Section 243 of Australian Consumer Law gives tenants a powerful weapon

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Landlords need to be very careful about what they say when negotiating leases because s.243  of the Australian Consumer Law provides a wronged tenant with a powerful weapon.

That section permits the court to make an order declaring the whole or any part of a contract void or to vary a contract.

The most famous case concerning the sections’s predecessor (s.87 of the Trade Practices Act 1974)  was Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 where the High Court varied a lease.

The Supreme Court of Queensland recently used s.243 of the ACL to set aside a lease and a guarantee. In that case the tenant and guarantors of the tenant’s obligations alleged that they were induced to enter into a 30 year lease by representations that if the tenant  paid rent at a rate of $180,000 per annum for three years and had not purchased the freehold after three years the landlord would cancel the lease and enter into a new lease at a rental of about $120,000 per annum.

The court found that the representation had been made and relied upon and that the tenant and the guarantor had suffered detriment as a result of the conduct of the defendants. The Court declared the lease and the guarantee void ab initio under s 243. The case is Morgo’s Leisure Pty Ltd and others v Morgan v Toula Holdings Pty Ltd and others [2013] QSC 325.

Postcript: the decision referred to above was reversed by the Court of Appeal in Toula Holdings Pty Ltd v Morgo’s v Dante (NQ) Pty Ltd [2014] QCA 201. Thanks to George Tsogas for alerting me to the result of the appeal.

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

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What is the effect of a nominee clause?

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What is the effect of a purchaser of land nominating a nominee under a nomination clause contained in the contract: what rights and obligations does the nominee have?

The answer is none: the nominee has no contractual rights and no obligations.

In 428 Little Bourke Street Pty Ltd v Lonsdale Street Cafe Pty Ltd [2009] VSC 133 the vendor misrepresented the lettable area of the property. The purchaser nominated the plaintiff as purchaser. The director of the purchaser was also the director of the nominee. It was alleged that the nominee purchaser relied on the representations. The nominee clause  provided as follows:

“If the contract says that the property is sold to a named purchaser ‘and/or nominee’ (or similar words) the named purchaser may, at least 14 days before settlement date, nominate a substitute or additional purchaser, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this contract.”

The contract authorised a substitute or additional purchaser.

The nominee purchaser brought an action for damages based on a breach of s 52 of the Trade Practices Act, s 9 of the Fair Trading Act and for negligent misstatement.

Judd J held that that the nomination did not have the effect of a novation and the plaintiff did not become a party to the contract of sale.

His Honour also found that by the time the plaintiff paid the purchase price and took the conveyance it was aware of the true lettable area of the property.

Thus, the cause of the plaintiff’s loss was either an informed choice to pay a price for the property and take the conveyance or, if the payment was involuntary, it was because the plaintiff was caused by its directors, in full knowledge of the true facts to make the payment in which case but for the nomination it would not have suffered any loss.  The loss was caused by the nomination – not the representations.  Judd J dismissed the proceeding.

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/