ACCC v CG Berbatis Holdings Pty Ltd & Ors P64/2002 [2002] HCATrans 505 (21 October 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P64 of 2002

B e t w e e n -

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Appellant

and

CG BERBATIS HOLDINGS PTY LTD

First Respondent

GPA PTY LTD

Second Respondent

P & G INVESTMENTS PTY LTD

Third Respondent

GEORGE PALASSIS ATZEMIS

Fourth Respondent

CONSTANTINE GEORGE BERBATIS

Fifth Respondent

ANNA MARIA ANTONIA HEIJNE

Sixth Respondent

BRIAN SULLIVAN PROPERTY PTD LTD

Seventh Respondent

BRIAN EDWARD SULLIVAN

Eighth Respondent

GLEESON CJ

GUMMOW J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT PERTH ON MONDAY, 21 OCTOBER 2002, AT 10.17 AM

Copyright in the High Court of Australia

__________________

MR N.W. McKERRACHER, QC: May it please the Court, with my learned friend, MS E.C. GORDON, I appear for the appellant. (instructed by the Australian Government Solicitor)

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR P.G. CLIFFORD, for the first six respondents who are the owners of the property in question. (instructed by Haydn Robinson)

MR N.C. HUTLEY, SC: If the Court pleases, I appear with my learned friend, MR N. PERRAM, for the seventh and eighth respondents. (instructed by Julian Johnson)

GLEESON CJ: Mr McKerracher.

MR McKERRACHER: Your Honours, at first instance in this litigation, Justice French, the learned trial judge, concluded that the owners, through Mr Sullivan, had grossly, unfairly exploited the particular vulnerability of the Roberts in relation to the sale of their business. He concluded that there had thus been a contravention of section 51AA of the Trade Practices Act 1974 .

KIRBY J: I noticed that adverb, "grossly". It seemed to be a very strong adverb in all the circumstances. Is that necessary? If it is necessary for your case, I think you will have problems myself; "grossly", it is a very strong word.

MR McKERRACHER: Terminology will not necessarily answer all the questions, in our respectful submission, your Honour. I accept that "grossly" is a strong conclusion, but it is clear that his Honour wished to convey that it was certainly something more than mere unfairness.

GLEESON CJ: The word that attracted my attention was "vulnerability". What was their particular vulnerability, apart from the fact that they did not have an option to renew their lease?

MR McKERRACHER: There were a sequence of vulnerabilities, your Honour, which really invites a detailed examination of all of the facts but the - - -

GLEESON CJ: Was that their essential vulnerability, that they had no option to renew?

MR McKERRACHER: That was an important feature of it, your Honour. It was also regarded by his Honour the learned trial judge as being a relevant consideration that they needed to sell the business in order to meet medical bills to pay for their daughter's serious illness. It was also relevant, in our respectful submission, that the imposition of the mutual release clause, as it was described, was something which was effectively placed upon the Roberts at the last minute - - -

GLEESON CJ: But none of this would have been a problem if they had had an option to renew the lease?

MR McKERRACHER: The Roberts were under the impression that they in fact had at least a lease and they were perhaps mistakenly under the impression, but they formed that view in light of the fact that they had received communications from the owners offering them a lease without the condition of a mutual release clause; and in each instance when they purported to sell the business of attempted to sell the business, expressly imported into the sale documentation those communications from the owners in which the lease had been offered. So, in a technical sense, with respect, your Honour, the Chief Justice is correct, but his Honour was viewing the matter from a perspective of small business owners who were not enormously experienced in commerce.

But, of course, the circumstances of the appeal are different from previous decisions of this Court in that it does invite consideration of the doctrine of unconscionable dealings in trade and commerce for the purposes of section 51AA and in particular looks at small business proprietors which has not been a significant feature of previous decisions of this Court.

But what has usually been important in previous decisions and is equally important in this appeal, in our submission, is that the individual circumstances require close analysis in order to form an evaluation as to whether or not the conduct is unconscionable. It is not the submission of the appellant, I should say, that the inclusion of the notion of unconscionable conduct in section 51AA changes the law in any way; but rather that it would be expected to stimulate from time to time the development of the concept of unconscionability in trade and commerce, most probably and certainly so in this case, we say, in assessing what is special disadvantage in commerce.

KIRBY J: It is a curious section, is it not, as it were, Parliament surrendering to the courts the development of the law which Parliament lays down. I saw that constitutionality was tested at first instance and is not for us, but is that not a little like the native title provision that was struck down by the Court?

MR McKERRACHER: It is a little like it, with respect, your Honour, but the analysis of Justice French in that decision where the constitutionality was assessed, in our submission, was correct and it has not been challenged at any point since that decision and, indeed, there was not even a challenge giving rise to that decision, but the distinction his Honour drew was that it was not a surrender as such but, rather, if I can use just a shorthand term for present purposes, a definition by which the courts could be guided.

KIRBY J: I suppose if Parliament had just used the word "unconscionable conduct", that itself would pick up the baggage of that expression but it is the way it has been stated which seems a little curious. It seems to be an assignment to others to do the work of Parliament in terms. However, it is not before us so I suppose we can ignore it.

MR McKERRACHER: I think that is correct, with respect, your Honour.

GUMMOW J: Now, paragraph 9 of the trial judge's judgment sets out the section, but is that in the right form? There is particular reference in subsection (2). My note is that it was amended by Act 36 of 1998 which would be too late for these events. I may be wrong about that. What is the relevant date?

MR McKERRACHER: Yes, that was an edition subsequent to the events referable to this - - -

GUMMOW J: We need to know the text at the right time, do we not?

MR McKERRACHER: Yes, your Honour, that needs to be understood. That is way in which we have prepared our submissions.

GUMMOW J: Someone had better give us the text.

MR McKERRACHER: But it does not - - -

GUMMOW J: Do not say it does not matter. You just have to have the right text.

MR McKERRACHER: The relevant provision is, of course, that contained in subsection (1), as his Honour considered that.

GUMMOW J: You are saying it does not matter?

MR McKERRACHER: We submit it does not matter for relevant purposes.

GUMMOW J: I am not going to hold up any more time, but we have really got to be shown the right text by somebody at some stage.

MR McKERRACHER: Your Honours, subject to the convenience of the Court, I propose to touch on the facts and then move to the submissions in support of the grounds of appeal.

GUMMOW J: Firstly, we have to work out what is meant by this phrase, the statutory phrase, "conduct that is unconscionable". If we do not do that, we do not know what we are measuring the facts against. Now, does this form of words exclude what some English cases call economic duress? Is there any consideration of that?

MR McKERRACHER: In our submission, no. The pleadings in this case were - - -

GUMMOW J: Just a minute. The second question is, is there in Australia any doctrine of economic duress. There are some cases in the New South Wales Court of Appeal. One is called Crescendo v Westpac, I think, in 19 NSWLR 40 which says there is. It may be right, may be wrong. Secondly, does this phrase, "unconscionable conduct", include the sort of wrongful pressure falling short of duress but not being undue influence which the Privy Council was talking about in Barton v Armstrong [1976] AC 104 at 118 which no one seems to have considered either? So what do you say is the content of this phrase, "unconscionable"?

MR McKERRACHER: Your Honour, for statutory purposes, it is large. We have touched upon the options in paragraph 35 of our written submissions in saying that the context of the unwritten law - at least four possible interpretations of conduct that is unconscionable may arise. Firstly, the discrete doctrine of unconscionable dealing which was the way this case was pleaded and run - - -

GUMMOW J: Yes, but what is that?

MR McKERRACHER: It is essentially the doctrine which flows from cases such as Amadio.

GUMMOW J: Amadio did not come suddenly from heaven.

MR McKERRACHER: No, your Honour - - -

GUMMOW J: Talking about setting aside transactions for undue influence or - - -?

MR McKERRACHER: Yes, section 51AA is at large in that regard, your Honour.

GUMMOW J: Some form of pressure or some inequality of dealing between people going to reality of consent or what are we talking about?

MR McKERRACHER: All of those matters, with respect, your Honour, but - - -

GUMMOW J: Because unless you analyse it, it is just a slogan, to my mind. Unless you analyse that word, it is not going to get anywhere.

MR McKERRACHER: Yes, but in terms of the present litigation, the parties ran it on the limited basis of an Amadio-type of doctrine recognising.....in time.

KIRBY J: Equity has been throwing around "unconscionable" for centuries. I would hate to think the judges were dealing in slogans.

MR McKERRACHER: Your Honour, our submission is that the section embraces any conduct which is contrary to conscience and in that meaning which has been recognised in equity.

GUMMOW J: On one view of it, that is the whole of the equity jurisdiction.

MR McKERRACHER: Therefore, a variety - - -

GUMMOW J: A lot of which on no footing would have anything to do with this case.

MR McKERRACHER: Quite so, your Honour, but the case was run on a limited basis, but we do not for a moment suggest that 51AA is so confined in its operation. It is, on its face, at large. There are some indicia in explanatory memoranda and other analyses which suggest that it might be best suited to the Amadio-type of cases, but those would not guide this Court in the appropriate case in any limited fashion.

GLEESON CJ: What is the relevant form of unconscionability you rely on?

MR McKERRACHER: We rely upon the unconscionable dealing as identified in Amadio and Blomley v Ryan, that is to say, the knowing exploitation by one party of the special disadvantage of another.

GUMMOW J: Special economic disadvantage in this case.

MR McKERRACHER: In our submission, it is not exclusively confined - - -

GUMMOW J: Just a minute, it is put against you there is not real finding on the family situation at the trial.

MR McKERRACHER: Yes. I understand that submission, your Honour. In our respectful submission, the portion of the reasons of the learned trial judge where he analysed the issue made it clear that he did in terms regard the stress and problems arising from the serious illness of the daughter as being irrelevant. He then went on to say, "even with out that, I would regard the conduct in imposing the term as being in breach of the Act". Now, when one sees - - -

KIRBY J: Does Mr Hutley say that it is not shown that his clients knew of the - - -

MR McKERRACHER: Yes, yes, your Honour.

KIRBY J: Do you accept that?

MR McKERRACHER: Yes, we do, your Honour.

KIRBY J: So that, vis-à-vis, the seventh respondents, we can put that factor out of mind.

MR McKERRACHER: That is correct, your Honour.

KIRBY J: But you say in respect of the first to sixth, there is a sufficient finding that they were aware and that the evidence of the conversations with Ms Clapp supports that finding?

MR McKERRACHER: Absolutely, your Honour, and I do not understand that to be disputed. What is put against us - - -

GUMMOW J: Wait a minute, what about paragraph 123 of the trial judge's judgment, the last couple of sentences:

"situational" as distinct from "constitutional" disadvantage. That is to say it did not stem from any inherent infirmity or weakness or deficiency. It arose out of the intersection of the legal and commercial circumstances - - -

MR McKERRACHER: That is certainly the confined manner in which his Honour was prepared to reach that conclusion. But his Honour also made the point that the special personal circumstances were relevant and we would ask if his Honour is observing that they are relevant. They have to be relevant too in the context of the reasons for determination of unconscionability, but he was prepared to confine his conclusion to the economic circumstances. But the conclusion which was repeatedly stated about the personal circumstances were said to be relevant and we submit that it was obviously taken into account by his Honour.

KIRBY J: Here is this word used in a federal statute that has been used for a long time and it is used in the context of:

within the meaning of the unwritten law, from to time; of the States and Territories.

So that rather implies that there is a reference out to what that law says now and in the future, "from time to time", so we have to give meaning to an ordinary word, refer out to the unwritten law and then look at all the facts and see whether out of the facts it was open to the trial judge to conclude unconscionability. Is there anything more to it than that?

MR McKERRACHER: No, your Honour, I do not believe there is.

KIRBY J: I do not think we should encrust the federal parliamentary law with unnecessary learning unless it is brought in by "within the meaning of the unwritten law, from time to time". It is just an ordinary word, is it unconscionable?

MR McKERRACHER: Yes, yes.

GUMMOW J: It is not an ordinary word, it is a technical word.

KIRBY J: You say it is an ordinary word in your submission, paragraph 35(a).

GUMMOW J: Why are you worried about Blomley v Ryan and Amadio if it is not a technical word?

MR McKERRACHER: Even those cases which - - -

GUMMOW J: This is why Law students get taught about the subject.

MR McKERRACHER: Even those cases, your Honour, which reach the technical conclusion which is the basis upon which we advanced it look at the dictionary definition of "unconscionable".

KIRBY J: But this is what led me to ask you the constitutional question at the outset because this is a law of the Federal Parliament of Australia and it is to be given meaning by this Court as such. Curiously, in this case, they have referred out to the unwritten law so that presumably that is what they intended the Court to do and that supports Justice Gummow's suggestion to you that is used in a technical meaning in this case, whatever might have been the meaning if it had not used those words within the meaning of the unwritten law.

MR McKERRACHER: I certainly accept that, that it is used formally in the Ryan and Amadio sense in this case.

GUMMOW J: Only in that sense?

MR McKERRACHER: That is the only basis on which we put the case, your Honour.

KIRBY J: Is that what the Minister said introducing the Bill that included this section - - -

MR McKERRACHER: It was not as confined as that. Those two cases were given as examples of the sort of conduct which the section might address but I would be very cautious about suggesting that that speech should limit the Court in its construction of the section. But that broader question does not arise on the case we put or the appeal we put. We have put the case, for better or worse, on the narrow basis.

GLEESON CJ: Has it ever been argued against you at any stage of the proceedings that the knowing exploitation by one party of the special disadvantage of another cannot be or might not be unconscionable?

MR McKERRACHER: No, your Honour, I do not believe so, no - - -

GLEESON CJ: So the parties have been at one at all stages of these proceedings on the form of unconscionability if it is relevant.

MR McKERRACHER: Precisely. When there is a departure or at least an important area of inquiry, is application of the doctrine in the commercial setting which would be something of a departure from the factual situation, at least, in the cases previously considered by this Court and also the inquiry as to whether the inclusion of the doctrine in trade and commerce invites exploration as to what special disadvantage in trade and commerce might mean as distinct from one-to-one dealings between other people.

KIRBY J: There is a legal argument as to what the words mean. I mean, there is a factual argument which divides as between the respondents, but even as between you and the first to sixth respondents, there is an argument that even if they knew of the vulnerability of the daughter, that was not causally relevant.

MR McKERRACHER: Yes.

KIRBY J: So you will have to meet that in due course.

MR McKERRACHER: Yes, that is correct, your Honour. But may I hasten to add that we would seek to support the learned trial judge's conclusion without reliance on that personal factor that the difference we draw and the distinction we make is that we contend it is very clear that his Honour did construe those factors as being relevant, even though he was prepared to reach the conclusion on a more narrow basis. But, of course, if one factors back in the personal circumstances as well, it is a further reason why the original decision should be upheld.

GLEESON CJ: Mr McKerracher, this may take you back to the question about the form of the text at the original time, but in section 51AB and section 51AC there is an elaborate statutory recitation of circumstances that might be relevant to whether conduct is unconscionable. Is that of any assistance in the present case, either positively or negatively?

MR McKERRACHER: Your Honour, we would say that on the current structure of Part IVA of the Trade Practices Act there is an intention designed to cover the field of unconscionable conduct in the broadest sense. Section 51AA clearly confines itself to the unwritten law and, in that sense, is not in a broad sense. As matters stand now, 51AA is also not applicable in those circumstances where 51AB and 51AC would apply but 51AB deals with domestic types of goods, consumer goods, and provides that short list to which your Honour refers. Section 51AC actually deals with small business transactions, albeit that it is up to a figure of $3 million and it precludes involvement of that section in circumstances where there is a limited company.

Now, although there is the limitation of equity in relation to 51AA in one sense, it is otherwise unencumbered by those specific statutory - - -

GLEESON CJ: I just wondered whether in your argument the provisions of 51AB and 51AC throw any light or at least any light that has any relevance to this case on 51AA.

MR McKERRACHER: They do in this sense, with respect, your Honour: it would appear clear from the circumstances in which those sections were introduced and their content that they were designed to provide for a broader range of statutory remedies in unconscionable conduct than might be thought to be available at equity. But as there was and has been no authoritative decision of this Court in relation to 51AA, it rather begs the question of what circumstances will apply in trade and commerce for application of equitable doctrine under 51AA.

GLEESON CJ: What is the provision under which your client was seeking remedies here?

MR McKERRACHER: Section 51AA.

GLEESON CJ: No, no, the remedies.

MR McKERRACHER: I beg your pardon, your Honour. Originally, section 84 injunctive remedies and section 87 for additional remedies. As the Court will be aware, the remedies were limited in nature to a declaration and an order that - - -

GLEESON CJ: They would go off for re-eduction.

MR McKERRACHER: That is right and those remedies are available under that section. Injunctive relief was also sought but not provided.

GUMMOW J: Injunctive relief to do what?

MR McKERRACHER: To restrain from repetition of the conduct.

GUMMOW J: I see.

MR McKERRACHER: Would it be convenient, your Honours, if I focused on some of the facts? Your Honours, the shopping centre is a medium size - - -

KIRBY J: Just before you do, do you challenge any findings by the Full Court of the facts, because we are hearing an appeal from them? They have a very lengthy elaboration of the facts which I have read and then there is a relatively short two-and-a-half page statement of their conclusions. Now, can we accept their findings of fact, so far as they - - -

MR McKERRACHER: With two minor exceptions, your Honour, yes, and with one general observation. The general observation is this, that there were about a dozen matters on which the Full Court did not comment. We do not raise that for a moment as criticism because that is consistent with a general approach that they took, that the Full Court took a general approach that no tenant in this position could ever be in a special disadvantage. Accepting that that is the view one takes, one would not necessarily go into the variety of matters examined by the learned trial judge. The only point that we have made in the course of our submissions in footnotes, really, is that the Full Court did not comment on those particular matters and, of course, the Full Court was not asked by either party to upset any finding of fact.

The only additional observations are minor matters and they are that the Full Court has made the point that there appeared to be no explanation as to why an offer which was presented to the Roberts in June was not accepted.

KIRBY J: Was that the one where there was no insistence upon any release?

MR McKERRACHER: There were several in which there was no insistence and that was one of them. There was, in fact, evidence - it is covered in our submissions and it arose in the course of cross-examination - she explained that she was dissatisfied with the term of the lease, the length of the lease, the rental under the lease; she was dissatisfied with the content of the disclosure statement because that statement wrongly reflected the number of tenancies and, therefore, the traffic in the shopping centre. She explained those to Mrs Clapp and she wanted to have the opportunity to negotiate.

So there was an explanation there. The Full Court was not taken to that in the course of argument. Equally, in August there was a re-presentation of another offer which, once again, did not contain a mutual release clause. But when that was offered, it was accepted by the Roberts and the Roberts sent back a letter to the owners. The owners apparently signed it as well but then nothing happened. The suggestion is that that is unexplained and that is certainly correct but clearly it is not for the Roberts to explain that because they would be expecting to receive from the owners a lease as they had on previous occasions. The owners always prepared leases and that is standard practice in shopping centres. That just did not happen and what happened was that in the October offer by Mr Holland, the documentation, the agreement to lease which had been sent back to the owners in August was referred to in that communication and understood by the Roberts to be the binding agreement as, on one point of view, it may well be.

KIRBY J: Now, hidden away in a footnote you make a point with which I have a bit of sympathy, that the question of unconscionability is an evaluative judgment - I think Professor Finn called it that - and, therefore, the more facts you have, the more you may be led to a conclusion of unconscionability; and that the primary judge had certain advantages which I think the Full Court acknowledged that he had longer time with it and he could see the nuances of the evidence and so on. Now, is your point that in so far as there is a disparity between the findings of the Full Court and the findings of the primary judge, you want to bring all the facts in?

MR McKERRACHER: Yes, that is correct, your Honour.

KIRBY J: Taken in isolation, questions about the through traffic and so on do not seem to enliven issues of unconscionability, but taken in the context with all of the material, they might add some little weight to it.

MR McKERRACHER: Yes and, your Honour, that is the first ground which - - -

HAYNE J: You answer "yes"? How?

