Two recent decisions of the Federal Court of Australia, Australian Competition and Consumer Commission v Lee Lee Pty Ltd and Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd, considered the application of Sections 51(AA) and 51(AC) of the Trade Practices Act in the context of unconscionable conduct by landlords. Both cases demonstrated the willingness of the court to find in favour of an aggrieved tenant where the landlord has unfairly exploited the disadvantage of the weaker party.
However, a subsequent case, Australian Competition and Consumer Commission v Samton Holdings Pty Ltd, demonstrated that courts are more reluctant to penalize a landlord where a tenant's misfortune is a result of his/her own mistake.
The tenant was an experienced businessman who purchased a business and then mistakenly failed to exercise an option to renew the lease for seven years. The landlord demanded $70,000 for the renewal of a lease for the same term. The Australian Competition and Consumer Commission, on behalf of the tenant, alleged that the landlord had exploited the tenant's special disadvantage by demanding such a payment, and had acted unconscionably and in breach of Section 51(AA) of the Trade Practices Act.
The landlord was aware that the tenant was in a position of special disadvantage due to having recently completed the purchase and being dependent on the income derived from the business. However, in applying the concept of unconscionable conduct from Australian Competition and Consumer Commission v Lee Lee Pty Ltd and Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd the court considered that the special disadvantage had come about through the tenant's own failure to exercise the option. Given the tenant's significant business experience it was reasonable for the parties to reach a negotiated settlement on the terms that they did. The tenant's failure to exercise the option was a costly mistake and it was in his business interests to pay the $70,000 to regain the lease. The landlord was not in breach of Section 51(AA).
For further information on this topic please contact Katerina Petrogiannakis or Toby Mittelman at Arnold Bloch Leibler by telephone (+61 3 9229 9779) or by fax (+61 3 9229 9889) or by e-mail ([email protected] or [email protected]).
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