Euginia v Chong [2007] VSC 381

What the court decided

Euginia Pty Ltd (Euginia), the landlord, leased premises to John Chong in 1997; after that lease expired in February 1999 he stayed on under a monthly overholding tenancy, and paid no rent from 13 May 1999 [8]. Euginia ended the tenancy and sued the tenant's brother, Joo Chong, for the arrears [1], [2]. Euginia alleged that Joo Chong had represented he would pay the rent personally or, alternatively, would ensure his brother paid it, and that these were misleading or deceptive contrary to section 11 of the Fair Trading Act 1985 (Vic) (the Act) [3].

Joo Chong admitted giving a "personal assurance that the rent would be paid on time" (the assurance) [9]. Euginia's primary case was that, by the assurance, he had represented he would be personally bound by the 1997 lease and overholding tenancy [9]. The magistrate refused that finding, and Euginia did not appeal [10]. She found that the assurance meant only best endeavours to persuade and help his brother pay on time, which in the circumstances was not misleading or deceptive [4].

Euginia appealed under section 109 of the Magistrates' Court Act 1989 (Vic) on grounds of error of law [5], [34].

Bell J treated whether the assurance misled or deceived as a question of law on the words in their individual context, the objective test being common ground [16]. His Honour accepted Euginia's submission that, depending on context, such an assurance could mean more than best endeavours, and thought that in a particular context it could extend to paying the rent personally "if the tenant failed to do so" [17]. But "a reasonable person of business in the position of the parties" would have understood it as best endeavours to have John Chong pay on time; the magistrate correctly held it neither misleading nor deceptive [18]. Euginia's alternative case restated the failed primary case: Joo Chong could not lawfully make his brother pay, so "ensure" could add, if his best endeavours failed, only his paying the rent himself, which the magistrate had excluded [19].

Under section 10A(1) of the Act, a future matter representation lacking reasonable grounds was taken to be misleading [22]. Bell J held that the assurance, as the magistrate construed it, concerned a future matter, so Joo Chong had to prove reasonable grounds, and that she wrongly failed to apply section 10A in her primary analysis [24]–[25], [28], [37]. She had said that had section 10A needed consideration she would have found reasonable grounds, which Bell J treated as "in effect" an alternative basis [30]. Her reasons were that the rent had been paid for many years until mid-May 1999, and that Joo Chong was in regular contact with his brother and "had considerable involvement in his financial affairs" [31]. His Honour held that basis correct: Joo Chong discharged his onus [32].

Bell J concluded the magistrate did not err in law, and the appeal would therefore be dismissed with costs [37]–[38].

Why it matters

Whether the assurance misled or deceived turned, as was common ground, on the objective impact of its words, in context, on a reasonable person in the parties' position [16]. Bell J thought another context could have stretched it to payment by Joo Chong if the tenant failed to pay [17]. As a best endeavours representation as to a future matter, the assurance put on Joo Chong the section 10A onus of showing reasonable grounds, which the magistrate had to address before moving on [24], [25], [28]. Her alternative finding that he discharged it, on undisputed facts, was upheld [32].

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.