Introduction - Lessor guilty of Misleading and Deceptive
Conduct in Leasing Negotiation
In the near 100 page judgement of ACCC v Duke Master Pty Ltd
 FCA 682 (24 June 2009), the Federal Court has delivered
a rare win for the ACCC, finding a lessor (and its employee) guilty
of unconscionable conduct and misleading and deceptive conduct
during the negotiation of a series of lease renewals.
The ACCC brought the case against the lessor for what it claimed
were breaches of Sections 52 (Misleading and Deceptive
Conduct) and 51AC (Unconscionable Conduct in Business
Transactions) of the Trade Practices Act 1974 (Cth).
(Equivalent provisions to these are contained in Part 7A of the
Retail leases Act 1994 (NSW).)
The Lessor's Misleading and Deceptive Conduct
The lessor, in letters accepting offers to renew the leases and
proposing the new rent, stated: "We believe the new rent is
very reasonable and below market value." The evidence showed
that the lessor had no reason to believe that the rent was
reasonable or below market value.
The lessor stated that the proposed rent was lower than what a
specialist retail valuer had determined, when in fact the rent had
not been determined by any valuer.
The lessor stated that time to exercise an option had expired,
when in fact it had not expired.
The Lessor's Unconscionable Conduct
The lessor sought rent that it had no basis to believe was
The lessor demanded responses to correspondence within short
deadlines without sufficient reason.
The lessor stated that any independent valuation sought to
determine the rent would be higher than the proposed rent and the
lessee would have to pay the higher rent.
The lessor refused to grant a new lease when the rent determined
by a specialist retail valuer was less than the proposed rent.
The lessor conducted the negotiations in English when it knew
that the lessee had little ability to speak English.
Lessons from the Case
Although the facts of this case seem to accumulate against the
lessor whose conduct was far from "best practice", the
case serves to show how the court views lessor's obligations
during lease negotiation.
The lessor's conduct was, in all the circumstances,
unconscionable, mainly because the lessor was aware of the lack of
bargaining power of the lessee.
The lessor knew that the lessee had only been operating the
(very small) business at the premises for a short period of time,
had limited English, had no knowledge of its rights under the
Tenant Protection Act for that State, and was under
pressure to renew the Lease so as to be able to sell the
The lessor intended to secure a renewal at a rental for which
there was no basis, and its conduct was unconscionable because it
took advantage of the lack of bargaining power of the lessee in
order to achieve this. In particular, the lessor knew that the
lessee was not aware of its legal rights under statute or the lease
and, in order to achieve a higher rent, deliberately acted to
ensure that the lessee did not exercise any of its rights.
The Court did not accept the lessor's defence that it acted
in line with standard industry practice by informing the lessee in
writing of its rights, eg the lessee's right to have the rent
determined independently. The lessor knew the lessee had limited
English and so the lessor needed to take extra steps to ensure that
the lessee understood.
Outcome for the Defendants
The lessor and the lessor's employee (the centre manager)
were ordered to pay substantial compensation to the lessee and
attend training programs about compliance with the Trade
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guide to the subject matter. Specialist advice should be sought
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Many retail leases include a covenant to trade, requiring the tenant to open the premises for trade during certain hours.
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