanatory Memorandum (C20296 Cat No 98 4407 0 ISBN 0642 387648) at p 2.

22. Consistent with this s 75AU(1) declared that a corporation contravened that section if it engaged in price exploitation in relation to the New Tax System changes. Price exploitation was defined in s 75AU(2) as follows:

    (2)For the purposes of this section, a corporation engages in price exploitation in relation to the New Tax System changes if:

    (a)     it makes a regulated supply; and

    (b)     the price for the supply is unreasonably high, having regard alone to the New Tax System changes (so far as they have taken effect);[8] and

    (c)     the price for the supply is unreasonably high even if the following other matters are also taken into account:

    (i)the supplier’s costs;

    (ii)supply and demand conditions;

    (iii)any other relevant matter.

    [8] Sch 4 cl 1 of A New Tax System (Indirect Tax and Consequential Amendments) Act1999 (Cth) omitted “so far as they have taken effect” and substituted with “whether the supply took place before or after those changes”.

23. What constituted a regulated supply for the purposes of s 75AU(2) was defined in s 75AT as meaning:

    (a)a supply that:

    (i)    occurs during the New Tax System transition period[9] and before the GST implementation date; and

    (ii) is by a person who would be required to be registered under the GST Act had the supply occurred on or after 1 July 2000; and

    (iii) had the supply occurred on or after 1 July 2000, it would have been a taxable supply for the purposes of the GST Act or would have been a taxable supply had it not been GST-free or input taxed for the purposes of that Act; or

    (b)a supply that:

    (i)    occurs during the New Tax System transition period and on or after the GST implementation date; and

    (ii) is by a person who is registered or required to be registered under the GST Act; and

    (iii) is a taxable supply for the purposes of the GST Act, or would have been a taxable supply for the purposes of the GST Act had it not been GST-free or input taxed for the purposes of that Act.

    [9] The “New Tax System transition period” is defined in s 75AT as meaning the period starting on the later of 1 July 1999 and the commencement of the A New Tax System (Trade Practices Amendment) Act 1999 (Cth), and ending on the day that is two years after the GST implementation date. The GST implementation date was defined as the day on which the GST Act commences. That date was 1 July 2000. Thus the transition period ended 1 July 2002.

24. The amending Act does not attempt to define “supplier’s costs” or the concept of “supply and demand conditions”. The Explanatory Memorandum makes plain that this was intended.[10] In each case formulating an appropriate definition was considered too difficult. This reflects the variability to be expected between suppliers as to particular cost pressures and market forces impacting upon supply and demand of the regulated supply and impacting factor inputs that may affect the price for the regulated supply.

    [10]  The Parliament of the Commonwealth of Australia, House of Representatives, A New Tax System (Trade Practices Amendment) Bill 1998, Explanatory Memorandum (C20296 Cat No 98 4407 0 ISBN 0642 387648) at pp 5-6.

25. The “New Tax System changes” were also defined in s 75AT as meaning:

    (a)the amendment of the Sales Tax (Exemptions and Classifications) Act 1992 made by the GST Transition Act;[11]

    (b)the ending of sales tax, as provided for in the A New Tax System (End of Sales Tax) Act 1999;

    (c)the imposition of GST;[12]

    (d)any other changes (including changes to Commonwealth, State or Territory laws) prescribed by regulations for the purposes of this definition.

    [11] Defined in s 75AT as meaning the A New Tax System (Goods and Services Tax Transition) Act 1999 (Cth).

    [12] Defined in s 75AT as having the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

26. Sections 75AV–75AZ conferred specific powers and imposed specific duties upon the Australian Competition and Consumer Commission (ACCC) related to the monitoring, prevention, detection and penalising of price exploitation.

27. Section 75AV(1) required the ACCC, by written instrument, to formulate guidelines about when prices for regulated supplies may be regarded as being in contravention of s 75AU. Such guidelines could be varied by the ACCC.[13] As soon as practicable after making or varying any guidelines, the ACCC was required to cause a copy of the guidelines to be published in the Gazette.[14] Section 75AV(3) governed the use to be made of those guidelines. It required the ACCC to have regard to the guidelines in making decisions under s 75AW (to issue a written notice to a corporation that the ACCC considered had made a supply in breach of s 75AU) or s 75AX (to issue a written notice to a corporation where the ACCC considered such notice would aid in the prevention of price exploitation). Section 75AV(3) permitted a court having jurisdiction to provide the relief contained in s 76 (the power to impose a pecuniary penalty if satisfied that a person had breached s 75AU) or s 80 (the power grant an injunction) to have regard to the guidelines. Thus the guidelines had no direct affect upon legal rights.

    [13]  Trade Practices Act 1974 (Cth), s 75AV(2); A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1, cl 5.

    [14]  Trade Practices Act 1974 (Cth), s 75AV(5); A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1, cl 5.

1. As touched upon, s 75AW(1) vested power in the ACCC to issue a written notice to a corporation where the ACCC formed the opinion that the corporation had made a supply in contravention of s 75AU. Section 75AW(2) prescribed the detail to be contained in the notice including requiring the identification of the kind of supply made and the circumstances in which it was made, in addition to stating the ACCC’s opinion that such supply was unreasonably high and not attributable to matters referred to in s 75AU(2)(c). In any proceeding under either s 76 or s 80 the notice constituted prima facie evidence that the price for the supply was unreasonably high and that such a price was not attributable to the matters referred to in s 75AU(2)(c).[15]

   [15]  Trade Practices Act1974 (Cth), s 75AW(3); A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1, cl 5.

2. As also touched upon, s 75AX(1) vested power in the ACCC to issue a written notice to a corporation where the ACCC considered that doing so would aid the prevention of price exploitation within the meaning of s 75AU. Like s 75AW, s 75AX prescribed the detail to be contained in the notice. The notice was required to relate expressly to any supply the corporation made of a kind specified, made in circumstances specified and during the period specified in the notice (not extending beyond the conclusion of the New Tax System transition period). Further, the notice was required to specify the maximum price that in the ACCC’s opinion may be charged for a supply to which the notice related.[16]

   [16]  Trade Practices Act1974 (Cth), s 75AX(2)(c); A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1, cl 5.

3. Section 75AY empowered the ACCC to monitor prices to assess the general effect of the New Tax System changes on prices charged by corporations for supplies during the New Tax System transition period and/or to assist its consideration of whether s 75AU has been, is being, or may in future be, contravened. To assist the ACCC s 75AY(2) empowered a member of the Commission by written notice to compel a person to give the ACCC specified information in writing or to produce specified documents, being information or documents containing information relating to prices or the setting of prices that the member considered will or may be useful to the ACCC in monitoring prices.[17] 

   [17]  Under Trade Practices Act1974 (Cth), s 75AY(3); A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1, cl 5 it was provided that information or documents may be required under s 75AY(2) relating to prices or the setting of prices (a) before or after all or any of the New Tax System changes had taken effect, (b) before or after the start of the New Tax System transition period, and (c) in a situation, during a period, specified in the notice. Under Trade Practices Act1974 (Cth), s 75AY(4); A New Tax System (Trade Practices Amendment) Act 1999 (Cth) sch 1, cl 5 refusal or failure to comply with a notice given under s 75AY(2) or providing false or misleading information intentionally or recklessly in purported compliance with such notice constituted an offence punishable by fine of 20 penalty units.

