Retail landlords negotiate with care

ACCC instituted proceedings against Dukemaster and Ms Patricia Wong (its General Manager) for alleged misleading and deceptive conduct, unconscionable conduct and making false representations in contravention of the Trade Practices Act 1974 (Cth) ‘TPA’. (ACCC v Dukemaster Pty Ltd)

ACCC took representative action on behalf of four tenants in relation to the negotiation of leases between Dukemaster and the tenants. Each tenant faced the following similar circumstances:

1. they were small business owners who had no or little ability to speak or read English, and Dukemaster was aware of that fact
2. the proposed rental was represented by Dukemaster as being very reasonable and below the market value when this was not the case and where Dukemaster had no basis for seeking the amount stated
3. Dukemaster imposed short time frames for the tenants to respond to proposed rents without justification or explanation (often a matter of days, and in one case when independent legal advice was not readily available)
4. Dukemaster’s continued failure to comply with the Retail Tenancies Reform Act 1998 (Vic)
5. Dukemaster threatened to evict or sent letters of demand to certain tenants

In relation to the proposed rents, the Court found that Dukemaster had made a number of false and misleading representations in breach of section 53(e) of the TPA. It was held that “[t]aken as a whole, the evidence reveal[ed] no basis for Ms Wong or Dukemaster stating … that it held a belief that the rent … was “very reasonable” and “below the market value”.”

Additionally, Justice Gordon found that “In the absence of positive evidence from the Respondents that the rent … was “very reasonable” and “below the market value” …, or that Ms Wong genuinely believed the market value of the rent … was greater than [the proposed rent], I can only conclude that the … Representations were misleading or deceptive or likely to mislead or deceive [the tenant].”

Justice Gordon held that Dukemaster’s conduct and that of its General Manager, Ms Patricia Wong, was not only unconscionable but also in relation to one particular tenant “the actions of Dukemaster were deliberate (or at least reckless), showed no regard for conscience and were irreconcilable with what is right and reasonable.” In that tenant’s case Justice Gordon considered that what had occurred “was not a negotiation – it was an ultimatum”.

Justice Gordon made similar observations in each case, however in one case where the tenant was a company, she noted that the TPA was “not intended to provide a safety net for those corporations and individuals who have the ability and means (relative to the supplier) to deal with lease issues and yet, for reasons unexplained, fail to take any or sufficient steps to protect themselves or who make a commercial decision which ultimately proves to be the wrong decision”. In this tenant’s case, it was the fact that the directors met regularly to discuss the business and while the manager had a limited grasp of English, her fellow directors were highly educated and therefore had the ability and means to protect themselves.

Retail landlords should be careful when engaging in lease renewal negotiations to avoid finding themselves in Dukemaster’s shoes. As such, it is important to understand who your tenants are, their business knowledge and their grasp of the English language. Furthermore, landlords must ensure their proposed rents are justifiable.

Author: Louise Tolson