MR McKERRACHER: Your Honour, there is a whole context in which the conduct occurs and that - - -

HAYNE J: I understand that but, at some point, I would be much assisted if you would identify in summary form what exactly you say is unconscionable about what was done. I understand your recitation and reference to knowing exploitation of special disadvantage, but at some point I would be assisted by knowing what is it, either as a single fact or combination of facts, that gave rise to the unconscionability here.

MR McKERRACHER: Your Honour, I could do that now or I will develop it in the course of argument. I am conscious that that is - - -

HAYNE J: Take what course as seems appropriate to you.

MR McKERRACHER: If your Honour pleases. In response to your Honour Justice Kirby's observations, in our respectful submission, although there may be debate about whether discretionary judgments are the same as evaluative judgments and, indeed, such debate has expressly arisen in the context of this section in the Full Federal Court, when one looks at the comprehensive analysis by the learned trial judge and who had the benefit of hearing the continuity of the proceedings and evaluating attitudes and the nuances of the entire litigation, in our respectful submission, an intermediate court would be slow to interfere with an evaluation of that nature. That is the first point that we run.

Your Honours, the exchanges so far this morning have covered a significant portion of the facts on which we would wish to rely. They are recited in the written submissions and I will only touch on additional matters that have arisen that have been - - -

KIRBY J: They are very detailed and they are very complicated and they go over a very long period and I think ultimately you are going to have to answer Justice Hayne's question because, in the end, you have to draw the threads together and say, "Well, this was this long course of dealing. On the face of it, it seems a very pedestrian and ordinary dealing between an owner of a shopping centre and a shop owner who wants out and wants to assign the lease. It seems very ordinary. There is the business about the daughter and there is the need for them to get out, but it seems very ordinary." Now, you have to, as it were, lift it up to something special and unconscionable and - "grossly", the word that has been used.

MR McKERRACHER: Yes. I do not know, with respect, that we necessarily have to put a tag of "grossly unfair" on it but I accept that that most certainly is the conclusion drawn by the trial judge. There are certain factors on which we would put emphasis which were not considered to be of same importance by the Full Federal Court. They include the personal factors which were known to the owners. They include the fact that in all the communications up until immediately prior to settlement on each occasion there had been no indication of any intention to insist upon giving up the litigation.

We also focus on the fact that the right to litigate and the nature of the litigation itself was regarded as being of real importance to the Roberts. It is put against us that it was not worth much but in fact there is no evidence at all as to what the dollar value of the litigation was. The only evidence is that had they participated in some settlement a year or so later, organised by other people without their knowledge, then they would only have received a modest amount of money.

GUMMOW J: It was your task to show the contrary, was it not, that it would have been much more?

MR McKERRACHER: There is two aspects - - -

HAYNE J: Or at least they thought it might be worth much more.

MR McKERRACHER: There is certainly evidence of that.

HAYNE J: How are you going to prove that?

MR McKERRACHER: There is certainly evidence that Mrs Roberts was of the view the litigation was worth $50,000.

GUMMOW J: Yes, that is right.

KIRBY J: Mr Jackson says that is grossly over value.

MR McKERRACHER: There is no conclusion to that effect.

KIRBY J: "Grossly" is thrown around in this case.

MR McKERRACHER: My learned friend makes that submission on the premise of what the settlement would ultimately have been for a year later by other people had the Roberts participated.

GLEESON CJ: We are not concerned with the conscience of the Roberts, we are concerned with the conscience of the owners. Would it not be more relevant to ask what the owners thought it was worth?

MR McKERRACHER: Yes. Your Honour, the owners, again, were not concerned simply with the dollar value of the litigation, although that was of a concern to them. They were seriously concerned about media adverse remarks. They went to the extent of engaging or seeking to engage a talkback radio person to try to persuade public opinion in their favour. The whole role - - -

CALLINAN J: They were probably fighting fire with fire in that regard.

MR McKERRACHER: Yes, that may well be, with respect, your Honour, but what is clear is that the owners regarded the litigation very seriously and saw the opportunity which would not otherwise arise at the stage of sale of the business and the need for a new lease to impose this condition. It was described by Mr Sullivan in the course of internal communications as being "a bonus", that is to say, a bonus which would not otherwise arise to get rid of the litigation. Tenants have a statutory right to litigate and the Roberts were entitled to regard that right jealously.

KIRBY J: Yes, but the point being made is that the owners did not have to give an extension. They did not have to give it at all. In that sense what they were offering was a bonus to your client and a quite considerable bonus for their dealings with the assignee.

MR McKERRACHER: That is a point at which we differ once again with both the Full Court in terms of construction, not a factual matter but in terms of the construction and emphasis played on it. The approach taken by the Full Court and by my learned friends is that something of a benefit is given to tenants by the granting of this lease. The position in relation to the Roberts and in relation to Mr Holland was that if we put the litigation to one side the owners would have been very happy to have the tenants in the centre because in their particular case they had been tenants who had performed very well.

CALLINAN J: Is that not an overstatement? They would only be happy to have them there if they were not litigating against them and if they were not repeatedly or persistently complaining about the charges. They were troublesome tenants in that respect.

MR McKERRACHER: I do not believe there is a finding that institution of proceedings on one occasion made them troublesome tenants.

CALLINAN J: You would not need a finding. The relationship between a landlord and a tenant who is suing the landlord is hard to be an amicable one and it would not be something that you would want to see perpetuated.

MR McKERRACHER: The owners were certainly keen that the litigation would not be perpetuated but this opportunity came to them as something of a windfall or a bonus. They would not have had that opportunity had it not been for the need to sell the business. What is important in examining the conduct of the owners is that they were seriously concerned themselves at the time about what they were doing. Both the managing agents, Ms Clapp and Mr Wilson, had put it to the owners and to Mr Sullivan that they were not entitled to do what they were doing.

GUMMOW J: They were worried about key money.

MR McKERRACHER: Not exclusively, with respect, your Honour, but certainly key money was part of it and the other - - -

GUMMOW J: To be precise, that statutory expression in the commercial tenancy legislation.

MR McKERRACHER: Yes, but also at about the same time, advice was sought from one of the three solicitors used by the owners who said, "Why do you not put it all in a separate document so no one can say that the two are connected?" Mr Sullivan was concerned about that sort of approach, understandably, sought advice from another solicitor who told him, amongst other things, as well as key money that the conduct may be unconscionable if there was an inequality of a bargaining position between the parties. So, this occurs in January, very shortly after the conduct with the Roberts which was examined by the trial judge.

KIRBY J: That cannot be a true criterion, inequality of bargaining power alone, otherwise this section will ride a whole team of elephants through the market economy.

MR McKERRACHER: I totally accept that, with respect, your Honour. The only point I make is that in examining the conduct of the owners they themselves were concerned about what they were doing at the time, so that to view in hindsight with the benefit of removal from the heat of the situation the circumstances as being perfectly normal is not even how the owners saw it themselves at the time.

GLEESON CJ: What is the best evidence you can take us to as to their concern? What is the high point of your case in this regard?

MR McKERRACHER: At page 338 of the appeal book, your Honour, Ms Clapp gave evidence which was accepted by his Honour about their "unchallenged recollection" at a meeting at which Mr Sullivan said:

We want to include a "Deed of Mutual Release" in all new leases for existing tenants who had claims before the Commercial Tribunal. If an existing tenants wants a new lease there will be a trade off; the tenants drop their claims, the Owners make no claims against the tenants and they get a new lease.

Wilson: Why would you want to do this with good tenants you don't want to lose them. Also, I am not sure it is even legal to get tenants to drop their case at the Commercial Registrar.

Sullivan: There are some problems at Farrington Fayre at the moment and we want to get rid of those problems. It doesn't matter if they have been a good tenant or not.

Wilson: Yeah, but is it legal. It's contracting out of law and you can't do that. You should get legal advice first.

Sullivan: We're going to get some legal advice.

Clapp: But it is the tenant's right to go to the Commercial Registrar. I don't believe you should stop them.

KIRBY J: I just cannot get out of my head, and you will have to get it out of my head, Mr Jackson's submission. This is just an ordinary - they were in dispute, they had this dispute with the litigation and they were asking a favour, and they were standing to gain a very big bonus, $60,000, which they did not have to get and as a price of getting that very big bonus they were being asked to give away a claim they had against the party that they were actually asking to give them this very big bonus. What is so odd in a commercial arrangement when that party is saying - and what is so unconscionable, more to the point - "Tit for tat. We settle with you and we will settle and give you this benefit." It happens all the time, it has happened for millennia in the marketplace. This has to work in the marketplace, this section.

MR McKERRACHER: No one would try to discourage people settling disputes but the $65,000 that the Roberts were to receive, (a) was necessary to deal with medical expenses and such like and to repay a variety of other expenses, but - - -

KIRBY J: But it is not known to some of the parties before us and it is said by the other parties it did not cause the arrangements, it is not causally relevant.

MR McKERRACHER: I am not sure that that "causally relevant" approach is one that we would respectfully accept as the approach they have taken.

KIRBY J: You can come to that in due course.

GLEESON CJ: Would it make any difference if the reason they needed the money was to pay medical bills or if the reason they needed the money was to pay their income tax bills?

MR McKERRACHER: In our submission, in either event his Honour was right in reaching the conclusion he drew, so the answer to your Honour's question is no, except that it just compounds the difficult circumstances.

Could I return to your Honour Justice Kirby's question about the large amount of money that the Roberts were to receive. That, of course, was the goodwill from their business derived from building up successful trading as a good tenant over a long period. It is their property.

KIRBY J: But they had no right to extension and they were getting something. They may have had all the goodwill in the world but they had no right to an extension of the lease, so they were getting a bonus.

MR McKERRACHER: Yes. From a legal perspective, with great respect, your Honour is quite right. If one looks at the chain of events though, one sees that from 1995 the owners were keen to offer the Roberts a new lease of five, seven or ten years. They were good tenants. They wanted them to stay on. The Roberts treated that as an open offer and actually incorporated that offer into the sale with Mr Holland at the outset. One then has for the first time the suggestion that because shortly prior to that they had instituted these proceedings that it was not possible to get a new lease unless they dropped the proceedings.

Then one sees things fall away. Mr Holland says he is not prepared to go ahead with a transaction like that where the Roberts have to give up their right to litigate and over a period of time the owners then come back to the Roberts saying, "Here is your new lease. Here, you can have a new lease." The Roberts accept that and then again, right at the death knock on the Friday evening before settlement due on the Monday, a new lease was sprung on them but with the mutual release clause in a circumstance in which they had no reasonable basis for expectation - - -

GUMMOW J: No, Mrs Roberts received legal advice, did she not?

MR McKERRACHER: The legal advice was totally neutral in this situation, your Honour, because although the lawyer said "do not sign" she felt she had absolutely no option. That is the distinction between this and a real commercial situation. The Roberts had no option. They were, in consequence of what had happened after the first sale falling down, in a very serious predicament. Personally, financially and emotionally, she was at her wits end, greatly stressed, greatly upset by the situation and she felt she had not option.

GLEESON CJ: That is the problem, she had no option, literally. If she had had an option, that is an option to renew her lease, she would not have been in this vulnerable situation.

MR McKERRACHER: From a legal perspective, with great respect, that is absolutely so.

HAYNE J: What other perspective are we to look at? You say from a legal perspective as if that is foul expression.

MR McKERRACHER: The perspective the Court is invited to approach it is the perspective equity would adopt which would not permit the unconscionable reliance upon a legal right and that is precisely what occurred in this situation.

GLEESON CJ: Is it the corollary of your argument that the Roberts could have set a transaction aside in equity?

GUMMOW J: You have to say yes, do you not?

GLEESON CJ: Yes, but we know that the last thing in the world the Roberts would want to have done was to have the transaction set aside, do we not?

MR McKERRACHER: I have to accept that too, your Honour, that they would not want that.

KIRBY J: I sat in the special leave and my recollection was the thing that was concerning you, the Commission, was the reasoning of the Full Court, in particular language in the Full Court reasons that suggested that this section did not operate in this commercial setting with small business, whereas you were saying that precisely one of the - and secondly that you had to have an overbearing of the will of a party which was the key to the Full Court's upsetting the primary judge's conclusion.

At some stage, if they are the errors that you assert on the part of the Full Court, that is you gateway into our looking at the matter ourselves. You are going to have to come to that because you will remember Justice Gummow honed in on especially the second point in the special leave, that is the thing that made this something more than just a factual case but in the end even when we look at it we are going to have look at whether our conscience is pricked by these events and that is where I have real difficulties but you may, nonetheless, demonstrate to the Full Court took too narrower a view of the section.

MR McKERRACHER: Yes. Your Honour, those were the special leave points and I am content to leave the facts for present purposes and to move on to those submissions.

GLEESON CJ: Have you said everything you wanted to say about the high point of the evidence in support of your submission that the owners were troubled by their own conduct?

MR McKERRACHER: No, your Honour. There was also the communications reflected in the appeal book at page 233, 234 to 235, and around those pages. Page 233 is where Mr Sullivan talks about the bonus that this opportunity presents the owners to knock on the head any pending claim. Shortly after that he seeks advice from a different solicitor in relation to the matter and that advice is reflected at page 242. Perhaps, starting at page 240:

Circumstances surrounding the arrangement which may suggest undue influence by the Lessor over the Lessee, duress or unconscionable conduct on the part of the lessor, may render such an arrangement unenforceable, both at law and in equity.

So, I do not think it matters in consideration at the time.

CALLINAN J: What weight do we give then - sensible, conservative advice by a solicitor. What do we get from that apart from - - -

MR McKERRACHER: Your Honour, we submit that this was not a simple commercial transaction but rather a circumstance where the owners were trying to adopt a special tactic across the board with all - - -

CALLINAN J: I understand that but what is the relevance and significance, of the solicitor's advice? The solicitor was just giving prudent, conservative advice.

MR McKERRACHER: The relevances are that the advice was being sought because of the concern Mr Sullivan had as to what was being done and the concern being reiterated to him by other people on the ground at the time long before these events occurred.

CALLINAN J: The fact of his solicitor seeking advice....his state of mind, I understand.

MR McKERRACHER: But, your Honour, if the advice had been, "There is nothing wrong with it at all, just go ahead and do it", that is material which we would be put before the Court as well but, interestingly, that is not the advice. It is the fact of seeking advice on several occasions against a background of the concern by the managing agents as to what was proposed to be done.

Your Honours, if I can move to the grounds of appeal under submissions. We have touched at paragraphs 35 to 38 in our outline of the meaning of section 51AA of the Act wanting really to stress that we do not seek by anything in this appeal to attempt to limit the proper application of that section to the limited and narrow Amadio basis on which the case was pursued.

We then move to the evaluation argument and I do not wish to dwell on this at length other than to say that the primary judge did make detailed findings in respect of all of the facts, including the general strategy of the owners, and it was only after considering those matters to the exercise the discretion identified as being consistent with and pursuant to the principles which he clearly and correctly articulated. It is also significant in this context that he exercised the discretion adversely to the Commission in respect of two other tenants. It is not as though he was moving lightly to adopt a general approach but indeed the judgment reveals, with respect, a very disciplined application of the principles, in our submission, and we say that in the exercise of - - -

KIRBY J: What is the point of differentiation he accepted in respect of the other tenants? No daughter? Anything else?

MR McKERRACHER: The main point of distinction was that they were not good tenants.

KIRBY J: Were not?

MR McKERRACHER: Were not as good as the Roberts and the reason that arises is in this context: if one evaluates what might happen in the normal commercial scenario one can see that if the tenants were not particularly attractive to the owners, there is no reason why the owners should either renew or no reason why they should not renew on conditions. But if it is a good tenants, and the Roberts were good and the Hollands were regarded as being good tenants, it is nothing but an "opportunistic bonus", as Mr Sullivan described it, to invoke this condition in conjunction with the application for the new lease.

KIRBY J: They might have been good tenants but - - -

HAYNE J: There is a chain of logic in there which is simply not apparent to me. You say that if to the landlord the tenant is a good tenant, what then follows?

MR McKERRACHER: We are simply saying that in the ordinary course of events the landlords, the owners, would have been keen to provide this lease. That is shown on the evidence, they were good tenants.

HAYNE J: What is it then that flows by way of conclusion about the conscionability of what the landlord does?

MR McKERRACHER: That despite that in ordinary commercial circumstances it would have been attractive to the landlords to have these tenants, they were able to use this particular intersection of events, namely, the need for a new lease to sell the business, to impose the condition.

HAYNE J: So, things were as they were. What follows from that fact?

MR McKERRACHER: The point about that, your Honour, is that one would not expect to see in the ordinary commercial environment an attempt to impose a condition of this nature if one wanted to retain a good tenant.

KIRBY J: But people have a battle on and one is asking a favour that the other would not say "Tit for tat." I just cannot get that out of my head because that has happened - you know, all those settlements you have done on the door of the court over the years. It is tit for tat. It goes on every dealing that parties have whether they are litigious or commercial or personal.

MR McKERRACHER: And in most cases there could be no suggestion of any unconscionability of the conduct but when one looks at the backdrop that I have identified, that is to say effectively the expectation engendered on the part of the Roberts that there would not be a difficulty of that nature by the communications which preceded this not containing the clause, an awareness of the owners - - -

HAYNE J: And that expectation did not give rise to any section 52 relief, did it? There is no misleading or deceptive conduct constituted by this "inducing of an expectation"?

MR McKERRACHER: No, that is so, but the case has always been pursued on the basis of identifying the conduct in the context in which is occurs and the context was - - -

HAYNE J: Could I make it quite plain to you, Mr McKerracher, the reference to taking account of all of the factors appears at times in the course of argument to be an excuse to avoid articulating the underlying principle. It is simply to say, "You take account of the lot and form a conclusion", but it does not tell you how you form the conclusion. What does it matter if they thought that they would get a renewal without - what is the chain of steps that you then take that lead to the conclusion, "Therefore, it is unconscionable."?

MR McKERRACHER: One does not proceed in a form of logic of that nature necessarily, with respect, your Honour. One, as a trial judge, has the opportunity to evaluate all the matters which are relevantly in evidence and to draw a conclusion about conscience which is a conclusion against one's experience and background in life generally.

GUMMOW J: Yes, but what should a conscientious party in the place of Mr Jackson's clients have done?

MR McKERRACHER: There would be two options. One would be to grant the new lease without imposing the condition; one would be not to grant the new lease, but to grant the new lease only on the terms that the litigation is discontinued against the backdrop of what had preceded this - - -

GUMMOW J: But why should they give up the first? I do not understand Why should they have to forego a requirement to assist their position?

MR McKERRACHER: They could simply decline to grant a new lease.

GUMMOW J: That would not have helped your client.

MR McKERRACHER: And it would not have helped them either because they actually wanted the tenant.

HAYNE J: Therefore, the two extremes are permissible but the middle ground is not. That seems an intuitively unusual answer, does it not? The middle ground is described as unconscientious.

MR McKERRACHER: Taken in isolation, yes, it may be. But against the background of the parties dealings, communications, and the knowledge of the circumstances, it is not, in our respectful submission, unusual.

HAYNE J: Do you say that the release or termination of the litigation was relevantly unconnected with the subject matter of the deal?

MR McKERRACHER: Relevantly unconnected, we say it was, but it is obviously - - -

HAYNE J: What do you mean by that? You have a negotiation for a new tenant, correct?

MR McKERRACHER: Yes.

HAYNE J: Why is it unconnected with that to say we draw the line about what has happened in the existing tenancy?

MR McKERRACHER: Because it was simply an opportunistic bonus as seen by Mr Sullivan. It was something which would not arise in the ordinary course of events. It was not that which would have happened in commerce generally because the owners wanted to keep the Roberts there or they wanted Mr Holland there.

KIRBY J: I may be wrong about what happens in commerce generally but I would have thought that trading off advantage is something that happens in commerce all the time. I cannot really overlook this.

