FEDERAL COURT OF AUSTRALIA

 

Australian Competition & Consumer Commission v Leelee Pty Ltd [1999] FCA 1121

 

TRADE PRACTICES - application under s 51AC(1) - whether insistence on term of contract may be unconscionable for the purposes of that section - whether action consistent with contractual right may be unconscionable.

TRADE PRACTICES - application under s 51AC(1) - whether conduct alleged was in connection with the supply of services.

TRADE PRACTICES - operation of s 51AC(6)(b) - extent to which applicants entitled to rely on conduct before 1 July 1998 - whether pleadings should be struck out because conduct alleged occurred before 1 July 1998 - difference between “circumstances” and “conduct”.

PRACTICE AND PROCEDURE - application to permanently stay action as abuse of process - application under O 20 r 2 of Federal Court Rules - circumstances in which application will be permanently stayed - whether abuse of process.

PRACTICE AND PROCEDURE - abuse of process - whether abuse to run “test case” - whether abuse of process where parties had disparate resources available - whether maintenance of proceedings so unfair and unjustifiably oppressive as to amount to abuse of process - whether proceedings were vexatious - whether proceedings should be stayed where one party cannot afford legal representation.

WORDS AND PHRASES - meaning of “unfairness” for the purpose of abuse of process application - meaning distinguished from colloquial sense of unfairness.

WORDS AND PHRASES - meaning of “circumstances existing before” - meaning of “conduct engaged in” - meaning of “have regard to” - difference between “circumstances” and “conduct”.

 

Federal Court Rules O 11 r 16, O 12 r 3 and O 20 r 2

Trade Practices Act 1974 (Cth) ss 4(2), 29(1), 51AC(1), 51AC(2), 51AC(3), 51AC(6)(b), 52A(1), 83, 87(1A), and 155

Medical Practitioners Act 1938 (NSW)

Companies (New South Wales) Code s 541(5)

Trade Practices Amendment (Fair Trading) Bill 1997

Trade Practices Amendment (Fair Trading) Act 1998

Dey v Victorian Railways Commissioners (1949) 78 CLR 62 applied

Walton v Gardiner (1993) 177 CLR 378 considered

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 considered

Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 considered

Williams v Spautz (1992) 174 CLR 509 considered

Trade Practices Commission v Frendship Aloe Vera Pty Ltd (1988) 82 ALR 557 followed

Australian Competition and Consumer Commission v The Shell Company of Australia Ltd (1997) 72 FCR 386 followed

Titan v Babic (1994) 49 FCR 546 considered

Ball v Commissioner of Taxation (1996) 96 ATC 4950 considered

Hamilton v Oades (1989) 166 CLR 486 considered

Dietrich v The Queen (1992) 177 CLR 292 distinguished

New South Wales v Canellis (1994) 181 CLR 309 applied

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 considered

Gardiner v Walton (1991) 25 NSWLR 190 considered

“A” v Pelekanakis [1999] FCA 236 considered

Hoare v The Queen (1989) 167 CLR 348 considered

Lek v Minister for Immigration Local Government and Ethnic Affairs (1993) 43 FCR 418 considered

Reid v Vocational Registration Appeal Committee (1997) 73 FCR 43 considered

Re BHP Petroleum Pty Ltd and Minister for Resources (1993) 30 ALD 173 considered

Re Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 considered

R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 considered

Fitti v Minister for Primary Industries (1993) 40 FCR 286 considered

Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 considered

Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 considered

Official Trustee in Bankruptcy v Tooheys Ltd (1993) 29 NSWLR 641 considered

Cameron v Qantas Airways Ltd (1995) 55 FCR 147 considered

Pritchard v Racecage Pty Ltd (1997) 142 ACR 527 considered

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v LEELEE PTY LTD and PUA HOR ONG

S 7 OF 1999

MANSFIELD J

20 AUGUST 1999

ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	S 7 OF 1999

 

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	LEELEE PTY LTD (ACN 008 131 020) First Respondent   PUA HOR ONG Second Respondent
JUDGE:	MANSFIELD J
DATE OF ORDER:	20 AUGUST 1999
WHERE MADE:	ADELAIDE

 

 

THE COURT ORDERS THAT:

 

1.                  The statement of claim is struck out.

2.                  The applicant is granted leave to file and serve an amended statement of claim.

3.                  The application to have the proceedings permanently stayed is refused.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	S 7 OF 1999

 

 

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	LEELEE PTY LTD (ACN 008 131 020) First Respondent   PUA HOR ONG Second Respondent

 

JUDGE:	MANSFIELD J
DATE:	20 AUGUST 1999
PLACE:	ADELAIDE

REASONS FOR DECISION

1                     The respondents have applied by motion dated 6 May 1999 for orders

(1)                permanently staying the action,

(2)               striking out pars 99-101 inclusive of the statement of claim, and

(3)               striking out the whole of the statement of claim, or substantial portions of it.

2                     It is agreed that the application should be determined by reference to the Further Amended Statement of Claim of the applicant, Australian Competition and Consumer Commission (“the applicant”), amended by leave given on 2 July 1999 (“the statement of claim”).  The application to strike out the statement of claim, or parts of it, is brought under O 11 r 16 of the Federal Court Rules (“the Rules”).  The application to stay the action is brought under O 20 r 2 of the Rules.

3                     The applicant’s claim is based upon alleged contraventions of s 51AC(1) of the Trade Practices Act 1974 (Cth) (“the Act”).  Section 51AC  was introduced into the Act by the Trade Practices Amendment (Fair Trading) Act 1998 (Cth).  It was proclaimed to commence on 1 July 1998.

4                     Section 51AC(1) provides:

“A corporation must not, in trade or commerce, in connection with:

 

(a)      the supply or possible supply of goods or services to a person (other than a listed public company); or

 

(b)      the acquisition or possible acquisition of goods or services from a person (other than a listed public company);

 

engage in conduct that is, in all the circumstances, unconscionable.”

 

5                     Section 51AC(6)(b) is important to the consideration of the present motion.  It deals with the extent to which conduct prior to the commencement of s 51AC may be considered for the purposes of determining whether there has been a contravention of s 51AC.  It provides:

“(6)   For the purpose of determining whether a corporation has contravened subsection (1) or whether a person has contravened subsection (2):

 

…

 

(b)       the Court may have regard to circumstances existing before the commencement of this section but not to conduct engaged in before that commencement.”

 

The allegations

6                     This section of the reasons for decision contains a brief description of the allegations in the statement of claim.  It is not intended to represent any findings of fact.

7                     Since 1987, Leelee Pty Ltd (“Leelee”) has been the lessee of premises at Moonta Street, Adelaide (“the Adelaide International Food Plaza”) from which it has conducted business as a landlord, and liquor licensee and food stall operator, under the business name ‘Adelaide International Food Plaza’.  Its business has included leasing food stalls to food stall proprietors.  There were twelve food stalls leased to stallholders.  The premises also include a central area seating four hundred and fifty people, and a liquor and drink vending bar conducted by Leelee.  Pua Hor Ong (“Mr Ong”) is the managing director of Leelee, and conducts its operations.  Counsel for Leelee and Mr Ong (together, “the respondents”) did not suggest that there should be any different outcome to the application in relation to them separately.  The allegations in the statement of claim are that, in effect, Mr Ong was the guiding mind and the principal actor on behalf of Leelee.  Mr Ong is claimed to have aided and abetted Leelee’s contravention of s 51AC(1) of the Act and to have been directly, knowingly concerned in, or party to, the contraventions:  ss 80(1)(c) and 80(1)(e) of the Act.  I shall not discriminate between the positions of the respondents, except where it is clearly desirable to do so.

8                     Kwee-Sang Choong and Lang-Hwa Guay (“the Choongs”) from 7 January 1991 until 6 January 1999 were stallholders of stall No 8 (“the stall”) in the Adelaide International Food Plaza by underlease from Leelee (“the underlease”).  They operated under the business name “Blessing Noodle Bar”.  The underlease was for an initial term of three years.  The Choongs exercised their right of renewal for the further period of five years.  The term granted by the underlease expired on 6 January 1999.

9                     The respondents’ counsel described the applicant’s complaints as falling into four general groups, the first three of which related to the conduct of the respondents under the underlease, and the last of which related to their conduct in relation to prospective new underlessees when the underlease was about to expire.  Counsel for the applicant generally acknowledged that categorisation, although disputing that each of the first three groups involved breaches by the respondents of the underlease.  It is convenient to adopt those categories of complaint in considering the present application.  All involved allegations of conduct in breach of s 51AC of the Act.

