Appellant v Respondent

Supreme Court of Victoria|2010-10-15|Before: KYROU J

Paul & Paul Pty Ltd v Business Licensing Authority [2010] VCAT 26 (8 January 2010) (Megay SM)

ADMINISTRATIVE LAW - Victorian Civil and Administrative Tribunal - Merits review - Failure by the Tribunal to make an independent decision - error of law.

ADMINISTRATIVE LAW - Victorian Civil and Administrative Tribunal Act 1998, s 117 - inadequate reasons for decision - error of law.

ADMINISTRATIVE LAW - Victorian Civil and Administrative Tribunal Act 1998, ss 46(2) and (7) and 49(1)(a) - Obligation on Business Licensing Authority to provide reasons for decision.

1 This is an appeal under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ('VCAT Act') from an order of the Victorian Civil and Administrative Tribunal ('VCAT') dated 8 January 2010. That order affirmed a decision of the Business Licensing Authority ('BLA') dated 28 August 2009 to impose three additional conditions on the motor car trader's licence of Paul & Paul Pty Ltd ('Paul & Paul'). The effect of the first of the three additional conditions was to require Paul & Paul to trade as a wholesale motor car trader, rather than as a retail motor car trader.

2 Paul & Paul has relied on three grounds of appeal, namely, that the VCAT did not make an independent decision; that the VCAT did not provide adequate reasons for its decision; and that the VCAT's decision was not reasonably open in all the circumstances of the case.

3 For the reasons that follow, I have upheld the first two grounds of appeal. The VCAT's order will be set aside and the proceeding will be remitted to the VCAT to be heard and decided again.

4 On 28 August 2006, the BLA granted a motor car trader's licence to Paul & Paul ('Licence'). The Licence was subject to the following conditions:

The licensee shall provide to the Business Licensing Authority a complete set of financial statements for the financial years ending 30 June 2007 and 30 June 2008 within 90 days of the completion of each financial year.
The licensee shall notify the Business Licensing Authority in writing within 48 hours of a person being appointed as, or ceasing to be a director of the licensee.

5 The Licence authorised Paul & Paul to trade as a motor car trader, which included buying motor cars from the public and selling motor cars to the public. Such a licence is known as a 'retail motor car trader's licence'.

6 At the time that the Licence was granted, Paul & Paul had two directors, namely, Paul Cowling and his wife, Johanne Cowling. On 17 April 2007, the BLA was notified that Mrs Cowling had resigned as a director of the company on 2 April 2007. As Mr Cowling did not own any assets, the BLA requested Paul & Paul to provide a bank guarantee for $10,000. Such a guarantee was provided on 14 August 2007.

7 On 27 November 2007, Mykola Denysenko was appointed as a director of Paul & Paul. It was not in dispute that Paul & Paul failed to notify the BLA of this change in directorship within the time required by condition 2 of the Licence. In fact, such notification was not provided until 22 December 2008.

8 It was also not in dispute that Paul & Paul did not provide to the BLA its financial statements for the financial years ended 30 June 2007 and 30 June 2008 within 90 days of the completion of each of those financial years, as required by condition 1 of the Licence. In fact, the financial statements for the financial year ended 30 June 2007 were not provided to the BLA until 12 June 2008 and a complete set of the financial statements for the financial year ended 30 June 2008 was not provided to the BLA until 6 November 2009.

9 Further, it was not in dispute that Paul & Paul failed to comply with s 20(1)(b) of the Motor Car Traders Act 1986 (Vic) ('MCT Act'), which required the company to notify the BLA of a change in its business premises within 14 days of any such change. The evidence before the VCAT suggested that Paul & Paul changed its trading premises from 415-473 Maroondah Highway, Ringwood to 10-12 Plunkett Road, Dandenong ('Dandenong premises') on 11 March 2009 and that this change was not notified to the BLA until 2 June 2009.

10 Once the BLA became aware of Mr Denysenko's appointment as a director of Paul & Paul, it sought further information from the company about Mr Denysenko and his business activities. Between 24 December 2008 and 10 July 2009, the BLA sent to Paul & Paul numerous letters seeking information on various matters, including information about the business activities of other companies with which Mr Denysenko was associated and which traded from the Dandenong premises. The requests for information were made pursuant to s 82AX of the MCT Act.

11 The responses that Paul & Paul provided to the BLA's request for information were invariably late and incomplete. The company frequently asked for extensions of time and then failed to meet the extended timelines for the provision of the information. It is obvious from the correspondence that the failures by the company to respond fully to the BLA's requests for information on a timely basis caused frustration and concern to the BLA.

