Landlord engages in Unconscionable Conduct

The recent decision in ACCC v Dukemaster Pty Ltd demonstrates the need for landlords to exercise more caution when making representations to tenants in regards to lease contracts.

In this particular case, Dukemaster owned a building complex with retail shops and a food court. Dukemaster sent a letter to tenants that operated food businesses with an option to renew their lease. In each instance the letters stated; ‘We believe the new rate is very reasonable and below the market value. If you object to our proposed rent, the matter will proceed to valuation in accordance with… the lease contract.’ All of the tenants accepted the new rent rates and claimed they were not aware they could have an independent valuation. During the trial, expert evidence found the rent was not reasonable and in some instances almost double market value.

Misleading and Deceptive Conduct

The Federal Court held that Dukemaster had engaged in misleading and deceptive conduct. The court stated that an expression of an opinion ‘however erroneous misrepresents nothing’. However it qualified that general proposition by stating that if an opinion was not honestly held, ‘lacked any adequate foundation’ and ‘was expressed as an expert’, the representation may contravene s52 of the Trade Practices Act.

The evidence showed that the opinion lacked any adequate basis and was able of inducing error because it was ‘much more probable than not’ that the rent was not ‘very reasonable’ or ‘below the market value’. The court indicated that a possible defence would have been if Dukemaster could adduce ‘positive evidence’ that the rent was reasonable or for market value.

Unconscionable Conduct

The court also found that Dukemaster had engaged in unconscionable conduct. Some of the key factors in the judgement were that most tenants had limited ability to speak English, they were very small businesses, Dukemaster knew the rent was not current market value, and that the tenants were given inadequate time to respond or obtain legal advice.

The result in this case highlights the importance of key staff, operating at the customer or client interface, need to be aware of the obligations that apply under the Trade Practices Act. To limit breaches of the law, it is recommended that organisations provide annual training in relation to the Trade Practices Act. Regular training is important to keep up to date with current changes in the law.

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