10                  The respondents submitted that the statement of claim related to

(a)               their conduct in relation to rental charged from time to time under the underlease (“the rental issue”)

(b)               their conduct in permitting other stallholders to sell food of the same kind as that exclusively reserved to the Choongs (“the food range issue”)

(c)                their conduct in permitting other stallholders to sell food at prices lower than their respective underleases permitted whilst insisting that the Choongs adhere to the prices as fixed in accordance with the underlease (“the food price issue”)

(d)               their conduct in failing to “consider” the grant of a fresh underlease of the stall to prospective tenants introduced by the Choongs, so that the Choongs might have the opportunity to sell to a prospective tenant the goodwill, and the plant and equipment, attaching to their Blessing Noodle Bar business (“the re-leasing issue).

(a)        The rental issue

11                  The underlease provided for review of the rental payable pursuant to the underlease only to the same percentage as applied to other stallholders at the premises.  The Choongs were not to be singled out for any rental increase.

12                  The rental comprised a rental payment of $545 and a contribution to operating expenses.  The rental payment was increased by $38.15 to $583.15 on 7 January 1992.  It was paid by the Choongs thereafter until 6 January 1999.  The Choongs requested details and information to verify that the increase was made in accordance with the underlease, but that request was not met.  The Choongs nevertheless paid the increased rental because the respondents threatened to withhold the supply of cutlery and plates necessary for the operations of the Blessing Noodle Bar, and because they were told that Leelee would provide the details and the information requested.

13                  However, the respondents did not at any time provide the detail and the information to the Choongs necessary for them to verify that that rental increase was in accordance with the underlease.  The Choongs made ongoing requests for that material.  The requests were oral “at various times commencing from about 14 January 1992” and in writing by letters from mid 1996.  No particular oral request after 1 July 1998 is identified.  It is not clear if any oral request after that date is alleged.  The only letter containing any such request after 1 July 1998 is a letter of 5 August 1998.

14                  On 10 December 1992, Leelee gave notice of a further proposed rental increase from 8 January 1993.  The Choongs again requested details and information to verify that the proposed increase was made in accordance with the underlease.  Those requests were made orally “at various times commencing from about 10 December 1992” and in writing, by the same letters as those requesting information about earlier rent review.  Again, no particular oral request after 1 July 1998 is identified, and it is not clear if any oral request after that date is alleged.

15                  The Choongs did not pay that proposed rental increase.

16                  It is alleged that that conduct, namely the failure to provide the details and information requested by the Choongs, is conduct in contravention of s 51AC(1) of the Act.  It is not alleged that the rental charged was not in accordance with the underlease.

17                  The failure to provide the details and information to enable the Choongs to verify the rental increase in accordance with the underlease is said to be conduct engaged in from about 7 January 1992 (or 10 December 1992 in respect of the second proposed rental increase) and in particular after 1 July 1998.  It is pleaded that:

“By engaging in the conduct described … the First Respondent, in trade or commerce, in connection with the supply of services to Mr and Mrs Choong, engaged in conduct that was, in all the circumstances, unconscionable within the meaning of section 51 AC(1) of the Act.”

 

(b)        The food range issue

18                  The underlease provided that the Choongs were permitted to sell certain Chinese foods only.  Leelee covenanted that no other stallholder would be permitted to sell those dishes without the Choongs’ prior consent, save for those dishes which were, prior to 12 December 1990, already being sold by existing stallholders.  It also contained a list of the permitted dishes to be sold.

19                  Leelee did not honour that condition.

20                  From April 1991 to 6 January 1996, certain of the “permitted dishes” which the Choongs exclusively could provide were sold by another stallholder.  They were not dishes which, prior to 12 December 1990, were sold by that stallholder.  The Choongs requested the respondents to prevent that conduct by the other stallholder, both orally and in writing.  Leelee was entitled under the terms of its agreement with that stallholder to protect the exclusive right of the Choongs to sell those dishes.  Despite those requests, the respondents took no action to protect the Choongs’ position.  The oral requests were made “at various times commencing from April 1991”.  The written requests were by letters between 1991 and 1998.

21                  Between about April 1991 and 6 January 1999 another stallholder was permitted by Leelee to sell dishes which, pursuant to the underlease, the Choongs were exclusively entitled to sell.  The Choongs also requested the respondents to prevent that conduct, but they did not.  The requests as particularised are the same requests.

22                  A third stallholder, between April 1991 and 6 January 1999, sold dishes which under the underlease were to be sold exclusively by the Choongs.  Again, between April 1991 and 6 January 1999, the Choongs requested the respondents to enforce their exclusive rights to sell those dishes.  The respondents took no action in response to those requests to protect the Choongs’ position.  The particulars of the requests are the same.

23                  A fourth stallholder, from about May 1993 to 6 January 1999 also sold dishes which, under the underlease, were to be sold exclusively by the Choongs.  Between those dates, the Choongs requested the respondents to enforce their exclusive entitlement to sell those dishes, both orally and in writing.  The oral requests were made “at various times commencing from May 1993”.  The written requests were made from mid 1996.  Again, the respondents did not take any steps to protect that exclusive entitlement of the Choongs.

24                  A fifth stallholder, from about 8 August 1993 to 26 June 1994 under one name, and thereafter to 6 January 1999 under another name, also sold dishes which, under the underlease, were to be sold exclusively by the Choongs.  Again, the Choongs requested the respondents to enforce their exclusive entitlement to sell those dishes.  Those requests were made orally “from about August 1993”, and in writing.  Again, the respondents took no action to enforce those exclusive rights.

25                  From 1 November 1996 to 6 January 1999, yet a further stallholder sold dishes which duplicated the dishes which, pursuant to the underlease, the Choongs were exclusively entitled to sell.  They made requests, orally and in writing, to the respondents to have their entitlement enforced.  The oral requests were made “at various times commencing from 1 November 1996” and in writing.  The respondents took no action to enforce those rights.  They refused to do so.

26                  Over the period from January 1991 to 6 January 1999 yet another stallholder sold dishes which, under the underlease, were to be sold exclusively by the Choongs.  They requested the respondents to take action to protect their position.  Again, their complaints were not acted upon.  The particulars of those requests again indicate that the requests were made orally “at various times commencing from January 1991” and in writing.

27                  In relation to those seven stallholders, the particulars of the requests are the same, apart from the commencement date of the requests.  In no instance is there any particularised occasion of an oral request made after 1 July 1998.  The particulars of the oral requests do not make it clear whether any such occasion is alleged.  The only written request identified after 1 July 1998 is the same letter of 5 August 1998.

28                  The conduct concerning the failure and refusal to protect the Choongs’ claimed exclusive entitlement to supply certain dishes at the Adelaide International Food Plaza, in each instance, is said to have been engaged in

“to all material times … from [the date relating to the particular stallholder] and in particular at all material times after 1 July 1998 …”

29                  The conduct is said to involve the respondents consenting to, or approving, the other stallholders trading in a way which is in breach of Leelee’s covenant in the underlease.

30                  It is then pleaded in each instance that:

“By engaging in the conduct described … the First Respondent, in trade or commerce, in connection with the supply of services to Mr and Mrs Choong, engaged in conduct that was, in all the circumstances, unconscionable within the meaning of section 51 AC(1) of the Act.”

 

(c)                The food price issue

31                  The underlease specified the minimum price at which the Choongs could sell the dishes which they were permitted to sell.

32                  From January 1992 to 6 January 1999, one stallholder (one of the stallholders selling dishes which were to be exclusively sold by the Choongs) sold and offered for sale those dishes at prices lower than the minimum price at which the Choongs were entitled to sell those dishes.  Over that period of time, the respondents obliged the Choongs to adhere to the minimum price requirement in the underlease by the threat of terminating the underlease.  The particulars of those communications by the respondents are that they were made orally “at various times commencing from January 1992” and in writing by letter dated 9 January 1997.

33                  The Choongs complained to the respondents over that period about that stallholder selling those dishes at below the minimum price applicable to them.  They requested the respondents not to oblige them to adhere to the minimum price applicable pursuant to the underlease.  Their complaints and requests were both oral “at various times commencing from about January 1992” and in writing in letters in 1997 and on 5 August 1998.  The respondents did not take any action, despite those complaints and requests, to oblige the competing stallholder to put up its prices, or to permit the Choongs to lower their prices.