12 In the BLA's letter of 21 May 2009 to Paul & Paul, the BLA stated that, if the requested information was not provided by 9 June 2009, it would consider immediately imposing a wholesale licence condition without any further notice to Paul & Paul. Such a condition would have prevented Paul & Paul from selling motor vehicles to members of the public by confining its sales to other licensed motor car traders.

13 On 2 June 2009, Paul & Paul provided to the BLA a copy of a planning permit dated 29 June 2005. The permit authorised the use of the Dandenong premises for the purposes of motor vehicle sales. The permit stated that it would expire if that authorised use did not commence within two years of the date of the permit. As it appeared to the BLA that Paul & Paul's use of the Dandenong premises did not commence until after 29 June 2007, the BLA sought from Paul & Paul evidence of a current planning permit.

14 On 4 June 2009, the BLA wrote to Paul & Paul and requested that the company provide to the BLA by 26 June 2009 complete financial statements for the financial year ended 30 June 2008 and certain other information. In the letter, the BLA stated that it would consider immediately imposing a wholesale licence condition without any further notice to Paul & Paul if the outstanding information was not provided by 26 June 2009.

15 On 24 June 2009, Paul & Paul's solicitors wrote to the BLA and provided some of the information that the BLA had requested. The letter requested an extension until 24 July 2009 for the provision of the outstanding information.

16 On 10 July 2009, the BLA granted an extension until 24 July 2009.

17 On 22 July 2009, Paul & Paul wrote to the BLA and stated that the outstanding information could not then be provided because the responsible partner at its accounting firm had 'just arrived back from England due to a family emergency.' The letter concluded, 'We will keep you informed as to when the documentation that you require will be available.' The BLA did not respond to this letter.

18 On 28 August 2009, Julienne Parsons, a member of the BLA, made a decision pursuant to s 14(1)(b) of the MCT Act ('BLA's Decision') to impose the following additional conditions on the Licence:

The licensee shall not offer to sell, sell or otherwise dispose of a motor vehicle except to a person who is the holder of a Motor Car Traders Licence under the Act.
The licensee is authorised to carry on business as a motor car trader from the premises endorsed on this licence certificate only insofar as to do so is consistent with the requirements and restrictions, if any, of the relevant local planning authority.
The licensee must submit to the Business Licensing Authority a copy in writing of the relevant planning authority's approval to lawfully trade in motor cars from the endorsed address within 14 days of the date of such approval.

19 On the same day, the BLA sent a letter to Paul & Paul's solicitors advising of the BLA's Decision. The letter referred to the previous correspondence between the BLA and Paul & Paul; to the company's failure to provide to the BLA all the outstanding information that was set out in the BLA's correspondence; and to the BLA's statement in its letter of 4 June 2009 that it would consider immediately imposing a wholesale licence condition if the company failed to provide it with all of the required information.

20 As at 28 August 2009, the information that had been requested by the BLA and that had not then been provided by Paul & Paul included the company's financial statements for the financial year ended 30 June 2008, information relating to Mr Denysenko and companies that were associated with him and evidence of a current planning permit.

21 The BLA's letter of 28 August 2009 did not, in terms, set out any reasons for the BLA's Decision. The letter stated that, '[h]aving regard to the provisions of section 46 of the [VCAT Act], the statutory grounds on which the decision is based are: [s]ection 14(1)(b) of the [MCT Act]'. I will discuss these statutory provisions below. In relation to the second and third additional conditions, the letter stated:

The BLA has determined to impose conditions 2 and 3 on your client's licence because information currently before it indicates there is not a current planning permit for the site at 10-12 Plunkett Road Dandenong and therefore it cannot be used to lawfully trade in motor cars, and the BLA has not received a copy of a current planning permit issued by the local planning authority as required from your client in previous correspondence, demonstrating your client is entitled to lawfully trade in motor cars from the address.

22 As I have mentioned at [1] above, the effect of the imposition of the first additional condition was to prevent Paul & Paul from selling motor vehicles to members of the public by confining its sales of motor vehicles to other licensed motor [1]ar traders.1 The condition required Paul & Paul to alter its business from that of a retail motor car trader to that of a wholesale motor car trader. In substance, although not in form, the imposition of the first additional condition cancelled the company's retail motor car trader's licence and substituted for that licence a wholesale motor car trader's licence.

23 Given the serious consequences of the additional conditions for Paul & Paul's business, it is extraordinary that the BLA did not provide any reasons for the BLA's Decision. In my opinion, the BLA's failure to provide reasons was based on a misconstruction of s 46(2)(a) of the VCAT Act.

