BOGHOSSIAN v WARNER & ORS

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40863/98

MASON P HANDLEY JA BEAZLEY JA

JUDGMENT 1 MASON P: A building dispute about a comparatively small sum of money has got completely out of hand. Much time and cost have been expended and much of that expenditure will be wasted if, as the claimant alleges, the determination of the building disputes tribunal is vitiated for lack of jurisdiction or denial of procedural fairness. The case is troubling because it is clear that the claimant has had a general understanding of the central allegation made against him from as early as late 1995. However, some of the points raised by the claimant are said to be based upon his lack of complete comprehension of English. His first language is Armenian and he requires the assistance of his wife or an official interpreter from time to time with complex matters. But he has lived in Australia for over 30 years and it is clear that he is generally able to understand and be understood in English. Like any litigant he is entitled to due process, no less and no more. 2 Mr Warner and the claimant owned a development site at Meadowbank and they retained Nascon Pty Ltd (Nascon) to construct a duplex there. There was a building dispute and Nascon suspended work. Mr Warner lodged a building claim against Nascon with the Registrar of the Consumer Claims Tribunals. 3 Proceedings before the tribunal eventuated in an order made on 26 July 1996 that the claimant pay Mr Warner $25,000. That order was challenged in the Supreme Court on the bases that it was made (a) without jurisdiction and (b) in circumstances involving a denial of natural justice. Smart J dismissed the summons with costs. 4 The claimant seeks leave to appeal and the hearing of that application has been treated as if it were the hearing of an appeal. The application was filed out of time, but we heard full argument and it is appropriate to deal with the matter on its merits. 5 In this Court the first opponent is Mr Warner, the second opponent is Nascon and the third opponent is the Registrar of the Consumer Claims Tribunals.

The jurisdiction and powers of a building disputes tribunal 6 A building disputes tribunal has jurisdiction to determine a "building claim" and to make one of the orders set out in s12I and s30 of the Consumer Claims Tribunals Act 1987 (the Act). A "building claim" includes a: claim … for the payment of a specified sum of money … that arises from a supply of building goods or services, whether under a contract or not, or that arises under a contract that is collateral to a contract for the supply of building goods or services (s12A(1)) .

The building claim is considered to be a consumer claim for most purposes (cf s12B), thereby incorporating the general provisions of the Act dealing with consumer claims per se . 7 A tribunal's order is final (s34), with limited immunity from judicial review (s12). The order may, however, be challenged if the tribunal had no jurisdiction to make it or if, in relation to the hearing or determination of the claim, a party to the claim has been denied natural justice (s12(2)). 8 A consumer claim is made by lodging a claim in the approved form (s13). It is then the obligation of the Registrar of Consumer Claims Tribunals to cause notice of the claim to be served on every person against whom the claim is made or who appears from the claim to have an interest in resolving the dispute to which the claim relates (s14(1)(c)). The Registrar has a similar obligation in relation to a person whom a referee considers to have a sufficient interest in resolving the dispute where the referee makes an order directing the joinder of that person (s14(2),(3)).

Proceedings before the tribunal leading to the order 9 In his Claim Form dated 1 November 1995 Mr Warner sought a "money order" of $10,025. Only one respondent is named, Nascon. Mr Warner provided details as follows: the builder has wholly suspended the carrying out of the works see attached

10 The attachment as filed was a memo signed by Mr Warner dated 30 October 1995 which, omitting formal parts, stated: CONTRACTORS RESPONSE The contractor has refused to proceed with the work. The Contractor alleges that Paul Boghossian, part owner/client, has: 1. Demanded and received secret payments before handing over Progress Payments. 2. Has asked, and may have received secret payments or other consideration from subcontractors and/or suppliers. 3. Has asked, and may have received a secret payment in lieu of not submitting a complaint for alleged defective work to the BSC. The Contractor has demanded the return of the money. Paul Boghossian has denied these allegations, and asserts that his actions have been at the direction of officers of the BSC. DETERMINATION The Contractor has asked for determination, on the basis of delay in obtaining instructions. To date no determination has been issued. Paul Boghossian has refused to agree to the issue of such. PROGRESS PAYMENTS All Progress Payments have been paid by cheque from a joint account held in the name "PB Boghossian and P G Warner". The records are held by Paul Boghossian.