MR McKERRACHER: I accept that entirely, with respect, your Honour, but what the section contemplates is that when the circumstances of trading off in commerce, as your Honour puts it, give rise to an unconscionable exploitation of another's weakness, then there is a contravention. That, and the preceding questions the Court have asked me do invite consideration of how the section operates in trade and commerce because the circumstances in trade and commerce will almost always be a commercial intersection of events. There may be overlaying constitutional factors but this is a section which finds its place in trade and commerce. In our outline of submissions we listed - - -

KIRBY J: It seems to me you are right, the section has to be operating in trade and commerce and therefore it contemplates that some things which in the past we would have just said, "That is the market", that is not to be accepted because the Federal Parliament says it is not, but it still has to be unconscionable which is a word both technically and in the ordinary language a rather strong content, hence the word "grossly" unfair.

MR McKERRACHER: Yes.

KIRBY J: It cannot be everything of an unfairness of inequality because that is very often the case. Everybody who deals with a bank is vis-à-vis the bank much more vulnerable than the bank is. We have to find some middle ground where the section bites but nonetheless works in a market where there is a lot of inequality and vulnerability.

MR McKERRACHER: Your Honour, in our submission, that is what his Honour the trial judge did. He was not prepared to accept unconscionability in relation to two of the tenants - and a primary reason was that they were not very good tenants, but there were other reasons - but he did in the case of this person. The matters that he took into account which appear not to have featured prominently in the Full Court's consideration include the owners' own concern and anxiety about the legal action, the breadth of the owners' conduct being a uniform pattern of conduct designed to affect every tenant, the owners' knowledge through the managing agent as to the emotional stress suffered by the Roberts as a result of their daughter's illness, that they were good operators and Mr Holland was a suitable tenant, Mr Sullivan's attitude towards the tenants not being able to obtain legal representation when dealing with the owners and the stress which had been suffered by the Roberts and the significant disruption caused to their lives by the first sale of the business falling through of which the owners through the managing agents were aware and that prior to the imposition of the release clause in November, offers to lease did not include any reference to that sort of a clause coming from the agents, that the Roberts appear to have mistakenly assumed that an agreement to lease was applicable, that they were under the impression that that would apply without a release clause and the inclusion of that release clause in the document at a time when the Roberts were under pressure to complete sale of their business and effectively by virtue of that last minute inclusion, as Mrs Roberts put it, had no option other than to sign. So it was a combination of those factors which are collected in our submissions at paragraph 74.

KIRBY J: But does not this view of the section mean that every time parties are negotiating some sort of commercial arrangement and there is some trade-off, horse trading that does go on, that courts will be invited to come in and second-guess the commercial settlement that has been reached between parties?

MR McKERRACHER: There is always a tension between certainty and justice.

KIRBY J: And is that not an indication that Federal Parliament must have meant that you have to get over quite a big barrier to get into the realm of unconscionability?

MR McKERRACHER: Indeed, that was the way the learned trial judge approached it.

KIRBY J: It has to be something that really shocks you or, if not shocks, at least causes a sense of serious disquiet.

MR McKERRACHER: And the terminology used by his Honour plainly suggests, in our respectful submission, that that was the impact that it had on him at trial.

GLEESON CJ: You seem to be assuming that if the owners had observed their obligations under the Trade Practices Act, what they should have done was grant a renewal of the lease without the mutual releases.

MR McKERRACHER: Or decline to grant a renewal.

GLEESON CJ: Exactly; just walk away. It would not be very bright of the legislature, would it, to have left the Roberts in the position in the present case where what the owners should have done is just ignore them and walk away from them? That would not be doing the Roberts any favour, would it?

MR McKERRACHER: I accept that, your Honour.

GLEESON CJ: If the owners had been properly legally advised, then presumably, consistently with your argument, the lawyer's advice would have been, "These people are under a special disadvantage. Just leave them alone. When their lease expires, get a new tenant. Don't deal with people who under a special disadvantage".

MR McKERRACHER: The concession we have made that the owners are not under an obligation is illegal is a concession that as a matter of law that is clearly the case.

GLEESON CJ: I am just looking at the legislative purpose behind this provision. It cannot be, can it, the legislative purpose to prevent people dealing in commerce with others who are at a disadvantage in terms of bargaining power?

MR McKERRACHER: No, clearly not.

GLEESON CJ: And it certainly would be a surprising outcome of the present case if the proper course for the owners to have taken, consistently with their legislative obligations, was just to have nothing to do with the Roberts.

MR McKERRACHER: It is difficult to respond to that in a vacuum. Certainly legally that was their entitlement, but I accept what your Honour says, that it would be a surprising outcome. Essentially what we have focused on is what did actually occur and the imposition of the clause in those circumstances.

KIRBY J: But we have to, as it were, look at the section as it is intended to operate on your theory of it. We just cannot solve this problem and forget about how it is going to operate in the - - -

MR McKERRACHER: No, quite.

KIRBY J: In a sense, your being here as the Commission is to assist us in thinking through how it is supposed to operate in the - you are not just the Roberts coming up here wanting some more money, you are the Commission.

MR McKERRACHER: It is difficult to respond with precision to the question as to what the owners would do in every circumstance. That is to address your Honour Justice Kirby's observations about the general position, but certainly in the circumstance of this case - - -

KIRBY J: I am just following up the questions the Chief Justice raised. We have to ask what is the consequence if your theory of the section operates. The fact of the consequence will be that lawyers will say, "Steer clear of them. You know Mr Holland. You know he's waiting in the wings. Just wait for the lease to expire and then zoom in on him".

MR McKERRACHER: That in itself might constitute an unconscionable dealing.

KIRBY J: It might. That is a different question but at least, "Just let it expire and put an ad in the paper. You know there's somebody out there who wants it". How long did it have to go?

GUMMOW J: Does "conduct" include refusal to act?

MR McKERRACHER: Yes, it does, your Honour, under section 4.

KIRBY J: How long did the Roberts' lease have to run?

MR McKERRACHER: It was not a long time, your Honour.

KIRBY J: No, I gather that.

HAYNE J: February 1997.

MR McKERRACHER: February 1997, yes, your Honour.

KIRBY J: So it was how many months?

MR McKERRACHER: This took place in December 1996, so it was imminent.

KIRBY J: Just a couple of months.

MR McKERRACHER: Yes. Your Honours, before I come to the will being overborne point, can I just touch on the law in relation to the evaluation issue and our - - -

HAYNE J: Before you turn to that, among the articles you gave us was an article by Duncan and Christensen entitled "Section 51AC of the Trade Practices Act" (1999) 27 ABLR 280. At page 289 the authors refer to discussion of the Uniform Commercial Code cases and in the second column towards the foot they speak as though the United States Supreme Court had adopted a definition of "unconscionable contract" and then give no case reference to it, the definition adopted being:

"[An unconscionable contract is one] such that no man in his senses and not under delusion would make on the one hand, and no honest and fair man would accept on the other."

At some point I would be grateful if you could give us the references to the UCC and any United States Supreme Court consideration that bears on it, because the definition there given seems to be much narrower than the one for which you would contend.

MR McKERRACHER: And narrower, we would say, than the approach equity would take in a circumstance of this nature as embraced by the section.

GLEESON CJ: And a great deal narrower than you will see spelled out in 51AB and 51AC now for what relevance that has.

MR McKERRACHER: Quite. Yes, certainly, your Honour, we will provide those references this afternoon. I simply wanted to make reference to two decisions which have taken different approaches to the evaluation question. There is one decision of the Full Federal Court which considers that a determination of unconscionability under section 51AA is something in respect of which there can be no constraints on review. That is the NZI decision which appears on our list of authorities and I will give your Honours the reference in one moment. On the other hand, in the Samton decision the Full Federal Court has taken the view for which we contend, which is that an intermediate court would take great care in disturbing the evaluation of a judge determining unconscionability. The NZI Case is unreported, Full Federal Court, 10 June 1998, No 29 on our list of authorities.

CALLINAN J: It is always a matter of inference though, is it not? The facts are found and then it is a matter of inference whether that constitutes the relevant statutory conduct. Why should not an appellate court form its own view on the basis of the facts found?

MR McKERRACHER: We would embrace the approach taken in Singer, albeit that that is in a slightly different context, your Honour.

KIRBY J: It certainly is. That was a pure discretionary decision, was it not? That is May, whereas this is not. I do not think this is a discretion. This is a value judgment, as Professor Finn says. There are similarities but it is not strictly a discretionary proceeding.

MR McKERRACHER: We accept that, with respect, and we do not put it higher than saying, as was pointed out in Singer at 210 in the joint judgment of Chief Justice Mason and Justices Deane and McHugh. After citing White v Barron, it was observed that:

"There is an element of the artificial in saying that it is only after jurisdiction is established that the exercise of discretion begins, for the twin tasks which face the primary judge are similar."

And then a citation from Goodman v Windeyer from Justice Gibbs who concurred with that comment, saying:

"[T]he words `adequate' and `proper' are always relative. There are no fixed standards, and the court is left to form opinions upon the basis of its own general knowledge and experience of current social conditions and standards."

We would submit that in terms of conscience, similar considerations apply. At 212 in that decision a citation of a passage from your Honour Justice Kirby, then sitting as President of the Court of Appeal of New South Wales, saying that by contrast your Honour has:

held that the principles that govern appellate review of discretionary decisions should apply. In our view, this is the correct approach. In this respect we should express our agreement with the following comments of his Honour in Golosky v Golosky:

"Unless appellate courts show restraint in disturbing the evaluative determinations of primary decision-makers they will inevitably invite appeals to a different evaluation which, objectively speaking, may be no better than the first. Second opinions in such cases would be brought at the cost of diminishing the finality of litigation in a troublesome area and, sometimes at least, with a burden of costs upon the estate which should not be encouraged."

CALLINAN J: It seems to me to be an entirely different concept.

MR McKERRACHER: Except that his Honour was speaking about evaluative judgments and it is difficult to conclude other than a decision about conscionability.

CALLINAN J: That is why parties can appeal. They have rights of appeal and they have rights of appeal to courts constituted by more people who can bring to bear more experience and, indeed, a better fund, as it were, of evaluative judgment.

MR McKERRACHER: We do not contend there should be no appeal and clearly there should be an appeal when there is an obvious error of principle. We do contend that in the area of evaluation, an intermediate court would be slow to substitute its own evaluation given the benefit the trial judge has had.

CALLINAN J: I do not understand that. The benefit that the trial judge has is in relation to the fact finding, not necessarily to the evaluation. Why is not anybody in that sort of position to make an evaluation?

MR McKERRACHER: I take your Honour's point but there will be subtle areas of weight and impression, the nuances of the trial, the atmosphere of the trial, all of which the trial judge has the benefit of.

CALLINAN J: It might be a more emotional atmosphere but that might not provide an advantage. Indeed, it might be a disadvantage.

KIRBY J: The big disadvantage that appellate judges have - and I sat as one for a long while - is that we tend to be just taken to the high points of each party's case, whereas the poor old trial judge has to sit there day after day, day after day, listening to the lot.

MR McKERRACHER: It is the continuity aspect, as your Honour has commented elsewhere in the same decision of - - -

KIRBY J: Though I am certainly with Justice Callinan. We do have appeals now and appeals are an established part of our system and they prevent injustices, so it is a matter of getting the balance right.

MR McKERRACHER: That is all we contend for and we say that in this particular situation, as contrasted with the Full Court's approach in Samton, the degree of weight given to the evaluation by the trial judge of all of the factors - and we have listed many that were not considered by the Full Court and thought to be relevant - is not as comprehensive, or at least I should say that there has not been the same degree of - - -

KIRBY J: It is a very comprehensive treatment of the facts. This was not once over lightly; this was a very thorough - - -

MR McKERRACHER: I do withdraw that. What I was trying to say was those facts to which they appear to give weight and those on which they did not comment can be the focus of attention and there were many on which they did not comment in their decision. I do not suggest that an intermediate court should laboriously reiterate all the facts. It is just the decision reveals that the primary judge was particularly interested in some facts which did not interest the Full Court.

GLEESON CJ: What do you say about the Full Court's proposition on page 440 at line 73 where they set out what they regard as the essence of the trial judge's conclusion and then respond to it?

MR McKERRACHER: We say two things about that. First, that it oversimplifies the special disadvantage both pleaded and addressed by his Honour the trial judge and the elements of the special disadvantage as pleaded and identified by the Full Court as well, but not necessarily embraced in those terms appear in 435 to 436 of the appeal book and there are a variety of matters listed there. We say that the special disadvantage was more complex and broader than that and is succinctly summarised at that point in the judgment.

As to the second sentence in the passage your Honour the Chief Justice has raised, we raise the concern reflected in the ground of appeal that a general statement like that appears not to take into account that portion of the section, 51AA, which contemplates the development of the unwritten law from time to time. A statement of that nature that any proprietor of business is in the same position has the capacity to root in time, so to speak, a factual circumstance rather than to recognise that what his Honour was looking at was a broader range of facts surrounding the Roberts' particular position. He stressed that he was looking at conduct in that context and it has the capacity to stand alone as a statement of principle which could guide people in the future as to understanding what a special disability is, and as such it would appear to resist the express words of the section "from time to time".

GLEESON CJ: I understand part of what the Full Court to be saying, and I would like you to comment on this, is that if you stripped away from this case matters such as the physical condition of the daughter and the history of the negotiations with the owners and the lateness of the inclusion of the mutual releases, if you stripped all that away you would still have the essential position that if the Roberts wanted to get a decent price for their business they were going to have to get a new lease, and what the owners were doing was taking advantage of that obvious opportunity presented to them by that circumstance.

MR McKERRACHER: I agree, with respect, that that is what the Full Court is saying and what we are saying is that the inappropriate process there is to strip away the factors which your Honour has articulated. They are the surrounding context in which the events occur and one needs, always, to be looking at the particular circumstances. That is the point of departure.

HAYNE J: Particular circumstances because they reveal the disadvantage of the tenant?

MR McKERRACHER: Yes, but may also be relevant to the conduct.

HAYNE J: What do you say was the position of disadvantage of the tenant?

MR McKERRACHER: At the point in which, to take the second incident, the lease was presented, the Roberts had no choice other than to sign it because the settlement was imminent. They were in a position at which they had, through the course of dealings, incurred substantial stress, anxiety and financial difficulty, that they placed a great store in their right to litigate - Mrs Roberts thought the litigation was worth $50,000 - that the owners were conscious of all those factors, and in that environment it was unconscionable at the last minute knowing that it would be virtually impossible to resist signing the document to present it in the way that they did.

HAYNE J: The chief weight appears to be placed on the proposition that they had no choice except to sign.

MR McKERRACHER: No real choice in a commercial sense, we submit.

HAYNE J: And is that not the position with every business owner confronted with renewal of lease, whether they wish to sell the business, continue the business? Unless they wish to give up their business, what choice have they?

MR McKERRACHER: That may be, but in this case there were other factors being those to which I have referred and those which are listed in the submissions at paragraph 74. It is a particular environment in which his Honour assessed all of the conduct.

Your Honours, in the context of evaluation we have also, at those paragraphs of the submissions dealing with that ground of appeal, touched on the tension between certainty and justice and refer to the competing arguments there and we conclude with the submission that equitable jurisdiction would always have to be exercised according to recognised principles. There is no general power of the Court to set aside bargain simply because in the eyes of the judges they appear to be unfair, harsh or unconscionable and the primary judge's careful evaluation of the facts and the application of relevant principles to the facts in this case - - -

GUMMOW J: Yes, but look, I mean you, standing in the place of the Roberts, do not want this transaction set aside. You want a situation whereby the other party is obliged to deal with you on your terms by another transaction. Is that right?

MR McKERRACHER: That is so, essentially, your Honour. Yes.

GUMMOW J: Well, you are out of the ordinary equity area, it seems to me, because the way the section locks into the remedy structure in the Trade Practices Act.

HAYNE J: The key remedy which might have been expected to be sought being setting aside that part of the transaction which constituted the release, but leaving the rest intact.

GUMMOW J: That is what it would come to, would it not?

HAYNE J: Rewriting the bargain.

MR McKERRACHER: All that was sought here was really something far more modest than that in any event: declaratory relief, injunction to restrain future conduct and attendance at seminars, so that - - -

HAYNE J: It will not delay to examine the desirability of declarations of these kind, the kind made here. If you had wanted relief other than declaration, the relief you would have sought would have been, would it not, to strike out, in effect, from the bargain the release provisions, but leave the rest intact.

MR McKERRACHER: It may well have been, yes.

HAYNE J: Could you have got that outside the Act?

GLEESON CJ: You might want to rely on Bridgewater v Leahy.

MR McKERRACHER: I was just thinking that there is support for the fact that we could get that. That relief is available. That is the release of the conscience so as to remove the property from the party who has been involved in the unconscionable conduct.

KIRBY J: Was that sought at trial? Was that relief sought against the respondent?

MR McKERRACHER: No, it was not, your Honour; it was a relatively modest approach in terms of relief.

GLEESON CJ: But if the ACCC had intervened in this transaction between the date of the agreement and the date of the sale to the Hollands, they would not have been very popular with the Roberts.

MR McKERRACHER: That would appear to be so, yes. It depends on what they did and what they sought, but your Honour's point is correct, that if they upset the sale of the business that would not have pleased the Roberts.

KIRBY J: I am in a state of confusion because footnote 12 of Mr Jackson's submissions say that the Roberts were entitled to a sum of $2,795 on the settlement in the Supreme Court. Now, did they sign the transfer on the condition of surrendering their entitlement in that settlement or did they get anything?

MR McKERRACHER: No, they did not participate in that settlement at all. This is where we say, with respect, that our learned friends are mistaken in that submission, in the sense that both in the Full Court and on the submissions against us today, reliance is placed on the fact that what they would actually have got had they participated in it, it would have been a modest amount of money and they got a much better benefit.

KIRBY J: Well, whether they got it or not, surely the first to the sixth respondent are entitled to say what was at stake here, on that side of the ledger, was very, very small.

MR McKERRACHER: The difficulty with that submission, in our respectful submission, your Honour, is that no one knew at the time that this took place. Those events did not occur until 12 months later. So that in terms of addressing the conduct - - -

KIRBY J: We now know it and we are being asked to respond to unconscientious conduct and therefore we are being asked to respond, according to Mr Jackson's submission, to the differential between $65,000 and $3,000.

MR McKERRACHER: But that focuses on the effect of the conduct as distinct from - - -

KIRBY J: Is that not relevant?

MR McKERRACHER: I accept that it has a place. As distinct from looking at the conduct at the time. The state of mind of the parties at the time is how one will determine unconscionability; that is when the conscience is tested.

KIRBY J: Yes, but surely the fact that Mrs Roberts thought it was worth $50,000 - I mean, that was just a pipedream apparently - at least. Let it be worth a little bit more than the $3,000; let it be worth twice $3,000, it is still peanuts as compared to the $65,000.

MR McKERRACHER: We accept that $65,000 was more than $50,000 or any figure she might reasonably have obtained, we accept that, but there were a variety of other factors at the time; (a) it was not just financial considerations, which were thought to be relevant by both parties and (b) no one had a clue at that stage as to what the litigation was really worth. It is a year after the event, it is a settlement the Roberts were unaware of and did not participate in. So that it is a long way removed from the conduct of the parties at the time of the impugned transaction.

KIRBY J: Yes, but it would be a strange thing for a court to say, "Well we think it is unconscientious because she thought it was worth $50,000" - footnote, in fact, as events transpired, involving admittedly other parties, "it was only worth $3,000."

GUMMOW J: Well, it comes to this too: I think the relevant authority on partial setting aside is Vadasz v Pioneer Concrete (SA) Pty Limited 184 CLR 102, but if you were to set aside only so much as has involved this release, you would then have to go into the other side of the coin, what was involved in the release, and that would raise the questions Justice Kirby has been dealing with.

MR McKERRACHER: Yes, well I accept that that may be a consequence if that avenue were pursued, but it is not this case.

HAYNE J: Well, you say it is not this case, but whether or not you are entitled to declarations, is it not relevant to consider the substantive relief that could have been obtained, for without considering the substantive relief that could have been obtained, how do you determine either what is the basis for the alleged unconscionability or how it could be remedied? How it could be remedied surely reflects back on whether or not what was done was unconscionable.

MR McKERRACHER: Well, the corollary appears to be that if the relief sought is declaratory, as it was in this nature, declaratory in essence, then one can assess whether or not it is unconscionable having regard to that likely outcome.

