Law And Management
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Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCAFC 4
FEDERAL COURT OF AUSTRALIA
BETWEEN:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
APPELLANT
SAMTON HOLDINGS PTY LTD (ACN 062 688 359)
FIRST RESPONDENT
FRANCESCO PARASILITI
SECOND RESPONDENT
GAETANINA PARASILITI
THIRD RESPONDENT
SALVATORE PARASILITI
FOURTH RESPONDENT
MARIA PARASILITI
FIFTH RESPONDENT
FELICE ANTONIO SCIARRETTA
SIXTH RESPONDENT
SILVANA SCIARRETTA
SEVENTH RESPONDENT
JUDGES:
GRAY, FRENCH and STONE JJ
DATE:
6 FEBRURY 2002
PLACE:
PERTH
STATEMENT OF FACTS
This contract concerned the sale of a business on leased premises
The company which assigned the lease and received the payment was Samton Holdings Pty Ltd (Samton), the first respondent
Samton owns the premises on which a lunch bar business is operated, leasing the land to Patricia and Giuseppe
Farruggio(PGF), who runs the lunch bar business
PGF subsequently sells the business to Executive Bloodstock (the Ranaldis) for $205,000 (however, 71% of this sale price is specified to be good will) (Para 6)
The Ranaldis take over the lease with 3 months until its date of expiry, but with the option to extend the lease for seven years
The option must be exercised by 2 March, 1997, which would allow the Ranaldis to continue operating under the same terms to which PGF is presently entitled (para 10)
Mr. Ranaldi carelessly fails to exercise the option for renewal by the due date. He exercises the option 16 days after its expiration
Samton now demands $70,000 for the lease extension
Thus, in addition to having paid for the business from the lessees, the Ranaldis now have to pay an additional sum of $70,000 to Samton in order to renew the lease.
The ACCC brings an action asserting unconscionable conduct on the part of the lessors in asking for the $70,000 as a price for renewal of the lease (which would normally have cost nothing had it been requested in time)
ISSUES
Did Samton engage in unconscionable conduct in contravention of s 51AA?
Did the trial judge err in failing to give consideration to (or giving incorrect weight to) factors that determine whether the conduct was unconscionable?
ANALYSIS OF THE COURTS DECISIONS
Trial Judge (Carr J): Were the Ranaldis in a position of special disability?
Mr. Ranaldi was in a position of situational disadvantage and Mr. Salvatore Parasiliti(SP), one of the lessors who managed Samton, was aware of that position
The conduct of the respondents in extracting the sum of $70,000 was harsh and opportunistic terms but had not taken advantage unconscionably
The lessors did not take advantage because they were not obliged to renew the lease
They just struck a hard bargain
ACCCs appeal:
ACCC argues that unconscionability embraces any conduct which is unconscionable in the dictionary meaning of the word, i.e. an expansion of the common law meaning
ACCC also argues, in the alternative, that the case was one of unconscionable dealing
Full Court of the Federal Court(Gray, French and Stone J):
Rejects the argument that s 51AA refers to the dictionary meaning of unconscionability
The reference is not to be construed at large – s 51AA refers to the unwritten law (specific common law equitable doctrines)
The relevant unwritten law is not confined to unconscionable dealing, which is only one of several doctrines involving unconscionability
There are also other doctrines where unconscionability is relevant like unilateral mistake, forfeiture and penalties, etc
The underlying idea is that a person may not exercise their strict legal rights unconscionably
This is not a specific equitable doctrine, just an overarching simple principle
Therefore, s 51 AA is not limited to unconscionable dealing
But it is limited to specific equitable doctrines
That is, the court cannot just apply general principles of equity to resolve the dispute.
s 51AA: unwritten law from time to time of the States and territories refers to the common law of Australia
Professor Finn notes distinct ways that unconscionable conduct has been described in law: (Para 46)
Forming the implicit basis for various equitable rules and doctrines
Preventing strict enforcement of legal rights (e.g. estoppel, unilateral mistake, and undue influence) where it would be unfair
Preventing unconscionable