34                  Another stallholder, who from 1 November 1996 to 6 January 1999 was selling dishes exclusively to be sold by the Choongs, sold and offered for sale those dishes at prices less than the minimum price prescribed for those dishes pursuant to the underlease.  The respondents however obliged the Choongs to adhere to those minimum prices, under threat of termination of the underlease.  Their directions were given orally “at various times from 1 November 1996” and in a letter dated 9 January 1997.

35                  The Choongs complained that their competitor should not be permitted to sell those dishes at prices below the Blessing Noodle Bar minimum prices applicable pursuant to the underlease.  Those complaints and requests were made orally “at various times commencing on 1 November 1996” and in writing.  The respondents failed to take any action in respect of those complaints.  They did not act upon the Choongs’ requests that the respondents not enforce compliance with the Blessing Noodle Bar minimum price requirement.

36                  A third stallholder, who from about January 1991 until 6 January 1999 sold dishes which were to be the exclusive entitlement of the Choongs, did so from about June 1996 below the minimum price for those dishes applicable to the Blessing Noodle Bar business pursuant to the underlease.  The respondents however, from 1 November 1996 until 6 January 1999, obliged the Choongs to adhere to those minimum prices under threat of terminating the underlease.  The same particulars of those directions are given, namely that they were given “at various times commencing from 1 November 1996” and in writing by letter dated 9 January 1997.

37                  From about 1 June 1998 until 6 January 1999, the Choongs complained to the respondents about that stallholder being permitted to sell at prices less than the minimum prices applicable to them, and they requested that the respondents not enforce compliance with the minimum price requirements applicable to them.  Again the particulars are that the oral complaints and requests were made orally “at various times commencing from about 1 June 1998” and by letter dated 5 August 1998.  The respondents failed and refused to act upon those complaints and requests.  (In respect of that third instance of conduct concerning the food price issue, I note that the conduct of the other stallholder and of the respondents is alleged to have commenced variously on about 1 November 1996 and on about 1 June 1998.)

38                  In each of those three instances, the particulars are the same, apart from the commencing date of the selling of the dishes by the particular shareholder.  The oral directions given by the respondents are not particularised to identify any occasion of oral directions after 1 July 1998.  It is however not clear that no such oral directions were given after 1 July 1998.  The only written direction alleged is that given by letter of 9 January 1997.  The complaints and requests of the Choongs appear to be the same communications as those concerning the rental issue and the food range issue (subject to the relevant commencing time) although that is not explicitly said to be the case.  No oral complaints or requests after 1 July 1998 are particularised.  Again it is not clear that no oral complaints or requests after that date are alleged.  The only written complaint or request after 1 July 1998 is the letter of 5 August 1998.

39                  There are, therefore, two features of the respondents’ conduct complained of.  The first is their insistence upon the Choongs adhering to the minimum price determined pursuant to the underlease.  The second is their refusal to act upon the complaints and requests concerning the prices charged by other stallholders for dishes in respect of which, pursuant to the underlease, the Choongs were obliged to adhere to certain minimum prices.  That conduct also is said to have been engaged in

“At all material times during the period from about January 1992 [or 1 November 1996 or 1 June 1998] until 6 January 1999 and in particular at all material times after 1 July 1998 …”

 

40                  It is then pleaded in each instance that:

“By engaging in the conduct described … above, the First Respondent, in trade or commerce, in connection with the supply of services to Mr and Mrs Choong, engaged in conduct that was, in all the circumstances, unconscionable within the meaning of section 51 AC(1) of the Act.”

 

(d)        The re-leasing issue

41                  Paragraphs 99-101 of the Further Amended Statement of Claim are under the heading “Refusal to Provide Further Term”.  They are in the following terms:

“99.     During 1997 and 1998 Mr and Mrs Choong requested the First Respondent to consider entry into an underlease with a prospective purchaser of the business, plant and equipment of the Blessing Noodle Bar.

 

Particulars

 

The requests were express oral and in writing.

 

As to the oral requests, these were made at various times commencing from about September 1997 directly to the Second Respondent by Mr Choong and included a request made on or about 14 October 1998 by Brock Barrett Project Marketing on behalf of Mr and Mrs Choong.

 

As to the written requests, these were contained in various correspondence  by, or on behalf of, Mr and Mrs Choong to the First Respondent and/or the Second Respondent namely:-

 

(a)                letter dated 11 September 1997; and

 

(b)        letter dated 5 August 1998.

 

100.     At all material times from September 1997 and in particular at all material times after 1 July 1998, the First Respondent, and the Second Respondent for and on behalf of the First Respondent, refused to consider entry into an underlease with a prospective purchaser of the business, plant and equipment of the Blessing Noodle Bar.

 

Particulars

 

The refusals were express oral and implied.

 

As to the oral refusals, these were made at various times commencing from about September 1997 directly by the Second Respondent to Mr Choong and included a refusal made by the Second Respondent on or about 14 October 1998 to Brock Barrett Project Marketing (on behalf of Mr and Mrs Choong).

 

The oral refusals also included a refusal directly by the Second Respondent to prospective purchaser Nellie Gibbs in about September 1998 to the effect that the Second Respondent would not countenace [sic] any tenancy arrangements with her if she dealt with the Choongs directly, that she must deal with the Second Respondent as to any such tenancy arrangements and that she could have a different stall but not that of the Choongs’.

 

The refusals were implied from the failure to respond to the letters dated 11 September 1997 and 5 August 1998 particularised at paragraph 99 above and by the serving upon Mr and Mrs Choong of a Notice to Vacate dated 27 July 1998 by, or on behalf of, the First Respondent.

 

100A.            Mr and Mrs Choong have suffered loss and damage as a result of the refusals of the Second Respondent, for and on behalf of the First Respondent, described in paragraph 100 above.

 

Particulars

 

Loss due to the First Respondent’s failure

to enter an underlease to a prospective

purchaser to enable the sale of the Blessing

Noodle Bar as a going concern being loss of:-

 

goodwill, plant and equipment (less estimated                      $52,000.00

realisable value of $6000.00)

 

costs in removing plant and equipment                                      $450.00

 

Total                                                                                       $52,450.00

 

Fuller particulars will be provided prior to trial.

 

100B.At all material times from September 1997 and in particular at all material times after 1 July 1998, the First Respondent, and the Second Respondent for and on behalf of the First Respondent, did not have another tenant occupy the Blessing Noodle Bar site being stall No. 8 and the stall remained vacant until at least the date of filing of these proceedings, except as to the placement of amusement machines.

 

100C.            The First and Second Respondents:-

 

(a)                had no valid commercial reason for refusing to consider entering into an underlease with a prospective purchaser;

 

(b)                capriciously refused to consider such an underlease; and

 

(c)                were solely or predominantly motivated by an intention to inflict economic harm on Mr and Mrs Choong in refusing to consider such an underlease.

 

101.   By engaging in the conduct referred to in paragraphs 100, 100A and 100B above, the First Respondent, in trade or commerce, in connection with the supply of services to Mr and Mrs Choong, engaged in conduct that was, in all the circumstances, unconscionable within the meaning of section 51AC(1) of the Act.”

 

It is hard to understand par 100B as it is elsewhere alleged that the Choongs did not vacate the stall until 6 January 1999 when the term granted by the underlease expired.

(e)        The consequences

42                  The conduct in each instance is said to have damaged the Choongs’ Blessing Noodle Bar business.  Their loss is said to include “unsubstantiated rent increase”, loss in net profit, loss in goodwill plant and equipment (less estimated realisable value), and costs of removal of plant and equipment.  But for the refusal to consider a new tenant, it is said the Choongs could have sold their plant and equipment to the new tenant in situ.  The total loss alleged is $72,529.  Orders sought in the application include declaratory orders that Leelee has contravened s 51AC of the Act, and that Mr Ong has been involved in the contravention, and for injunctive orders.  The applicant also seeks declarations that the Choongs have suffered loss or damage by reason of the conduct alleged, and findings of facts for the purposes of s 83 of the Act.  The applicant proposes to seek orders in favour of the Choongs under s 87(1A) of the Act.