GUMMOW J: At the end of the day, if after proper investigation you did come to the conclusion that all that was involved was a couple of thousand dollars, you would not interfere.

MR McKERRACHER: That may be.

GUMMOW J: That is the reality.

MR McKERRACHER: That may be, but there is simply no evidence on that point in this case. There is no basis for a conclusion that the right to litigate or - - -

HAYNE J: That may run against you. Saying there is no evidence may in fact run directly against you - a want of proof by the Commission that what was done was unconscionable.

MR McKERRACHER: What was proved at trial was that Mrs Roberts regarded her right to pursue the commercial tenancy matters very seriously.

GUMMOW J: Yes, but maybe quite foolishly. At the end of the day that would have to be looked into. Maybe she had the most exaggerated views, stubbornly held no doubt, but exaggerated.

MR McKERRACHER: That is not established on the evidence and we did not have the onus to prove that aspect of the matter. The conclusion by his Honour was that the litigation was genuine and bona fide, it was not trivial and it was not vexatious. He thought that that was an important consideration.

GLEESON CJ: But the judge was not concerned with Mrs Roberts' conscience. The judge was concerned with the consciences of the owners.

MR McKERRACHER: Yes.

GLEESON CJ: Let it be assumed from their point of view that the litigation had substantial nuisance value. Why were they not entitled to take the opportunity to get it off their backs?

MR McKERRACHER: In some situations they were. In the case of the other two tenants it was reasonable for them to do it. In the case of Mrs Roberts, in light of the catalogue of things articulated, his Honour was of the view that it was not right.

Your Honours, if I could move to what is actually the first substantive ground of appeal, as distinct from the evaluative aspect which stands discretely. That is the will being overborne, and I can dispose of this matter, subject to your Honours' queries, quite quickly.

GUMMOW J: Do your opponents support that? Do your opponents support such a strict view of the section? I did not think they did.

KIRBY J: Is there a notice of contention in this case?

MR McKERRACHER: No, there is not, your Honour.

GUMMOW J: They say they can win anyway without - - -

MR McKERRACHER: I think that is the position, and I do not think it is really articulated at length.

GUMMOW J: Well, overborne is the language of duress.

MR McKERRACHER: That is right. That is the short point, but it is very important to the process. What our opponents put against us is that it was really by the bye and not very important in the decision-making process. Our submission is that it was in fact central to the process because of this reliance on the question of choice. This is where the Full Court says at 442 that there was in fact a throwing of a lifeline to the Roberts and that they were able to exercise a judgment or to make a choice to abandon their right to proceed with bona fide litigation against the owners. However, we submit on the circumstances of this case that in the manner in which the terms was imposed against the background I have described, there really was no choice and, as his Honour repeatedly said, and adopted indeed what Mrs Roberts had said, that:

Mrs Roberts decided she had little option but to sign. She believed that she had no choice but to sign the deed of assignment as it was, because her lease was due to expire on 14 February 1997 and without renewal she would have no business to sell. She felt extremely upset and angry that the Owners had, in her view, put her in a situation where she had no choice but to give up her legal rights.

So in that context, in our submission, the will being overborne factor was an important consideration for the Full Court in its decision. The passage in which "the will being overborne" is found is towards the conclusion of the Full Court's reasons, in which they focus in particular about - - -

GUMMOW J: Paragraph 81.

MR McKERRACHER: At page 442 line 22:

It cannot be said that the Roberts' wills were so overborne that they did not act independently and voluntarily.

GLEESON CJ: Mr McKerracher, can I ask you a question of fact about the way the evidence proceeded at trial. It just strikes me as a possibility that it is a considerable oversimplification to assume that the owners of a shopping centre do not have a commercial interest in permitting their tenants to build up and have available for sale a goodwill in their business. If it is the case that the owners of a shopping centre in their own business interests will encourage their tenants to build up a saleable goodwill, then it is a little more complex factually, is it not, than simply saying the Roberts had nothing to sell unless the owners renewed the lease and the owners could have just told them to go and jump in the lake? Did anybody explore in evidence the question of the interests of the owners in renewing leases for tenants so that they can have a marketable goodwill?

MR McKERRACHER: There was substantial evidence - I can take your Honour to it shortly - on the - - -

GLEESON CJ: No, I just wanted to know whether it was dealt with.

MR McKERRACHER: Yes, I have covered it in the submissions. The position was at the beginning of 1996 that the owners were actually concerned about losing tenants, and they sought advice from the managing agents as to what the prospects were that the leases which were coming up for renewal would or would not be renewed and the managing agent said some will renew and some will not. This was an issue of concern for the owners. Your Honour asks a very important point because the owners were keen to ensure that the tenants did stay in the shopping centre, particularly if they were good tenants. They wanted to keep on the good ones, and that was the reason why there was, in addition to addressing this litigation problem, a campaign to try to keep the tenants in the shopping centre because if they went, the owners would have to start from scratch.

GLEESON CJ: Yes. The owners of a shopping centre ordinarily have a goodwill of their own to protect.

MR McKERRACHER: That is precisely right, with respect, and they were anxious to ensure that whenever they possibly could they would keep good tenants. It did not follow that they wanted to keep bad tenants, but it was a matter of concern to the owners that these renewals were coming up and it was in their commercial interests to keep the good tenants in the shopping centre. Then we have the repeated references to the fact that the Roberts, and in the future Mr Holland, were going to be good tenants. They were going to be an asset to the owners; an important means of preservation of the owners' own goodwill in the shopping centre. That is why we have resisted the suggestion that it is only of some benefit to the tenants that a renewal be granted, because it is a commercial transaction in which there is a real benefit to the owners in an environment in which there was a concern about some people not renewing their tenancies. So there was quite a campaign to ensure that the tenants did stay in.

GLEESON CJ: Presumably you can get higher rents from tenants who think they can develop a marketable goodwill.

MR McKERRACHER: Absolutely. This is somewhat in the abstract, perhaps not in response to your Honour's question, but I am tempted to make the comment that one could see the argument we advance in the opposite position. If a very large department store was a tenant and was threatening to withdraw from the shopping centre, that would impose, depending upon conditions asked for by that very valuable anchor tenant, a dealing which could also attract the intervention of equity, although the owners in that instance would be in the disadvantage. So, your Honours, we say the basis of the will being overborne is important to the conclusion of the Full Court about choice and options, and the reliance upon that provision in the sections of the reasons at 442, at the conclusion of the reasons, we say, with respect, is misplaced.

The next ground of appeal addressed is the commercial connection point, but in the course of debate with your Honours I addressed the argument we have in relation to that and, indeed, perhaps that has been ventilated more thoroughly in the most recent exchange with your Honour the Chief Justice.

We then deal with the ground of appeal ground 3 in which we submit that the Full Court was, with respect, in error in drawing no distinction between - as the trial judge did - the requirement to discontinue bona fide litigation on the one hand and trivial litigation on the other. We have spelt out in paragraphs 64 through to 73 those portions in which we emphasise the importance of that aspect and the broader considerations generally collected in 74, which I have already taken the Court to, in relation to the broader range of matters which were considered by the trial judge as distinct from the more generalised approach by the Full Court.

One of the points which we have raised in this context and at paragraph 75 of the written submissions is that it is not necessary in any event in every case of unconscionable conduct that the disadvantaged party should suffer a loss or detriment by the bargain. To that end we rely on the judgment of Justice Fullagar in Blomley v Ryan at page 405.

GUMMOW J: Mr Hutley says that is about drunks.

MR McKERRACHER: Your Honour, that raises what this appeal is all about.

MR McKERRACHER: Of course Blomley v Ryan does relate to that style of problem, but that is not to say that the equitable doctrine does not have a place by virtue of 51AA in trade and commerce. We would respectfully submit that in the appropriate circumstance it is most important to recognise that, quite apart from impairment of physical or mental capacity, the intersection of events and the most recent cases of this Court go close to relying upon non-physical infirmity or mental incapacity.

GLEESON CJ: Do you have Amadio 151 CLR handy? If you look at page 462 you will find Justice Mason explaining the meaning of the word "special" in the phrase "special disadvantage". Do you see that in the passage beginning with the words, "It is made plain enough"?

MR McKERRACHER: Yes I do, your Honour.

GLEESON CJ: And do you see he says:

I qualify the word "disadvantage" by the adjective "special" -

and he explains the purpose. Do you accept that?

MR McKERRACHER: Absolutely, your Honour, yes.

GLEESON CJ: And is that the sense in which you use the words "special disadvantage" in your description of the nature of the unconscionability here?

MR McKERRACHER: Yes, in the sense of a disabling circumstance seriously affecting the ability of the innocent party to make a judgment in his own best interests.

HAYNE J: What was contrary to best interests here?

MR McKERRACHER: The best interest of the Roberts was clearly to be able to sell the business without having to give up the right to litigate.

HAYNE J: Best interests probably would win Lotto. You seem to equate "best interests" with complete freedom. Is that not the slide in the argument?

MR McKERRACHER: "His own best interests" in this context means own reasonable best interests. It does not mean complete freedom. We do not contend that Mrs Roberts should have had complete freedom. We contend that in the particular - - -

GUMMOW J: What Justice Mason is trying to draw together is what is said by the two Judges in Blomley v Ryan. They are talking about what Justice French put to one side as constitutional disadvantages, I think myself, and what you are trying to latch onto is some notion of "situational disadvantage", and I do not think that comes out of the earlier cases.

MR McKERRACHER: That is why we maintain that the presence of the - - -

GUMMOW J: It is all about the quality of the assent of the person, which may fall short of something that duress would look at.

MR McKERRACHER: Yes, I accept that.

GUMMOW J: It may fall short of that, but nevertheless there is some impairment of the quality of the assent of the transaction, by reason of something peculiar to an individual's, at the end, mental processes. They may not understand English, they may be drunk, et cetera, et cetera.

MR McKERRACHER: That, with respect, we would submit, is putting it too narrowly. It is true that infatuation may cloud judgment.

GUMMOW J: Exactly.

MR McKERRACHER: But, equally, the person whose judgment is being clouded is a very experienced solicitor in one instance and - - -

GUMMOW J: .....solicitor in Louth v Diprose, that is right.

MR McKERRACHER: And the nephew receiving the benefit in Bridgewater from the grandfather is in a circumstance simply of emotional connection but there is no - - -

GUMMOW J: No emotion between these parties here.

MR McKERRACHER: There is no demonstrated mental impairment on the part of the grandfather in Bridgewater.

GUMMOW J: No, not necessarily impairment at all, but some sapping in predisposition and so on, on a psychological level.

MR McKERRACHER: Yes, but that is the position of Mrs Roberts, on the evidence found by the trial judge, at the time when she felt she had absolutely no choice, was upset and frustrated by the whole process but had absolutely no choice other than to sign. We accept that - - -

GUMMOW J: But that was true by reason of the commercial imperatives. She was dead right.

HAYNE J: Was she not thereby conserving her best interests?

MR McKERRACHER: Not out of choice. She could not make a judgment. She did not have a choice. That is what distinguishes her position from that which is being advanced by your Honour.

GLEESON CJ: Suppose we were to look at this transaction. Suppose a judge, to depersonalise it, was to look at this transaction and say, "Mrs Roberts was dead right. She made a very rational decision in her own best interests. If I had been advising Mrs Roberts at the time I would have advised her to go ahead and accept these terms". Now, how does that relate to the concept of "special disadvantage" explained by Justice Mason in Amadio?

MR McKERRACHER: She would still not be making a judgment or choice as to her best interests, her best interests being able to proceed without the clause being invoked. That is her best interest. She does not have the capacity, because of all the circumstances, to make that judgment.

GLEESON CJ: But you criticise, for example, as one of the aspects of unconscionability the pressure that was put on her by putting this mutual release clause in at the end. Suppose the facts were that they had offered her the mutual release clause and said, "Now, we're going to give you time to consult the best Queen's Counsel in Australia to take advice as to your position, and after you've done that you come back and tell us yes or no". And suppose we were to take the view that the best Queen's Counsel in Australia would have said, "Say yes". What would be the legal consequence of that?

MR McKERRACHER: That may be a very different situation from the circumstance which did occur, and it was the pressure of the situation which, despite the advice she got not to sign, she felt that she had no choice. She just was not able to exercise a judgment or make a choice. She just had to get rid of the whole problem. It was really an absence of choice, an ability to decline, an ability for all practical purposes. If one looks at a position of someone being commercially or in some other way blackmailed, it may very well be for the person who is being blackmailed that the better choice is to accept the ultimatum, but it does not follow that that is a proper exercise of free will and judgment or choice. That is the difficulty in the Full Court's approach of simply judgment or choice, because the most important consideration is the examination of her position and then looking at the conduct of the party imposing the so-called mutual release clause.

Your Honours, I move then to ground 4, dealing with the unwritten law "from time to time" and the submission that the broad statement of principle by the Full Court - I am sorry, could I backtrack just a moment, your Honours. I simply wanted to refer to the statement made by Justice Fullagar in Blomley v Ryan at 405:

It does not appear to be essential in all cases that the party at a disadvantage should suffer loss or detriment by the bargain.

We submit that that is important because what is under examination is the conduct of the party - - -

GUMMOW J: No, the circumstances in which the consent was educed. All this is by way of qualification of the objective theory of contract. That is why his Honour says what he says.

MR McKERRACHER: Yes, but the objective theory of contract has a place in a sense in this case as well, we would submit, your Honour. This is not the nature of a free bargain, which is at the root of all contract. It is a case of a circumstance where a party feels she has absolutely no choice other to sign. That is the argument we put against our opponents in relation to the submission that it is purely a commercial deal.

CALLINAN J: Could I just ask you about one matter, please. It is the trial judge's finding at page 380 between lines 20 and 25:

Unfair exploitation of disadvantage amounting to unconscionable conduct may occur when an owner uses its bargaining power to extract a concession from the tenant that is commercially irrelevant to the terms and conditions of any proposed new lease.

Can you give me any authority to support such a far-reaching proposition first?

MR McKERRACHER: No, your Honour.

CALLINAN J: You cannot?

MR McKERRACHER: No.

CALLINAN J: Secondly, in any event how could it be said of what was extracted from Mr and Mrs Roberts was commercially irrelevant to the terms and conditions of any proposed new lease? It was highly relevant to any new lease commercially, was it not?

MR McKERRACHER: There is obviously a connection because the litigation relates to the lease and the Roberts are suing for overpayments made under the lease. What his Honour was - - -

CALLINAN J: Furthermore, it is only in respect of matters that may be of some relevance in practice, I would have thought, that one party to a transaction could ever possibly extract a concession from another.

MR McKERRACHER: What his Honour was identifying, in our submission, was that in the ordinary commercial situation the owners would not have done this. The Roberts were valuable to them. The new purchaser, Mr Holland, would have been valuable.

CALLINAN J: Only valuable to them subject to a qualification that they stop molesting them and harassing them with the litigation.

MR McKERRACHER: Well, they do have a right to litigate.

CALLINAN J: Litigation in the Tribunal.

MR McKERRACHER: Tenants do have a right to pursue litigation in a Tribunal. It is a statutorily enforced right of importance.

CALLINAN J: Everybody has a right to sue in any court if he or she wants to, but not to get the outcome - - -

MR McKERRACHER: The difficulty is, your Honour, that the owners had Mrs Roberts over a barrel at the death knock and said, "This is the only basis on which you will get this", and that is not a commercial negotiation. It is the imposition of a harsh term in a circumstance where someone is in a disability.

CALLINAN J: Was she not only in that position because they had never accepted the offer of 10 April in a timely way? Did not all of their problems really stem from that? If they had accepted that offer - - -

MR McKERRACHER: I do not think that can be said, your Honour, because they had already accepted the August offer in express terms, and that was what founded the contract with Mr Holland. The Roberts had signed and sent back that offer which contained no mutual release clause.

CALLINAN J: Go back before that. In April - - -

MR McKERRACHER: But there were no problems at the time of the imposition of the condition. There were no problems of an absence of a lease in the mind of the Roberts because they had signed this document and sent it back. There was a binding agreement.

CALLINAN J: They have their rights if there is a binding agreement. They could have pursued - - -

MR McKERRACHER: All of which illustrates - - -

CALLINAN J: They could have sought to enforce that like the tenants in Lorinda Park, one of the cases that was referred to by his Honour on the hearing with respect to the constitutional matter.

MR McKERRACHER: Yes, your Honour is no doubt correct, unquestionably. But focusing simply on the unconscionable aspect of the matter it can be seen why the Roberts thought at the time they signed the agreement that they had something to sell. When it is only brought to them at the death knock that they do not have something unless they sign the condition, that is what creates the particular chemistry on which the application was brought.

CALLINAN J: Alchemistry, not chemistry.

MR McKERRACHER: The passage which we say does not recognise the words "from time to time" appearing in the section is the passage on which I have commented already, your Honours, which says that any proprietor in this situation:

would not constitute special circumstances that would attract the intervention of equity.

GLEESON CJ: Does the law relating to unconscionability, the unwritten law, represent standards of commercial morality as they apply from time to time?

MR McKERRACHER: It does, in our submission, your Honour.

GLEESON CJ: And are they getting stricter?

MR McKERRACHER: There is an evolution - - -

GLEESON CJ: Quite, but is it an evolution in the direction of stricter standards or laxer standards?

MR McKERRACHER: Stricter.

GLEESON CJ: How do you know that?

MR McKERRACHER: At least in so far as small business is concerned and as affected by the Trade Practices Act, the development of the introduction of the sections designed specifically to assist small business is articulated at length in the constitutional decision of his Honour Justice French, and what it reflects, we say, is the legislative pronouncements which appear in this part of the Act and which are designed, amongst other things, to ensure that there is a recognition in trade and commerce specifically for the benefit of small business and obviously therefore specifically for the benefit of shopping and tenancy relationships of the doctrine of unconscionable dealings. When one sees an intention as reflected in the development of the law in that way, almost inevitably it is going to impinge upon commercial transactions rather than simply situations and families and friends that have been examined in previous cases. It is quite clear that there is a recognition, in our respectful submission, that just as the needs of society and the economic pressures of commerce change from time to time, the law will shift with it as well.

GLEESON CJ: It is comforting to us to know that the standards of the commercial community are tightening up. We see that reflected in the newspapers day by day.

MR McKERRACHER: It may take time, your Honour.

KIRBY J: Maybe the point of the Act is to try to encourage that.

MR McKERRACHER: Undoubtedly.

GLEESON CJ: That is why I asked whether these are standards of commercial morality or legislative standards.

MR McKERRACHER: Obviously the Court recognises the direction in which commercial morality should shift, in our respectful submission, and can embrace that leadership role.

KIRBY J: Do we have the second reading speech and the explanatory memorandum somewhere in our papers? Have you made them available to us?

MR McKERRACHER: I do not believe - - -

KIRBY J: I would like to see them, if you would not mind.

MR McKERRACHER: We will certainly make those available, your Honour.

KIRBY J: It seems the whole point of giving special leave is to address our attention to this section.

MR McKERRACHER: Yes. But the express inclusion in the section of the expression "from time to time" accords, we say, with the flexible approach of equity which - - -

GUMMOW J: Are you saying the principles change?

MR McKERRACHER: We say that the principles are established from time to time, altered, improved and refined.

GUMMOW J: Now, what change are you advocating here?

MR McKERRACHER: A recognition of the need for special disadvantage to directly contemplate the trade and commerce setting - - -

GUMMOW J: What Justice French called constitutional, the situational disadvantage in a commercial setting.

MR McKERRACHER: It does not really matter what term is given to it, but a situational disadvantage reflects all the circumstances which his Honour articulated about the Roberts' personal position and we would submit that it is entirely appropriate for equity to recognise that those commercial standards change from time to time. They are improved and refined.

GLEESON CJ: Improved. This is the theory of melioration. It all changes for the better?

KIRBY J: One hopes the Federal Parliament does not enact laws that change for the worse.

GLEESON CJ: That is why I ask whether we are talking about legislative standards or commercial standards. Are you talking about the standards of the market, or are you talking about the standards of the legislature?

MR McKERRACHER: The standards are the standards of the unwritten law, but it is the unwritten law that - - -

GLEESON CJ: Now, unwritten law is presumably law that is not written by Parliament.