4. Pursuant to s 75AZ the ACCC was required to report quarterly to the Minister about its operations under Part VB.

5. It should also be observed that the A New Tax System (Trade Practices Amendment) Act 1999 (Cth) amended Part VI of the TPA:

   a. so that pursuant to s 77 TPA the ACCC could apply for a pecuniary penalty under s 76 in an amount up to $10 million for a body corporate and $500,000 for a person other than a body corporate that had contravened, attempted to contravene, or conspired to contravene, s 75AU, or contravened that section in an accessorial capacity or been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention of s 75AU by a person;

   b. so that pursuant to s 80 TPA the ACCC may obtain an injunction against a person who had engaged in, or is proposing to engage in, conduct that constitutes or would constitute a contravention of s 75AU or a person who had contravened s 75AU in an accessorial capacity or been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention of s 75AU or conspired with others to contravene s 75AU;

   c. providing that only the ACCC could seek a pecuniary penalty order under s 76(1)(a) or an injunction under s 80(1)(a).[18]

   d. making plain that criminal proceedings did not lie against a person by reason only that the person had contravened s 75AU or attempted or conspired to do so, or done so in an accessorial capacity or been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention of s 75AU;

   e. inserting a fresh s 80B empowering a court in which an application is made by the ACCC under s 80 TPA, if satisfied that a person had engaged in conduct constituting a contravention of s 75AU, to order that the person to whom the application relates not make a regulated supply of a kind specified in the order for a price in excess of the price specified in the order while the order remains in force, and/or an order requiring that person, or a person involved in the contravention, to refund money to a person specified in the order.

   f. Permitting the ACCC to invoke the aids contained in s 84 TPA in applications made under s 76(1) or s 80 for the contravention of s 75AU.[19]

   [18]  Trade Practices Act 1974 (Cth), ss 77, 80(1A); A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1, cll 7, 10.

   [19]  Trade Practices Act 1974 (Cth), s 84; A New Tax System (Trade Practices Amendment) Act 1999 (Cth), sch 1, cl 12.

6. It may also be observed that a consequence of the amendments to the TPA vesting powers in the ACCC to, amongst other things, seek a pecuniary penalty or an injunction, was that the power vested in the Commission to accept an undertaking under s 87B TPA and for courts having jurisdiction to enforce such undertakings as contained in the same section became available in relation to the person who contravened s 75AU.

7. The A New Tax System (Trade Practices Amendment) Act 1999 (Cth) also inserted a new Part XIAA and the New Tax System Price Exploitation Code into the TPA. The Explanatory Memorandum explained:[20]

   The States and Territories are to apply the new Part VB in their respective jurisdictions, in order to ensure coverage of the provisions in those areas where the Commonwealth’s constitutional power does not extend. This application is facilitated by the insertion of a version of the new Part VB into the Schedule to the TPA (see item 19) which can then be applied by the States and Territories.

   [20]  The Parliament of the Commonwealth of Australia, House of Representatives, A New Tax System (Trade Practices Amendment) Bill 1998, Explanatory Memorandum (C20296 Cat No 98 4407 0 ISBN 0642 387648) at p 9.

8. It is unnecessary to say anything more regarding the implementation by the States and Territories of the code and its application to non-corporation businesses.

   The Council’s Case and the submissions made

9. As mentioned India is the trustee of the Jade Investment Trust. The Trust was registered for GST purposes under the GST Act on and from 1 July 2000. As also mentioned, in its capacity as trustee India has carried on business as the lessor of the commercial tenancies located within the building subject of the head lease including the car park under-lease.

10. It is not necessary to make any finding as to whether the carpark under-lease was a supply and a taxable supply for the purposes of the GST Act.[21] For present purposes it may be assumed that they were and that whilst the supplies made under the carpark under-lease were GST-free until 1 July 2005,[22] they were nonetheless regulated supplies for the purposes of s 75AU TPA. As a regulated supply Part VB TPA applied to the carpark under-lease during the “New Tax System transition period” as defined in s 75AT TPA, being the period 9 July 1999 to 1 July 2002.

    [21]  A New Tax System (Goods and Services Tax) Act 1999 (Cth), ch 2, pt 2-2, div 9 ss 9-5, 9-10.

    [22]  A New Tax System (Goods and Services Tax Transition) Act 1999 (Cth), s 13.

11. The Council contends that the rent charged pursuant to clause 4(3) of the carpark under-lease was a price charged for a regulated supply that was unreasonably high within the meaning of s 75AU and thus amounted to price exploitation in that the contribution to the spike in the CPI caused by price exploitation has flowed into the rent reviews conducted since 1 July 2001 by reason of those reviews being determined according to the increase in the CPI.

12. Against this background, in the Third Statement of Claim the Council contends:

    31A. On the proper construction of clause 4(3) of the Car Park Underlease, as amended, the annual rent payable immediately prior to the Review Date in respect of the regulated supply pleaded in paragraph 31 above, could not be such as to amount to, involve or constitute “price exploitation” within the meaning of section 75AU of the TPA.

    Particulars

    31A.1.Clause 4(3) is to be construed as if the words and brackets “(as far as section 75AU of the TPA permits)” were inserted in the clause after the words “the annual rent to be paid for the following year will be” and before the words, “an amount calculated by multiplying …”, thereby providing that the annual rent payable in connection with the regulated supply is not to amount to, involve or constitute “price exploitation” within the meaning of section 75AU of the TPA.

    31A.2.Further and in the first alternative, clause 4(3) is to be construed as if the words and brackets “(but not so as to permit India to take advantage of its own wrong)” were inserted in the clause after the words “the annual rent to be paid for the following year will be” and before the words, “an amount calculated by multiplying …”:

    31A.2.1.thereby providing that the annual rent payable in connection with the regulated supply is not to amount to, involve or constitute “price exploitation” within the meaning of section 75AU of the TPA; and

    31A.2.2.thereby giving to effect to the principle of construction that a party is not to be permitted to take advantage of their own wrong (“the prevention principle”).

    31A.3.Further and in the second alternative:

    31A.3.1.the expression “annual rent payable immediately prior to the relevant Review Date” in clause 4(3) is to be construed as referring to the rent the subject of an enforceable obligation to pay pursuant to the covenant in clause 1(1) of the Car Park Underlease; and

    31A.3.2.to the extent that it would otherwise have obliged ACC to pay, in connection with the regulated supply, an amount by way of rent that would amount to, involve or constitute “price exploitation” within the meaning of section 75AU of the TPA, the covenant was not enforceable

    31B.If, contrary to the plea in paragraph 31A above, the clause is not to be construed as there pleaded, the prevention principle applies as a rule of law to preclude India from taking advantage of any contravention by it of s 75AU of the TPA, both by charging and receiving more rent than it was entitled to and by basing subsequent rent reviews upon the illegally charged previous rent.

13. In this Court the Council made submissions supporting the constructions advanced in each of 31A.1, 31A.2 and 31A.3 in addition to submissions in support of the contention in 31B.

    a.     Mr Verwer’s evidence

14. As will be seen, one aspect of the submissions made by the Council in support of the first construction advanced in 31A.1 of the Third Statement of Claim was the contention that it was a notorious fact known within the property industry that with the introduction of the GST the CPI would experience a spike and that, as a consequence, landlords with CPI-based rent review clauses were at risk of engaging in price exploitation.

15. The evidential basis for this contention was not agreed. As a result, in an endeavour to prove the fact and the notoriety of it the Council called Mr Peter Verwer, the Chief Executive Officer of the Asia Pacific Real Estate Association since July 2014, and before that, the Chief Executive Officer of the Property Council of Australia from 1992.

16. Mr Verwer’s evidence-in-chief consisted of an affidavit he affirmed on 5 August 2016.[23] In that affidavit he referred to his duties as Chief Executive Officer of the Property Council of Australia in the period leading up to the introduction of the GST. In this regard Mr Verwer was responsible for the leadership and strategic direction of the Property Council, for the advocacy role that the Council played on the part of its members and for the delivery of member services. At that time the Council had approximately 2000 members Australia wide including investors, owners, managers and developers.

    [23]  Exhibit P1.