11 There was a mediation conference on 18 December 1995, attended by Mr Warner, the claimant, Mr Nasr (the principal of Nascon) and a mediator from the Department of Fair Trading. Mr Nasr repeated his earlier allegation that the claimant had demanded cash in exchange for progress payments. 12 Despite further mediation attempts and a hearing in early 1996 that did not involve the claimant, the dispute remained unresolved. On 10 May 1996 Mr Warner applied to increase his claim to $25,000. He also requested that the claimant be joined as a respondent to the proceedings before the tribunal. The proceedings were adjourned to enable that joinder to take place and so that notice could be given of the amended claim. 13 On about 21 May 1996 the claimant was served with a letter of that date from the Registrar informing him that he had been joined as a party pursuant to s14(2). The letter attached a copy of "the claim form" but unfortunately (as found by Smart J) it did not contain the Warner memorandum that provided details of the claim against the claimant and its basis. The claimant swore in an affidavit that: As a result of receiving the first notice I knew I had to go to Court. I thought I was going to Court as Mr Warner's partner to be a witness as we were claiming against the builder. 14 He effectively adhered to this testimony in cross-examination (See Tr p10). He acknowledged that he knew that the builder had already made the bribery allegations against him (Tr p5) and that Mr Warner was unhappy that these allegations had been made (Tr p6), but he asserted (p7) that he did not realise that Mr Warner was pursuing him for a money award until part way through the hearing that took place on 21 June 1996 (see below). 15 The Registrar's default meant that (written) notice of the claim was not given to the claimant as the newly joined party before the tribunal, as required by s14(4) of the Act. Informing the claimant that he had been "joined as a party" told him nothing about any claim adverse to his interest, and it lacked essential details of the nature of that claim. 16 On about 4 June 1996 the claimant received another letter from the Registrar. The heading on the letter referred to the building claim as: Peter Warner - v - Nascon Pty Limited Paul Boghus Boghossian

