Solicitors: Zander Dre Lawyers (Respondents)
File Number(s): AP 16/07512
Decision under appeal Court or tribunal: Civil and Administrative Tribunal
Jurisdiction: Consumer and Commercial Division
Date of Decision: 1 February 2016
Before: M Cohen, Member
File Number(s): GEN 13/64141
[2]
Overview
Mr Chaw, the Appellant, had a cleaning business franchise which failed to achieve the level of business he was expecting. He has been unsuccessful in his claim for damages in the Tribunal against one of the directors of the franchisor, Ms Jenkinson, and a related company, to recover the fee he paid to acquire the franchise. They are the Respondents to the appeal.
Before that claim in the Tribunal, Mr Chaw had obtained a judgment in the Local Court against the franchisor, Coverall NSW Pty Ltd (Coverall NSW) for $20,000, following an order of the predecessor of the Tribunal (the CTTT) for the payment of that sum. That occurred in September 2012. Mr Chaw's claim was that Coverall NSW had engaged in misleading and deceptive conduct inducing him to acquire the franchise and pay the franchise fee.
Around the time when the judgment was obtained the franchise rights for New South Wales were transferred to another Coverall entity, Coverall Cleaning Concepts North West Sydney Pty Ltd. After the judgment was obtained, Coverall NSW went into liquidation. Mr Chaw was unable to recover his judgment. As a consequence, in December 2013, Mr Chaw sought to recover the amount of his loss from the Respondents.
Mr Chaw is adamant that the First Respondent, Ms Jenkinson, in particular, should be responsible for the loss that he has been unable to recover from Coverall NSW. His argument did not focus on a reason why the Second Respondent should be liable to him.
It is common ground that Ms Jenkinson never had any dealings with Mr Chaw before the dispute about the franchise arose. She was not, for instance, the representative of Coverall NSW who spoke to Mr Chaw about taking up the franchise. Various correspondence with Coverall entities was provided by Mr Chaw to the Tribunal below, but Ms Jenkinson is not the author of any of these documents.
When he first brought his claim against Ms Jenkinson and the Second Respondent, the Tribunal at first instance (Senior Member Buckley) understood his claim to be based upon the allegation that the Respondents were persons involved in the misleading and deceptive conduct of Coverall NSW. That was a claim under s 236 of the Australian Consumer Law (NSW) (ACL) in respect of an alleged contravention by Coverall NSW of s 18 of the ACL. On that occasion, the Tribunal upheld Mr Chaw's claim against Ms Jenkinson.
This is the second time that the dispute between Mr Chaw and Ms Jenkinson has come before the Appeal Panel. On the first occasion, the Appeal Panel upheld Ms Jenkinson's appeal from the decision of the Tribunal finding that Ms Jenkinson was liable. The Appeal Panel overturned that decision and remitted the matter for reconsideration by a differently constituted Tribunal: Jenkinson v Chaw [2015] NSWCATAP 127.
In essence, the Appeal Panel concluded that more specific reasons needed to be provided to explain how Ms Jenkinson was said to be liable on the basis that she was involved in the contravention.
On the reconsideration of the dispute, the Tribunal at first instance, dismissed Mr Chaw's claim. It is apparent from the reasons that the specific basis of Mr Chaw's claim was somewhat uncertain.
Mr Chaw now appeals against that decision.
In his oral submissions (given through an interpreter of Mandarin), Mr Chaw (who was unrepresented) emphasised that Ms Jenkinson should be required to pay him his loss of $20,000. Little emphasis was given in his oral submissions to a case of knowing involvement by Ms Jenkinson in any misleading inducement to acquire the franchise. As to such a case, Mr Chaw faced the impediment of an affidavit from Ms Jenkinson, not adduced at the first hearing before Senior Member Buckley, which addressed in some detail how she had nothing to do with, and had no knowledge of, the dealings between Coverall NSW and Mr Chaw. She was not cross-examined on this affidavit.
Instead, on the hearing of the appeal, Mr Chaw stressed that it was Ms Jenkinson's alleged actions in selling Coverall NSW and transferring its assets to another Coverall entity, after he obtained judgment against Coverall NSW, that was the cause of his loss. This was because he says it left Coverall NSW with no means to pay his judgment debt. He also complained that Coverall NSW had underpaid him the contractual refund to which he was entitled because the volume of business was below expectations, and that Ms Jenkinson should be responsible for that default.
Generally, Mr Chaw was critical of the decision of the Tribunal below for what he said was applying company law, rather than the consumer law right to damages under s 236 of the ACL.
Other grounds of appeal and argument appear in Mr Chaw's written material supplied to the Appeal Panel.
We do not see any merit in Mr Chaw's appeal, other than in two respects. These two respects concern reasons that are additional to the main reason for dismissing his claim. Firstly, in our opinion, the Tribunal was in error in concluding that Mr Chaw's claim was stayed as a result of the liquidation of Coverall NSW. Secondly, in our opinion, the Tribunal was in error in concluding that Mr Chaw's claim against Ms Jenkinson had ceased to exist because it had merged in the judgment against Coverall NSW.