17. Mr Verwer recalled becoming aware of the imminent introduction of the GST by the start of 1999 and the likely impact it would have upon the Australian economy and the Property Council’s members. He deposed:

    I was also aware by at least the start of 1999 that the introduction of the GST was going to cause a spike in the Consumer Price Index (CPI). I do not recall precisely when I first became aware of these issues, however I would read about these issues in the Australian Financial Review, publications produced by the ACCC and newsletters authored by large law firms that were members of the PCA [the Property Council of Australia]. I was aware that the expected spike in the CPI was going to cause an issue for landlords because it would potentially expose landlords to allegations of price exploitation in relation to both short term and long term leases which provided for adjustment of rent directly by reference to the CPI.

18. Mr Verwer states that he spent a considerable period of time in 1999 communicating with members about the “CPI spike issue” because it was a matter of priority for many members who needed guidance in managing leases with CPI-based rent review clauses. Understandably the introduction of the GST was of importance to members generally and in dealing with that issue the Property Council also addressed the anticipated CPI spike and its ramifications.

19. Mr Verwer recalled that the Commonwealth Government announced additional funding for the ACCC to deal with profiteering associated with the introduction of the GST. In this regard the ACCC produced guidelines to assist businesses possibly at risk. The Property Council, in turn, identified landlords who had leases that included CPI-linked rent review clauses as, in its opinion, likely candidates to fall foul of the ACCC guidelines. In pursuing the issue the Property Council was driven by the need to protect the reputations of its members in addition to securing certainty as to the income streams generated from property.

20. Much of the work undertaken by the Property Council regarding the ramifications of the introduction of the GST for members took place in 1999 so as to ensure that the membership was equipped to deal with the changes when they commenced in 2000. This included approaching the ACCC to establish “a safe harbour regime which, if followed by Property Council members, would ensure that they would be deemed to be acting in accordance with the ACCC’s price exploitation guidelines.” The advice received was that the Property Council should devise a solution and present the same to the ACCC for consideration. In this connection the Property Council approached the Australian Bureau of Statistics seeking assistance with the development of a methodology that would allow for the adjustment of the CPI to account for the anticipated spike. The Bureau declined to assist leading the Property Council to seek the assistance of an economic modelling agency, Econtech. The adjustment methodology ultimately produced was provided to the ACCC for consideration. The ACCC did not endorse the methodology but did venture the opinion that the adoption of the methodology would negate any allegation that the user was attempting to profiteer. The Property Council loaded the methodology up onto its website so that it would be available to members. Further the Council published data produced by Econtech on a regular basis for the use of members.

21. In cross-examination Mr Verwer agreed that a CPI escalator was a common form of rent review provision contained in leases. The idea of such provision was that the rental stream kept pace with inflation. He also agreed that a CPI escalator, based as it was on the price of goods and services, was necessarily affected by taxes upon those goods and services. In this connection the changes to the taxation system brought about in 1999 included the repeal or reduction of some inefficient taxes in addition to the introduction of the GST with the consequence that the impact of the new tax system was likely to differ over time. Mr Verwer said:

    Q:   So when you say in para.6 of your affidavit that you came to appreciate that there ‘would be a likely spike in the Consumer Price Index’, you mean by that that since the tax arrangements for some of the items in the basket were going to change, this would necessarily feed through into the overall CPI measure.

    A:   That is correct, and would create a different profile of CPI outcomes over a period of, we assume, two years because that’s what Treasury had said, but that was also what the ACCC had said was their period of extra review of the practices of the industry, so we had to get it right for each quarter in order to provide the industry with certainty, but it was our objective.

    Q:   So in 1999 you anticipated that the impact of the new tax system changes might be, in relative terms, inflationary in some quarters and deflationary in other quarters.

    A:   That’s correct, [t]here’s a difficulty in heading it off.

22. Mr Verwer conceded that the Econtech report predicted differential rates of inflation/deflation for the first two years of the GST. He said the Property Council was also aware of the view that whatever jump in prices occurred would “get washed out within a particular period”. That said the spike would continue to have an impact on leases. In commissioning Econtech the primary objective of the Property Council was to construct a rate that might in different periods be more or less than the CPI rate but attempted to neutralise the effects of the new tax changes in a manner which attempted to ensure that members did not gain an advantage from the transition to the new tax system.

23. As will be seen, a commercial contract is to be construed in the context of the surrounding circumstances knowledge of which is to be attributed to the reasonable businessperson in the position of the contracting parties. The knowledge attributed to the reasonable businessperson is that which the parties may be taken to have possessed in the context of their mutual dealings. In Codelfa Construction Pty Ltd v State Rail Authority (NSW) (Codelfa) Mason J, with whom Stephen and Wilson JJ agreed, said:[24]

    Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

    [24] (1982) 149 CLR 337 at 352.

24. It was submitted that a notorious fact is of a different order to a fact in relation to which judicial notice may be taken. For present purposes, a notorious fact may be taken as being a fact knowledge of which on the part of the parties to the contract is assumed because it is so widely known that it is reasonable to assume that in the circumstances the parties must also have been aware of it. That knowledge may then be taken into account as part of the surrounding circumstances or context in which the contract was made and which inform the construction exercise.

25. The question arises, does Mr Verwer’s evidence establish that it was generally known, or at least known generally in the commercial property industry, that the introduction of the GST would likely result in a spike in the CPI attributable in part to price exploitation such that this Court can assume the parties knew the same? In my view it does not. Mr Verwer’s evidence rises no higher than that the Property Council and its membership held an opinion that a spike in the CPI in some quarters during the two-year period following the commencement of the GST was anticipated as a consequence of the new tax system which might expose landlords with rent review clauses to allegations of price exploitation and profiteering.

    b.     The Council’s first argument

1. The Council submitted that clause 4(3) was open to three possible constructions; one that permitted India to charge a rental even if the effect of which was to contravene s 75AU TPA. The second, to exact no rent in the event that to charge rent in accordance with the clause would result in unlawfulness, and, the third, to charge rent in accordance with clause 4(3) but only to an extent that did not result in the contravention of s 75AU TPA. The second construction, it was contended, could be discounted as uncommercial and unbusinesslike. I agree. As to the remaining two constructions, the Council contended the third to be the appropriate construction. Accepting this construction had the consequence that the rent review component of clause 4(3) should be read as if the parenthetical phrase “(so far as section 75AU of the TPA permits)” was inserted into the clause after the words “the annual rent to be paid for the following year will be” such that it read as follows:

   The annual rent hereby reserved will be reviewed on 1 July 1996 and on each anniversary of that date (each such date being called a “Review Date”) whereupon the annual rent to be paid for the following year will be (so far as section 75AU of the TPA permits) an amount calculated by multiplying the amount of the annual rent payable immediately prior to the relevant Review Date by a fraction the numerator of which fraction will be the Consumer Price Index (All Groups) Eight Capital Cities published by the Australian Bureau of Statistics in respect of the last concluded quarter for which such Index has been published as at the relevant Review Date and the denominator of which fraction will be the same Index so published in respect of the equivalent quarter of the immediately preceding year...

2. The starting point for the Council’s argument is the contention that clause 4(3) if read literally and without qualification would allow for an increase in rent contrary to s 75AU TPA. That the lease is open to a construction that would facilitate an unlawful outcome is said to give rise to a constructional choice and/or ambiguity in that the general words used were ambiguous as to the possible contravention of s 75AU. Those general words were amenable to being read down in the manner pleaded in paragraph 31A.1 of the Third Statement of Claim and as set out above. Accepting this, the choice or ambiguity is resolved, it is said, by invoking the presumption that a contract is to be construed on the basis that the parties did not intend to authorise a rent review that would result in the charging of a rental that would be unlawful. The propriety of invoking the presumption is said to gain force when regard is had to the state of the law as at the time the lease was amended in February 2000. That is to say, at that time Part VB TPA was in force and the GST Act had received assent and was due to come into operation on 1 July 2000. In these circumstances the prohibition on price exploitation that applied to the lease during the New Tax System Transition period should be taken as something known to the parties. It is then submitted that these things the reasonable person should be taken to have known and thus such person, in considering the bargain struck by the parties, would consider clause 4(3) to address the potential for unlawfulness and thus be construed to avoid such outcome.