17 The letter informed the parties that the matter was listed for a hearing on 21 June 1996. 18 The claimant provided copies of the letters he had received from the Registrar to his solicitor Mr Greene. It is hardly surprising that Mr Greene was unable to explain why the claimant had been joined as a party, nor was he able to ascertain the nature of the claim being made against him. The solicitor advised his client to attend the hearing on 21 June 1996. Mrs Boghossian rang the Tribunal and requested an Armenian interpreter to be present to assist the claimant. Subsequently the claimant informed his solicitor that he had arranged for an Armenian interpreter to be available. 19 On 21 June 1996 the claimant attended the Tribunal. Mr Nasr gave evidence of the bribes he had paid to the claimant. He said that the claimant refused to pay progress claims unless cash payments were made to him. The referee commenced asking the claimant questions about the matter and, at this stage, the claimant asked why the interpreter which he had previously requested was not present. The claimant was asked if he understood what had been said to date and he said that he did, although there were bits he could not understand. The referee recorded his opinion that the claimant understood and spoke English well, but to ensure fairness he decided to allow an adjournment. Accordingly the proceedings were adjourned. 20 In cross-examination before Smart J, the claimant acknowledged that by the end of the hearing on 21 June he realised that Mr Warner was joining in the builder's accusations against him and seeking relief against him on that basis. It was that realisation that prompted him to cry halt and to press for an adjournment based upon the absence of the interpreter which had been previously promised on behalf of the tribunal. The claimant says that this realisation also came about because he saw Mr Warner and Mr Nasr in discussion together and because he thereby perceived that they were putting their heads together to make a joint accusation against him. As indicated, the referee acceded to the adjournment application because he perceived that fairness required it, although he considered that the claimant understood and spoke English well. It is relevant that a deal of evidence had been given by this stage of the proceedings, and that this evidence was part of the corpus of material with which the claimant was confronted when he attended (with interpreter) on 26 July 1996. 21 On 25 June 1996 Mr Greene wrote to the Registrar stating that, from the information provided to his client to date, he did not understand the basis of Mr Warner's claim against Nascon nor the reason for the claimant being joined to the proceeding in the tribunal. Mr Greene sought further information in relation to the claim. He never received any reply to this letter. 22 On about 4 July 1996 the claimant received notice from the Registrar that the matter was listed for hearing on 26 July 1996. 23 On 26 July 1996 Mr Warner and his wife attended but Mr Nasr did not appear. The claimant was present and had the assistance of an Armenian interpreter. The referee's reasons for his award explain what happened that day: On that day Respondent 2 (Mr Boghossian) attended with an interpreter. He said that the things said by Claimant and Respondent 1 on the previous hearing were untrue. I put to Mr Boghossian the allegations made at the previous hearing, particularly the bribery allegations. I find that there was one contract between Respondent 1 and on the other part Respondent 2 and Claimant. There is not one contract with Claimant and a different contract between Respondent 1 and Respondent 2. I find that Respondent 2 did receive and demand bribes as alleged by Respondent 1. In view of the conduct of Respondent 2 I find that the contract between Claimant and Respondent 2 on the one part and Respondent 1 on the other part was repudiated by the party of the first part. Therefore Claimant and Respondent 2 cannot sue Respondent 1 to enforce the contract or recover damages. However, there was a collateral agreement between Respondent 2 and Claimant under which Respondent 2 was to make payments to Respondent 1 on behalf of Respondent 2 and Claimant. Respondent 2 breached that collateral agreement. The consequence is that Claimant has lost the benefit of the contract with Respondent 1. That benefit was worth more than $25,000. The cost of completing the work will exceed $25,000. I find Respondent 2 evasive and untruthful. He admits paying Respondent 1 $5,000 as evidenced by Exhibit "A" but he says that it was not repayment of bribe moneys but a gift by Respondent 2 to Respondent 1 following Respondent 1's return from overseas after his wedding. I don't believe Respondent 2. I believe Respondent 1. Respondent 2 must pay Claimant $25,000 within 14 days. The claim against Respondent 1 is dismissed.

24 These reasons make plain that the claimant gave evidence before the referee on 26 July 1996 to the effect that what had been said by Mr Warner and Mr Nasr at the previous hearing was untrue. He refuted the bribery allegation. 25 The referee accepted the evidence of Mr Nasr and rejected the claimant's explanation. He was certainly entitled to do so. As Smart J observed, the story being propounded by the claimant was incredible (Judgment p9). 26 The claimant states in an affidavit that the referee asked who wanted to start to talk first, and that he said he would. He expressed surprise that Mr Warner was taking him to court. He was confronted with the allegation that he was getting money from the builder. He produced papers showing defects to the property. He gave evidence or made submissions through the interpreter, although he complains that the interpreter did not interpret his statements properly. (Affidavit of claimant sworn 29 July 1997, pars 16-18.) 27 A Notice of Order issued from the tribunal informing the claimant that the claim by Mr Warner against Nascon had been dismissed and that the claimant had been ordered to pay Mr Warner $25,000 within 14 days. This Order led to subsequent enforcement proceedings.