24 It appears that, in its letter of 28 August 2009, the BLA relied on s 46(7) of the VCAT Act. That provision states that a written statement of reasons for a decision by the BLA complies with s 46(2)(a) if it sets out the statutory ground on which the decision is based. Section 14(1)(b) of the MCT Act confers on the BLA a power to impose conditions or restrictions on a licence. It does not state any grounds for doing so. Accordingly, the BLA's statement that the grounds on which the BLA's Decision is based 'are' s 14(1)(b) is nonsensical because that provision does not set out any grounds.

25 In my opinion, s 46(7) of the VCAT Act applies only to decisions that are based on a statutory provision which sets out grounds upon which the decision can be made. An example of such a provision is s 13 of the MCT Act.

26 On 7 September 2009, Paul & Paul filed an application to the VCAT seeking a review of the BLA's Decision. On 16 September 2009, the VCAT made an order staying the operation of the BLA's Decision until the hearing of the application for review or until the making of a further order. The VCAT's order of 16 September 2009 fixed the substantive hearing of the application for review for 23 November 2009 and required the parties to file their evidence by 13 November 2009.

27 The BLA filed a statement pursuant to s 49 of the VCAT Act. That statement referred to the relevant legislative provisions and the history of dealings with the BLA and Paul & Paul. It also attached copies of relevant correspondence and other documents. It did not, however, set out any reasons for the BLA's Decision.

28 Section 49(1)(a) required the BLA to file with the VCAT a statement of reasons given by it under s 46(1) or, if no such statement had been given, a statement containing the matters set out in s 46(2)(a). As the BLA had not previously provided a statement of reasons and was not exempted by s 46(7) of the VCAT Act from the obligation to do so, the BLA was required by s 49(1)(a) to provide a statement of reasons.[2]

29 The BLA filed a witness statement of its then registrar, Graeme McDonald. The witness statement set out the history of dealings between the BLA and Paul & Paul, and the BLA's concerns 'regarding the suitability of [Paul & Paul] to hold a licence allowing it to trade in motor cars to the general public.' Those concerns were not described as the reasons for the BLA's Decision. Further, the witness statement did not explain why the concerns warranted the imposition of the three additional conditions.

30 Paul & Paul did not file any witness statements.

31 The hearing before the VCAT commenced on the morning of 23 November 2009 and concluded on the same day. At the start of the hearing, counsel who then appeared for Paul & Paul, Mr Simon, handed to the presiding senior member, letters dated 6 and 10 November 2009 from Paul & Paul's solicitors, which were said to provide all outstanding information, including a complete set of the financial statements for the financial year ended 30 June 2008. Nine days after the VCAT had reserved its decision, Paul & Paul filed with the VCAT its financial statements for the year ended 30 June 2009. The materials before me do not enable me to determine whether Paul & Paul was required to provide these financial statements to the BLA and, if it was required to do so, when they were due.

32 As I have mentioned at [1] above, on 8 January 2010, the VCAT made an order affirming the BLA's Decision. On the same day, the VCAT published reasons for its decision ('Reasons'). The Reasons comprised 43 paragraphs extending over 10 pages.

33 Paragraphs 1 to 14 of the Reasons set out the background factual matters and the BLA's Decision. Paragraph 15 refers to the procedural history of the application for review and paragraph 16 describes the letters that are referred to at [31] above. Paragraphs 17 to 20 of the Reasons discuss Mr Simon's submission that the BLA had not complied with s 49 of the VCAT Act because the statement that had been filed pursuant to that section did not set out reasons for the BLA's Decision. The VCAT rejected the submission on the basis that s 46(7) only required the BLA to refer to the statutory provision pursuant to which it had made the BLA's Decision. For the reasons set out at [24] and [25] above, the VCAT was incorrect. That error, however, does not form part of the grounds of appeal.

34 In paragraph 21 of the Reasons, the VCAT set out an additional basis for rejecting Mr Simon's submission. The VCAT stated that it conducts a hearing de novo and makes the correct or preferable decision based on all the material that is before it, including the documents in the BLA's s 49 statement. The VCAT went on to say:

The fact that this is an application de novo means that the Tribunal can consider what was before the decision maker and any other material that is relevant. It considers the entire matter afresh. It is notable that no witness statements were filed in support of this application. The Tribunal did not hear from any of the directors, from the company accountant or indeed from anyone. The section 49 statement was filed and served and was in the possession of the licensee well before the matter came before the Tribunal. It contains all the correspondence passing between the Authority, the company, its directors, its accountants and its lawyers. The licensee simply cannot seriously suggest that it was unaware of the Authority's requirements or the reasons for its action.

35 Paragraphs 22 and 23 of the Reasons discuss some procedural matters and the admissibility of Mr McDonald's witness statement.

