Problem Question:

Christian has been operating a bakery/coffee business called YumYums 2 U (YY2u) which went well for the first year, slowed down by 20% for the second but hit a major downturn in year 3. The contract has 2 years, 1 month remaining on a five-year lease.

Business dropped off substantially in March-June 2020 as the COVID-19 restrictions, distancing requirements and customer reactions to home isolation regulations impacted all the merchants' business in that area (except for the store that sold toilet paper and hand gel).

COVID restraints caused a range of issues around customer access and, more broadly, self-isolation has meant customers were not keen to head out for cake and coffee. Business has picked up a bit in June but it is expected this downturn will run for another two months before things return to normal levels of operation.

Christian discussed this with his landlord, LL, and explained he was concerned he might have to close up shop permanently if business didn't improve. LL responded:

'Not to worry. We can drop your rent by 40% until the end of your lease to make up for the hassles and you can run some terrific door buster specials to make sure all those loyal clients figure out it is worth the hassle to get here. You are a good tenant; you make awesome lamingtons and ANZAC biscuits and I have no desire to see you go out of business or risk losing your tenancy."

Christian was delighted, told LL that was great and he would, as suggested, immediately run a couple of weeks of 2 for 1 product specials. He proceeded to run the specials and business went back to year 2 levels at the end of June. Better yet, the area around the store was renovated by the local council during the COVID months and has left the area looking fantastic with lots of potential for decent atmospheric outdoor coffee and cake catch ups. LL was thrilled with the upgrade as he did not have to pay towards this council initiative.

Unfortunately, however, Christian has just received an email (on 10 July 2020) from LL indicating that now construction is done, LL intends to put the rent back up in September to the prior level in line with the contract (which still has another 2 years and 1 month to run until the end of its five years).

Christian tells LL he does not want to pay the full rent again and is enjoying the extra money in his pocket from the 40% discount LL gave him.

LL responds by telling Christian the discount will end in September and LL says he is also thinking about claiming back the 40% discount in rent, backdated to June.

Christian is not happy and, knowing you are a super business law guru now, has sought your advice as to his legal rights, obligations and options against LL. Explain the relevant law and how it applies to his situation, including recommendations as to the likely prospects of success around each. Be specific and reference appropriate legal authority.

To add to his run of bad news, Christian tells you he has just purchased 10 litres of a product which was advertised on the website and in store as 'hospital grade hand sanitiser containing 75% alcohol'. It came with an automatic dispenser machine for customers to use the sanitiser as they entered YY2u. Christian poured the first bottle of hand sanitiser into the dispenser and noticed that it was like water. Worried about the health of his customers Christian arranged for the sanitiser to be independently tested and the test confirmed that there were no disinfectant properties at all in the product and a near zero percentage of alcohol. The report concluded that the sanitiser Christian purchased was useless in killing viruses and germs when customers used it on their hands.

Christian is furious, he bought the product from HealthE, and clearly explained the purpose of the sanitiser to the assistant. The pharmacist at HealthE told Christian that not only was this product 75% alcohol, it was also the 'best hand sanitiser in the world'. Both the 75% alcohol content and the statement, 'best hand sanitiser in the world' were advertised on HealthE's website, on the product itself and in the paper brochures in store.

Christian has paid the invoice for the sanitiser and asks for your advice. He wants to know if HealthE would be liable under s18 Australian Consumer Law (ACL) which is Schedule 2 to the Competition and Consumer Act 2010 (the CCA). Christian also asks what he should do with the sanitiser as there was a sign stating 'no refunds under any circumstances' at the counter when he paid for the product. Do not address sanctions or penalties related to HealthE.

Getting Started:

For the avoidance of doubt, please ignore any real (or imagined) issues re:

? landlord/tenancy, Qld real estate or other equivalencies including COVID 19 temporary changes

? Agency - assume this not to be at issue on these facts

? Any formalities for executing the existing lease- assume all steps were fully compliant

Focus primarily on the major issues that may be relevant to this including

breach, estoppel, collateral contract, termination, damages, s18 Australian Consumer Law (ACL) which is Schedule 2 to the Competition and Consumer Act 2010 (the CCA), puffery.

When researching s18 ACL, remember that before 2010, the relevant legislation was contained in s52 Trade Practices Act and as a general rule, cases dealing with s52 TPA are applicable to s18 ACL. On that basis, cases dealing with s52 TPA can be cited in support of your arguments.

In preparing, you can read the materials on offer/acceptance and consideration, estoppel, ACL s18 and breach, and (at least) summaries of the following:

Pharmaceutical Society of Great Britain v Boots (1953). Chappel & Co Ltd v Nestle Co Ltd (1960). Stilk v Myrick (1809). Central London Property Trust v High Trees House Ltd (1991). Waltons Stores v Maher Je Maintiendrai v Quaglia (1980)