The Contentions

43                  The respondents acknowledge that, in so far as the application seeks to strike out pleadings under O 11 r 16 of the Rules as disclosing no reasonable cause of action, or to have the action permanently stayed as an abuse of the process of the Court under O 20 r 2, they are only entitled to an order in a very clear case:  Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.

44                  The respondents first submit that the proceedings should be stayed as an abuse of the process of the Court.  It is contended that the Court has the power so to do when, by weighing up the factors warranting the maintenance of the proceedings against those indicating that they should not be permitted to continue, it appears that the continuation of the proceedings would be so unfairly and unjustifiably oppressive as to constitute an abuse of process.  That submission is made, even though no improper purpose on the part of the applicant is alleged and even though a fair hearing may be possible.  Reliance was placed in particular upon certain observations of Mason CJ, Deane and Dawson JJ in Walton v Gardiner (1993) 177 CLR 378 at 392-393 and of Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247.

45                  As to the balancing exercise, the respondents point to the length and apparent complexity of the statement of claim, and to the period of time to which it relates.  They claim already to have expended considerable time, and to have incurred considerable expense, in responding to notices given to them by the applicant under s 155 of the Act.  They point to the small amount of loss allegedly incurred by the Choongs, and to its “highly speculative” character.  They assert that, but for the claim in pars 99-100 of the statement of claim, the claims could and should more appropriately be brought in proceedings for damages for breach of the underlease, so that it is neither necessary nor appropriate to permit those claims to be converted into claims under s 51AC of the Act.  In that regard, they point to the fact that the allegations involve conduct engaged in mainly prior to 1 July 1998, which by reason of s 51AC(6) cannot give rise to a breach of s 51AC(1) even though that conduct may give rise to a claim for damages for breach of the underlease at the instigation of the Choongs.  They submit that the fact that the applicant seeks to rely upon ss 83 and 87(1A) to support a claim on behalf of the Choongs for compensation, which would cover the period from 1991, notwithstanding the provisions of s 51AC(6)(b), heightens that unfairness.  The respondents submit that the action is in part being run to assist the Choongs (and possibly others) to a resolution of their claims, as well as being to establish a legal precedent as to the scope of the operation of s 51AC.  Further, they claim that the disparity in resources available to the applicant on the one hand, and to the respondents on the other, is of significance.  In a practical sense, they submit that the only resolution of the proceedings short of a full hearing is “total capitulation”, and that they do not have the resources to defend the proceedings fully.  Thus, they contend, the proceedings are seriously and unfairly burdensome, prejudicial or damaging and productive of serious and unjustified trouble and harassment, so as to constitute an abuse of the process of the Court.

46                  The applicant does not accept that the test propounded by the respondents is a proper test to determine whether the proceedings are an abuse of the process of the Court.  It also joined issue with a number of factual contentions put by the respondents.

47                  As a separate matter, the respondents submit that pars 99-101 of the Statement of Claim disclose no reasonable cause of action because

(a)                the applicants are only entitled to rely upon conduct which took place after 1 July 1998 by reason of s 51AC(6)(b) of the Act

(b)               there is no conduct in connection with the supply of services to the Choongs after 1 July 1998, or at any time, and

(c)        the conduct relied upon, namely the refusal to deal with the Choongs or “to consider” dealing with any other person wishing to become a tenant of the particular premises then occupied by the Choongs, either directly or through the Choongs, so that the particular stall became and remains vacant, cannot amount to unconscionable conduct under s 51AC.  They assert that none of the matters to which s 51AC(3) directs attention as matters to which regard may be had in determining if conduct is unconscionable has been pleaded.

48                  Finally, the respondents submit that the statement of claim in toto, including pars 99-101 is not properly pleaded and should be struck out.  By reason of s 51AC(6) of the Act, the applicant cannot rely on conduct of the respondents prior to 1 July 1998.  They submit that the whole of the pleading is riddled with allegations of conduct engaged in prior to 1 July 1998, or is expressed so that it is not clear whether such conduct is alleged, and that they are entitled to know precisely what conduct is alleged against them so that they may have it determined whether the allegations of conduct prior to 1 July 1998 can be maintained.

The claim that the proceedings be permanently stayed

49                  It may be accepted, as the respondents contend, that the possible varieties of abuse of process are only limited by human ingenuity and that the categories are not closed:  per French J in Sea Culture International Pty Ltd v Scoles (1991) 32 FCR 275 at 279.

50                  Walton (above) upheld the permanent stay of complaints to the Medical Tribunal under the Medical Practitioners Act 1938 (NSW) against two medical practitioners for misconduct.  The alleged misconduct took place between 1973 and 1977, and the complaints were made in 1991.  Earlier complaints laid in 1986 touching much the same conduct had already been permanently stayed.  The majority (Mason CJ, Deane and Dawson JJ) said at 392-393:

“None of the members of the Court of Appeal accepted the Department’s narrow view of the extent of the jurisdiction of the Supreme Court to order a stay of proceedings on abuse of process grounds.  Gleeson C.J. and Kirby P. considered that the Court of Appeal has power to make an order staying proceedings if it is satisfied that the continuation of the proceedings would be “so unfairly and unjustifiably oppressive” as to constitute an abuse of process.  Their Honours made plain that the court would only be so satisfied in an exceptional or extreme case.  Mahoney J.A. adopted a similar approach, while formulating the appropriate test in slightly different words.  His Honour considered that the question for the Court of Appeal was whether, in all the circumstances, the continuation of the proceedings before the Tribunal would involve unacceptable injustice or unfairness.  In our view, the approach adopted by the members of the Court of Appeal was correct.

 

The inherent jurisdiction of a superior court to stay its proceedings on grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness.  Thus, it has long been established that, regardless of the propriety of the purpose of the person responsible for their institution and maintenance, proceedings will constitute an abuse of process if they can be clearly seen to be foredoomed to fail.  Again, proceedings within the jurisdiction of a court will be unjustifiably oppressive and vexatious of an objecting defendant, and will constitute an abuse of process, if that court is, in all the circumstances of the particular case, a clearly inappropriate forum to entertain them.  Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings.”

51                  Their Honours, at 395, pointed out that Williams v Spautz (1992) 174 CLR 509 did not determine that a permanent stay of proceedings can only be ordered where a permanent stay is sought of a criminal proceeding to prevent an accused person from being subjected to an unfair trial, or where proceedings have been instituted and maintained for an improper purpose.  The respondents did not contend that this case fell clearly into either of those two categories.

52                  It was appropriate not to contend that the applicant had an improper purpose in instituting and maintaining the proceedings.  The applicant is expressly empowered to institute proceedings under the Act:  s 80, including in appropriate circumstances the claim for compensation on behalf of the Choongs:  s 87(1B).  The express seeking of findings under s 83 does not indicate any improper purpose on its part:  Trade Practices Commission v Frendship Aloe Vera Pty Ltd (1988) 82 ALR 557 at 559-560 and Australian Competition and Consumer Commission v The Shell Company of Australia Ltd (1997) 72 FCR 386 at 387.  The fact that the applicant regards the proceedings as a potential test case about the operation of s 51AC of the Act also does not involve any element of improper purpose on its part.

53                  It is clear that the applicant is of that view.  Following service of the proceedings, on 4 February 1999, the applicant issued a media release concerning them.  It includes a quote attributed to the Chairman of the applicant that

“A successful outcome in this case will show how the new law protects small business and that landlords must treat their tenants fairly.”

 

54                  The background material provided with that press release, included information that the Government has specifically provided the applicant with funds to initiate legal proceedings in actions based on alleged contraventions of s 51AC for the purpose of establishing legal precedent on matters of specific relevance to small business.

55                  By Gazette No GN 35, 2 September 1998, the Minister for Customs and Consumer Affairs by notice dated 25 August 1998, issued Consumer Protection Notice No 5 of 1998.  That Notice also referred to the provision to the applicant of $480,000 annually for the next four years to initiate precedent setting cases under the Act in areas of specific relevance to small business, and to the desire of the Minister to protect small business from unconscionable conduct.  It directed the applicant pursuant to s 29(1) of the Act, inter alia, to

“initiate, as soon as practicable after 1 July 1998, legal proceedings in an action or actions based upon alleged contraventions of the Trade Practices Act 1974 for the purpose, among others, of establishing legal precedent under new section 51AC of the Trade Practices Act on matters of specific relevance to small business.”