MR McKERRACHER: Correct, your Honour.

GLEESON CJ: If the expression means anything, it means law that is not law promulgated by Parliament.

MR McKERRACHER: Certainly, but in this context it means the law of equity and we submit that the law of equity has - and citing from Justice Kirby in Garcia, "been established from time to time, altered, improved and refined" which in turn - - -

KIRBY J: Yes, but I - - -

GAUDRON J: It was Sir George Jessel actually.

MR McKERRACHER: I beg your pardon.

GUMMOW J: It was Sir George Jessel actually.

MR McKERRACHER: That is correct, in re Hallett's Estate, and that is a principle which we say can be taken into account in looking at the context in which the words of 51AA appear.

GLEESON CJ: But is there any change that is relevant to the present case?

MR McKERRACHER: Change of the law?

GLEESON CJ: No, a change in the unwritten law.

MR McKERRACHER: Only if the Court is of the view, as the Full Court may have been, although they did not necessarily say so, that the description of a situational disadvantage is inappropriate and the fundamental submission in relation to the entire case is that the categories are not closed and the categories not being closed is the circumstance upon which his Honour the trial judge addressed his conclusion on the principles. So that if the categories are not closed and a situational disadvantage is appropriate within that category, then no change is necessary. On the other hand, it seems to be put against us that a situational disadvantage - and I am reluctant to adopt a tag because it can be confusing - is something new, and if it is something new, we say that it is a proper direction to take 51AA into.

GUMMOW J: Now, how would this development you are speaking of now fit in with the suggested development from time to time of implied duties of good faith in contractual performance? Does this reflect the same ideas? This is in contractual formation, I suppose, is it not?

MR McKERRACHER: It may tie in quite appropriately depending on the view that the Court takes of the meaning of "unconscionable conduct" in 51AA. If the Court were to take a narrower view, which we would respectfully discourage, then the two developments may move quite independently. If a broader view is taken of the meaning of the words in 51AA then it is legislative recognition of the development of that area.

GLEESON CJ: Mr McKerracher, what was the origin of these expressions, "constitutional and situational disadvantage"? Where do we find them first being used?

MR McKERRACHER: In the learned trial judge's reasons, your Honour.

GLEESON CJ: It strikes me that an obvious form of situational disadvantage is poverty.

MR McKERRACHER: Yes.

HAYNE J: And his Honour's content is really given by the last sentence in paragraph 122, is it not, that the disadvantage is one:

not able to be mitigated by the fact of legal representation -

so it is a disadvantage that is not a disadvantage of information, not a disadvantage of advice. It is simply that, on one view, all the commercial considerations are pointing to only one answer. Do you accept that?

MR McKERRACHER: I do not believe that his Honour was confining his description of situational disadvantage simply to the inability of legal representation to assist, but what his Honour was saying was availability of legal representation was completely irrelevant, in this case, because it could be of no help whatsoever. It is not a situation where someone does not understand the effect of a guarantee they are signing. Mrs Roberts knew precisely the position she was in.

HAYNE J: And notions of absence of choice can be understood, in some circumstances, as meaning no more than that all available arguments point to one answer.

MR McKERRACHER: It may mean that, your Honour, but one would embark - - -

HAYNE J: Do you mean more than that in this case.

MR McKERRACHER: Yes, because in this case, the absence of choice is the product of the conduct of the owners. It is the owners who produce the ultimatum at the last minute against the background of the dealings they have had, so the absence - - -

HAYNE J: That is inevitably so in any formation of contract, is it not, where one parties says, "These and only these are the terms upon which I will deal".

MR McKERRACHER: There could have been any other number of resolutions of this situation which would have been attractive to both parties, not least of which would be the owners sending back the lease document which the Roberts had requested by signing the agreement to lease forwarded to them in August.

GLEESON CJ: But any quality of bargaining power is a form of situational disadvantage that is about as common as you could find. What is it that makes inequality of bargaining power a special disadvantage?

MR McKERRACHER: Even if inequality of bargaining power alone were a special disadvantage, that alone would not attract the intervention of equity.

GLEESON CJ: Why not?

MR McKERRACHER: Because it depends upon the conduct of the party dealing with the party who is in the inequality of bargaining power.

GLEESON CJ: And suppose the conduct consists in taking advantage of the inequality of bargaining power. When does that become unconscientious?

MR McKERRACHER: There cannot be a "bright line" rule, your Honour, and that does get back to our fundamental submission that one needs to evaluate all the circumstances and to form an impression from those circumstances, but there will not be a black and white line and a "bright line" rule to guide in that situation. The most important thing is to examine the principles of equity, as his Honour has done.

KIRBY J: You did not really give an answer to the Chief Justice's question. I mean, ultimately, we are going to have to give meaning to the statute as Justice Gummow asked you at the beginning. You have to have a concept of what it is at before you plunge into the facts, so you have a criterion. Now, can one take into account - do interpretive principles allow you to take into account subsequent amendments, the addition of other sections to this part of the statute to indicate what is the package deal that Parliament has in mind for the operation of the act in this type of commercial setting? I mean, one would think that you read the Act as a whole and you read this section, 51AA, in what is now the context, or what was the context at the time the courts below were considering the matter.

MR McKERRACHER: Yes.

KIRBY J: Is that a correct interpretive principle?

MR McKERRACHER: That is a correct interpretive principle, your Honour. One of the complications, though, is that 51AC was not introduced at the time of this conduct.

GUMMOW J: Section 51AB was there, though, was it not?

MR McKERRACHER: Yes, that is so, yes, and there have been differing judgments of the Federal Court as to whether 51AA is confined to an Amadio and Blomley v Ryan type of unconscionable dealing, so to speak, as distinct from unconscionable conduct at large. Certainly, Justice French was of the view that it would be inappropriate to draw a conclusion as to a limitation of those words in the context of this case in which we have simply submitted on the basis of Amadio, but the - - -

GUMMOW J: Now, there is a recent judgment of Mr Justice Gyles in which I see Mr Hutley appeared called GPG Australia v GIO [2001] FCA 1761; 191 ALR 342 where there was quite a detailed discussion of these matters in paragraphs [113] and following of the judgment. I think you might be unhappy with some of it. Is there any appeal in that case, do you know of?

MR McKERRACHER: I am not aware of any, your Honour. There are two approaches taken. One approach was that because the explanatory memorandum and first reading speech refer specifically to Blomley v Ryan and Amadio-type cases, that that is what 51AA is intended to deal with and the other approach taken, for example by Justice French and, indeed, in the Full Court in Samton, was that there is no basis for confining the words to simply an Amadio situation. Simply by virtue of the explanatory memorandum one would need to examine the entire legislative context.

KIRBY J: Your submission is that the Full Court is right in that respect.

MR McKERRACHER: No, our submission, your Honour, is that - well, yes, that judgment of the Full Court is right.

KIRBY J: What judgment was that?

MR McKERRACHER: That is in the Samton decision.

KIRBY J: Could you put that on the record?

MR McKERRACHER: Which is in our list of authorities at page 3. It is recorded at 189 ALR 76. So there are two approaches, and the approach we would submit is appropriate is the broader approach, the 51AA, particularly prior to introduction of 51AC. We would submit that it is the broader notion of unconscionable conduct which underpins all the relief provided in equity to which the section - - -

KIRBY J: This is cut back by the words, as in the unwritten law from time to time.

MR McKERRACHER: Yes.

KIRBY J: The word is used in perfect generality in this section, so that you would give it an ample meaning on the basis of - - -

MR McKERRACHER: Yes, absolutely, that is our submission.

KIRBY J: Otherwise you are glossing the statute.

MR McKERRACHER: Yes.

KIRBY J: The question then is what is the meaning of the addition of the new sections, although not present at the time, with which the section must now be read.

MR McKERRACHER: I am happy to address on that in some detail, your Honour. The broad position - - -

KIRBY J: Do we have to get into that in this case?

MR McKERRACHER: In my submission, your Honours do not have to and that is why I have avoided going in that because I do not really regard it as being important. My submission at the outset is simply that we do not contend that 51AA should only be confined to Amadio-type cases and it is not necessary to reach that conclusion at this stage, but broadly speaking, the part, we say, is designed to cover the field and there are limitations between the three sections as to when each one of them will apply. But, in our submission, it is not necessary to go at length at all into that analysis for the purpose of this case because we have conducted it on a narrow basis.

If it is of assistance to your Honour Justice Kirby I can provide some written submissions as to the entire framework but my preferred position is that it is simply not necessary for present purposes.

KIRBY J: Yes, the only thing is practitioners are going to no doubt leap upon this decision when it comes out and we can say that you have to now consider a new element in the equation, that people will not necessarily see that or pay attention to it.

MR McKERRACHER: I could certainly provide after lunch some comprehensive written submissions which do evaluate and put the Commission's position as to exactly how the various sections in the Act work.

GUMMOW J: You would have to think about it more than over lunch I think.

MR McKERRACHER: I have them prepared, your Honour.

GUMMOW J: Well, you would have to give consideration to what Justice Gyles concludes at paragraph [125] of GIO Australia, for example, which is completely to the opposite of what you have been saying about the scope of unconscionable - - -

MR McKERRACHER: I appreciate that, and there are conflicting decisions on the point.

KIRBY J: Well, if there is this big debate in the Federal Court it may, in the end, not affect our decision but I am not at all familiar with this, not at all. I know nothing about it, and therefore, if you think it is relevant as background you had better give us some document.

MR McKERRACHER: I will do that after lunch, if your Honour pleases.

GUMMOW J: I can only encourage it a bit more carefully.

GLEESON CJ: Right, now what ground of appeal have you arrived at?

MR McKERRACHER: Your Honour, I was dealing with ground 5(a), special disadvantage in trade and commerce. I think that I have covered the ground essentially in the submissions that have been made to your Honours on that topic. There were some remaining issues dealt with in grounds 5(b) and (c) as to the interpretation placed by the Full Court on the findings concerning special disadvantage and we pick that up at page 18 of the written submissions in which we point out that the primary judge did warn of the dangers of generalising about relationships between landlords and tenants and went on to expressly analyse the particular situations in this context between the Roberts and the owners.

I have made the submission about the emotional context as well. There is debate about whether or not any communication with one of the managing agents induced any expectation on the part of the Roberts and the Court will know that the primary judge concluded that in the context of a contravention of section 52 of the Act he was inclined to doubt that an assurance that there would be no clause was actually given to Mrs Roberts in sufficiently unequivocal terms to constitute a misrepresentation. As against that he also said that it was likely or entirely possible that Mr Wilson had given expression to the doubts which he had expressed to Mr Sullivan in May 1996 which I had earlier mentioned to your Honours.

So we say that, although the section 52 argument on the basis of an express representation failed, there is no finding against us that there was not, through Mr Wilson, a basis for confidence on the part of Mrs Roberts at the time immediately prior to the settlement. The Roberts were, it is clear from the primary judge's conclusion and in our respectful submission, small business operators as compared with the commercially and financially powerful owners and that was central to the disadvantageous position in which they ultimately found themselves, and we submit that in the environment of standard form leases and mortgages, the commercial and financial strength of lessors, including their ability to work from a strong information base, access to commercial professional experience and guidance will inevitably, and certainly did in this instance, put them in a superior bargaining position.

KIRBY J: You mentioned the emotional element and you have referred to that throughout. Is it common ground that one takes that into account in the unconscionability in this setting? It does really introduce into commercial dealings an element which in the past would have been regarded as completely irrelevant.

MR McKERRACHER: Yes.

KIRBY J: Does the doctrine in the Federal Court say you take into account these nebulous sort of considerations in judging what is unconscionable or do you simply look at commercial considerations?

MR McKERRACHER: They cannot be put aside, in our submission, which is why the trial judge expressly said that they were relevant, but then he went on to say, "But regardless of that, I would also conclude on the commercial axis".

KIRBY J: I realise that, but leave aside this case. As it has developed in the Federal Court, has that court taken into account all these sorts of things? You see, the theory of our market is that business people make hardnosed decisions solely on economic considerations. That is what economists write about and the whole theory, at least when I did economics, is on that footing, but this is injecting a new criterion that they have to take into account, at least where they are dealing with parties in a special disadvantage, I suppose.

MR McKERRACHER: The special disadvantage the Roberts were in was that they were small fish and chip proprietors who were in financial need. That may apply to a lot of people, I accept that, but there was an overlaying factor which had arisen as a result of the dealing that parties had had over the preceding months and one could not ignore that and that - - -

KIRBY J: And that has been applied in other cases, personal considerations like that?

MR McKERRACHER: I am not aware of another case in which a factual finding has arisen on that basis in which there has been a need to consider that aspect of the matter in the context of the Federal Court's jurisdiction.

KIRBY J: It is a bit hard on the owners, is it not, to say that there has never been a case like this and you have never had the courts saying that you have to take that into account, but you ought to have known you should have taken that into account in this case.

MR McKERRACHER: That might be so, your Honour, if it were true that there had never been a case like this. What we submit is that this is application of existing equitable doctrine and the disadvantage in which they were placed is consistent with the disadvantage recognised in equitable cases in any event. So we do not, with respect, put the proposition that this would not occur in a previous case. It may occur right outside of the context of the statute.

Indeed, Justice Einfeld in one decision reported in 1999, and referred to at 126 in our written submissions, was of the view that it would be odd if unconscionability under 51AA was not at least arguable where the exercise of the conduct by the stronger party resulted in the disadvantaged party declining to enter into a contract, that being in the context of a large commercial organisation as against the government. So that case is important for two aspects of this appeal, one being - - -

GUMMOW J: Is that authority on our list, the Hydro-Electric Case? Do we have that?

MR McKERRACHER: No, it is not, your Honour.

GUMMOW J: It is unreported, I see.

MR McKERRACHER: It is reported at [1999] FCA 882.

GUMMOW J: That is electronic. It is not reported.

MR McKERRACHER: I am sorry, it is not, that is true. It was an interlocutory decision on a statement of claim. He was dealing with arguability, which is why we have not - - -

GUMMOW J: Yes, I see.

MR McKERRACHER: The final ground of substance other than the one which collects the others is ground 6 which questions the determination by the Full Court in relation to the May 1996 contravention on the additional basis that no transaction resulted from it. The Full Court's view was that unconscionable dealing applied only to transactions and therefore an additional reason for rejecting the May contravention was that no transaction resulted.

GUMMOW J: The real point is why would you make a declaration. That is the real point, it seems to me. It seems to be a good point.

MR McKERRACHER: It is a practical issue, and I am content to rely upon the reasons that we - - -

GUMMOW J: There are lots of contraventions in the sections of these Acts, but you do not necessarily give a remedy. That is the way the Act works.

MR McKERRACHER: Well, what we are really addressing, I think, your Honour, is the equitable concept in any event. What we are challenging is the question of whether you do require a transaction.

GUMMOW J: You would not get anywhere with equity because you have nothing to set aside. You would not be so foolish to start a suit.

MR McKERRACHER: There was a cause for complaint at that time because the complaint gave rise to a great deal of inconvenience with loss of staff who had left the business, cancellation of an overseas trip, the husband losing the job, a whole variety of matters which gave rise to consequences as a result of the late imposition of the condition in May and the fact that the dealing failed. Our submission simply is that an examination of the cases will show that the focus is really on the conduct of the stronger party in procuring. It is the act of attempting to procure a weaker party's assent to the impugned transaction which is the key area of the focus.

GUMMOW J: You might grant an injunction if you thought they were going to do it again but the drama is over here and it has been played out at a much later date.

MR McKERRACHER: That is true, but as a matter of principle, we would submit that the act would give rise to a very curious situation if a party in a strong position could act unconscionably against a weaker party and the weaker party gives in and there is no right to redress simply because no transaction occurred. That would seem to entirely defeat the legislative purpose.

KIRBY J: But there would have been, at least theoretically, an entitlement to have that clause removed so that the Roberts were free to pursue their rights in the settlement and to participate in the settlement.

MR McKERRACHER: This is in the May transaction, your Honour?

KIRBY J: Yes.

MR McKERRACHER: Yes.

KIRBY J: Well, would it not be to all the - to the extent that they agreed to a clause under the pressure, you say, of their vulnerability that excluded them from pursuing their entitlements against the owners, the court could, could it not, under the Act, have set aside that clause or released them from the obligations under that clause?

MR McKERRACHER: That is true, your Honour, but I was focusing on the May situation where they - - -

GUMMOW J: But you never produced such a transaction to set aside, wholly or in part. That is your problem.

KIRBY J: But was not that the point of the Full Court? That did not lead anywhere.

MR McKERRACHER: That was the point and that is the point we submit, respectfully, is erroneous.

GUMMOW J: What I am putting to you is even if there was a contravention at that stage in terms of the legal norm, what is the utility of granting any relief by way of a declaration, if that is all there was in the case? There is much more of course because of what happened later.

MR McKERRACHER: The utility is this, your Honour, that if parties in a stronger position know that they can act unconscionably so that someone will withdraw from a transaction, then there is nothing to prevent them doing so which defeats one of the purposes of section 51AA which is designed to create a norm of conduct, a norm of conduct which the Commission is required to seek to enforce. It is the conduct in acting unconscionably which contravenes the Act, whether or not a transaction is produced.

GLEESON CJ: How long do you expect you will need for the remainder of your submissions, Mr McKerracher?

MR McKERRACHER: Your Honour, I was just about to say that I am essentially completed.

GLEESON CJ: You might as well keep it open until after lunch.

MR McKERRACHER: I am not trying to string it out by any means, your Honour.

GLEESON CJ: We will adjourn until 2 pm.

MR McKERRACHER: May it please your Honour.

AT 12.46 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.01 PM:

GLEESON CJ: Yes, Mr McKerracher.

MR McKERRACHER: Thank you, your Honour. Your Honours, but for adopting the written submissions and the submissions in reply, that is all we wish to say by way of argument on the appeal. With the Court's leave, could I hand up some submissions, going only to the application of section 51AA in the context of the legislation, as inquired about by your Honour Justice Kirby and also a photocopy of the precise provision in the Act as it was at the time and that is reflected in paragraph 132 of our submissions.

GLEESON CJ: Thank you.

KIRBY J: You just happened to have 70 pages prepared to answer my question. What would have happened if I had not asked that?

MR McKERRACHER: Your Honour, it is intriguing; in the Full Court I prepared similar submissions to assist and they thought it was completely irrelevant, so perhaps I was - - -

KIRBY J: Well, they probably know a whole lot more about it than I do because they the section so many times.

MR McKERRACHER: I think one of the difficulties though is, on this very point, that there are conflicting authorities. There is, as I mentioned before lunch, in addition to the single judge decision of Justice Gyles, there is the comprehensive analysis by the Full Court in the Samton Case, where the Full Court reaches a different conclusion as to the width of the section. So that the position at this stage is undetermined.

GLEESON CJ: Thank you. Yes, Mr Jackson.

MR JACKSON: Your Honours, in relation to the matter that has just been handed up, unless Mr Clifford is in a position to respond to that this afternoon, perhaps we might give some written submissions if we need to, your Honour.

GLEESON CJ: Yes.

MR JACKSON: Your Honours, could I deal first with three aspects; factual matters that have arisen in the course of the argument today. The first concerns what is said to be the course of dealing, as it were, in relation to the various offers of leases. Your Honours will see that the first situation occurred in April 1995 when they, the Roberts, chose not to go ahead. Your Honours will see that in volume 2, page 343, about line 30. Your Honours will see at the end of paragraph 37 of his Honour's reasons:

There was no period stated in the letter within which the offer had to be accepted. Mrs Roberts treated it as an open offer and did not take it up at that time.

That, of course, was April 1995. Your Honours, there was an event which took place in 1996 and in 1996 in April, on 24 April, I think - I will give your Honours the reference a little later - that was the point at which the Roberts themselves started legal proceedings in the commercial tribunal. I will give your Honours the reference in just a moment. But staying, your Honours, with the course of dealing, in June 1996 certainly there was an offer of a lease made and it was said by our learned friends that there was not a reason for that not being taken up in a sense, but if one looks in volume 1 at page 101 in the evidence of Mrs Roberts, you will see at the bottom of page 101 that she wanted to negotiate about the rent. That is the last question and answer on page 101 and going over to page 102 about line 20.