36 In paragraphs 24 to 26 of the Reasons, the VCAT referred to the letters of 6 and 10 November 2009 that Mr Simon had handed to the presiding senior member at the commencement of the hearing. The VCAT stated:

It seems that on 6 November 2009 the applicant's solicitors served and filed a document entitled 'Applicant's Response' which was to be placed 'on the court file.' In that response there was indication that the applicant's financial statements for the year ended 30 June 2008 had been provided to the respondent on 6 November 2009 and the document also contained some of the answers to the Authority's outstanding requests.
At the commencement of the hearing before me I was handed copies of two letters from Messrs Chadwick acting for the licensee (see para 16). The first of those letters was a copy of a letter to Mr McDonald at the BLA providing some information formerly requested by BLA back in June and purportedly enclosing the 'Financial Statement for the period ending 2008'. The second was dated 10 November 2009 and was addressed to the Registrar of the BLA and was headed 'DRAFT' in the top right hand corner; further information was provided in that letter. Whether the information in those two letters essentially answers BLA's enquiries is not known to the Tribunal.
On 2 December 2009 (well after completion of the hearing), counsel for the licensee forwarded to the Tribunal a copy of the [2009] accounts.[3] Unsurprisingly, the respondent's solicitor has objected to the Tribunal considering the contents of those accounts and I have put them to one side.[4]

37 In paragraphs 27 to 38 of the Reasons, the VCAT referred to correspondence between the BLA and Paul & Paul and the various defaults by Paul & Paul in the provision of information to the BLA.

38 The last five paragraphs of the Reasons - paragraphs 39 to 43 - are crucial to a consideration of the three grounds of appeal. Those paragraphs are set out below:

The Tribunal did not hear from the accountants or the directors and in the absence of such evidence it considers the submission put forward by counsel to be entirely lacking in substance.[5] The necessity for the filing of accounts is not a minor or insignificant matter. What the Tribunal infers from the evidence before it is that the directors of the licensee company have a particularly cavalier attitude to the regulatory framework in which they operate, they see no reason to comply with regulatory timelines and appear to be entirely contemptuous of the role of the BLA. The Tribunal finds it astonishing that, faced with the possibility of a 'wholesale only' licence flagged as a possibility as early as June 2007, it did nothing to ensure its position, nothing to comply with the Authority's requirements and indeed only provided the requested information a matter of days before this hearing. One would have thought that establishing the solvency and efficiency of the company to the satisfaction of the Authority would have been at the forefront of the directors' thoughts. Counsel's submission that now all the information has been provided it should be 'business as usual' entirely disregards the purpose of the legislation and the regulatory regime in which motor car traders operate.
The purpose of the Motor Car Traders Act 1986 is spelled out with considerable clarity in section 1 of the Act. It is expressed as follows:

The purpose of this Act is to provide for the regulation of motor car traders and to ensure that licensing is carried out efficiently and equitably and that the rights of those who purchase motor cars are adequately protected.[6]

When this legislation was initially introduced into Parliament the then Minister for Consumer Affairs expressed the objects in the following vein:

The objects of the Bill are to ensure that people who wish to trade in motor vehicles are fit and proper and that they will deal with the public in ways that are fair and reasonable. Particular attention has been given to putting in place provisions which will ensure that the rights of purchasers are protected and, where necessary, enhanced.

In meeting these objectives, the Government has been conscious of the need to avoid unnecessary or onerous regulation. It has sought to balance the often conflicting and competing requirements of motor car traders and consumers in a way that provides for efficient procedures and optimum protection for all parties.

It is no doubt with these objects in mind that the Authority determined that the conditions it imposed were a proper response to its regulatory duty and were designed to sit comfortably with its responsibility for the efficient and equitable trading in vehicles and the provision of optimum protection to consumers.
The recent and most important condition imposed on the licensee (as distinct from the two relatively minor planning conditions) is that it 'shall not offer to sell, sell or otherwise dispose of a motor vehicle except to a person who is a holder of a Motor Car Traders Licence under the Act'. The result of the condition is that the licensee can no longer deal with members of the public. In the circumstances set out and for the reasons expressed herein the Tribunal sees no reason to tamper with the conditions and affirms the decision.

39 On 18 February 2010, Lansdowne AsJ granted to Paul & Paul leave to appeal and a stay of the VCAT's order of 8 January 2010 pending the hearing and determination of the appeal.

40 The notice of appeal sets out the following grounds of appeal:

The learned Senior Member erred in law in affirming the Respondent's decision and imposing additional condition 1 on the Appellant's Motor Car Trader's licence:

(i) Without having independently determined whether the imposition of the additional condition was necessary; and

(ii) Without giving any or any adequate reasons, for the imposition of the additional condition on the Appellant's Motor Car Trader's licence.