3. An additional limb of this first argument rested upon the evidence of Mr Verwer. That evidence, the Council contends, established that it was widely understood in the property industry at the time of the 2000 Extension that the likely effect of the introduction of the GST would be a spike in the CPI contributed to by price exploitation. That notorious fact is one to which the objective construction of the under-lease must have regard.

4. For its part India contended that clause 4(3) should be given its plain and ordinary meaning. Doing so gave rise to no ambiguity. Consequently, no need arose to have regard to the circumstances surrounding the making of the bargain comprised in the lease. In any event those circumstances, India submitted, suggested the construction advanced by the Council could not be accepted. In particular, the state of industry knowledge as at February 2000 could be said to rise no higher than that it was “on the cards” that a CPI-based rent review might result in price exploitation. If it were otherwise one would expect the parties to have specifically addressed the issue in the amendment to the lease.

5. India also pointed to the surrounding circumstances as including the accommodation of Macquarie’s requirements in extending finance to India.  These amendments, India contends, are indicative of a premium being placed on certainty suggesting that any agreement that the contract be “subject to the vagaries of “price exploitation”” were objectively unlikely.

6. India expanded on this submission pointing to the fact that the principal covenant in every lease is the covenant to pay rent, free from deductions, in the manner specified in the lease. Uncertainty as to the rent agreed or in the calculation of the rent payable is inimical to this. In the present case clause 1(1) of the carpark under-lease, requiring that the rent be paid “at the respective times and in manner herein appointed for payment thereof free and clear of all deductions and abatements whatsoever”, and clause 3, which entitled the lessor, “if the said rent hereby reserved or any part thereof shall be in arrear and unpaid for the space of one (1) calendar month next after any day herein appointed for the payment thereof”, to re-enter, re-possess and enjoy “as of its former estate”, suggest the general proposition was no less applicable.

7. Further, the near impossibility of determining as at the time of any rent review whether the application of the CPI would or might amount to price exploitation, and if so to what extent, similarly suggested that the Council’s construction could not be accepted. In this regard counsel referred to the criteria to be taken into account in determining whether a person had engaged in price exploitation (supplier’s costs, supply and demand conditions, any other relevant matter)[25] and the necessary requirement that an opinion be formed as to whether the price charged was “unreasonably high”.

   [25]  Trade Practices Act 1974 (Cth), s 75AU(2).

8. Then there is the uncertainty associated with the Council’s proposed reading down. The maximum rent achievable without infringement of s 75AU would be “unknowable in prospect”. Consequently, commercial considerations did not point to a construction any different from the one that attributed to clause 4(3) a plain and ordinary meaning.

9. India then returned to contextual matters. The variations to clause 1 of the carpark under-lease, and the insertion of new clauses 6 and 16 into the under-lease made by the 2000 Extension were intended to remove obstacles that might prevent Macquarie receiving the rental stream in repayment of the sums advanced to India. The purpose and specificity of those arrangements, it was contended, render it unlikely that the parties agreed that the rent payable be subject to the uncertainty of the possibility that it might contravene s 75AU. To this was added the fact that India requested that the CPI index referred to in clause 4(3) be varied for which it paid $75,000 in consideration. In all the circumstances the construction advanced by the Council would serve to undermine the commercial purpose surrounding the February 2000 arrangements objectively discerned.

   c.      The Council’s second argument

10. The first step in the Council’s first alternate argument was the contention that the words “the amount of annual rent payable immediately prior to the relevant Review Date”, as contained in clause 4(3), should be understood as referring to the amount that the lessee was lawfully obliged to pay. Accordingly, on each review date clause 4(3), in taking as its subject the rent payable in the preceding year that the lessee was lawfully obliged to pay, contemplated an examination of whether the rent for each preceding year was correctly determined going back, if necessary, to the foundational rent. Such construction had the benefit of avoiding the entrenchment of error.

11. The second step in the argument takes one to s 75AU TPA. Because a court will not enforce the exaction of a rent resulting in the breach of s 75AU, “the amount of the annual rent payable immediately prior to the relevant Review Date”, which was the amount that the lessee was lawfully obliged to pay, was an amount exclusive of that portion of the CPI index that could be attributed to price exploitation. That is to say, the exploitative portion of the rent would not be “payable” within the meaning of clause 4(3) as no enforceable obligation attached to it under clause 1(1) of the carpark under-lease.

12. In my view the construction proffered in paragraph 31A.2 of the Third Statement of Claim is but a variant of that advanced in paragraph 31A.3. Both are underpinned by the prevention principle (about which more is said below) operating as a rule of construction.

13. Returning to the submissions in relation to the construction proffered in paragraph 31A.3 of the Third Statement of Claim, India pointed to clause 1(1) of the carpark under-lease and the obligation to pay the rent “hereby reserved at the respective times and in manner herein appointed for payment thereof free and clear of all deductions and abatements whatsoever” as incompatible with the alternate construction advanced by the Council. To accept the Council’s argument was to accept that even though the parties agreed to a rent review methodology involving a CPI escalator, and even if the lessee paid rent calculated in accordance with the escalator without objection, then nonetheless upon the next rent review it was open to consider the extent of the lessee’s legal obligation to pay the quantum in rent paid stemming back to the foundational payment. Such construction was uncommercial. No reason arose to read “payable” as meaning anything broader than payable in accordance with the conditions of the under-lease.

14. India then attacked the second step in the Council’s argument contending that Part VB TPA intended no consequence for private rights. The detailed provisions contained in the TPA for addressing price exploitation suggested that there was no room for any additional consequence at common law.

    d.     The Council’s third argument

15. The prevention principle is to the effect that a contractual entitlement arising upon the occurrence of an event will not be enforced if the event constitutes a breach of duty (whether contractual or otherwise) owed by the party claiming the entitlement to the other party. In the present case it is contended that the right to an increase in rent arises from the fixing of that increase in accordance with the CPI-based formula prescribed by clause 4(3). As the enforcement of that right carries with it a breach of s 75AU TPA, it is unenforceable at the behest of India.

16. As mentioned the principle underpins the second limb of the Council’s second argument. However, the Council further contends that the prevention principle rises as high as to amount to a rule of law precluding a wrongdoer from taking advantage of his or her own wrong as India would do in the present case if it were permitted to charge rent inflated by price exploitation.

17. India submitted that the prevention principle most often finds expression as a qualification upon a right to terminate a contract; i.e. a party to a contract cannot terminate for breach where the breach by the other party was in fact the product of the terminating party’s own breach. The principle also operates to prevent a breaching party relying upon his or her own breach to avoid compliance with other obligations under a contract. Importantly, the breach must be one of a duty owed to the other party. The breach of a duty owed to a stranger will not suffice to enliven the principle. Equally unless there is interdependence between the wrong committed by the terminating party and the breach of contract that same party seeks to rely upon the principle does not apply. Here, the required interdependence is absent. India submitted that the Council’s argument was in fact circular – the enforcement of the obligation to pay rent to India is only the result of a breach of contract if it constitutes a breach of contract by India to enforce the obligation. India was not attempting to exercise a right based upon any breach by the Council of the lease caused by India. The only issue, it was submitted, is whether clause 4(3) is to be given a meaning other than the plain and ordinary. India suggested the true contention advanced to be that clause 4(3) should be read down to prevent one party to the contract being in breach of a statutory provision. This broader contention, India submits, is not supported by the authorities that deal with the prevention principle nor those that deal with the enforcement provisions of the TPA. Further, as a construction principle it must give way to the plain meaning of the provision and cannot otherwise be permitted to modify that meaning.