It is true in relation to the third occasion, August 1996 - your Honours will see this referred to in volume 2 at page 352 - that there were offers of a new lease and your Honours will see that referred to in paragraph 55 but, your Honours, nothing was done to give effect to it. Your Honours will see that the next thing that happened, of course, was that a new offer came and the "new offer", I mean new offer to the Roberts from a purchaser is referred to, and this is when things became a little more focused. That is referred to in paragraph 56 on page 352.

It was at that point that one sees the letter, which is in volume 1 at page 209 and that letter, your Honours, is a letter in which the solicitors for the Roberts say, in the second paragraph, we have an intending purchaser and want to come up with the lease. This is on the assumption that the lease had been "signed some time ago". You will see that in the first paragraph and those assertions go on through the remainder of that letter.

Your Honours, the last lease was, of course, that in December and the position is that whatever might have taken place, Mrs Roberts knew that a release might be sought - no doubt hoped it would not be, but knew that it might be sought. And that that is so appears in the primary judge's reasons at page 353, paragraph 57 and, your Honours, about line 17 on that page:

She did not feel confident that the business would be sold because she expected the release clause to be retained.

Now one then sees immediately following that, the evidence that she gave about her view that Mr Wilson had conveyed to her that it would not be sought - and your Honours will recall that there was a finding by the primary judge that that had not be said by him at all. You will see that finding at page 383 and, in particular, at paragraph 129 and it is the last half of the paragraph and concluding with the last four lines:

it is improbable, having regard to his concern about the legality of the clauses -

et cetera -

that he would have made an unequivocal and groundless statement -

and your Honours will see the remainder of it there set out.

Could I refer also, your Honours, in that connection to page 278 in the same volume, paragraph 24 of Mrs Robert's statement, and your Honours will see that she said she:

did not feel confident about selling the business without having to withdraw because I expected the clause to remain after the meeting.

That is speaking about the meeting that took place with Mr Wilson.

Now, the second thing I wanted to mention, your Honours, is this, that your Honour the Chief Justice asked about the choices and your Honours will see that, and I am going to go to the end of volume 1, what happened after the document had been signed by Mrs Roberts - and I am taking your Honours to page 222 where her solicitors, on 6 December, four days after the day on which she had signed it, said that we had:

confirmed that if our client wanted an extension of lease she would have to have remain in the deed of assignment -

with clause 14, to put it shortly. That then, your Honours will see the assertions remaining through that letter.

That takes one, your Honours, then to page 225 where your Honours will see that our side in return makes various assertions about what should take place, we, in effect, having offered them the choice of assignment, no clause 14 and, on the other hand, "if you wanted a new lease, clause 14 had to be in." The issue concluded, your Honours, at page 237 in volume 2 where our solicitor writes to Mr Sullivan saying that the solicitors for the Roberts had said their:

clients had had enough and had resolved "to do nothing and to call it a day".

Your Honours will see the date of that being 9 January 1997 and it does not quite appear what the date of the "follow-up call" that is referred to in the first paragraph was, but it is clear it must have been, at some stage, in December 1996. So your Honours will see, if one is looking at the whole of the conduct and looking to see what is unconscionable, what emerges from it is that, even after - before we executed the document, in effect, we were prepared to offer one of the choices that was said to be open.

Your Honours, the third thing I wanted to say was your Honour the Chief Justice asked about, does the owner have goodwill? Well, of course, it must depend on the circumstances and depend on the profitability and things of that kind, bearing in mind, of course, that the owner is prohibited from charging rent based on a share of takings and it is under the same Act as was relied upon in the commercial tribunal. I will give your Honours a reference to the provision a little later, but the position is that that cannot be the subject of rent. So that the goodwill, in a slightly less direct sense, in the sense of being able presumably to get better ordinary rents than might otherwise be obtainable for the premises.

GLEESON CJ: Well, brewery tenancies, are they not, are well-known example of circumstances in which people who are in often quite a precarious contractual position, nevertheless deal in goodwill?

MR JACKSON: Yes. Well, your Honour the precariousness of that perhaps is not much mitigated, but was reduced somewhat in the end by that .....series of cases.

CALLINAN J: I was going to ask you about that; is that Bond Brewing New South Wales Limited v Whitehouse Properties.

MR JACKSON: Yes, that is the one I am thinking of, your Honour.

CALLINAN J: Mr Jackson, I think that is unreported, is it not? I wonder if we could get a copy of that.

MR JACKSON: Yes. Your Honour, it was about 1988/89, I think.

CALLINAN J: I can tell you, it is referred to, Mr Jackson, in Whitehouse Properties v Bond Brewing (1992) 28 NSWLR 17, but it was a decision of Justice Waddell in Equity on 11 September 1987. It provides a marked contrast to this case because there was an estoppel; what his Honour found, I think, was a representation by a long course of conduct, is that correct?

MR JACKSON: Yes, that is so, your Honour. I do not know whether your Honour has seen the case, I think not, but that is the name of a number of cases heard together.

CALLINAN J: Yes, I did - I know it, Mr Jackson. In fact I appeared in the subsequent valuation test case which valued that goodwill.

MR JACKSON: Yes. Your Honour, the point I was simply trying to make, your Honours, is this, that it is true to say that precarious tenancies can give rise to rights that really are valuable, but it is not really quite from the precariousness from the tenancy itself; it is often from what has been built upon it, if I can put it that way.

Your Honours, I was just dealing with that third aspect. The position as at April 1996 was dealt with in volume 2 at page 337 by the primary judge and in paragraph 24 of his reasons where he spoke of giving:

an overview of the various properties which they owned and on which he was advising them. He said he anticipated limited rental growth at Farrington Fayre due to increased competition and the absence of "catchment growth". Among the things which needed doing there was a "rebuilding of the relationship with the tenants". It was necessary at that time to enter into new leases with a number of them.

And your Honours will see the remainder of that paragraph. Could I just give your Honours one page of his evidence which is not part of the record and your Honours will see in the passage commencing line 15 going through to about line 30 on that page, he referred to the situation. Could I just say about it, it does not go very far, of course, but what it simply seeks to demonstrate is that the notion that you have, on the one hand, in the particular circumstances, the dominant landlord as against the weak and, in a sense, disenfranchised tenant, is not quite right.

Your Honours, that really brings me to what I was going to say about the way in which the case ran, in a sense, because it was a case where the Roberts had been in the tenth year of a two of five plus five year lease. They had operated the business for the whole of that term, except for the first two and a half years. You will see that in Mrs Roberts statement in volume 2 at page 266, paragraphs 2 to 3, and they and other tenants had banded together to look after their rights in a sense of "unity is strength" approach. Your Honours will see that at page 267 in volume 2 at paragraph 5. Some of them were in litigation with the owners, with legal advisers acting on their behalf. You will see that at page 268, paragraph 6.

You will see that decision, your Honours, having been made, she says in paragraph 6:

On or about May 1996 . . . to allow one action . . . to proceed -

but your Honours will see in the preceding paragraph, paragraph 5, that they had a "Fighting Fund", they had solicitors acting on their behalf and actions were commenced "on various grounds" and, in the last sentence in paragraph 5, she "lodged similar claims".

Your Honours, as is apparent from the agreed facts, which are set out in volume 1 at page 86 in paragraph 33, the date on which the Roberts commenced legal proceedings against the owners was 24 April 1996 and, your Honours, that is, in our submission, a somewhat provocative thing to do in circumstances where they then were trying to obtain a new lease; a new lease because someone had come to make her an offer to buy the old.

KIRBY J: It is suggested to us that we have to look at them as somewhat separate; they were good tenants, they were regarded as good tenants by your client; in a sense they joined the bandwagon of the others, they were not standing out, they were just parties to it, and as citizens and as tenants they had a right to bring their proceedings before a court.

MR JACKSON: Could I start from the end of that, no one doubts they had a right and one is not talking about, your Honour, circumstances where they were going to a statutory court to obtain an exercise of a statutory discretion to vary the lease; they were simply exercising what they claimed to be their rights under the lease. Those are the kinds of rights that very commonly, to use the expression, can be bargained and sold and compromised; they are the very sorts of things that are and it is hardly surprising if one of the results of further dealings in relation to them is that they are compromised.

Your Honour, going back a little in what your Honour said, one does see at one point, and I think the same passage is repeated on a number of occasions, that prior to, I think, the commencement of those proceedings, they had been described as being good tenants. So be it; we do not suggest that they did not pay their rent or anything of that kind, but, your Honours, that does not really, in our submission, give those who comply with their leases and otherwise operate their businesses satisfactorily some greater right over and above that provided for by the terms of the lease. No doubt one deals with them on a more amicable basis than with others and is happy enough to see them back, but a little blip across the horizon of that and masking the sunny nature of it somewhat, is the fact that they are actively suing. Your Honours, that is, of course, an event which tends to make less attractive the idea of keeping people there.

KIRBY J: But there is a difference. I could understand that argument if they were seeking the extension for themselves, but they were only seeking the extension in order to assign.

MR JACKSON: Well, they were seeking an extension of the lease, your Honour. The occasions when they sought the extension in the active sense, and it was the two occasions when they wanted to sell, and they are perfectly entitled to seek it, as entitled as we are not to give it. The occasion for them seeking it was that they wanted to sell, but, your Honour, that will very frequently be the case.

GUMMOW J: They had a statutory right to assign under section 10.

MR JACKSON: Yes, your Honour, it is the extra bit. We could not stop them assigning; your Honour will see that in the correspondence. We said we would attach no condition to it, but it is getting, if I could put it this way, the icing that is on the cake.

Your Honours, could I just say also there were references in our learned friend's submissions to this being a case of need on their part. Your Honours, that does not quite reflect, in our submission, what the position was. Your Honours will see that there was really a finding, not of need to sell, but of a desire to get out and, if possible, to sell as well. Your Honours will see that at volume 2 at page 343 in paragraph 37 about line 15.

KIRBY J: Which page, I am sorry?

MR JACKSON: Page 343, your Honour, at the commencement of paragraph 37:

In or about March 1995, Mrs Roberts contacted Glenda Clapp to discuss the possibility of renewal of the lease. She said they were thinking of selling the business. Their daughter was ill and required considerable attention and both she and her husband thought it was time to get out. They had been in the business long enough. She said that if they could negotiate a new lease term that would assist them.

Your Honours, that is a long way from a case of need. It was a matter of choice. Your Honours, that is why, in a sense, when one comes to what the Full Court did, the Full Court was looking at this and speaking of the situation as being no different from that of anyone else who, in the end, wants to, in a sense, get out of a lease but, at the same time, make something from it. Your Honours, that is something that could happen in a large variety of situations: it could be age, divorce, need to care for sick or aged relatives, personal ill health or simply sick of, I suppose, gutting and scaling the fish and standing in front of the cooker all day. Your Honours, those are all the kind of things that make people want to leave, but they do not amount to need.

Could I say, your Honours, that if one goes to Amadio [1983] HCA 14; 151 CLR 447 and going to the passage which reference was made earlier at page 462. Could I just say, your Honours, your Honour Justice Gummow said that in the passages from Bromley that are referred to, there is not any reference to - I cannot think the exact term your Honour used, but there is not any reference to trade or commerce. There is, I suppose, the reference in the second passage quoted on page 462 from Justice Kitto, where he speaks in the third line of "financial need". Now, it is a question of what is meant by "financial need", but one could imagine that there would be circumstances in which a company could unconscientiously take advantage of something, a situation brought about by a "financial need" and, as in the case of most activities of a corporation, though not all and not of all corporations, it might well be in trade or commerce, but, your Honours, that is really about as far, in our submission, as it would go.

The point we would seek to make about it - and I will come back to Amadio in just a moment - is that what one sees in the Full Court is a case where, correctly, their Honours said there is really nothing to this, there is nothing that attracts any of the features that are in this area of unconscionability; it is just, in the end, a case where one has someone who, for one of the many reasons that motivate humanity, wants to get out of it and to sell it.

GUMMOW J: His Honour did refer to the record cases at the bottom of the page too. Schroeder Music is one of them.

MR JACKSON: Yes, your Honour.

GUMMOW J: At the bottom of page 462. Which have more of a purely economic flavour about them, I suspect.

MR JACKSON: Yes. Your Honour, it would be very difficult, with respect, to say that there could be - if I could put it this way - no case that you could describe as occurring in trade or commerce, whatever quite might be meant by that concept, on the one hand, and where the party engaging in the conduct is a corporation. There are cases, your Honour, under the most - I will not say traditional - but most received versions of the notion of unconscionably that could fall within section 51AA. We would seek to say two things about that, in a sense: one is, one does need to bear in mind in relation to section 51AA that the expression "in trade or commerce" is not likely to be enlarging; it is one that is limiting. "trade or commerce" is defined, of course, in the Act as meaning "trade or commerce in Australia or with other countries". They are also the provisions of section, I think, 5A and 6(2)

KIRBY J: But I thought the point being made by the appellant was that true it is that you need that to make validity, but we have to look at unconscionability in a context where it normally has only a limited role to play and the will of the Parliament is that it is to play a role in trade and commerce and that introduces new concepts which in another society or in an earlier time would not have played a big part in trade and commerce.

MR JACKSON: Well, your Honour, one only, in a very debatable sense, needs it for validity, because, of course, the Trade Practices Act is based in a significant measure on the corporations power so that in section 51AA, in its ordinary operation, is speaking about the conduct of a corporation, which would fall within section 51(xx). The need to perceive need perhaps to say in trade or commerce is because of perhaps the fringe elements left of the doubt about the corporations power in saying does it deal with the activities of corporations otherwise than in trade or commerce. So it is simply saying - and your Honour, one could have activities of corporations, that are trading or financial corporations, but, in larger reality, are say, municipal corporations, things of that kind, that really would not be activities in trade or commerce.

KIRBY J: It still leaves the realm of activity one which, at least in orthodox economic theory, is not overburdened with conscionability; it is self-interest.

MR JACKSON: No, that is so, your Honour. Your Honour, may I come onto that in just a moment. What I was going to say about it, your Honour, was that most activities of most corporations take place in trade or commerce. However, if one looks at section 51AA, what it is not doing is increasing the ambit of the concept of unconscionability, because it ties it to what is unconscionable under the unwritten law. If one goes to the general law, one sees, however imperfectly what it may be, but section 51AA picks it up; it does not enlarge it and, if anything, trade or commerce pins it down.

Your Honours, to come then to what your Honour was just putting to me, if one does say, "How does the concept of unconscionability apply in trade or commerce?", one has to bear in mind that at the very heartland of trade or commerce lies negotiation and negotiation is very frequently a negotiation between people who are not of equal bargaining capacity. Your Honours, if one bears that in mind and, your Honour, if I could just put it this way: if there are two airlines in competition, the prospect that some fares will be cheaper does seem a little greater. If the two airlines are reaching a situation where one of them is in significant trouble and there is an ability for the better one to purchase the assets of the one not doing so well, one would think that the price payable is some mirror of the success of the less successful airline. So, your Honours, the point I am seeking to make about that is that one really is talking about section 51AA being applied to a situation of negotiation, where power, placement and money are things of importance.

So the point I am seeking to make about that, your Honours, is that one really is talking about section 51AA being applied to a situation of negotiation where power, placement and money are things of importance. That is where one comes back, if I could do so, to Amadio 151 CLR 462, because if one goes to the particular class of case, as this was framed, one sees Justice Mason saying two-thirds of the way down the page:

I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests.

Your Honours will see the remainder of that paragraph. Bearing in mind that that is a restatement, as it were, of what one sees - - -

GUMMOW J: Well, those words are crucial, are not they, "ability to make a judgment as to his own best interests"?

MR JACKSON: Your Honour, they are, yes, "seriously affects the ability of the innocent party to make a judgment as to his own best interests". Your Honour, that is where if one goes to the present case, one sees the difficulty in identifying what makes this different from any other case where there is an opportunity for a tenant whose tenancy is coming to an end to obtain an advantage, that the tenant is faced with a disadvantage as well, that is, the tenant is involved in litigation with the landlord.

Now, Your Honours, in the very ordinary course of events, our submission would be to say that to require that one be given up to obtain the advantage of the other and that a tenant would not be able to make a judgment as to which is the best interest is a very unusual case.

GLEESON CJ: May I take you back to this passage that you are relying on and to look at the next paragraph. The next paragraph beginning with the words "Because times" refers to a party whose bargaining power is greatly superior. And then in the last line of that paragraph there is a reference to the "disabling condition or circumstances". The word "disabling" there is presumably a reference back to the word "ability" in the fourth-last line of the preceding paragraph. Correct?

MR JACKSON: Yes, your Honour.

GLEESON CJ: So "disabling" means disabling in relation to the capacity to make a judgment as to your own best interests, but a person who is in a greatly inferior bargaining position may have not the slightest lack of capacity to make a judgment about that person's own best interests. The disability is a disability to do anything about it.

MR JACKSON: Yes, and also fewer choices, able to do anything or fewer choices.

HAYNE J: And it may be thought that section 46 was the section of the Act which was concerned with that kind of structural element.

GUMMOW J: That is right. That is why it has always seemed to me that in Australia, English notions of commercial duress are not right, because the statute covers it in section 46 in a very specific way.

MR JACKSON: Yes. The provisions of section 46 go slightly differently, slightly more focused in a way, and do not cover the whole - - -

HAYNE J: Yes, but the very fact of the difference and the focus is that to which I am drawing attention.

GUMMOW J: That is situation or disadvantage.

MR JACKSON: Yes, your Honour, and one can say about it that the legislature has chosen to give the cover an area of it without necessarily wanting to go further. Indeed, it may well be that the legislature in a review of the Act at some point might add or take away. What it does suggest, your Honour, is that the terms of section 51AA should be given the meaning that they say, and that is that you pick up the general law and apply it.

GLEESON CJ: Well, your opponents say that they are relying on the form of unconscionability described by Justice Mason in Amadio at page 462 and that, as I understand it, is an impairment of judgmental ability or capacity, not a weakened bargaining position.

MR JACKSON: As we would understand it, what your Honour is saying about what is the law we would accept or adopt, if I may say so with respect. However, what our learned friends are saying is in fact something different from that. It is off to the side, and that is why - I think I have said this already - one really sees the Full Court saying, "Well, in the end, all you have is a situation where you have someone who is in the same position as any other lessee. That person's position is no different. That person is not relevantly affected."

There is another aspect to it, your Honour, and that is the second half of it, and that is that unconscionability is not just the existence of the diminished seriously affected ability to make the judgment, but also taking advantage of it in an unfair or unconscientious way, or taking "unfair or unconscientious advantage". That is in the same paragraph. Your Honours, that is the second aspect of it at which, in our submission, the case would fail.

GLEESON CJ: What I would like to understand a little better than I do at the moment is the relationship between unconscionability in the statutory provision and driving a very hard bargain.

MR JACKSON: Your Honour, may I say a couple of things about it. The first is that the expression "driving a hard bargain" itself carries with it an element of value judgment, but it also carries with it sometimes, but not necessarily - and perhaps not necessarily - an element of comparison of the position of the two persons.

GLEESON CJ: I can think of a briefer expression than "driving a very hard bargain", but you know what I mean.

MR JACKSON: I am not sure that I do, your Honour, but I do not know that your Honour was going to tell me.

HAYNE J: You might have encountered it recently in this Court, Mr Jackson.

MR JACKSON: Your Honours, what I was going to say is that the difference in the end must in a sense be a question of degree, that not every hard bargain is one brought about on the one hand by something which would seriously affect the ability of one party to make a judgment and on the other hand, the unfair or unconscientious advantage which is obtained. Could I say this. Let us say, your Honours, that one has a tyre that goes on a car and the desire to actually change the tyre personally is not great. The choices are to call the appropriate road service body - assuming there is not a directors meeting that day - and having done that - or, on the other hand, to obtain the services of the garage but the garage is the only one nearby, the only one for a long distance, and the price they will charge for doing it is very high indeed.