The learned Senior Member erred in law in failing to give any reasons or any sufficient reasons for the imposition of the additional conditions 2 & 3 imposed on the Appellant's licence.
The decision was not reasonably open to the learned Senior Member in all the circumstances of the case.

First ground of appeal: failure to make an independent decision

41 In the appeal, it was not in dispute that the VCAT was required to review the BLA's Decision on its merits and to make an independent decision on the action, if any, that should be taken in relation to the Licence.

42 Mr Reid, who appeared for the BLA, submitted that the VCAT had independently reviewed the evidence before it and had concluded that, in the light of the history of defaults by Paul & Paul, the correct decision was the decision that had been made by the BLA to impose the three additional conditions on the Licence.

43 Mr Reid submitted that the adoption by the VCAT of the BLA's Decision was not inconsistent with the VCAT arriving at its own independent decision. He contended that it could be inferred that, after independently reviewing all the relevant material, the VCAT had concluded that Paul & Paul's defaults warranted the imposition of the three additional conditions and that, having arrived at this conclusion, it was appropriate for the VCAT to affirm the BLA's Decision.

44 Mr McCormick, who appeared for Paul & Paul, submitted that, although the VCAT reviewed the factual background and made some findings of fact, the language in paragraphs 42 and 43 of the Reasons indicated that the VCAT had not made an independent decision, but had confined itself to considering whether the BLA's Decision was reasonable.

45 Mr McCormick submitted that paragraph 42 of the Reasons referred to the BLA's assessment, rather than the VCAT's assessment, of how the BLA's Decision was consistent with the objects of the MCT Act. He placed particular emphasis on the VCAT's statement in paragraph 43 of the Reasons that it saw 'no reason to tamper with the [three additional] conditions'.

46 Mr McCormick also referred to the VCAT's statement in paragraph 25 of the Reasons that it was 'not known to the [VCAT]' whether the financial statements for the financial year ended 30 June 2008 that had been provided to the BLA on 6 November 2009 and handed to the presiding senior member at the commencement of the hearing, 'essentially answers BLA's enquiries'. Mr McCormick submitted that the statement was 'quite telling' because it showed that the VCAT was relying on the BLA's assessment, rather than making its own assessment.

47 I agree with Mr Reid that it is not necessarily inconsistent with the VCAT's obligation to conduct a merits review and to arrive at its own independent decision for the VCAT to adopt as its own the decision under review and the primary decision-maker's reasons for that decision. In the present case, if the BLA had given reasons for the BLA's Decision and the VCAT, after reviewing the evidence before it and making findings of fact on that evidence, had discussed the reasons of the BLA and had made it clear that it had independently decided that the BLA's Decision was the correct or preferable decision for the reasons given by the BLA, the VCAT would have discharged its independent review function.

48 There are at least three reasons, however, for rejecting the applicability of the above analysis to the facts of this case.

49 The first reason is that the BLA did not provide any reasons for the BLA's Decision. The closest that it came to doing so was the witness statement of Mr McDonald, which listed the BLA's 'concerns' about the conduct of Paul & Paul. The witness statement, however, did not explain the nexus between those concerns and the imposition of the three additional conditions. It did not, for example, identify the risks to the public in buying motor vehicles from Paul & Paul and explain why those risks warranted a revocation of the company's authority to sell motor vehicles to the public.[7] It is simply not possible to discern how the VCAT arrived at its decision by reference to any reasons that were given by the BLA.

50 The second reason is that the Reasons do not explain how the circumstances prevailing as at the time of the hearing before the VCAT warranted the imposition of the three additional conditions.

51 In paragraph 39 of the Reasons, the VCAT made findings of fact that the directors of Paul & Paul had 'a particularly cavalier attitude to the regulatory framework in which they operate' and that they 'appear to be entirely contemptuous of the role of the BLA.' Having made those findings, the VCAT did not explain how the directors' attitude to regulatory matters would be compatible with Paul & Paul holding the wholesale motor car trader's licence that the BLA's Decision had effectively substituted for the company's existing retail motor car trader's licence.

52 In paragraph 39 of the Reasons, the VCAT also found that Paul & Paul had provided all outstanding information to the BLA 'a matter of days before this hearing'. This finding of the VCAT meant that the factual position as at the date of the hearing before the VCAT was materially different from the factual position as at the date of the BLA's Decision when important information was still outstanding. The VCAT did not explain why, notwithstanding that Paul & Paul had supplied all outstanding information as at the date of the hearing, it was appropriate to impose the three additional conditions.