    Analysis

    a.     Two preliminaries

    i.      The effect of the 1995 and 2000 Extensions on the carpark under-lease

18. In Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd Gleeson CJ, Gaudron, McHugh and Hayne JJ said:[26]

    When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists. In the present case, if the effect of what occurred on 30 August 1991 had been to rescind the agreement of 31 May 1991, then that would go a long way towards providing an answer to the appellant’s argument that the assignment which occurred on 30 August was pursuant to the agreement of 31 May, with whatever that entails for the application of Pt IIIA of the Act.

    In Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vict) Pty LtdTaylor J said:

    “It is firmly established by a long line of cases … that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement.”

    That passage was cited with approval by Wilson and Dawson JJ in Dan v Barclays Australia Ltd. It accords with principle and with authority.

    [footnotes omitted]

    [26] (2000) 201 CLR 520 at [22]-[24].

19. I agree with the Council that in the present case the 1995 and 2000 Extensions are contracts neither of which wholly rescinds the carpark under-lease. In my view in each case the parties intended that the carpark under-lease remain on foot subject to the alterations effected by each Extension. The contractual relation is modified with some rights and obligations cut out and others substituted.[27] This conclusion follows from the language used in each Extension; each extends the carpark under-lease upon the same terms and conditions as are expressed or implied in the carpark under-lease except as varied by the relevant extension instrument. On the second page of the extension instrument in each instance under the heading, “Variations”, the instruments affirm the lessor’s and lessee’s agreement to the terms and conditions of the carpark under-lease as varied. The variations are then largely expressed as deletions from, or insertions in, the carpark under-lease. Then clause 6 of the 1995 Extension makes plain that the rights and obligations as agreed in the lease remain in full force and effect as if repeated in the Extension save to the extent that the Extension modifies the same. And the 2000 Extension is brought to an end with the statement:

    In all other respects the terms and conditions of the Underlease shall remain unaltered and of full force and effect.

    [27]  Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) PtyLtd (1957) 98 CLR 93 at 144 (Taylor J).

20. I also agree with the submission that, as in the case of the amendment of a statute,[28] where a contract is amended it must be re-construed in the light of the amendment particularly where, as here, the amendments prospectively modify rights and liabilities. Accordingly, the relevant date as at which the construction exercise is to be undertaken for the purposes of this case is 28 February 2000, the date upon which the 2000 Extension was executed. Of course the construction exercise is not undertaken in ignorance of the history of the head lease and carpark under-lease.

    [28]  Commissioner of Stamps (SA) v Telegraph Investment CoPty Ltd (1995) 184 CLR 453 at 463 (Brennan CJ, Dawson and Toohey JJ).

    ii. Was there a breach of s 75AU TPA?

21. The preliminary issue that I am asked to try does not require that I arrive at any conclusion as to whether India has engaged in price exploitation. Nor am I required to determine whether there was in fact any spike in the CPI (All Groups) Eight Capital Cities index and if there was, whether it was due in part to price exploitation. As indicated the question of construction for me to determine is to be determined as at 28 February 2000. Whether or not there was a spike and whether, consequently, price exploitation did occur is a matter for a subsequent trial.

    b.     The Council’s first argument

22. The ordinary principles applicable in the law of contract apply to the construction of leases, leases being a species of commercial contract.[29] As a commercial contract the terms of the carpark under-lease are “to be understood objectively, by what a reasonable businessperson would have understood them to mean”.[30] In Electricity Generation Corporation v Woodside Energy Ltd it was said that such approach requires:[31]

    … consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.

    [footnotes omitted]

    [29]  Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 29 (Mason J, with whom Wilson and Dawson JJ agreed), 40 (Brennan J), 53 (Deane J); Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45.

    [30]  Ecosse Property Holdings Pty Ltd v Gee Dee NomineesPty Ltd (2017) 91 ALJR 486 at [16] (Kiefel, Bell and Gordon JJ); Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] (French CJ, Hayne, Crennan and Kiefel JJ).

    [31] (2014) 251 CLR 640 at [35] (French CJ, Hayne, Crennan and Kiefel JJ); see also Ecosse Property Holdings Pty Ltd v Gee Dee NomineesPty Ltd (2017) 91 ALJR 486 at [17] (Kiefel, Bell and Gordon JJ); Simic v NSW Land and Housing Corporation (2016) 260 CLR 85 at [78] (Gageler, Nettle and Gordon JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[52] (French CJ, Nettle and Gordon JJ).

1. The question of illegality in circumstances such as the present is “bound up with the view taken of the underlying policy” of the TPA.[60]

   [60]  Nelson v Nelson (1995) 184 CLR 538 at 559 (Deane and Gummon JJ); Miller v Miller (2011) 242 CLR 446 at [24]-[25] (French CJ, Gummow, Hayden, Crennan, Kiefel and Bell JJ).

2. In Master Education Services Pty Ltd v Ketchell (Ketchell) it was said that it “is not to be assumed that the common law sanction is to apply in the case of every contravention of a prohibition directed to one of the parties to a contract unless the statute contradicts or displaces such an effect”.[61] The correct approach, the joint reasons continued, was as set out in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (Baxter Healthcare) where it was said:[62]

   In Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd, Mason J said:

   “The principle that a contract the making of which is expressly or impliedly prohibited by statute is illegal and void is one of long standing but it has always been recognised that the principle is necessarily subject to any contrary intention manifested by the statute. It is perhaps more accurate to say that the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction and that the principle to which I have referred does no more than enunciate the ordinary rule which will be applied when the statute itself is silent upon the question.”

   That passage was cited by Kerr LJ in Phoenix General Insurance Co of Greece SA v Halvanon Insurance Co Ltd, where his Lordship said that when a statute contains a unilateral prohibition on entry into a contract, it does not follow that the contract is void. Whether or not the statute has this effect depends upon the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations. Ultimately, the question is one of statutory construction.

   [footnotes omitted]

   [61] (2008) 236 CLR 101 at [11] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

   [62] (2007) 232 CLR 1 at [45]-[46] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ); see also, Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [11] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ); Gnych v Polish Club Ltd (2015) 255 CLR 414 at [37] (French CJ, Kiefel, Keane and Nettle JJ).

3. In SST Consulting Services Pty Ltd v Rieson (SST) it was observed that the TPA “does much more than proscribe … certain forms of conduct”; it contained “detailed provisions, in Pt VI, dealing with the enforcement of the Act and providing remedies for past or proposed contraventions of the Act.”[63] The TPA was then described as including:[64]

   … a framework of legislation that makes elaborate provision not only for the creation of norms of conduct but also for the consequences that are to follow from the contravention of those norms.

   [footnote omitted]

   [63] (2006) 225 CLR 516 at [29] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

   [64]  SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [30] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ); see also Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 232 CLR 1 at [23] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

4. SST was a case concerning a loan agreement which included an exclusive dealing provision within the meaning of s 47(6) TPA. Breach of the exclusive dealing provision amounted to default resulting in the amount borrowed plus interest becoming due and payable. The borrower repaid some of the loan but not all. The loan was guaranteed. The lender sued the guarantors under the guarantee for the balance of the outstanding loan plus interest. The guarantors defended the action on the basis that the contract was illegal and unenforceable for contravening the prohibition on exclusive dealing contained in s 47(1) TPA. The questions that arose for consideration before the High Court were as follows: was the contract to which the guarantee related illegal and unenforceable, or, did s 4L TPA require severance of the provisions of the contract so that the borrower’s obligations to repay the loan remained enforceable?

5. Section 4L TPA was inserted into the TPA in 1977. It provided:

   If the making of a contract after the commencement of this section contravenes this Act by reason of the inclusion of a particular provision in the contract, then, subject to any order made under section 87 or 87A, nothing in this Act affects the validity or enforceability of the contract otherwise than in relation to that provision in so far as that provision is severable.