Now, they in one sense might be driving a hard bargain, but if they are dealing with a person who does not want to change the tyre personally and has enough money and perfectly prepared to pay, it is a hard bargain from their point of view in the sense they are making a lot of money. It is an annoying thing from the other person's point of view, but on the other hand, there is no affectation of that person's ability to make a judgment as to the person's best interest. Your Honour, the expression "hard bargain" one sees, I think, in the Full Court's judgment here, is one which really is in a sense partly a throwaway line, but it is not - - -

KIRBY J: They do not quite treat it as that. They refer in paragraph 81, which is on 442, to the early decision in Samton which we were told about earlier today. Is this a developed area of the jurisprudence of the Federal Court in this context or not?

MR JACKSON: Your Honour, in Samton Holdings there is a reference to - that you can draw a distinction between parties who adopt the opportunistic approach to strike a hard bargain and parties who act unconscionably. People taking advantage of circumstances to, for example, charge higher prices, things of that kind, do drive a hard bargain.

KIRBY J: Well, that is exactly what they are supposed to do in the market according to economic theory. So what is it that the Act has injected into the answer? Well, you have to look at all the facts, and that is something where the primary judge has some advantages that the Full Court and we do not have.

MR JACKSON: Your Honour, that is true of course in finding what the facts are, but when the firm facts have been found, it is really then a question of saying whether those facts give rise to the two elements that relevantly constitute unconscionability and that is a matter which - - -

KIRBY J: Well, the Full Court seemed to have been affected by its view that you had to have an overbearing of the will, which I rather do not take you to be supporting in your approach to the matter.

MR JACKSON: No, I do not, your Honour.

KIRBY J: So, therefore, the key that unlocked the Full Court's door was erroneous, and you say nonetheless the answer that they gave was correct?

MR JACKSON: I think your Honour is referring to the sentence, "It cannot be said that the Roberts' wills were so overborne", et cetera?

KIRBY J: Yes.

MR JACKSON: Your Honour, that is an observation, in our submission, on the weight of a decision as distinct from being a reason for it. They are saying it cannot be said their wills are overborne, and then they go on to deal in the remainder of that paragraph and the next paragraph with what was or was not unconscionable. They say they were not overborne, so that is the starting point, they had a choice. It may have been a hard bargain, looked at from their point of view perhaps, but it was not one that satisfied either of those two tests.

GLEESON CJ: This may be the importance of that expression within the meaning of the unwritten law in section 51AA. I may be wrong, but I think that the word "unconscionable" is sometimes used colloquially simply as an emphatic way of saying it is a very hard bargain, whereas, as I would have understood the legal meaning of the term "unconscionable", there is more to it than that.

MR JACKSON: Yes, your Honour, that is so. It is right of course to say that sometimes the term is used in a very broad sense, and I think we said at one point in our written submissions that some of the conduct in question was not unconscionable, whatever be the meaning of that term. Your Honour, it is right to say, however, that I think in The Commonwealth v Verwayen, one sees an observation of Justice Deane which seems to go a long way, saying that everything that is unconscionable in the common sense of the term, in a sense, is conscionable in equity. Well, that depends, of course, on the meaning one gives to "unconscionable" in the general sense, in any event. I do not think your Honours have this, but can I just give the reference. It is (1990) 170 CLR 395, and the passage to which I was referring is at the top of page 441 where his Honour said:

As Lord Scarman pointed out in National Westminster Bank Plc v Morgan, definition "is a poor instrument when used to determine whether a transaction is or is not unconscionable: this is a question which depends upon the particular facts of the case". The most -

reverting to Justice Deane -

that can be said is that "unconscionable" should be understood in the sense of referring to what one party -

and he begins to quote from Story -

"ought not, in conscience, as between [the parties], to be allowed" to do . . . In this as in other areas of equity-related doctrine, conduct which is "unconscionable" will commonly involve the use of or insistence upon legal entitlement to take advantage of another's special vulnerability or misadventure.

"Special vulnerability or misadventure" was the expression used.

KIRBY J: But I asked you my question earlier because the Full Court judgment is quite a long one and a very detailed analysis of the facts. They were going through their appellate fact finding, but when you actually look at their analysis that leads them to their conclusion, it is really only two-and-a-half pages and of that a bit of it is introduction, so we get down to paragraphs 80, 81, 82, which really is the core of why they felt authorised to disturb the conclusion of the primary judge where he had all the facts and sat through the whole trial. Now, if they were wrong in the overbearing of the will, what do you say was the mistake of the - just assume that I come to a conclusion that they were wrong in the authority that they thought they had to disturb the primary judge's conclusion. What do you say was the error of the primary judge?

MR JACKSON: Well, what we would say, your Honour, was that the - perhaps if I put it maybe in two ways. Perhaps they are the same thing said twice, but the first would be to say this, that if one looked at the facts found by the primary judge, there was no basis upon which those facts could satisfy the two arms of the relevant aspect of unconscionability that was relied on by the appellant in the case. That is the first thing.

The second thing we would say, your Honours, is that if one looks at the approach taken by the primary judge, it in reality comes down to no more than the basic fact that was adverted to by the Full Court, and that is the fact that you had someone, to put it shortly, who was seeking to have renewal of the lease, tenants seeking to have renewal of the lease, your Honour. I am putting that a little shortly, but I think your Honour will understand what I mean. I suppose another way of putting the second of those propositions is that the matters that the primary judge seemed to take into account perhaps or advert to, other than that last aspect, were ones which were not germane to the resolution of the issue.

KIRBY J: Such as the daughter's position. Is that - - -

MR JACKSON: Yes, your Honour, that is the first, and the others are the various other matters that our learned friends seek to rely on.

HAYNE J: I will see if I can understand the points you have just put, but to begin with, the order that the trial judge made at 387, where the relevant conduct is identified with particularity, conduct identified is requiring "as a condition of the grant of a new lease" something. That is, the conscionable conduct is said to be, or is identified as being, conduct in one party to a transaction, insisting upon the inclusion of a term.

MR JACKSON: Yes, your Honour.

HAYNE J: Unconscionability therefore relates apparently to the formation of the contract, that is, the assent of both parties to it, does it?

MR JACKSON: Yes, your Honour, it does. The way in which it is put in the declaration is requiring "as a condition of the grant", and presumably that is a reference to clause 14.

HAYNE J: As I understand your proposition, it is that the decision of the Roberts to accept or not accept the condition proffered was a decision not affected in any of the ways identified by Justice Mason in Amadio?

MR JACKSON: That is the first aspect. The second aspect is that it would also be not, in our submission, possible to describe the thing that is the subject of the declaration, that is, requiring as the commission, something which is the taking of unfair or unconscientious advantage of the opportunity created.

HAYNE J: The conduct on which we focus is the decision to insist on the term.

MR JACKSON: Yes, your Honour, the decision to insist on the term is the event or the conduct, perhaps I should say more accurately in terms of the statute, which would have to be regarded as being the conduct which was the taking of the unfair or unconscientious advantage. Anterior to that in a sense is identification of the special disadvantage vis-à-vis the owners.

HAYNE J: Once you identify the conduct as requiring the term, much of the argument against you falls away.

MR JACKSON: This was a case always presented as an Amadio case in the Justice Mason sense, if I can put it that way, at page 462 of that case. That is the way it was pleaded, that is the way it was conducted on both sides, and that is perhaps why one does not see too much analysis of the further ambit of the provision except in a theoretical way. Now, your Honours, that being so, it really came down to a case which was fundamentally one of the factual aspects of the case with, however, an ultimate question in the end, whether it was a case falling within the concept referred to in section 51AA under the general law.

Your Honours, could I say, just going back for a moment to the circumstances, in the first place - and I will deal very briefly with these - in relation to the May transaction, your Honours will recall that we offered a new 10-year lease and the new owner did not want 10 years. That was one of the new lessees' two reasons for not being in it at that point. Now, your Honours, a further aspect of the case, in our submission, in relation to the advantage that was taken, the second aspect of Amadio, is the question of the actual disadvantage in money terms. In our submission, there is no reason at all why one cannot look when considering the disadvantage at what it was in fact.

Your Honours, if one has to look at what is the best evidence of that, some very good evidence is the amount at which the proceedings were settled, which your Honours have seen in the agreed facts at pages 88 and 90 of volume 1. If I could first to page 88, your Honours will see a reference at the top of page 88:

On 1 April . . . instituted proceedings in the Supreme Court -

and then the last six lines or so, being a reference to the agreement being confirmed by a letter dated 26 November 1997 from the solicitors acting for inter alia the Roberts, although the Roberts were not parties to the proceedings. You will see the nature of the settlement set out in that paragraph. Then, your Honours, at page 90, the agreed fact in the last four lines of paragraph 59 that if the Roberts had participated in the proceedings the amounts payable to them would have been a total of $2,700-odd.

Now, that is referred to by the primary judge at page 359 and your Honours will see that referred to at page 359 paragraph 69 of his Honour's reasons. We have referred to this in our written submissions, paragraphs 10 to 12.

KIRBY J: That footnote of yours, I have misunderstood that, have I? It rather suggested that the Roberts did take - - -

MR JACKSON: Yes, your Honour, if that is what it suggests, that is incorrect. I think the reason why that is there - - -

KIRBY J: I assumed throughout - - -

MR JACKSON: No, footnote 12, I am sorry, your Honour is right. I think it conveys the wrong impression and says that the Roberts were entitled to a total of 2,750. There is a reference then to the paragraph to which I took your Honour, but the thing about it is, that they would have been entitled if they had been parties. Of course, their solicitor, as your Honours have seen in that agreed fact, wrote about as if he were acting on behalf of the Roberts.

Your Honours, could I just say if one looks at the circumstances as they ultimately arise, one does have a situation where the lease is in the last year, no right to renew. Mr Holland knocks on the door and says, "I want to buy". As part of a co-ordinated, legally advised and represented tenants group, they are already suing the owners for money said to be overpaid under the previous lease. They want a new lease and at a time when they are represented by lawyers and their own estate agents. Your Honours, if one is looking to see what is the disadvantage, only that they cannot get the money from selling a new lease unless we agree to give it to them. If your Honours ask the second half of the question, "What is the conscientious advantage which has been taken?", the answer, in our submission, is that none has been taken. It is just in the end a matter of business.

KIRBY J: Well, it is said you had them over a barrel.

MR JACKSON: Your Honour will recall our learned friend saying, "Well, they were being sued. They thought it was worth 50,000." Your Honours, there might have been two barrels perhaps, if I can put it that way. They wanted the money from selling it. We wanted the litigation over, and the quantum had not been arrived at at that time. No doubt we had our own views, and as your Honour said, double what there was in the settlement. It still is not much. Your Honour would appreciate if one has a tenant and the tenant is suing and the tenant comes along and says, "I want a new lease" and we say, "Well, let's finish off the past before we look to the future" or "if we are going to look to the future, let's finish off the past." It hardly seems a particularly unreasonable thing to do.

Could I go on to say our learned friends made some submissions about the notion that the release was not relevant commercially in the sense adverted to by the primary judge. Your Honours, its commercial relevance in the first place was that the person suing was wanting a commercial favour. One of the chips in the bargaining was the fact of the litigation going on but in any event, your Honours, why, we would submit, was not the resolution of a dispute about the existing lease relevant to the grant of a new? We have submitted in our written submissions some of the reasons referred to my our learned friends in their paragraphs 59 to 61 as being reasons why it was not commercial were in fact the very things that did make it commercial to bring it to an end.

Could I come then, your Honours, to the position of the daughter of the Roberts. Now, your Honours will have seen at page 381, the primary judge found - this is at the top of the page 381, part of paragraph 124 - the primary judge found that:

Mrs Roberts had spoken to Ms Clapp" -

who was an employee of our letting agents -

on numerous occasions over the years" -

and she had been there for six-and-a-half or something years at that stage -

about her daughter's condition and the consequent emotional strain placed on herself and her husband.

Now, your Honours, if I could just pause there at that point, there is no finding by the judge that the daughter's condition played a part or was a reason or a cause for entry into the lease. That is the first thing, your Honours. The second thing is that - - -

KIRBY J: Entering into the lease or entering into the assignment of the lease or - - -

MR JACKSON: Well, your Honour, the December transaction, perhaps I could put it that way. The entering into clause 14, the document contains that.

Now, I said, your Honours, that the judge found that Ms Clapp knew of the daughter's illness. Mr Sullivan, on the other hand, did not. There was no evidence to show that the owners - otherwise than by any attribution to them of the knowledge of Ms Clapp - actually knew of the daughter's condition. Reliance on Ms Clapp's knowledge could only be justified by the application - may I start again. The attribution to the owners of the knowledge of Ms Clapp could only be justified by section 84(1) of the Trade Practices Act. This is a point, I am afraid, which has really, in a sense, arisen this morning, so I am not certain if your Honours have section 84. Section 84(1) at the time - and, I think, still does - provided relevantly that:

Where, in a proceeding under this Part in respect of conduct engaged in by a body corporate, being conduct in relation to which section 46 or 46A or Part IVA, IVB, V or VB applies, it is necessary to establish the state of mind of the body corporate, it is sufficient to show that a -

and if I can simply adopt the appropriate word -

agent of the body corporate, being a director, servant or agent by whom the conduct was engaged in within the scope of the person's actual or apparent authority, had that state of mind.

The point I would seek to make about it is that Ms Clapp may have known of the events, but she was not the acting party in relation to requiring the term in question. Now, your Honours, if it be that the daughter's condition may be taken into account, what does one arrive at? In our submission, fundamentally, no more than a situation where a tenant whose lease is expiring but can be sold has a reason for wanting to sell it. I went through a list of reasons earlier - age, and so on, personal ill health, getting sick of doing it - that is not really any more than that.

It is all very well to say that each case must turn on its own facts, but there will always be a myriad of facts, and if one took the list of possible reasons that people might have for wanting to get out and to sell at the same time, one would have to ask, are all the cases where the owner insists on the litigation coming to an end - are they all cases of special or serious disadvantage, in terms of Amadio? Are some? If so, which? Or are none? But the reality of the situation is that, in our submission, there will be very few cases that could be regarded as falling within those concepts. What one has to establish is in respect of each, that the two requirements referred to exist. In our submission, this is a case falling within the very ordinary range of human behaviour.

KIRBY J: Well, you say that, but there have been cases where parents, in their relations with their children, have been in a special position of vulnerability and disadvantage because of their obligations to their children - or their felt obligations - and so on. Now, what is so different about this case?

MR JACKSON: Well, your Honour, if one took the case of children, and - - -

KIRBY J: I am thinking of a contracts case under the Contracts Review Act in New South Wales where the son wanted to get into a business and the parents were under a lot of pressure by the son, and the parents gave way to the son's desires, with a little bit of pressure from the bank at the time, and there was then an application for relief under the Contracts Review Act. It seems somewhat analogous.

MR JACKSON: Well, your Honour, one does start in circumstances like that with an underlying relationship - parent and child - which is likely to give rise to situations where, first of all, the opportunity to exercise that pressure is likely to exist, but secondly, because of the relationship and sometimes the inability to see the faults of those to whom one is related, the likelihood of succumbing to pressure is greater. Your Honour will also recall that in Garcia v National Australia Bank one of the features that was adverted to there was the possibility of other relationships attracting the same concept of what I think there was also called unconscionability. What that tends to build on is relationships, the nature of which is such that they are likely to give rise to the successful application of suasion, if I can use that word, in its various forms. Landlord and tenant, your Honour, is, with respect, a little remote from that, in the ordinary course of events.

GLEESON CJ: In the days when courts were so tender to protect the interests of expectant heirs, what was it about those characters that attracted such concern?

MR JACKSON: I cannot give your Honour a complete answer. One feature about it may have been the desire to protect, in days when there were, for example, fee tail, things of that kind, the desire to protect fortunes, or what remained of them, for succeeding generations and - - -

KIRBY J: Titles, too.

MR JACKSON: I am sorry?

KIRBY J: Titles. To protect those titles.

MR JACKSON: Yes.

GLEESON CJ: Who are the modern equivalents of expectant heirs? Who do we protect from catching bargains these days?

MR JACKSON: The parents, your Honour. Well, it is perhaps a little difficult to identify them in Australia. Perhaps one might go to people who -and, your Honour, in a sense, it may become more significant as families get smaller. One will see that there are children who are likely, subject to all the contingencies of events, to be heirs to substantial estates. Now, they are persons who, because they have the actual or perceived ability to get funds relatively easily, and by the use of their position, are ones upon whom people are likely to prey.

GLEESON CJ: But what made these expectant heirs vulnerable was that they were being kept out of their money for the time being, was it not?

MR JACKSON: Your Honour, kept out of their money, but would make bargains in relation to what they would do with it when they had it.

GLEESON CJ: But all these people wandering around with great expectations did not get diminished judgment, did they?

MR JACKSON: Well, your Honour, not all, of course, but one is dealing with a spectrum of people. It may well have, in that regard, perhaps an historical aspect to it, in some respects. I do not know that I can really advance that much farther. Perhaps, your Honour, if we could find something more about it, we can give your Honour - - -

GLEESON CJ: Thank you. I would be obliged.

MR JACKSON: - - - a note about that in a few days. Your Honours, one comes, really, in a sense, then, to the question of what were the alternatives in this case. The alternatives really come down to: "Do not grant the new lease" - which may be hard on the Roberts, "Grant the new lease, and let the litigation take its course" - that seems pretty tough on us. The third thing is: do what was done. Our learned friend's submission in response to that, if one goes to the appellant's submissions in reply, one sees in paragraph 48 - and this is in response to this question being raised by the other respondents. It says:

As to the rhetorical question `what should the owners have done' . . . the answer is simple. They should not have exploited the particular vulnerability of the Roberts in relation to the sale of their business.

Well, your Honour, that, with respect, is something that is a worthy, but, in our submission, impractical and unreal answer, which does not reflect the words of section 51. Your Honours, we adopt, of course, our written submissions, but those are our oral submissions.

GLEESON CJ: Thank you, Mr Jackson. Yes, Mr Hutley.

MR HUTLEY: If your Honours please, we adopt the submissions of my learned friend, Mr Jackson. As has been said, the case was conducted on the basis of the principles to be found expressed in the leading decisions in this Court, particularly Amadio and Bridgewater v Leahy. There were really two issues before the trial judge, firstly, and before the Full Court. Was there a special disadvantage, within those principles? The trial judge held there was, at paragraph 122 of his judgment, and the Full Court held there was not, at paragraph 75 of the Full Court judgment. As to whether unfair advantage was taken, the trial judge, in paragraph 124, held it was, and the Full Court, between paragraphs 70 and 80, held it was not.

Your Honour, we would seek to analyse the transaction first from the point of view of the taking advantage, with a view to pointing up, one, why there was not, but also, that will disclose what the flaw in the approach of the trial judge was to identifying a special advantage. Relevantly, as has been observed, there seemed to be three possible outcomes to the negotiations between the Roberts and the owners, and we will call them outcomes A, B and C. We put them in descending order, on the basis from the most desirable to the least desirable, from the point of view of the Roberts.

Firstly, renewal of the lease and retention of the suit - outcome A. Outcome B, renewal of the lease and release of the suit, and outcome C, no renewal of the lease and retention of the suit. Outcome A was obviously the desired outcome for the Roberts, but was unacceptable to the owners, and the owners were at liberty to prevent it. It was never the case of the ACCC that the owners had to deal with the Roberts to achieve outcome A. That, of course, is the option - the existence of an option. Outcome B - - -

KIRBY J: The theory of the section that is being advanced is that you had to put the release of the suit out of mind, because of the operation of the section.

MR HUTLEY: But, your Honour, if it is put that we had to ignore the release of the suit in determining whether to renew or not, in our respectful submission, that simply cannot be the law. The owners made the decision, on the advice of my client, not to renew leases while the suits were on foot. It was accepted by the trial judge, and no submission was put to the contrary in the Full Court, that that was an available approach. That is, outcome A was not one which was incumbent upon the owners to proffer.

KIRBY J: Not at law, but the suggestion is by force of the Act.

MR HUTLEY: No, your Honour. It was not run that equity or conscience required it. That, in our respectful submission, is the flaw with the whole analysis. The owners were at liberty to decline to deal - that is, to renew - and, on the advice of my clients, they had determined, in their own commercial interests, to so deal. Now, outcomes B and C were not desired by the Roberts, although outcome B - that is, renewal and release - was preferred to outcome C. The Roberts were at liberty throughout to choose either outcome. The owners were prepared to accept outcome B or C, but probably preferred outcome B, namely, the renewal of the lease with the release of the suit.