 

56                  These proceedings reflect that direction given by the Minister under s 29(1) of the Act.  It is a matter for the applicant’s judgment, at this stage, whether those proceedings may serve that direction.  There is no assertion that the applicant is acting outside the proper boundaries of the Act.

57                  The respondents submitted, nevertheless, that the maintenance of the proceedings is so unfair and unjustifiably oppressive as to amount to an abuse of the process of the Court.  I have set out above the circumstances relied upon to demonstrate that unfairness and oppression.

58                  I am not persuaded that, in civil proceedings instituted without any improper purpose, the mere balancing of the types of considerations to which the respondents referred may itself result in the proceedings being stayed as an abuse of the process of the Court.  In many, if not most cases, there is a disparity between the resources available to the parties to prosecute or defend the proceedings.  It is an increasingly common phenomenon for litigants to appear in person for the very reason that they do not have resources to obtain legal representation, even in lengthy and complex litigation.  Nevertheless, the fundamental elements of procedural fairness are extended to such persons:  the opportunity to be heard, and the entitlement to an impartial hearing.  See eg. Titan v Babic (1994) 49 FCR 546 at 554-555; Ball v Commissioner of Taxation (1996) 96 ATC 4950.  There is no reason put forward as to why the Court cannot accord procedural fairness to the respondents in the conduct of the proceedings in this matter.  It is likely to be an exceptional case where that circumstance could arise.

59                  In my judgment, the proposition for which the respondents contend does not emerge from the authorities relied upon.  In particular they referred to certain observations in Hamilton v Oades (1989) 166 CLR 486 and in Oceanic (above) in support of their contention.  Oceanic concerned an application for a stay of proceedings on the basis that the Supreme Court of New South Wales was forum non conveniens.  There was no question that the institution of proceedings in that Court constituted an abuse of process:  see per Wilson and Toohey JJ at 217.  It concerned the exercise of the discretion to stay those proceedings upon the ground that some other forum was the more appropriate one.  In the exercise of that discretion, oppression or vexation of the defendant are relevant factors:  per Brennan J at 233 and per Deane J at 243.  Indeed, the particular words relied upon by the respondents in submissions before me appear to be taken from the reasons of Deane J at 247 where his Honour said:

“ ‘oppressive’ should, in this context, be understood as meaning seriously and unfairly burdensome, prejudicial or damaging while ‘vexatious’ should be understood as meaning productive of serious and unjustified trouble and harassment”  (my emphasis)

 

60                  The context was the inquiry as to whether the Supreme Court of New South Wales was forum non conveniens.  I do not think that his Honour was suggesting that the sort of considerations about which the respondents complain would themselves warrant a permanent stay of proceedings because it is seriously burdensome or damaging to them to have to defend the proceedings.  Nor was his Honour saying that the fact that the defence of those proceedings will cause the respondent serious trouble and harassment provides a reason to permanently stay the proceedings.  Those sorts of considerations are not uncommonly the circumstance in litigation.  It is, regrettably, often very expensive to defend proceedings and often significantly disruptive of the orderly course of a business to do so, particularly a small business with an owner-operator.  Where the Court has a discretion to determine the appropriate forum for the proceeding, the matters to which Deane J referred will obviously be of moment.  Factors which might give rise to “unfairness” or “prejudice” or “unjustified” trouble or harassment in that context are not factors which of themselves, in the context of the present application, mean that the respondents are unable to obtain procedural fairness in these proceedings.  Hamilton (above) concerned the scope of the Court’s power under the then s 541(5) of the Companies (New South Wales) Code to determine that, pending the hearing and determination of certain criminal charges, the respondent was not to be compelled to answer certain questions in his examination under that section.  In my judgment, it also does not really advance the respondents’ contention.

61                  To an extent, the submission invites the proposition that the court can, and should, permanently stay proceedings where one party to civil proceedings cannot afford legal representation and that such representation is necessary for a fair trial in complex civil proceedings.  It bears some analogy to the principle enunciated in Dietrich v The Queen (1992) 177 CLR 292.  The principle recognised in Dietrich (above) is a feature of the entitlement to procedural fairness, but it is confined to serious criminal proceedings.  That decision was not intended to apply in respect of civil proceedings:  New South Wales v Canellis (1994) 181 CLR 309 at 328-329 per Mason CJ, Dawson, Toohey and McHugh JJ.  In Canellis, their Honours said at 330:

“The question is not whether it is unfair, in some colloquial sense, for the inquiry to proceed with the respondents unrepresented.  The question is whether procedural fairness dictates that the inquiry may not proceed unless the respondents are represented by counsel.  For the reasons already given, procedural fairness does not dictate such a course in the case of witnesses at an inquiry under s. 475.”

62                  That observation indicates that the colloquial use of the concept of unfairness which underlies the respondents’ submission is not an appropriate one.  As I have found, there is nothing which was identified by counsel for the respondents to demonstrate that the respondents cannot be or might not be accorded procedural fairness in the trial of this action.

63                  In my judgment, the respondents’ concerns do not really go beyond “unfairness” in a colloquial sense.  They would not demonstrate that the conduct and maintenance of these proceedings by the applicant will give rise to any procedural unfairness, or in any other respect that the applicant is acting improperly, even if the complaints are made out.  I do not consider therefore that those concerns should lead to the proceedings being stayed as an abuse of the process of the Court.  It is clear that the Court should exercise great care to ensure that an applicant is not improperly deprived of the opportunity of a trial:  General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130; Dey at 91 per Dixon J.

64                  I refuse to make an order permanently staying the proceedings.  The applicant in fulfilment of its functions and powers has properly invoked the jurisdiction of the Court.  It is therefore entitled to the exercise of that jurisdiction by the Court.  I do not think that the respondents have made out that it is so unfairly and unjustifiably oppressive that the proceedings should continue as to constitute an abuse of the process of the Court.  I have considered the various matters put by the respondents individually.  I have also taken the step of considering whether, collectively, they tilt the scales in the way the respondents contend.  I do not think they have that effect.  There are matters to go into the scales in favour of the maintenance of the proceedings, in particular the public interest in the Court resolving matters properly brought before it, the public interest in the conduct of these proceedings, and the fact that the respondents can be afforded procedural fairness in their conduct.  As Kirby P (as he then case) said in Gardiner v Walton (1991) 25 NSWLR 190 at 204, the power to terminate proceedings before they have been decided on their merits is “clearly exceptional and reserved to cases having special characteristics.”

65                  Even if I accept the respondents’ contention as to the nature of the balancing exercise which should be undertaken, that is adopting a colloquial sense of unfairness or oppression, I would not exercise my discretion to permanently stay the proceedings.  The applicant is properly exercising its power in bringing them.  The proceedings appear to raise certain issues of potential general importance.  The respondents claim that, whatever their motives, their conduct in insisting upon the vacation of the stall at the end of the term granted by the underlease cannot constitute them engaging in conduct which is unconscionable in contravention of s 51AC(1) of the Act.  They claim that they are acting within their contractual rights.  It may be significant to determine whether, in those circumstances, s 51AC(1) has any scope for its operation.  The proceeding may also raise for consideration whether their conduct is in relation to the supply of services and the nature of the connection between the conduct and the supply of services necessary to make out a contravention of s 51AC(1).  Those matters are properly matters for the consideration of the applicant in invoking the jurisdiction of the Court.

66                  It may be accepted that there is a disparity of resources available to the respondents compared to those available to the applicant.  In this instance, the evidence shows dedicated Government funding for cases such as the present.  I am not satisfied, however, that the respondents do not have the resources to instruct solicitors properly to defend the proceedings.  Mr Ong’s income tax return for the 1997/98 year shows he earned $20,499 as manager of Leelee, and interest on money in the bank of $4,053.  The unsigned financial accounts of Leelee show that it is a trustee for the Market Plaza Unit Trust.  Leelee’s only asset is its right of indemnity from the trust assets to the extent of its liabilities.  The Market Plaza Unit Trust had a net profit for that year of $76,302.99 as a landlord, but after its trading income and expenses were allowed for, it had only a net income distributed to its beneficiaries of $27,733.10.  It paid $208,094.50 to Strategic Alliance Holdings Co Pty Ltd, the lessor to Leelee, presumably for rental.  Mr Ong is also a director of sixteen other registered companies and he is a shareholder in most of them.  There is no evidence as to his personal assets and liabilities, or as to any resources available to him through those companies.  I do not consider that it has been shown, in those circumstances, that the respondents would be unable to afford legal representation, or that they are indigent.