53 The VCAT's statement in paragraph 25 of the Reasons that the VCAT did not know whether the information that Paul & Paul had provided to the BLA on 6 and 10 November 2009, 'essentially answers BLA's enquiries', clearly indicates that the VCAT did not consider that it was necessary for it to conduct its own assessment of the position.

54 The third reason for rejecting the applicability of the analysis at [47] to the facts of this case is the structure of, and the language used in, the Reasons.

55 In the first 38 paragraphs of the Reasons, the VCAT refers to factual and procedural matters. In paragraph 39, it made the findings of fact that are referred to at [51] and [52] above. In paragraph 40 of the Reasons, the VCAT referred to s 1 of the MCT Act, which sets out the purpose of the Act. That purpose is set out at [38] above. In paragraph 41 of the Reasons, the VCAT quoted what the then Minister for Consumer Affairs said about the objects of the MCT Act in the second reading speech for the Motor[8]Car Trader's Bill 1986 (Vic).8 The Minister's statement of the objects of the MCT Act is set out at [38] above.

56 If, as Mr Reid submitted, the VCAT reached an independent decision on the action, if any, that should be taken in relation to the Licence based on its findings of fact and the purpose and objects of the MCT Act, one would expect to find that independent decision in the two remaining paragraphs of the Reasons. Paragraphs 42 and 43 of the Reasons, however, do not contain any explanation as to why the three additional conditions were warranted. Indeed, those paragraphs make no reference at all to the VCAT's findings of fact.

57 Paragraphs 42 and 43 of the Reasons do not set out any nexus between the VCAT's findings of fact and the purpose and objects of the MCT Act, on the one hand, and the imposition of the three additional conditions, on the other hand. Rather, those paragraphs refer to the BLA's Decision and conclude that there is 'no reason to tamper with [that decision]'.

58 In my opinion, paragraphs 42 and 43 of the Reasons, read in the context of the Reasons as a whole, clearly indicate that, although the VCAT was aware that it was required to conduct a hearing de novo and to make a fresh decision, it failed to conduct a truly independent merits review. The VCAT reviewed the BLA's Decision in the factual context in which it was made by the BLA; the VCAT then decided that, as the BLA's Decision was reasonable, there was no reason to alter it. In doing so, the VCAT failed to review the BLA's Decision in the context of the factual position prevailing at the time of the VCAT's hearing, and to decide independently the action, if any, that should be taken in relation to the Licence in the light of the factual position.

59 My conclusion at [58] above is supported by the fact that the VCAT did not consider any alternative course of action. During the hearing before the VCAT, Mr Simon submitted that 'a fine would have ... been an appropriate way of ensuring compliance.' As the BLA is not authorised by the MCT Act to take enforcement action, such action could only have been taken by the Director of Consumer Affairs ('Director'). Mr McDonald gave evidence before the VCAT that, as a matter of practice, the Director responded positively to any request by the BLA for the taking of enforcement action against a licensed motor[9]car trader.9

60 In the light of the VCAT's finding that, as at the date of the hearing, Paul & Paul's breaches of the two original Licence conditions were purely historical, it is not clear why the VCAT did not discuss the option of referring those breaches to the Director and, instead, confined itself to the course of action adopted by the BLA, namely, the imposition of the three additional conditions.[10]

61 If the VCAT's concerns related to the financial viability of Paul & Paul, it could have considered the option of requiring an increase in the amount of the bank guarantee.

62 If the VCAT had engaged in an independent review with the aim of reaching an independent decision on the action, if any, that should be taken in relation to the Licence, one would have expected it to consider any alternative courses of action that were reasonably open and to explain why it preferred the option of imposing the three additional conditions.

63 The fact that the VCAT confined itself to a consideration of the course of action adopted by the BLA and asked itself whether there was any reason to 'tamper' with that course of action indicates that the VCAT did not conduct an independent review and that it did not reach an independent decision. The VCAT impermissibly presumed the correctness of the BLA's Decision.

64 In his written submissions, Mr Reid relied heavily on Paul & Paul's failure to call any evidence at the VCAT hearing. He submitted that, as the only evidence before the VCAT was that of Mr McDonald, the VCAT was justified in concluding that the imposition of the three additional conditions was appropriate in all the circumstances. I agree that the failure by Paul & Paul to lead any evidence enabled the VCAT to make findings of fact that were favourable to the BLA. Neither that failure nor those findings, however, self-evidently justified the imposition of the three additional conditions. In the absence of an explanation in the Reasons of why the VCAT's findings of fact warranted the imposition of the three additional conditions, the irresistible inference is that the VCAT simply assumed the correctness of the BLA's Decision without independently considering for itself the appropriateness of those conditions in the light of the VCAT's findings of fact.