Smart J's reasons 28 Smart J recited the facts. He held that the Claim Form that had been served on the claimant did not have its attachment. He also held that it was not possible to ascertain the nature of the claim being made against the claimant from the documents that were issued to him by the Tribunal. 29 Smart J held that the claimant was aware of the claims of Mr Warner and the complaints of the builder and that he had been aware of them since December 1995 and probably late October 1995. These claims included damages for failure to complete the duplex due to the claimant demanding "kick backs" and refusing to repay the "kick backs" which he had extracted from the builder. His Honour observed that it was not surprising that the claimant did not tell Mr Greene about this (Judgment p5). 30 Smart J also made findings as to the claimant's credibility. He held that the claimant's evidence in the Supreme Court was evasive and untruthful and that his asserted lack of understanding was a pretence. He used the English language when speaking to his solicitor Mr Greene and when conducting business dealings with Mr Warner and his wife. Smart J rejected the submission that the claimant was denied natural justice because of the absence of an interpreter on 21 June 1996. 31 His Honour then addressed the two principal matters advanced by the claimant. 32 As to the jurisdiction point, it was noted that the submission was that Mr Warner did not have a "building claim" against the claimant and that it could not be said that Mr Warner's claim arose under a contract that was collateral to a contract for the supply of building goods and services. It was submitted that "arises under" in s12A(1) of the Act (par 6 above) meant derived from a collateral contract which was related to a contract for the supply of building goods or services. It was submitted that a claim based on the tort of deceit or a claim for an account against a partner or joint venturer arose not from the supply of goods or services but from the relationship between the partners/joint venturers and the obligations flowing from that relationship. 33 Smart J rejected these submissions. He saw the evidence as pointing to a joint venture rather than a partnership. But it was a joint venture in which the parties agreed with each other that neither would act dishonestly as between themselves or when dealing with the builder in its performance of the building contract and payment for the services rendered. "Kick backs" to one building owner inflating the price to cover them at the expense of the other and bribery were not within their joint contemplation. The simple and fundamental obligations of honesty and good faith bore directly upon the builder's supply of goods and services. The claimant's breaches led to the works being suspended and the claim for damages. On this basis Mr Warner's claim against the claimant arose under a contract that was collateral to a contract for the supply of building goods or services. Accordingly the tribunal had jurisdiction. 34 Before us, the claimant repeated the submissions he made before Smart J as to jurisdiction. 35 In my view Smart J was clearly correct in his decision as to jurisdiction. I am content to adopt the reasons that he gave. The essential fallacy in the claimant's argument is the suggestion that the fiduciary obligations between partners/joint venturers were not also part of their contractual relations under the joint venture contract which is itself collateral to the contract to supply building services to them. 36 In this Court, the jurisdictional argument had a second limb. The claimant submitted that the Tribunal's jurisdiction vis a vis the claimant was not duly engaged because the Warner memorandum was not served upon him. In my view this submission should be rejected. Section 13 of the Act deals with the making of a consumer claim, and it confines itself to the lodgement of the claim in approved form and payment of the prescribed fee. Additional parties may be joined (s14(2)) and necessary amendments may be made (s19). These requirements were met in the present case. 37 The Act is clear in its requirements that notice of the claim must be given to affected persons (s14(1)(c)(d), (3), (7)). Breach of these important procedural requirements may ground a denial of natural justice, but I can see no indication in the statute that such breach went to the jurisdiction of the Tribunal in the sense contemplated by s12(2) of the Act. 38 As to denial of natural justice, I shall confine myself to the matters pressed in this Court. The claimant submitted that he had been denied natural justice because the Registrar's failure to ensure that he was served with written notice of the claim made against him by Mr Warner meant that he did not know the case he had to meet. Smart J rejected this submission on the facts. He held that the claimant knew from late 1995 onwards that Nascon was holding him responsible because of the demand for and receipt of "kick backs" and that Mr Warner wanted the situation resolved and the building finished. 39 Smart J observed that at the hearing of 21 June 1996 both Mr Warner and Mr Nasr stated their position and the claimant made some comments before being granted an adjournment. His Honour rejected the suggestion that the claimant did not understand what was being alleged and the purpose of the proceedings. He held that the claimant understood that he was being sued for $25,000 and that it was being alleged that he caused the works to be suspended and the contract to be terminated because of his refusal to repay the "kick backs". He held that there was no valid reason why the claimant could not explain the position fully to his solicitor. The claimant was "trying to put things off, hiding behind a screen of pretended ignorance and shuffle everything into the hands of his solicitor whom he hoped could help him"(p15). There were other specific findings to the effect that the claimant knew exactly what was being alleged against him in the tribunal (pp15-16). It was because he understood this and the serious implications it raised that he sought and was given the adjournment on 21 June 1996. That, it was held, was the real reason why the claimant sought the adjournment, rather than the stated reason of lack of understanding of what was being said. The claimant was aware that he was being sued for $25,000. 