67                  I have considered the submissions concerning the scope of the allegations in the statement of claim, and therefore the complexity of the facts to be inquired into.  That complaint is said to be the more significant because those facts appear to extend beyond that which s 51AC(6)(b) contemplates.  Later in these reasons, I rule that the statement of claim should be struck out, and that conduct of the respondents prior to 1 July 1998 may not be alleged or proved against them.  Accordingly, the proceedings will ultimately address a much shorter time span and (judging from the present particulars) involve a much more confined set of facts than the respondents presently anticipate.  Their concerns about the proceedings dictating an inquiry into many instances of alleged conduct from 1991 are, in the light of that ruling, not warranted.

68                  Given the nature and evident purpose of s 51AC, the fact that at least to some extent the claims now to be made under s 51AC (in so far as they relate to conduct after 1 July 1998) might in part be brought by the Choongs in separate proceedings under the underlease does not lead to the conclusion that the proceedings are vexatious or an abuse of process.  The re-leasing claim is not one which is said to arise under the underlease.  The applicant also contends that the relief based on unconscionable conduct concerning the rental issue, the food range issue, and the food price issue, is at least partly beyond mere enforcement of the terms of the underlease.  For example, the applicant wishes to contend that it was unconscionable not to provide information concerning the rental issue, even though there may have been no provision in the lease that such information be provided.  I do not think that the respondents have shown any grounds why the applicant should not be entitled to pursue such matters.  Nor does the relatively small amount of loss which the Choongs might have sustained by that conduct give rise to such a conclusion.  It is likely to be the case in many actions under s 51AC and under s 51AB that the individual losses of the small business or businesses, or of the consumers, will be relatively small.  Indeed, often the fact that individual losses are small leads to the individual trader or consumer not pursuing a claim.  The Legislature has enacted provisions such as s 51AC to enable unconscionable conduct (if established) to be penalised notwithstanding such considerations.

69                  I note that before the proceedings were served on the respondents on 3 February 1999, there had already been extensive correspondence between the applicant and its solicitors on the one hand and the respondents by their solicitors on the other, following the service upon Leelee of a notice under s 155 of the Act on 21 October 1998; and a further notice also served upon Leelee under s 155 of the Act on 19 November 1998.  I accept that the respondents were required to undertake extensive searches, and reasonably incurred legal fees, in seeking advice about and complying with those notices.  I do not consider that it follows that, by the exercise of those statutory powers, the applicant should be precluded from maintaining these proceedings.  Nor does it follow that those notices provide some reason why the applicant should be precluded from doing so.  No particular complaint about the manner of the exercise of those powers was developed in contentions.

70                  I have also taken into account that the applicant has not yet been prepared to resolve the proceedings by compromise.  In so far as this matter is said to illustrate oppression or unfairness because the respondents cannot afford legal representation to defend the proceedings, I have dealt with that topic above.  It was also put, as I apprehended the argument, that there was an element of unfairness or oppression because the applicant will not compromise the claim except on “total capitulation” by the respondents.  The evidence adduced on this topic does not show that the applicant is determined to proceed to trial come what may.  There is correspondence indicating the sort of terms upon which it might resolve the proceedings.  Its attitude may alter to a degree over time, and perhaps in the light of these reasons.  The respondents, however, are in no particularly disadvantaged position compared to other parties against whom the applicant institutes proceedings under the Act.  Nor is it unfair or oppressive for the applicant to form a view as to its prospects of success in the proceedings, and to endeavour to negotiate resolution reflecting that view.  It is commonplace in litigation that parties’ respective assessments of their prospects of success differ, so resolution by compromise does not occur.  It is also not uncommon for one party to take the view that it wishes the Court to decide the matters in issue.  So long as its position does not amount to an abuse of the process of the Court, it should be entitled to maintain that position and seek recourse to the Court to decide the matter in issue.

71                  Accordingly, even if I accept that it is appropriate to undertake the balancing exercise urged by the respondents, I would not make the order sought.  As I have found their concerns to be, either taken individually or collectively, they do not in my view go far to demonstrating unfairness or oppression, even using those terms in a colloquial sense.  The countervailing considerations, to which I have referred earlier in those reasons, greatly outweigh the respondents concerns.  In my judgment, even on that basis, the conduct of these proceedings is not unfair or unjustifiably oppressive of the respondents so as to constitute an abuse of the process of the Court.

Should pars 99-101 of the statement of claim be struck out?

(a)               The operation of s 51AC(6)(b)

72                  That subsection permits the Court to have regard to “circumstances existing” before 1 July 1998, but not to have regard to “conduct engaged in” before 1 July 1998 for the purposes of determining whether a corporation has contravened s 51AC(1).  The applicant accepted that the provision prohibiting the Court from having regard to conduct engaged in before 1 July 1998 was mandatory.

73                  As is apparent from the pleading, the applicant makes allegations of requests made by the Choongs to consider an underlease to a new tenant of the stall during 1997 and 1998.  It is not clear if any oral request was made after 1 July 1998.  None is particularised.  The written requests include a letter of 5 August 1998.  It is then alleged that “from September 1997 and in particular at all material times after 1 July 1998” the respondents refused to consider that prospect.  The particulars of the express refusals include two oral communications on about 14 October 1998 and in about September 1998, but are not limited to those two refusals or to the period after 1 July 1998.  It is also asserted that the refusal is to be implied from failure to respond to letters of 11 September 1997 and 5 August 1998, and by the giving on 27 July 1998 of the notice of vacate the stall.

74                  The allegation in par 101 expressly asserts conduct of Leelee covering the period from September 1997.

75                  The applicant contends that the pleading in its present form is proper.  To the extent that it alleges contravening conduct prior to 1 July 1998, it is put that the applicant is entitled to establish that conduct so as to inform the judgment whether the conduct after 1 July 1998 did contravene s 51AC(1).  It is said to provide factual background from which an inference may be drawn as to the state of mind of the respondents on and after 1 July 1998.  Their state of mind is said to be relevant to whether their conduct on and after that date is unconscionable.  It submitted that s 51AC(6)(b) only prevents the Court from “applying s 51AC remedies to conduct that occurred before 1 July 1998”.

76                  I do not accept the applicant’s contention.  It would have been easy for the legislature to express s 51AC(6)(b) in a way to achieve that result if that is what had been intended.  It has not done so.  The subsection makes use of an expression defined in the Act.  The restriction imposed by subs 51AC(6)(b) is expressly in relation to the purpose of determining whether a contravention has occurred.  That contravention must itself occur after 1 July 1998.  The proscription in the subsection is expressly with respect to conduct before that date.

77                  It is therefore necessary to consider the application of the expressions “circumstances existing before” 1 July 1998 and “conduct engaged in before” 1 July 1998 to the statement of claim.  It may also be necessary to determine whether “conduct” for the purposes of s 51AC(6)(b) only refers to conduct amounting to or contributing to an alleged contravention of s 51AC(1) or (2) or includes conduct of other persons, (in this instance the Choongs’ conduct) against which conduct of the respondents may have to be measured.

78                  There is no assistance to be gained from the Explanatory Memorandum to the Trade Practices Amendment (Fair Trading) Bill 1997 as to the scope of the expression “circumstances existing before the commencement” of s 51AC, in contrast with the expression “conduct engaged in before that commencement” in the section.  At the time of its introduction, the relevant clause was cl 51AC(5) of the Bill, although it was relevantly in the same terms.  The Explanatory Memorandum said that the Court

“is entitled to consider circumstances existing before the commencement of the section but it must not have regard to oppressiveness or injustices arising from conduct engaged in before the commencement of the amendment …”

The particular difficulties which the respondents’ present contention presents do not appear to have been addressed.

79                  The section does not define “circumstances existing before” the commencement of s 51AC, nor is that term defined elsewhere in the Act.  “Conduct” also is not defined in s 51AC.  Section 4(2) defines the expressions ‘engaging in conduct’ and ‘conduct’ in very wide terms.  Relevantly, those expressions mean the doing or refusing to do any act.  “Refusing to do an act” is defined to include refraining (otherwise than inadvertently) from doing that act or making it known that that act will not be done.