The owners chose outcome B, being the preferable of the two outcomes. Essentially, the conduct complained of lies in the proffering by the owners of the alternatives, of outcomes B or C. This is against the background, of course, when the value of the business was contingent upon achieving renewal of the lease. In our respectful submission, practically all other facts are irrelevant in determining this case. Analysis therefore must be concentrated on those circumstances, and that, in our respectful submission, is what the Full Court did, between 72 and 80.

Justice French, at paragraph 123, found that the special disadvantage lay in the dependency of the value of the business upon renewal. The unconscionable conduct involved the owners - to use his Honour's words - "extracting" release of the suit through a refusal to renew other than on that basis. He characterised the release of the suit as "commercially irrelevant". His Honour accepted that the owners could pursue outcome C; what they could not do is - to use his Honour's words - "extract" outcome B. His Honour's reasoning, of course, in our respectful submission, is illogical. The concept of extracting the release fails to have regard to the fact that, at all times, outcomes B and C were on offer. It is illogical that the owners can be found not to have acted unconscionably if they offer Hobson's choice - that is, outcome C - however, they can act unconscionably if they offer a range of options which includes Hobson's choice.

GLEESON CJ: Well, it seems to involve the proposition that the Trade Practices Act prohibited them from acting so as to deprive the Roberts of $60,000 - I am sorry - permitted them to act so as to deprive the Roberts of $60,000 and prohibited them from depriving them of $3,000.

MR HUTLEY: In fact, obliged them to deprive them of the opportunity to earn $60,000.

KIRBY J: No. It said that it forced them into providing the $60,000 and not subtracting the three.

MR HUTLEY: No, your Honour, no case was put - - -

KIRBY J: Well, I know you keep saying that, but that may be the flaw in the way the case was put. The theory that is being presented to us is not quite so illogical. It may not be open on the way the case was put, but it is said that you cannot take advantage of people who are vulnerable, bending over the barrel.

MR HUTLEY: Well, your Honour, if that is the case, the oddity of it is that because the Roberts had failed to negotiate an option at the time they entered into this lease to renew, and because they would lose the value of their business at the end of the lease, they acquired, by force of the unwritten law, an option.

GLEESON CJ: I thought you put it to us a minute ago that Justice French found that it would have been perfectly lawful for the owner simply to have had no further dealings with Roberts.

MR HUTLEY: Quite. That is what he found.

GLEESON CJ: That would have deprived the Roberts of $60,000.

MR HUTLEY: Quite.

KIRBY J: Now, I like this - - -

MR HUTLEY: But the logic of his Honour's judgment, in our respectful submission, is that that is what our clients were obliged to do, unless they gave the Roberts outcome A.

GLEESON CJ: That is why I was interested in these brewery leases, because you can have a situation, can you not, of which I thought brewery leases might be an example, where you could have a landlord who was obliged to give a renewal because of representations that were made about goodwill, for example.

MR HUTLEY: Yes, your Honour. There was that series of cases about, in effect, the acquisition of goodwill and what its character was, and, in effect, it almost turned, really, on customary approach in relation to pubs which had developed over time, in New South Wales, particularly. That is really what informed that series of litigation - various historical reasons associated with pubs in New South Wales. I do not know if it applied outside New South Wales, but that is as I understood how the circumstances arose.

KIRBY J: Now, this logical analysis that you have just done - I do not remember reading that in your written submissions.

MR HUTLEY: Your Honour, it really is just the exposure of the submission which appears at paragraph 22 - darest one say, slightly more focused language - on page 7. That analysis points up a number of conclusions, firstly, that there was no taking advantage of any special disadvantage. Absent an obligation to renew without a release, the Roberts were in fact offered more than the owners had to offer. It also is apt to identify the flaw in the approach to special disadvantage, and - to take up something which fell from the Bench - equity is concerned with the capacity to protect one's interests, and, as Justice Hayne observed, it assumes that there are interests to protect. Further, in our respectful submission, it assumes that the capacity is not impaired just because a person has to make unpalatable decisions.

Unpalatable decisions arise out of what is called an inequality of bargaining power, which, of course, can arise from a myriad of circumstances. Often, of course, a measure of a person's astuteness, and thus their ability to protect their interests, is his or her capacity to make the best choice between available - albeit unpalatable - alternatives, and further, to realise when they have no choice, in the circumstances, and to act accordingly. To take up a question that fell from your Honour the Chief Justice, a hard bargain is just that - a bargain. It is just a very unpalatable one, from the point of view of the offeree of the disadvantageous terms. One, of course, is always in a position where one can say, "No". It just means that one has to accept the consequences of not taking up the hard bargain.

KIRBY J: I think the theory of the Act is that some hard bargains will merge into - given the circumstances and the vulnerability of the parties - an unconscionable bargain.

MR HUTLEY: Your Honour's reference to the circumstances of the parties, if those are circumstances which impact upon the capacity - and I will come to that in a moment - of the person to judge the bargain that they are entering into, we would agree with that. That, of course, explains what the Full Court was doing when they referred to the fact that the will had not been overborne. They were saying, in effect, "Well, we have been through all this". There are options available to them; there is the unpalatable outcome C, there is the less unpalatable outcome B. They chose unpalatable outcome B. Question: it may be that equity would intervene if it were established that, in choosing outcome B, their will was overborne to the extent that they were unaware or impaired or incapable of determining that there was even outcome C.

That was the significance in the context of the analysis of the Full Court's consideration of whether the will was overborne - that is, had the capacity of the Roberts - was it impaired? The problem with a concept of situational disadvantage, if it is merely a means to refer to a factual position in commerce that a person finds him or herself in, is that it is apt to divert attention from what, in our submission, is the important questions. Firstly, what are the interests which in fact exist?

Secondly, to measure the reaction of the person in the light of those interests by reference to the true principles appearing in the unwritten law in the cases in this Court to which your Honours have been referred. Thirdly, identifying the quality of that reaction, in the light of those principles. Where his Honour erred is in failing to identify the interests and measure the reaction of Mr and Mrs Roberts to the position in the light of those interests. Instead, his Honour conflated a number of steps and fell into error in assuming, sub silentio, that the Roberts should have, and therefore equity would give, the result which they desired.

GUMMOW J: The result being what?

MR HUTLEY: They are not to be dealt with except on the basis of achieving the best possible result - - -

KIRBY J: Option A.

MR HUTLEY: Option A. Yet acknowledging at the same time that that was not compelled upon our client. In other words, his Honour, in effect, effectively said, "If you want to deal with them at all, you must give them option A".

GLEESON CJ: "But you can lawfully ignore them."

MR HUTLEY: "But you can lawfully ignore them." Now, in our respectful submission - - -

GUMMOW J: So you can only deal with them to your disadvantage.

MR HUTLEY: Quite - your Honour, because there was a failure to identify interests, such as Justice Hayne referred to, as the first step before analysing whether there has been an impairment of the capacity to protect those interests. The two last points we would like to make submissions on, beyond that which is in our written submissions, is the reference in his Honour's judgment to things being, "commercially irrelevant". That is a phrase which, in our respectful submission, is also apt to mislead, it being an elliptical noun phrase. The question immediately is, commercially relevant - - -

GUMMOW J: You use the word in paragraph 23, "commerciality", which shocked me, at any rate.

MR HUTLEY: I am sorry, your Honour. That was Mr Perram, your Honour.

GLEESON CJ: We assumed that from your earlier argument. Characterising a benefit as "commercially irrelevant" suggests that there is some objective standard available to the courts to determine relevance and irrelevance to the parties collectively.

CALLINAN J: But is not the word "concession" a misdescription?

MR HUTLEY: I am sorry, your Honour?

CALLINAN J: The word, "concession", in that passage at 380 in the primary judge's reasoning, at about line 27. His Honour said:

Unfair exploitation of disadvantage amounting to unconscionable conduct may occur when an owner uses its bargaining power to extract a concession - - -

MR HUTLEY: Yes, well, the word "extract" is, in our respectful - - -

CALLINAN J: I know, but it is not a "concession".

MR HUTLEY: It is a deal. It is a hard deal, but it is a deal.

CALLINAN J: Well, it was not a concession. They had a choice. Which was better: the uncertain outcome of a claim which might be, and was worth, only a few thousand dollars, or a new lease, which would enable the sale of the business to be made for tens of thousands of dollars?

MR HUTLEY: Precisely, your Honour. It is - - -

CALLINAN J: You cannot describe that as a concession, surely.

MR HUTLEY: Yes, your Honour, and it also is led by the concept of extracting. "Extracting" brings with it a notion of no choice. The simple fact is that the Roberts always knew they had a choice. When they signed the arrangements with the Hollands in October, they immediately went to the owners' agent and said, "Are you going to insist upon the release?" So they always knew that the release was a potential aspect of the deal - an unpalatable one - and your Honours have heard all that. What we say is that the problem one arrives at, if one speaks in terms of "commercially irrelevant", is that it puts the court in a position where it has to define some objective standard of what is commercially relevant.

Now, commercial relevance to men and women of business in relation to transactions is usually what they can get out of them. Their relevance arises from the fact that they become part of the currency. In other words, if one can obtain benefits, one does, subject to the controls which have been referred to such as section 46, section 4D, section 45 and section 47 of the Trade Practices Act.

KIRBY J: And, it is said, section 51AA.

MR HUTLEY: And it is said.

KIRBY J: You just want to write it out of the Act.

MR HUTLEY: No, your Honour. We say it is just not found in the writing of this Court.

KIRBY J: Whet my appetite with a conception of a case where that section would be attracted. Is there such a case?

MR HUTLEY: Your Honour, a myriad of cases within the conventional principles at the very heart of business. Taking insurance, what is happening in insurance companies is currently the flavour of the month. In New South Wales, let it be assumed an insurance broker was putting bad business to an insurance company and realised that the underwriter within the insurance company had a secret drinking problem.

GLEESON CJ: What about the case of a brewery that over decades had conducted its business on the basis that it encouraged its licensees to believe that they had goodwill but yet gave them tenancies of three years with no renewability. Why would not this section apply to that?

MR HUTLEY: Your Honour, in those circumstances it all depends what the - if the conduct said is the creation of an expectation and a belief that that was marketable and, for example, a practice of making it marketable such that people entered into agreements on that assumption that were so represented, it may be, firstly, that they would be estopped from denying such marketability and that it may be unconscionable to depart from that representation, one can well imagine, but that would not be necessarily in the principles referred to in Amadio. A number of other equitable principles might well be engaged to achieve a result.

GLEESON CJ: We do not have to decide in this case, do we, that Amadio sets out the metes and bounds of unconscionability for the purpose of this legislation?

MR HUTLEY: Your Honour, the case was never run on the basis that this was to be the sort of encyclopaedia for section 51AA.

GLEESON CJ: But the case has been presented on the basis that Amadio sets out the metes and bounds of this claim.

MR HUTLEY: Quite, yes, your Honour. For example, no submission was ever made - - -

KIRBY J: That cannot be so, can it? Why would Federal Parliament be bothered enacting the provision?

MR HUTLEY: Your Honour, why Federal Parliament was bothered - - -

KIRBY J: Why bother?

MR HUTLEY: To engage the remedies.

GUMMOW J: And to engage the ACCC as the plaintiff's champion at the public purse.

GLEESON CJ: The Roberts are not here trying to set aside this transaction.

MR HUTLEY: Precisely, your Honour. One, to give standing to the ACCC but, secondly, the range of remedies available under the Trade Practices Act is, on one view, substantially broader than might be traditionally available in an equity court.

KIRBY J: Yes. So far as I know, an equity court has not ordered re-education.

MR HUTLEY: No, not yet. Your Honour, in that regard no case was mounted in this case concerned with the principles in Crescendo Management Pty Limited v Westpac or Barton v Armstrong, your Honour. It formed no part of the case at any stage.

GUMMOW J: It seems to me it had to if they were going to win.

MR HUTLEY: Well, your Honour, it simply formed no part of the case at any stage and it was not run on that basis.

GUMMOW J: I realise that.

MR HUTLEY: The conception is that the words, particularly of Justice Mason in Amadio, enabled one to, in effect, determine situations of commercial vulnerability and that was a special disadvantage, that is to identify situations where one had no interests and could then say if one takes advantage of that, that is if in commerce a person plays upon the fact that one has no particular interest, that would engage the principles that Justice Mason referred to in the case, and we submit it simply has nothing to do with it.

Finally, as we have submitted, commercial relevance is a matter of the choice of the parties. The final submission we would make, your Honours, is in relation to relief when one looks from the point of view of had the principles referred to in Amadio in fact been engaged, one of the things which would have of course gone to whether any relief would have been granted on the basis of unconscionability is, as Mrs Roberts deposed, she ignored the relevant covenant and continued to pursue her rights in the relevant - - -

GUMMOW J: Where do we see that? The judge made findings about that.

MR HUTLEY: Your Honour will see the actual evidence at volume 2, page 287. Now, there was an issue, as it were, floating about at first instance as to whether this was what was called "key money" and your Honours will see reference to that which is, as it were, a premium. All one could say from paragraph 40 is perhaps that view was maintained by the relevant parties.

GLEESON CJ: It does not seem to me to be a silly argument.

MR HUTLEY: Your Honour, it simply points up what developed in debate between the Bench and my learned friend. To inquire as to what happened subsequent to the transactions is not irrelevant to a consideration as to whether the conduct should be characterised as unconscionable, not only questions of valuation of those interests but whether the offending provision has or has not, as it were, operated in the real world.

If the Court pleases, those are our submissions.

GLEESON CJ: Thank you, Mr Hutley. Yes, Mr McKerracher.

MR McKERRACHER: Your Honours, may I respond briefly to one or two points. First, your Honours were taken by my learned friend, Mr Jackson, to the proposition that rather than being a need on the part of the Roberts, really it was just a desire to get out of the business. I simply point to the fact that the evidence to which my learned friend took your Honours was evidence in existence in March 1995. The passage being considered at that point in time was many months before the events complained of in December 1996.

Can I also respond to the suggestion that section 46 of the Act might be intended to deal with a circumstance of power, a misuse of power. In our respectful submission, it would be erroneous to construe Part IV of the Act as having anything to say about the conduct in a circumstance of Part IVA and Part V of the Act. Part IV, a misuse of market power, is driven towards anti-competitive behaviour by corporations. There is nothing in the context of this situation at all which could be remotely relevant to such a comparison.

GUMMOW J: What do you say about the relationship between 51AA(2) and this case?

MR McKERRACHER: And the exclusion of 51AB?

GUMMOW J: Yes.

MR McKERRACHER: We say that that is why what is achieved - and that was not in operation at the time - but we say that is - - -

GUMMOW J: Well, 51AB was, was it not?

MR McKERRACHER: Section 51AB was in operation.

GUMMOW J: Yes.

MR McKERRACHER: We say that is why there is a spreading of the notion of unconscionable conduct and covering the entire field through those three sections in different areas of operation. We would say, much like Justice Einfeld said, that, theoretically at least, 51AA could operate between sizeable corporations or between a corporation and a government if there is a special disability in the context of the law as developed through those cases following from Blomley v Ryan.

The essence of many commercial situations, in our submission, will be that lack of ability to make a judgment which the Roberts faced in this situation here. The Roberts had, through Mrs Roberts, really no practical choice other than to sign. In that sense there was no judgment able to be exercised because it was her view that she had no choice in the matter, and that was the view accepted by the trial judge.

If the opposite opinion is formed and if one examines the logical, as it is put, demonstration of options, it is overly simplistic, in our respectful submission, because that enables the imposition of any number or any style of conditions whatsoever and if they are not accepted, then that would be something of which no complaint could be made.

GUMMOW J: No, that is not what I was asking you. Looking at 51AA as it stood at the relevant time, it said that the section "did not apply to conduct prohibited by section 51AB". Now, to find, as the judge found here, is one thing. Did he not also have to go on to find whether or not 51AB applied? If it did, it would cut out 51AA. In other words, can you determine a 51AA case and - - -

MR McKERRACHER: Section 51AB is a consumer goods type of case, your Honour, so it would not have application.

GUMMOW J: Right. That would be right, would it not?

MR McKERRACHER: That his Honour would have to consider it?

GUMMOW J: Yes. I know this case is different but as a matter of structure of the Act - - -

MR McKERRACHER: As a matter of structure of the Act, that is correct, yes.

GUMMOW J: Right. As it now stands you would, would you not?

MR McKERRACHER: Yes, you would look at the appropriate section. There is a range of options there, then 51AC goes on to look at the different range of small business dealings with a different shopping list, so to speak, and a limit of $3 million for the transaction and excluding a limited company.

GUMMOW J: Yes, but if this case had been fought today under the Act as it now stands, you could not just look at 51AA(1), could you?

MR McKERRACHER: No, you would have to consider the whole. Absolutely.

GUMMOW J: You have to consider 51AC as well, would you not?

MR McKERRACHER: Yes, you would, your Honour.

GUMMOW J: Thank you. That way you throw a line on the construction of it as Justice Kirby was remarking this morning.

MR McKERRACHER: Yes, that is certainly so. Just dealing with the options argument as advanced - - -

KIRBY J: If you are going to send in the explanatory memoranda and second reading speeches in relation to 51AA, we had better have it in relation to these new provisions in the Act as well.

MR McKERRACHER: Yes, certainly, we will make those available.

KIRBY J: To see what it was that they thought that they needed to remedy.

MR McKERRACHER: We will certainly provide those, your Honour. There are extracts in the submissions that have been handed up as well but the full body will most certainly be provided.

The point which, in our opinion, has maybe been misunderstood in relation to the options in the circumstances of the Roberts case is that his Honour's observation about the option of the owners to not offer a new lease at all is an observation as to their legal entitlement. Nothing was canvassed before his Honour, it was not relevant to the case before his Honour, and it would have been obiter to consider whether or not a failure to do that might breach the Trade Practices Act or be otherwise inequitable. So it is not the position that his Honour was saying that could be done without breaching the Act, he was simply collecting the position at law but it was a position at law which simply did not apply because it was not on the facts before him. The facts that were before him are those which his Honour analysed at page 378 of the book, after quoting from the passage from Justice Fullagar in Blomley v Ryan and also Justice Deane in Amadio setting out the qualifications to that and observing that the onus is cast on the stronger party to show that the transaction was fair, just and reasonable, observing:

The elements of inequality, disadvantage or disability on the one hand and the unfair conduct of the stronger party taking advantage of them on the other are not, in my opinion, to be weighed up as though independent. It is conduct in context which has to be judged. A party may take advantage of the disadvantage of another without necessarily acting unfairly or so unfairly, having regard to the nature of the disadvantage, that equity would intervene. Where the disadvantage or inequality is great it may take less to discern unconscientious exploitation of it than in a situation involving less disadvantage or inequality.

And he goes on to apply that approach to the particular circumstances of the case.

What his Honour was considering was not a question of whether or not the owners should have not offered anything at all but rather their conduct in the context of the pleaded facts and the articulated nine points of special disability in the statement of claim and he concluded it in that context that "each case much be considered according to its own circumstances" which comes from many judgments of the Court looking exclusively at this area. "The personal circumstances of the Roberts are also relevant in so far as they were known to the owners or their agents" and he goes on to talk about the facts of that. The relevance of those circumstances can go both to the special disability and also to the conduct and the conscionability of the conduct, and I make that point in the context of the agency argument advanced by my learned friend, Mr Jackson.

Your Honours, we make the point that if one in reality does not have a real choice other than to concede and sign then, in reality, one does not have a choice; one cannot exercise the judgment contemplated by Amadio and that is the position as found by the trial judge in all the circumstances of this case. In our submission, this is a case amongst many in which 51AA will have work to do.

Unless there is anything further, your Honours, those are our submissions.

GLEESON CJ: Thank you, Mr McKerracher. We will reserve our decision this matter and we will adjourn for a few minutes to reconstitute.

AT 3.48 PM THE MATTER WAS ADJOURNED