6. Section 4L is only engaged if there is a contract that contravenes the TPA by reason of the inclusion of a particular provision in that contract.[65] It is necessary then to identify the provision whose inclusion brings about the result that making the contract contravened the TPA. In SST the loan contract contravened the TPA by reason of the inclusion of a provision requiring the borrower to direct certain work to corporations identified by the lender thereby engaging in exclusive dealing. The joint reasons observed:[66]

   It was the inclusion of the condition obliging AFS USA [the borrower] to direct its work in that way that brought the lender’s supply of services within s 47(6). It is that condition with which s 4L deals in the second part of its provisions, namely: “subject to any order made under section 87 or 87A, nothing in this Act affects the validity or enforceability of the contract otherwise than in relation to that provision in so far as that provision is severable” (emphasis added).

   It is important to recognise the way in which this second part of s 4L is constructed. It sets out what may be identified as its central proposition – “nothing in this Act affects the validity or enforceability of the contract”. That central proposition is qualified in two respects. First, it is “subject to any order made under section 87 or 87A”; secondly, different consequences are to follow in relation to the offending provision “in so far as that provision is severable”. But it is to be noted that, subject to those qualifications, what we have called the “central proposition” is that the contract, the making of which contravened the Act, is valid and enforceable. That central proposition is the direct opposite of the ordinary rule that a contract whose making is illegal will not be enforced. As was said in Yango Pastoral:

   “When a statute expressly prohibits the making of a particular contract, a contract made in breach of the prohibition will be illegal, void and unenforceable, unless the statute otherwise provides either expressly or by implication from its language.”

   The second qualification to the central proposition hinges about the words “in so far as”. The offending provision is not valid and is not enforceable “in so far as” that provision is severable. The words “in so far as” describe the extentof invalidity and unenforceability that is to follow from the contravention that engages the section. …

   [footnotes omitted]

   [65]  SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [32] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

   [66]  SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [33]-[35] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

7. Once the offending provision is identified “[i]t is that provision which is unenforceable and void and it is that provision” which s 4L requires to be severed.[67] The joint reasons further observed:[68]

   This outcome is wholly consistent with the purpose, text and structure of the Act. It is an outcome that recognises that the consequences of contravention are prescribed by the Act, not by resort to a general and all-embracing principle whose application in this case would favour one group of parties knowingly concerned in the contravention over another party in like contravention of the Act. AFS USA and the respondents were all knowingly concerned in the appellant’s contravention of the Act. It was the first respondent who, on behalf of AFS USA, offered “certainty in relation to the work”. Yet on the respondents’ arguments, the debt which AFS USA owed would be irrecoverable. That result would not advance any purpose of the Act. Nor, for the reasons given earlier, is it a result that is consistent with either the Act’s text or its structure.

   [67]  SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [40], [52] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

   [68]  SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [53] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

8. Baxter Healthcare concerned the interaction of ss 2B, 46 and 47 of the TPA.[69] Section 46 provided that a corporation that had a substantial degree of power in a market should not take advantage of that power to eliminate or damage a competitor, or to deter or prevent others from entering the market. As mentioned, s 47 contained a prohibition against the practice of exclusive dealing. Section 2B provided that ss 46 and 47 bound the Crown insofar as the Crown carried on a business, either directly or by an authority in the State or Territory.

   [69] (2007) 232 CLR 1.

9. Baxter was the dominant wholesale supplier of certain medical fluid products in Australia. It contracted with the State purchasing authorities of, inter alia, New South Wales, South Australia and Western Australia for such products on an exclusive supply basis. The ACCC brought an action against Baxter and the States of Western Australia, South Australia and New South Wales. The primary issue in dispute was whether ss 46 and 47 applied to Baxter by operation of the “derived immunity” doctrine as stated in Bradken Consolidated Ltd v Broken Hill Pty Co Ltd.[70] Ultimately it was held that Baxter was bound by ss 46 and 47 and that the doctrine did not apply.

   [70] (1979) 145 CLR 107.

10. It was conceded at first instance by the ACCC that ss 46 and 47 did not apply to the conduct of the States because the State purchasing authorities were not ‘carrying on a business’ pursuant to s 2B. In fact, injunctive relief was sought by the ACCC to preserve the contractual rights of the States. The majority consisting of Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ left the questions regarding the enforceability of the contract and the nature of injunctive relief to be granted, if at all, for determination by the Full Court of the Federal Court upon remittal. However, their Honours emphasised that mere unilateral illegality of a contract does not render it unenforceable:[71]

    In order to protect legal rights of the Crown, it is not necessary to deny that entering into or performing a contract could involve a contravention of s 46 or s 47 by a non-government party. As was pointed out earlier, many statutes, and the Act in particular, may produce the consequence that making or performing a contract is illegal for one party but not for the other. When that occurs, the result is not necessarily general unenforceability of the contract. In the case of the Act, that is reinforced by s 4L as explained in SST Consulting Services Pty Ltd v Rieson. The outcome is determined by the application of the detailed legislative scheme concerning remedies. It is not dictated by a general conclusion that, in order to preserve the Crown's immunity, it is necessary also to extend a general immunity to any non-government party negotiating or contracting with the Crown.

    [emphasis added]

    [71]  Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 232 CLR 1 at [70] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

11. In Ketchell a franchisee sought to avoid liability for fees payable under a franchise agreement on the basis that the franchisor did not comply with clause 11(1) of the Franchising Code of Conduct contrary to s 51AD TPA. The Franchising Code of Conduct was an applicable industry code for the purposes of s 51AD. Clause 11(1)(a) and (c) of that Code in combination provided that a franchisor must not enter into a franchise agreement or receive non-refundable money under a franchise agreement unless the franchisor had received from the relevant franchisee a written statement that the franchisee had received, read and had a reasonable opportunity to understand the required disclosure document and the Code. A unanimous High Court said:[72]

    Section 51AD is not expressed to prohibit entry into a franchise agreement where a franchisor has not complied with the Code. It does not make performance of such an agreement unlawful in that circumstance. Like the statutory provisions in Yango Pastoral Co v First Chicago, it contains no reference to contracts or transactions. Its prohibition is directed to compliance with industry codes, which are central to the operation of Pt IVB. An industry code is defined to mean “a code regulating the conduct of participants in an industry towards other participants in the industry or towards consumers in the industry”.

    As was pointed out in the passage from Yango Pastoral Co v First Chicago, cited in Australian Competition and Consumer Commission v Baxter Healthcare, it does not always follow from a prohibition directed to one party to an agreement that the contract is void. In Yango Pastoral Co v First Chicago the statutory prohibition in questionprohibited a corporation from carrying on any banking business without an authority to do so, and provided a daily penalty for contravention. It was held that securities taken by a corporation which contravened that provision were not rendered void and unenforceable by the Act. Gibbs A-CJ observed that it was directed not at the making or performance of particular contracts, but at the carrying on of any banking business.

    [footnotes omitted]

    [72]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [15]-[16].

12. In the absence of an express prohibition against the making of an agreement in contravention of clause 11 any prohibition had to be the product of implication.[73] The Court then referred to the purposes of the Code and Part VI TPA and the protection it afforded franchisees. That protection was achieved by the imposition of obligations upon the franchisor to provide the franchisee with information and advice such that informed decisions could be made. Compliance by franchisors with the Code was promoted by s 51AD which rendered a franchisor liable to the remedies contained in Part VI for any proven contravention. It was “no part of the scheme, and unnecessary to the purposes mentioned, to strike down a contract made by a non-complying franchisor.”[74] The Court said:[75]

    Section 51AD is not converted into a prohibition upon the making of an agreement where there is non-compliance with the Code because cl 11(1) of the Code is expressed in imperative terms. … It is not to be inferred from the language of cl 11(1) that the stated prohibition is to have the result that a contract entered into by a non-complying franchisor is to be void and unenforceable. The use of imperative language in cl 11(1) does not require that conclusion. As was pointed out in Project Blue Sky Inc v Australian Broadcasting Authority, it is necessary to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. In determining the question of purpose, regard must be had not only to the language of the relevant provision but also to the scope and object of the whole statute.