80                  In my opinion, the expression “engage in conduct” in s 51AC(1) should be taken to be used in the sense in which that term is defined in s 4(2).  The structure of s 51AC is consistent with the structure of other provisions in the Act in which the expression is used, and to which the definition is directed.  There is no reason to think that the amendment effected by the Trade Practices Amendment (Fair Trading) Act 1998 was intended to contain some other meaning for that expression, either from its text or from its purpose.  For the same reasons, I consider that the expression “conduct” in s 51AC including in s 51AC(6)(b) should carry the defined meaning.

81                  The expression “have regard to” is a common one.  It means no more than to take into account or to consider:  The Macquarie Concise Dictionary, 2ed, 831.  “A” v Pelekanakis [1999] FCA 236 concerned, inter alia, the obligation of the Minister for Immigration and Multicultural Affairs under s 54 of the Migration Act 1966 (Cth) to have regard to all the information in the application for a visa when considering that application.  Weinberg J said at par 58:

“The expression “have regard to” must, in context, mean “take into account”.  It does not, of course, require the recipient of the information to accept it as true, to act upon it, or even ultimately to be influenced by it – Hoare v The Queen (1989) 167 CLR 348 at 365.  It does, however, require the recipient of the information to consider it properly in the context of performing the statutory duty imposed upon him, and to which the information to be considered is directed, …”

82                  That commonsense and practical approach is reflected in many decisions of the Court under that Act:  see eg per Wilcox J in Lek v Minister for Immigration Local Government and Ethnic Affairs (1993) 43 FCR 418.

83                  The expression was also considered by O’Loughlin J in Reid v Vocational Registration Appeal Committee (1997) 73 FCR 43 at 53-54.  His Honour said at 54:

“The expression “must have regard to”, which is found in statutory instruments from time to time, will always take its meaning from the context in which it appears.  Thus the matters to which a decision-maker, such as the Appeal Committee, “must have regard to” might be exhaustively listed:  see, for example, Re BHP Petroleum Pty Ltd and Minister for Resources (1993) 30 ALD 173 at 180.  Alternatively, the relevant provisions might be “so generally expressed that it is not possible to say that he is confined to these … considerations …”:  Re Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329 per Mason J.  But whether the listed subject matters are or are not exhaustive, they are matters to which regard must be had by the decision-maker.  It is essential that the decision-maker, to adopt the words of Gibbs CJ in R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 333, “give weight to them as a fundamental element” in coming to a conclusion.”

84                  The issue in that case was the obligation imposed upon the decision maker by the use of the word “must”, but his Honour’s views also indicate that it is necessary to give weight to a matter if there is an obligation to have regard to it.  O’Loughlin J expressed similar views in Fitti v Minister for Primary Industries (1993) 40 FCR 286 at 299.  His Honour applied the words of Mason J in The Queen v Hunt; ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329 that the obligation to have regard to the matter obliges the decision maker

“… to take [that matter] into account and to give weight to [it] as a fundamental element in making his determination”.

 

85                  Those considerations lead me to the conclusion that, in determining whether an alleged contravention of s 51AC(1) of the Act has occurred, the Court cannot take into account conduct on the part of the alleged contravener, using the term ‘conduct’ in the wide sense in which it is defined in s 4(2) of the Act.  It follows, in my judgment, that the applicant ought not be permitted to make allegations of conduct on the part of the respondents prior to 1 July 1998 in the statement of claim.

86                  That does not indicate where the borderline between ‘circumstances’ and ‘conduct’ lies.  Yet, borderline there must be.  There may clearly be matters relevant to an alleged contravention of s 51AC(1) of the Act which do not involve any conduct on the part of the alleged contravener, and which arose before 1 July 1998.  Where they provide the context in which an alleged contravention is sought to be proved, there is nothing to indicate that those matters might not be alleged and proved.  There may also be matters which involve some act done or transaction entered into by an alleged contravener prior to 1 July 1998 which provide the content in which the alleged contravention occurred.  Such matters may well be “circumstances” under s 51AC(6)(b).  An illustration in the present claim may be Leelee’s lease of the premises, and its underlease of the stall to the Choongs.  Another illustration may be the fact of Mr Ong’s directorship of Leelee.  Although, in a sense, each of those matters involves conduct because Leelee had to act to accept the lease and grant the underlease, and Mr Ong had to give his consent to be a director of Leelee, I do not think that that is the sort of conduct to which s 51AC(6)(b) refers.  That is because the definition of conduct, and of engaging in conduct, in s 4(2) of the Act, although widely expressed, serves the purpose of identifying behaviour which may relate in some way to a potential contravention of a provision of the Act.  In the present matter, the fact of the underlease (for example) is not related in that way to the alleged infringement but provides the setting in which the alleged infringement occurred.

87                  It is not appropriate to endeavour to provide some formula always applicable to draw the distinction between “circumstances” and “conduct” for the purposes of s 51AC(6)(b).  The answer may depend upon the purpose for which the particular fact is alleged.  In relation to the allegations of conduct identified by the applicant in par 101 (it is not clear that the reference to par 100A conduct is correct), in my view the allegations specifically transgress the direction in s 51AC(6)(b).  They should be confined to any conduct after 1 July 1998.  Even if those allegations have the more limited purpose of informing the respondents’ state of mind in respect of the alleged contravention after 1 July 1998, I consider that they transgress that statutory direction.  They require the Court to have regard to conduct of the respondents prior to 1 July 1998 for the purpose of determining whether the respondents, after 1 July 1998, contravened s 51AC(1).

88                  There is also a difficult question as to whether the alleged conduct of the Choongs referred to in par 99 of the statement of claim should be allowed to be pleaded and proved.  In practical terms, the question is whether the Court should be permitted to have regard to requests by the Choongs in the terms referred to, but made prior to 1 July 1998, for the purposes of determining whether, after 1 July 1998, the respondents contravened s 51AC(1).  It is hypothetically possible that the Choongs may have made the same request on 30 June 1998 and on 1 July 1998.  Should evidence be permitted only about the request on 1 July 1998, and not about that of the day before?  If the request were made only on 30 June 1998 and the response alleged to be unconscionable conduct was made on 1 July 1998, should evidence be permitted of the conduct of the Choongs on 30 June 1998?

89                  In my judgment, the allegations about the Choongs’ conduct in par 99 of the statement of claim should not be permitted.  The allegation does relate to conduct, as that term is defined in s 4(2), as it alleges the doing of an act.  Section 51AC(6) is introduced by describing when subs (6)(b) will apply.  It applies where the purpose of the proposed evidence is to determine whether a corporation has contravened s 51AC(1).  The purpose of the allegations about the Choongs’ conduct is explicitly to determine whether Leelee has contravened s 51AC(1).  It is an allegation which is part of the transaction which gives rise to the alleged contravention.  It is a piece of conduct to which the Court must have regard, in the sense described above, to determine if there has been a contravention of s 51AC(1).  It is not a fact which merely sets the scene, or a “circumstance”, in which the impugned conduct takes place.  The impugned conduct only takes its colour and significance from the conduct alleged.

90                  A consideration of what might occur in this matter if such allegations are treated as “circumstances” and not “conduct” supports that conclusion.  There may be many oral requests alleged to have been made by the Choongs in the period September 1997 to 30 June 1998.  The respondents may wish to dispute the terms of those requests, or even that they were made at all.  They may wish to lead evidence of their conduct in response to those requests up to 30 June 1998.  Those sorts of issues may need to be resolved to ascertain whether there were any requests still active, or as to their ongoing significance, at 1 July 1998.  The respondents may wish to show that they refused the requests prior to 30 June 1998, and that the requests were not further pursued, or that they were pursued in terms which differ from the present allegations.  In my view, it is those sorts of inquiries which s 51AC(6)(b) was intended to exclude from the Court’s consideration.  Indeed, on its terms s 51AC(1)(b) would clearly preclude the Court from having regard to conduct of the respondents which might throw a significantly different light on the alleged requests.  It could not have been the legislative intention that that opportunity would be denied to the alleged contravener of s 51AC(1).

91                  Accordingly, I have concluded that the allegations of conduct on the part of the respondents and the allegations of conduct on the part of the Choongs which are part of the transaction giving rise to the alleged contravention, and not merely allegations which set the scene in which the alleged contravention occurred, should be disallowed.