40 Smart J concluded that the absence of further writing did not go to the tribunal's jurisdiction to make an order against the claimant. He held that a written statement of the material allegations of fact was and is highly desirable and normally essential, but in the circumstances of this case he did not regard its absence as fatal. The tribunal treated the necessary amendments as having been made. 41 Smart J also held that the claimant's state of knowledge was in no way the reason for his inability to get proper legal assistance. He held (p18) that if the claimant had told his solicitor what he knew and understood both before and after 21 June 1996, the difficulties of obtaining full legal assistance would not have existed. 42 In all of the circumstances it was held that there was no denial of natural justice. 43 The claimant challenged these conclusions. The challenge accepted the credibility-based factual findings. However, the claimant submitted that the failure to give proper notification of the claim constituted a denial of procedural fairness, especially when the solicitor's reasonable request for particulars went unanswered by the Tribunal (cf Thomson v Consumer Claims Tribunal [1981] 1 NSWLR 68 at 73). It was insufficient that the claimant may have become aware of the true nature of Mr Warner's claim during the course of the hearing on 21 June 1996 because critical evidence had already been given by that stage, being evidence (given without benefit of a translator) that was ultimately taken into account by the referee. 44 I find this a troubling case. On the one hand there was a clear breach of the express statutory requirement to give the newly joined respondent written notice of the claim as it affected his interests. The need for such notice was underlined by the language difficulties under which the claimant laboured (however much exaggerated) and by the fact that the claimant was unrepresented. The allegations were serious and the outcome costly so far as the claimant was concerned. 45 In the end I have concluded that Smart J was correct in dismissing the Summons on the basis of his findings as to the claimant's true understanding. It must not be forgotten that the ultimate issue is compliance with the rules of procedural fairness, not just compliance with the procedural mandates of the Act. The precise content of the requirements of procedural fairness vary according to the circumstances of the particular case (Re Media, Entertainment & Arts Alliance; Ex parte Arnel (1994) 68 ALJR 185 at 192). It is fundamental that a person in the position of the claimant be given a reasonable opportunity of appearing and presenting his case (Hoskins v Van Den-Braak (1998) 43 NSWLR 290). However, procedural defaults and omissions that would otherwise constitute breach of the rules of procedural fairness are capable of waiver (Essex County Council v Essex Incorporated Congregational Church Union [1963] AC 808 at 828; Vakauta v Kelly (1989) 167 CLR 568; Thomas v University of Bradford (No 2) [1992] 1 All ER 964 at 979). 46 In Commonwealth v Verwayen (1990) 170 CLR 394 at 483 Gaudron J said: A party to litigation who has failed to object that a condition attaching to the exercise of jurisdiction has not been satisfied or that the proceedings were irregularly instituted may, by reason of his subsequent participation in the proceedings, be precluded from later raising the defect. 47 The critical issue becomes whether the claimant was sufficiently apprised of his position to bring himself within this principle. On the credibility-based findings of fact made by Smart J the claimant was. 48 The claimant sufficiently understood the true situation when, at the very latest, he sought and was granted an adjournment on 21 June 1996. By then he knew full well that Messrs Warner and Nasr were pointing the finger at him and that Mr Warner was seeking to recover a money award from him. Appreciating or exploiting his comparative disadvantage because the promised interpreter was not there, he sought and was granted an adjournment. When he came back before the Tribunal on 26 July, with an interpreter, he participated in the resumed hearing on its merits. He was aware that the hearing was a continuation of that which had commenced (in one sense) on 21 June, but he sought and was given the opportunity to put his case to the referee in circumstances where he knew the essentials of the case sought to be put against him. The mere absence of the proper notice of the amended claim did not in itself cause any denial of natural justice, on the findings made by Smart J. Those findings were clearly open in the light of the claimant's own evidence about the events of 26 July 1996 (pars 26, above). It is also relevant that the claim by Mr Warner against the claimant in the proceedings did not come out of the blue on 21 June 1996. It had been the subject of the unsuccessful mediation earlier that year. 49 The Appeal should be dismissed with costs. 50 HANDLEY JA: I agree with Mason P. 51 BEAZLEY JA: I agree with Mason P.

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