    [footnote omitted]

    [73]  In this regard s 51AD could be contrasted with s 45(2) of the Trade Practices Act 1974 (Cth): see Trade Practices Commission v MilreisPty Ltd (1977) 29 FLR 144; see also Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [31], [33] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

    [74]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [25] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

    [75]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [26] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

13. The Court then noted that to too readily conclude that a statute prohibited a contract would have the consequence of excluding from consideration the remedies that might be provided for by the Act which might be tailored to the circumstances of the particular case. Coming back to Part VI TPA, the Court noted that the remedies available thereunder could “be seen as directed to the range of circumstances which may arise” where a franchisor has failed in the obligations owed to a franchisee.[76] Those remedies included “the grant of an injunction with respect to conduct engaged in, or which is proposed to be engaged in, which would constitute a contravention of Pt IVB (or Pt IVA) (s 80), damages (s 82), non-punitive orders (s 86C) and the range of orders laid out in s 87(2), including orders varying contracts and refusing to enforce all or any contractual provisions”.[77] The Court concluded:[78]

    The operation of the Act with respect to a contravention of a provision of the Code therefore stands in marked contrast to a contravention of other statutory regimes which, beyond stating that contravention is an offence, are silent as to the remedial consequences for the relations in the civil law between the parties. That was the difficulty presented by the terms of the legislation in Yango Pastoral Co v First Chicago, which provided only for the imposition of a penalty. The Court was nonetheless able to conclude that the legislative purpose, relating to the business of banking, could be fulfilled without the securities being void or unenforceable.

    [footnotes omitted]

    [76]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [27].

    [77]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [28] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

    [78]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [30] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

14. The Court referred to the judgment in Carlton & United Breweries v Castlemaine Tooheys Ltd[79] (CUB) and the rejection in Trade Practices Commission v Milreis Pty Ltd[80] (Milreis) of the submission that the TPA was a code on the basis that provisions such as ss 45(1), 45B(1), Div 2 Pt V, and 163A were indicative of the TPA not providing for all consequences.[81] In CUB the Court noted that the TPA had been amended since Milreis was decided. Whilst the Court did not expressly revisit the question of whether the TPA was a code in light of the amendments, it commented:[82]

    The provisions of the Trade Practices Act are part of the law of Australia and a Supreme Court, in the exercise of its jurisdiction, is bound to give effect to them, and it is not deprived of jurisdiction simply because it is called on to do so.

    [79] (1986) 161 CLR 543.

    [80] (1977) 29 FLR 144.

    [81] (1986) 161 CLR 543 at 554 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ).

    [82]  Carlton & United Breweries v Castlemaine Tooheys Ltd (1986) 161 CLR 543 at 555 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ).

15. Returning to Ketchell, the Court considered that the sections referenced did not support an argument that the Act, taken as a whole, did not intend to provide for the consequences of every contravention. Provision made by the Act for consequences other than those provided for by the TPA suggested the contrary.[83] The Court concluded:[84]

    The detailed provision by the Act for the consequences of non-compliance with an industry code, such as the Franchising Code of Conduct, does not support a conclusion that it was intended that the harsh consequences provided by the common law were to follow upon contravention of s 51AD. The Act provides a more flexible approach. It allows a court to prevent entry into a franchise agreement, to vary the terms of an agreement entered into in breach of the Code, or to terminate such an agreement or provide compensation for loss and damage, if it is shown to have been caused by the contravention. In that regard the extended meaning which may be given to loss and damage by s 82, which is suffered by reason of entry into contractual obligations, may assume significance.

    The final matter which supports the non-applicability of the common law sanction for contravention of s 51AD has regard to the position of the franchisee. One of the purposes of the Code is the protection of the position of the franchisee. It is not expressed to prohibit the franchisee from entering into an agreement where a franchisor had not complied with cl 11. As Rares J pointed out in Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd [No 2], it would be an unusual result if, in that circumstance, a franchisee’s bargain was struck down in every case, regardless of the position in which it places the franchisee. It is not to be assumed in every case that a franchisee wishes to be relieved of their bargain. To render void every franchise agreement entered into where a franchisor had not complied with the Code would be to give the franchisor, the wrong-doer, an opportunity to avoid its obligations, and at the same time to place the franchisee in breach of obligations to third parties. A preferable result, and one for which the Act provides, is to permit a franchisee to seek such relief as is appropriate to the circumstances of the case. Some cases of non-compliance with cl 11 might involve substantial non-disclosure; others may only involve a failure to obtain the written statement, confirming that the franchisee has read and understood the disclosure document and the Code. This is such a case.

    Section 51AD does not in its terms prohibit the making of a franchise agreement where a franchisor has not complied with the Code. That section and the Code are concerned with the regulation of the conduct of participants in the franchising industry; in particular the conduct of franchisors. It is not to be inferred from a purpose which promotes or prescribes better and fairer business practices that contractual relations between parties will be affected. As was pointed out in SST Consulting Services v Rieson, the Act is far from being silent upon the question of the consequences of illegality, but, rather, contains elaborate provision. That is not to say that the express provisions of the Act answer all questions that may arise, but they answer many of them, and set the context in which others are to be answered. The provision made by the Act, in Pt VI, for remedies for contraventions of Pt IVB, and the unconscionability provisions of Pt IVA, tell strongly against an intention that the common law remedy for illegality was to apply. Such a conclusion is reinforced by the disadvantage which may be caused to a franchisee, which would not be consistent with the purposes of Pt IVB and the Code. It follows that s 4L does not apply to require the severance of the respondent’s obligation under the Franchise Agreement to pay moneys, as the respondent contended.

    [83]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [37] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

    [84]  Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101 at [38]-[40] (Gummow A-CJ, Kirby, Hayne, Crennan and Kiefel JJ).

1. In what follows I adopt the approach invoked in each of SST, Baxter Healthcare and Ketchell. That approach accords with the principles enunciated in Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (Yango)[85] reaffirmed in Gnych v Polish Club Ltd.[86]

   [85] (1978) 139 CLR 410 at 413 (Gibbs ACJ), 423 (Mason J, Aickin J agreeing), 430 (Jacobs J).

   [86] (2015) 255 CLR 414 at [35]-[39] (French CJ, Kiefel, Keane and Nettle JJ).

2. Section 75AU(1) creates a norm of conduct. The subject of the prohibition contained in s 75AU(1) is the making of a regulated supply having the character prescribed in s 75AU(2). That section operates on contracts for the supply of goods and services. A contract for a regulated supply made or to be made by a corporation in consideration for the payment of the price of the supply, where the price is unreasonably high having regard alone to the New Tax System changes and after taking into account the supplier’s costs, supply and demand conditions and any other relevant matter, is one contrary to the prohibition contained in s 75AU(1). Such contract is unilaterally illegal in that the illegality stems from the price charged by the corporation. There is no agreement with the recipient of the supply to engage in price exploitation. Rather the section seeks to protect the recipient of the supply from price fixing even though the recipient may be quite prepared to pay the price as fixed by the supplier.

3. The Council contends that in the present case the carpark under-lease in its making offended s 75AU(1). The evidence to support that contention is a matter for any future trial. I admit that it is not immediately apparent to me that any spike in the CPI would necessarily be the product of price exploitation or that the contribution made by price exploitation to that spike, as opposed to, for example, increased costs associated with the tax changes passed on to consumers, would be such as to render rent charged pursuant to clause 4(3) unreasonable within the meaning of s 75AU(2). I arrive at no conclusion as to whether this is a case falling within either the first or fourth of Gibbs ACJ’s categories.[87] It is not necessary to my conclusion to arrive at such view. It does, however, have ramifications for any possible application of s 4L TPA.

   [87]  Yango Pastoral Company Pty Ltd v First Chicago AustraliaLtd (1978) 139 CLR 410 at 413 (Gibbs ACJ).