92                  I do not think it is feasible to strike out parts only of pars 99-101 of the statement of claim.  The introductory words to par 99 and the particulars to par 99 except for the reference to the letter of 5 August 1998 and any particular oral request after 1 July 1998 (if any), the introductory words to par 100 and parts of the particulars of par 100 again except in so far as they relate to particular communications after 1 July 1998, and the introductory words to pars 100B and 101 should all be struck out and redrawn in accordance with these reasons.  That will involve substantial changes to the pleadings, and piecemeal amendments might leave the applicant with allegations expressed in an unsatisfactory way.  I propose, therefore, to strike out the whole of pars 99-101 of the statement of claim.  I will give to the applicant leave to file and serve a fresh statement of claim.  That leave will enable the applicant to decide whether to provide particulars of the facts upon which the state of mind of the respondents alleged in pars 100C(b) and (c):  see O 12 r 3 of the Federal Court Rules.

(b)        Is there conduct in connection with the supply of services?

93                  For the purpose of considering this issue, I shall treat the existence of the underlease as a circumstance capable of being proved and will assume that it is alleged that there was a request by the Choongs after 1 July 1998 to the respondents to consider the entry into a fresh underlease with a third party so that the Choongs, as existing tenants of the stall, and as persons who had substantial plant and equipment at the stall, had the opportunity of selling that plant and equipment in situ to any new tenant of the stall, and that the respondents refused that request.

94                  The respondents submit that such conduct is not relevantly in connection with the supply or possible supply of services to a person.  They point out that the term granted by the underlease was to, and did, expire on 6 January 1999.  There is no allegation that the Choongs had any right to any extension of the term.  They rely upon certain observations of Hill J in Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 at 463, in the content of s 52A(1) of the Act, as follows:

“There must, for s 52A(1) to be satisfied, be some connection between the provision of the services and the unconscionable conduct.  No doubt any connection, except perhaps one that is very remote, will suffice but it is hard to see here any relevant connection at all save the obvious fact that a loan has to be first made before, it being in default, it is called up (even if the provision of loans can be the relevant service).”

95                  The applicant in submissions identified the relevant services being supplied by the respondents as the underlease and the provisions to the Choongs of their entitlements under the covenants in the underlease.  It was a term of the underlease that, upon the expiration of the occupancy rights which it granted, the Choongs would vacate the stall and remove their plant and equipment.  The applicant claims that, to insist on the performance of that covenant where the Choongs might otherwise have the opportunity to sell that plant and equipment in situ to a new tenant is unconscionable, in circumstances where (as is here alleged) that insistence is both capricious and directed solely towards causing loss to the Choongs.  The determination of whether there is unconscionable conduct may be assessed having regard to the factors identified in s 51AC(3).  The applicant asserts that subpars (b) and (k) are of particular relevance.  They provide:

“(b)   whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

 

…

 

(k)   the extent to which the supplier and the business consumer acted in good faith.”

The applicant submits that the factors referred to above are relevant, in the light of those provisions.

96                  For the purposes of this application, it is not appropriate to make findings of fact.  I take the pleadings as containing the relevant facts.  On the assumption that the allegations are confined to conduct after 1 July 1998, I do not think that the applicant’s claims are so untenable that the claim should be struck out.  In expressing my conclusion in that way, I am simply applying the test laid down for resolving such an application as the present:  General Steel Industries (above).  I have no view as to whether or not the applicant will be able to prove all or any of the facts it alleges.  However, accepting that the allegations will be established at the hearing, including as to the respondents’ state of mind, I consider that it is arguable by the applicant that the respondents’ conduct was in connection with the supply or possible supply of services to the Choongs.  In the course of submissions, counsel for the applicant indicated that the applicant may wish to add to the statement of claim to indicate an alternative way in which it is said that the respondents’ conduct is in connection with the supply or possible supply of services.  I have not had regard to that prospect in ruling upon this particular contention, but the leave to amend the statement of claim will enable any such additional facts or matters to be pleaded.

(c)        Can the conduct alleged be unconscionable?

97                  The respondents finally contend, in relation to these paragraphs of the statement of claim, that the refusal of the respondents to deal with the Choongs in relation to any potential new tenants, or the refusal “to consider” an underlease to a prospective tenant of the stall so that the Choongs might have the opportunity to sell to that tenant their plant and equipment, cannot amount to unconscionable conduct in connection with the supply of services in any event.  In effect, it is contended that the respondents cannot contravene s 51AC(1) simply by insisting on their right of vacant possession at the expiration of the term granted by the underlease.

98                  Counsel for the respondents referred to Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 for the proposition that heads of agreement to negotiate in good faith may be enforceable.  It was put that, inferentially from that decision, in the absence of any such agreement there can be no obligation to negotiate.  Counsel also referred to Official Trustee in Bankruptcy v Tooheys Ltd (1993) 29 NSWLR 641 as providing an illustration of circumstances where it would be unconscionable for a landlord simply to allow a tenancy to expire without the tenant having an opportunity to transfer its business and assets to a new tenant.  In that case, the conduct relied upon included specific representations by the landlord as to the transferability of the tenant’s business and assets at the expiration of the term.

99                  That general submission may be correct.  However, in my view, those submissions are more appropriately considered when the admissible evidence has been received, and in the light of the facts as found.  I do not think those authorities so conclusively establish the outer boundaries of the concept of unconscionable conduct for the purposes of s 51AC of the Act as to lead to the view that the applicant presently has no real prospect of success on its application as expressed in the statement of claim.  The views expressed about the breadth of the concept encompassed within the expression “unconscionable conduct” by Beaumont J in Cameron v Qantas Airways Ltd (1995) 55 FCR 147 at 179-181 and by Branson J (with whom Spender J agreed on this point, and Olney J agreed) in Pritchard v Racecage Pty Ltd (1997) 142 ALR 527 at 543-546 are, in my view, sufficient reason not to accede to the proposition of the respondents at this stage of the proceedings.  The fact that the respondents may be exercising contractual rights is not necessarily a circumstance which precludes a finding of unconscionable conduct in the present circumstances.  It may do so, but in my view that proposition of the respondents is not so clearly right that the applicants should be deprived of the opportunity of taking the matter to trial if it is not otherwise resolved.  There may also be other facts proved at trial which might be relevant to whether the respondents’ conduct is unconscionable in any event, including (if it be the case) that the respondents have some sound commercial reason for not releasing the stall.  It is preferable that the respondents’ arguments be addressed in the light of the facts as they are found to be.

Should the statement of claim be struck out?

100               I have referred in some detail to the allegations concerning the rental issue, the food range issue, and the food price issue.  In the light of my decision about the way in which s 51AC(6)(b) operates, it is clear that many of the facts alleged should not be allowed to stand.  In respect of each of those issues, allegations are made of conduct prior to 1 July 1998 which is said to be unconscionable.  Allegations are also made of conduct prior to 1 July 1998 which is said to be part of the transaction involving the conduct after 1 July 1998 said to be unconscionable.

101               Again, I do not think it is sensible or feasible simply to strike out parts of the statement of claim.  The applicant, and the respondents, may be left with a confusing document and one which is difficult to follow.  In the light of those reasons, the applicant may wish to review the way in which the matters alleged are pleaded, or to omit parts of its allegation.  Unless some oral direction was given after 1 July 1998 on the topic, it may limit the allegations it makes concerning the food price issue to some degree.  It may wish to indicate the relevant “circumstances”, as that term is used in s 51AC(6)(b), in some different way.  I am not to be taken as indicating that the applicant should do any of those things, or as indicating how the applicant should plead its case.  Subject to the statement of claim reflecting the particular rulings contained in these reasons for judgment, that is a matter for the applicant.  However, the opportunity given to the applicant to consider such matters in the light of the submissions put by the respondents is a further reason why I consider that the appropriate order is to strike out the statement of claim.

Order

102               I strike out the statement of claim.  I will give to the applicant leave to file and serve an amended statement of claim which should reflect the rulings contained in these reasons.  I will hear counsel as to the time to be allowed for the applicant to do so.

 

 

I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.

 

Associate:

 

Dated:

 

 

Counsel for the Applicant:	Mr C Kourakis QC
Solicitors for the Applicant:	Australian Government Solicitor
Counsel for the Respondents:	Mr K Nicholson
Solicitors for the Respondents:	Pearce & Meister
Date of Hearing:	2 July 1999
Date of Decision:	20 August 1999