65 In his oral submissions, Mr Reid emphasised that the three additional conditions would not necessarily operate in perpetuity because s 14(1)(c) of the MCT Act empowered the BLA to vary or revoke those conditions. He submitted that the BLA could revoke the conditions once it was satisfied that Paul & Paul had become fully compliant. In my opinion, s 14(1)(c) has no bearing on the first ground of review.

66 For the above reasons, I find that the VCAT made an error of law in failing to make an independent determination on whether the imposition of the three additional conditions was the correct or preferable decision in light of the circumstances prevailing as at the time of the hearing before the VCAT. Accordingly, I uphold the first ground of appeal.

Second ground of appeal: failure to provide adequate reasons

67 In the appeal, it was not in dispute that a failure by the VCAT to comply with its obligation in s 117(1) of the VCAT Act to provide reasons for its order, constitutes an error of law.[11]

68 The question of the adequacy of reasons, in the context of an appeal from the County Court, was considered by the Court of Appeal in Franklin v Ubaldi Foods Pty Ltd.[12] Ashley JA, with whom Warren CJ and Nettle JA agreed, said:

Reasons must be such as reveal - although in a particular case it may be by necessary inference - the path of reasoning which leads to the ultimate conclusion. If reasons fail in that respect, they will not enable the losing party to know why the case was lost, they will tend to frustrate a right of appeal, and their inadequacy will in such circumstances constitute an error of law.[13]

69 In determining whether the VCAT's reasons are adequate, the Court does not scrutinise those reasons over-zealously with a view to finding error.[14] Nor does the Court expect the VCAT to address every issue raised in the proceeding. It is enough for the VCAT to make findings on the material facts on which its decision turns and to explain the logic of the decision. Its reasons must also be intelligible. Reasons are not intelligible if they leave the reader to wonder about the process of reasoning which has been followed.[15]

70 The second ground of appeal overlaps with the first ground of appeal. If the VCAT had provided adequate reasons for its decision to affirm the BLA's Decision, it may have been possible to conclude that it had arrived at an independent decision based on those reasons. As is evident from the discussion at [47] to [57] above, a key reason for my conclusion that the VCAT did not reach an independent decision was the absence in the Reasons of any explanation of why, having regard to the VCAT's findings of fact and the purpose and objects of the MCT Act, it was appropriate to affirm the BLA's Decision to impose the three additional conditions.

71 Mr Reid submitted that the Reasons were adequate because, when they were read as a whole, it was possible to infer the VCAT's path of reasoning. He submitted that the VCAT's path of reasoning was that the facts as found by the VCAT and the purpose and objects of the MCT Act necessitated the imposition of the three additional conditions.

72 I reject Mr Reid's submission. In my opinion, any attempt to infer the VCAT's reasons for its decision would not disclose an unambiguous path of reasoning. Rather, it would expose a number of competing inferences without providing any guidance as to which inference was correct.

73 One possible inference is that the VCAT formed the view that the historical breaches by Paul & Paul should not be allowed to go unpunished and that the imposition of the three additional conditions was a necessary punitive measure.[16] One of the difficulties with this inference is that the MCT Act does not confer any enforcement powers on the BLA. The BLA is not permitted to use its powers for the purpose of achieving indirectly an outcome which it lacks the power to achieve directly.

74 Another possible inference is that Paul & Paul's breaches of its regulatory obligations were so serious and so prevalent that the company could not be trusted to comply with its regulatory obligations in the future. One of the difficulties with this inference is that the three additional conditions permitted Paul & Paul to continue trading as a licensed wholesale motor car trader and to remain subject to ongoing regulatory obligations.

75 A further possible inference is that Paul & Paul's breaches of its regulatory obligations indicated that the company and its directors were not suitable persons to have business dealings with members of the public. One of the difficulties with this inference is that the VCAT did not make any adverse findings against Paul & Paul or its directors on matters such as financial viability and probity; it simply found that the directors had a cavalier and contemptuous attitude to regulatory compliance. Furthermore, the three additional conditions did not prevent Paul & Paul from buying motor vehicles from the public.

76 This discussion indicates that any attempt to infer the VCAT's path of reasoning is speculative and unsafe. The fact is that the VCAT failed to articulate any nexus between its findings of fact and the purpose and objects of the MCT Act, on the one hand, and its decision to affirm the BLA's Decision, on the other hand. It is simply not evident from the Reasons why the VCAT decided to take the drastic step of effectively cancelling Paul & Paul's retail motor car trader's licence and substituting a wholesale motor car trader's licence.

