ACCC v Samton Holdings Pty Ltd & others

The Full Federal Court has dismissed an Australian Competition and Consumer Commission appeal against an earlier decision that Samton Holdings Pty Ltd and six individual landlords did not breach the Trade Practices Act 1974 over their conduct towards a tenant.

The ACCC originally instituted proceedings in the Federal Court, Perth, against the lessors of a lunch bar and associated company, Samton Holdings, alleging they had dealt with a tenant of a lunch bar in an unconscionable manner. Section 51AA of the Act prohibits unconscionable conduct in commercial transactions.

The ACCC alleged that, after the failure of the tenant to exercise an option to extend the term of a lease, the tenant was required to pay $70,000 to Samton Holdings for the assignment of a lease for seven years. The ACCC believed the tenant was at a special disadvantage because of his financial dependence on extended tenure of the business premises and because of the level of debt. The ACCC alleged it was unconscionable for Samton Holdings and the individuals to take advantage of their superior bargaining position to obtain the $70,000 from the tenant.

At trial the Federal Court found the respondents adopted an avaricious, opportunistic approach and struck a very hard bargain but the conduct fell short, though not far short, of being unconscionable.

The ACCC appealed that decision in the interests of clarifying the law.

"The ACCC continues to regard as a high priority the prohibitions on unconscionable conduct contained in the Act", ACCC Chairman, Professor Allan Fels, said today. "Although disappointed the Full Federal Court did not accept the conduct amounted to unconscionable conduct the decision has clarified the limitations of section 51AA of the Act, one of three provisions which deal with unconscionable conduct.

"This matter was taken under previously existing provisions of the Act", he said "A new provision, section 51AC, which came into effect from 1 July 1998, provides an improved level of legal protection for small businesses".