4. Earlier in these reasons I have set out the amendments made to the TPA by the A New Tax System (Trade Practices Amendment) Act 1999 (Cth). With the exception of s 75AU, the sections contained in Part VB fall into three general categories; the informative and preventative, those concerned with proof of breach, and those that permit information gathering and reporting. The first category includes ss 75AV(1), (2), (3) and (5), 75AX and 75AZ(4). The third category, ss 75AY and 75AZ. Sections 75AV and 75AW fall into the second category. They prescribe no legal consequence for a breach of s 75AU but provide an aid to proof in applications under ss 76 and 80. Enforcement is the province of those amendments that pick up and apply aspects of Part VI TPA to contraventions of s 75AU. In this regard I have already mentioned s 76 (pecuniary penalty orders) and s 80 (injunctions). Section 80B TPA expands the relief that may be obtained on an application by the ACCC under s 80 to include an order requiring the person who has contravened s 75AU to refund money. Section 80B TPA is significant. The expanded remedy denies the suggestion that the underlying contract is unenforceable.

5. It is necessary to say something more regarding s 75AU(2) TPA. Proof of price exploitation requires evidence of the supplier’s costs, evidence of supply and demand conditions in the market in which the regulated supply was made, and evidence of other matters relevant to the fixing of the price for the supply. Here too it should not be overlooked that it is “unreasonably high” prices that are prohibited. Detection, investigation and proof are not something that generally speaking the individual can be expected to be able to undertake. No doubt this is why the particular power contained in s 75AY(2) was vested in the ACCC in addition to the powers contained in s 155 TPA. That suggests that the legislature did not contemplate that Part VB would give rise to anything in the way of a private remedy. This is, in turn, reflected in the limitation imposed by s 80(1A), that any refund is contemplated as an adjunct to an application by the ACCC under s 80 TPA and the exclusion of Part VB from the power to seek a declaration under s 163A. Of course it is not to be overlooked that in the vast majority of cases of price exploitation, perhaps the overwhelming majority, the recipient will have accepted the price. That is, the recipient agreed to the consideration paid in return for the supply. That likely explains why ss 87 and 87A TPA were not amended to apply to contraventions to s 75AU.

6. Lastly, reference should be made to s 4L TPA. The statutory consequence prescribed by s 4L TPA applying in a case like the present where the offending clause governs consideration for the service is within the contemplation of the section.[88] Whilst the Council did not contend that s 4L applied to the carpark under-lease and such question may need to be visited in future, the section is another example of the legislature having turned its mind to the consequence of a contravention of the TPA.

   [88]  SST Consulting Services Pty Ltd v Rieson (2006) 225 CLR 516 at [50] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

7. In my view the purpose of protecting the public from excessive profit taking to be effected by Part VB TPA and the amendments made to Part VI TPA did not require that a contract made in breach of s 75AU be rendered illegal and unenforceable. I consider the powers vested in the ACCC all that the legislature considered necessary to deter those who might engage in price exploitation. I arrive at the same conclusion in relation to Part VB TPA as the majority did in each of SST and Ketchell in relation to the Franchising Code and the exclusive dealing provisions of the TPA respectively.

8. In Yango Mason J said:[89]

   There is much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished—see my judgment in Jackson v. Harrison. See also the suggestions that the principle cannot apply to all statutory offences (Beresford v. Royal Insurance Co. Ltd. in the Court of Appeal, per Lord Wright; Marles v. Philip Trant & Sons Ltd., per Denning L.J., and that it would be a curious thing if the offender is to be punished twice, civilly as well as criminally (St. John Shipping Corporation v. Joseph Rank Ltd., per Devlin J.). The main considerations from which the principle ex turpi causa arose can be seen in the reluctance of the courts to be instrumental in offering an inducement to crime or removing a restraint to crime: Beresford’s Case; Amicable Society v. Bolland (Fauntleroy’s Case).

   However, in the present case Parliament has provided a penalty which is a measure of the deterrent which it intends to operate in respect of non-compliance with s. 8. In this case it is not for the court to hold that further consequences should flow, consequences which in financial terms could well far exceed the prescribed penalty and could even conceivably lead the plaintiff to insolvency with resultant loss to innocent lenders or investors. In saying this I am mindful that there could be a case where the facts disclose that the plaintiff stands to gain by enforcement of rights gained through an illegal activity far more than the prescribed penalty. This circumstance might provide a sufficient foundation for attributing a different intention to the legislature. It may be that the true basis of the principle is that the court will refuse to enforce a transaction with a fraudulent or immoral purpose: Beresford v. Royal Insurance Co. Ltd. On this basis the common law principle of ex turpi causa can be given an operation consistent with, though subordinate to, the statutory intention, denying relief in those cases where a plaintiff may otherwise evade the real consequences of a breach of a statutory prohibition.

   [footnotes omitted]

   [89]  Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 429-430.

9. These sentiments apply in the present case. The consequences of any contravention of s 75AU are, in my view, prescribed by the TPA. In my view, the carpark under-lease is not, applied according to the ordinary meaning of its terms, illegal or unenforceable.

10. Accordingly the premise underpinning the second step in the construction arguments subject of paragraphs 31A.2 and 31A.3 of the Third Statement of Claim cannot be sustained.

    d.     The Council’s third argument

11. In Gnych v Polish Club Ltd Gageler J said:[90]

    The consideration of public policy that a person ought not to be permitted by law to found a cause of action on an immoral or illegal act is the product of an earlier age. The broader consideration of public policy is now rarely recognised by the common law to have application in relation to illegality which arises under a modern regulatory statute. That is the import of the observation by Mason J in Yango that “[t]here is much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished”. It is not the function of the common law to seek to improve on a regulatory scheme by supplementing the statutory sanctions for its breach. If a statute itself does not operate to deny legal operation to an agreement made in breach of one of its prohibitions, or to render that agreement unenforceable by reason of that breach, the coherence of the law is best served by a court respecting and enforcing that legislative choice.

    But the other consideration of public policy – that a person ought not to be assisted by law to benefit from an immoral or illegal act – can have application where the first does not. That is the import of the further observation by Mason J in Yango that “there could be a case where the facts disclose that the plaintiff stands to gain by enforcement of rights gained through an illegal activity far more than the prescribed penalty”.

    A court examining the application of that consideration of public policy to the enforcement of an agreement made in breach of a statutory prohibition will examine the intention of a person in entering into the agreement and in seeking to enforce the agreement. The court will recognise that, “whilst persons who deliberately set out to break the law cannot expect to be aided by a court, it is a different matter when the law is unwittingly broken”. The court will weigh the consequences of withholding a remedy to enforce the agreement in light of the objects or policies which the statute seeks to advance and the means which the statute has adopted to achieve that end. Ordinarily, it would be open to the court to conclude that withholding a common law remedy from a person whose intention was, and remained, to flout the statute was justified by reference to the narrower consideration of public policy only if the consequence of withholding the remedy could be determined by the court to be both proportionate to the seriousness of the illegality and not incongruous with the statutory scheme. The moulding of an equitable remedy, if sought, might involve other considerations and permit of greater flexibility.

    [footnotes omitted]

    [90] (2015) 255 CLR 414 at [73]-[75].

12. In addressing the Council’s second argument I have dealt with the first of Gageler J’s public policy considerations. In my view, the TPA contemplates no greater consequences for a contract that breaches s 75AU than that which it prescribes. If there remains room for the second of Gageler J’s public policy considerations to apply the Council has not pleaded a case alleging as much and in particular that India has deliberately set out to breach the TPA. There is then on the current pleadings no room for the prevention principle to operate.

    Conclusion

13. For the reasons provided above, in my view, clause 4(3) of the carpark under-lease, as varied by the 1995 and 2000 Extensions, should be afforded its plain, ordinary meaning. Further, having regard to Part VB TPA and to the TPA more generally, the prevention principle does not apply to prevent the enforcement of clause 4(3).

14. I will hear the parties further as to the appropriate form of the orders to be made.