77 Mr Reid also submitted that, in 'making sense' of the VCAT's decision, the Court can refer to the documents that were read by the VCAT, even though the documents were not quoted or analysed in the Reasons. In my opinion, in the circumstances of this case, any reliance on information that is external to the Reasons for the purpose of inferring the VCAT's path of reasoning would merely heighten the speculative and hazardous nature of such a task.

78 The above discussion has focused on the first of the three additional conditions. The task of identifying the VCAT's reasons for imposing the second and third additional conditions is even more precarious because the only clue that is provided by the Reasons is the parenthetical description of those conditions - in paragraph 43 of the Reasons - as 'the two relatively minor planning conditions'.[17]

79 For the above reasons, I find that the Reasons fail to set out the VCAT's path of reasoning. This failure constitutes a breach of s 117(1) of the VCAT Act and an error of law. Accordingly, I uphold the second ground of appeal.

Third ground of appeal: the VCAT's decision was not reasonably open

80 In the appeal, I asked Mr McCormick whether the third ground of appeal raised an error of law. While conceding that he had had difficulty in understanding the third ground of appeal, Mr McCormick was not prepared to abandon it. He submitted that it was linked to the first and second grounds of appeal. He also suggested that it may raise an error of law based on the ground of Wednesbury unreasonableness or on the ground that there was no evidence to support the VCAT's order.

81 In view of my conclusions on the first and second grounds of appeal, it is not necessary for me to express a final view on whether the third ground of appeal was proper. It suffices for me to say that, if Paul & Paul had failed on the first and second grounds of appeal, it also would have failed on the third ground of appeal.

82 The appeal will be allowed. The VCAT's order of 8 January 2010 will be set aside and the proceeding will be remitted to the VCAT to be heard and decided again. I will hear from the parties on the precise form of the order to be made by the Court and on the question of costs.

[1] The company could continue to purchase motor vehicles from the public.

[2] It is to be noted that s 49(1)(a) refers to s 46(2)(a) and makes no reference to s 46(7).

[3] The Reasons refer to the 2008 accounts. In the appeal, the parties agreed that the reference should be to the 2009 accounts.

[4] In paragraph 16 of the Reasons, the second letter is said to be dated 19 November 2009, whereas, in paragraph 25, it is said to be dated 10 November 2009. For ease of reference, I will assume the letter is dated 10 November 2009.

[5] It is not clear to which submission the VCAT was referring.

[6] The VCAT failed to note that on 1 December 2008, s 1 of the MCT Act was amended by substituting the words 'deal with motor car traders' for the words 'purchase motor cars'.

[7] The witness statement referred to only one risk to the public. This was the risk that, given the fact that several companies operated businesses at the Dandenong premises, members of the public would be confused about the company with which they were dealing.

[8] See Victoria, Parliamentary Debates, Legislative Assembly, 9 October 1986, 1208 (Peter Spyker).

[10] It is arguable that the second of the two original Licence conditions was beyond the power of the BLA as being repugnant to s 20(1) of the MCT Act. Not only did the condition specify a shorter period than the period set out in s 20(1) for the giving of notice of a change in directors, a breach of the condition exposed Paul & Paul to a penalty of 100 penalty units under s 14(2) compared to the penalty of five penalty units for a breach of s 20(1).

[11] See Secretary, Department of Treasury and Finance v Dalla-Riva [2007] VSCA 11; (2007) 26 VAR 96, 102 [23]; [2007] VSCA 11 (13 February 2007).

[12] [2005] VSCA 317 (21 December 2005).

[13] [2005] VSCA 317 (21 December 2005) [38] (citation omitted). See also ACN 087 528 774 Pty Ltd v Chetcuti [2008] VSCA 274; (2008) 21 VR 559, 566 [20].

[14] Minister for Immigration and Ethnic Affairs v Liang [1996] HCA 6; (1996) 185 CLR 259, 271-2.

[15] Commissioner of State Revenue v Anderson [2004] VSC 152 (12 May 2004) [33]; Caruso v Kite [2008] VSC 207 (18 June 2008) [32].

[16] There is a hint that this was the VCAT's intention in its rejection of Mr Simon's submission that, as Paul & Paul had provided all outstanding information prior to the hearing, it should be 'business as usual'. See [38] above.

[17] It may be that the VCAT intended to adopt the BLA's reasons that are set out at [21] above. If this was the case, the VCAT did not make clear that intention.

Civil and Administrative Tribunal Act 1998

Car Traders Act 1986

Licensing Authority Act 1998

At a glance

Court

Decision date

Before

Source

Judgment (122 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (2)