Australian Property News

Court condemns retail landlord's ultimatums

Posted on Friday, July 03 2009 at 1:15 PM

In what the Australian Competition and Consumer Commission (ACCC) has hailed as a "victory for small business operators", the Federal Court has ordered a Melbourne retail landlord to compensate four tenants after it engaged in unconscionable, misleading and deceptive conduct.

The court declared Dukemaster Pty Ltd had also made false representations.

The ACCC alleged Dukemaster, which is a landlord of retail outlets, engaged in unconscionable conduct in breach of the Trade Practices Act 1974 by taking unfair advantage of its stronger bargaining position, exerting undue pressure and using unfair tactics against four tenants in connection with their leases.

The court's declaration of unconscionable conduct against Dukemaster was made against a backdrop involving:

- small business owners who had no or little ability to speak or read English and Dukemaster's knowledge of that fact;

- a proposed rental which was represented by Dukemaster as being reasonable and below market value when this was not the case and where there was no basis for Dukemaster to seek the amount stated;

- Dukemaster imposing, without justification or explanation, a very short timeframe for the tenants to respond to the proposed rental (often a matter of days was sought and, in one instance, when independent advice was not readily available);

- Dukemaster's ongoing failure to comply with Victorian retail leasing legislation; and

- Dukemaster threatening to evict or sending letters of demand to certain tenants.

In relation to her finding of unconscionable conduct by Dukemaster against one tenant, Justice Michelle Gordon stated that what had occurred was not a negotiation but an ultimatum and that the tenant had no choice but to accept the rental amount Dukemaster proposed.

Later in her judgment the judge observed in relation to the same tenant that, "the actions of Dukemaster were deliberate – or at least reckless – showed no regard for conscience and were irreconcilable with what is right or reasonable".

She made similar observations in relation to other tenants, the ACCC noted.

In addition to the declarations of contravention of the Act, the court made orders including:

- injunctions which restrain Dukemaster for a period of three years from engaging in similar conduct; and

- an order that Dukemaster and its general manager pay compensation to the tenants in excess of $275,000 for their loss and damage suffered as a result of the contravening conduct.