However, these errors do not alter the outcome of the appeal. This is because Mr Chaw has not been able to point to any error in the first ground for rejecting his claim in the Tribunal below, namely, that Mr Chaw had not presented any evidence establishing that the Respondents were involved in any contravention by Coverall NSW within the meaning of s 236 of the ACL.
[3]
Mr Chaw's case
The nature of Mr Chaw's claim against Ms Jenkinson in the first hearing before Senior Member Buckley can be discerned from the following passage of the reasons of the Tribunal (at [39]):
On the basis of the above, I am of the view that the slight evidence produced by the applicant [Mr Chaw], unexplained by the first respondent [Ms Jenkinson], a party who had the power to produce it, is sufficient to satisfy the civil onus that [Mr Chaw] has established [Ms Jenkinson] had knowledge of the essential elements of the contravention, and was therefore involved in the conceded contravention, as a person who was indirectly knowingly concerned in the contravention.
It was sufficiently apparent from those reasons that "the contravention" was misleading and deceptive conduct by Coverall NSW, as found in the earlier proceedings between Mr Chaw and Coverall NSW.
As was pointed out by the Appeal Panel on the first appeal (at [80]-[82]), there was a lack of precision about the misleading and deceptive conduct of Coverall NSW as found in the 2012 proceedings. One aspect was, however, reasonably specific. That was that oral representations were made to Mr Chaw, prior to his signing the franchise agreement, that within two months of commencing, Mr Chaw would be provided with a sufficient client base to earn $5,000 per month.
This conduct appears to continue to be material to Mr Chaw's complaint against the Respondents.
We have already mentioned that Mr Chaw asserted in general terms that Ms Jenkinson ought to be responsible to him for the loss he has suffered. However, the Tribunal must decide legal responsibility under a claim within its jurisdiction according to law. It is not empowered to determine liability by any other standard.
[4]
The decision of the Tribunal under appeal
Pertinent aspects of the reasons for decision under appeal were:
1. It was common ground that the primary contravention was that found by the CTTT, the predecessor of the Tribunal, in September 2012 to be misleading and deceptive conduct of Coverall NSW.
2. Mr Chaw was an unsecured creditor of Coverall NSW. As a consequence of that company being placed in liquidation, further litigation, such as the present proceeding, was stayed unless a Court gave leave for it to proceed or the liquidator gave consent to the conduct of a claim. Mr Chaw had no mechanism to enforce the order he had obtained against Coverall NSW because no leave had been obtained and the liquidator declined to give consent for Mr Chaw to conduct any further proceeding.
3. Following the liquidation of Coverall NSW, Mr Chaw determined to bring the present proceeding as an endeavour to vindicate the judgment that he was not able to enforce against Coverall NSW.
4. All through the hearing of the application, Mr Chaw repeated the submission that the responsibility of Ms Jenkinson was to ensure that Coverall NSW met its obligations, and that if it could not, she should stand in its shoes.
5. The Tribunal pointed out to Mr Chaw that a claim for breach of directors' duties was open to Mr Chaw, but the Tribunal was not the forum for such an application.
6. Also, there was a possibility that Mr Chaw could pursue claims under s 588FA or s 588G of the Corporations Act 2001 (Cth), but such claims were not within the jurisdiction of the Tribunal.
7. On many occasions during the hearing, the Tribunal pressed Mr Chaw to identify the facts established by evidence showing that Ms Jenkinson or the Second Respondent were liable as accessories to a contravention of the ACL by Coverall NSW. Mr Chaw's response was that the Tribunal should look in the evidence contained in Exhibit A tendered by Mr Chaw. However, the Tribunal found it quite impossible to conclude that such material established accessorial liability. Mr Chaw had failed to prove that either Ms Jenkinson or the Second Respondent had personal knowledge of the particular facts of contravention by Coverall NSW.
8. It was clear from Ms Jenkinson's affidavit that she had no dealings with Mr Chaw at any time and knew nothing of the facts and circumstances by which Mr Chaw dealt with an officer of Coverall NSW and came to an agreement to purchase the franchise. Mr Chaw failed to make out the necessary facts to find that Ms Jenkinson or the Second Respondent had conducted themselves in a manner by which they might be liable as an accessory according to the requirements of Yorke v Lucas (1985) 158 CLR 661.
9. If such conclusions be wrong, Mr Chaw's application should be dismissed on the basis that Mr Chaw's claims were prevented by reason of the existence of the determination in the CTTT proceedings which disposed of Mr Chaw's claim once and for all. The causes of action he now advanced had merged with the determination made in the CTTT proceedings. If Mr Chaw wished to make a claim against the Respondents he should have joined them in the original proceedings against Coverall NSW. Ms Jenkinson and the Second Respondent had informed the Tribunal that they did not take the point that these matters prevented Mr Chaw from now proceeding with his claim. However, these matters did mean that Mr Chaw's application must be dismissed.
[5]
Grounds of Appeal
In his Notice of Appeal, Mr Chaw states his grounds of appeal as:
1. The decision was not fair and equitable.
2. The decision was against the weight of the evidence.
3. Significant new evidence has arisen that was not reasonably available at the time of the original hearing.
4. Question of law.
As to why the decision was not fair and equitable, the Notice of Appeal stated:
1. Respondent gave me submission 1/2/2016. 1/2/2016 is hearing day. So I did not have enough time to argue.
2. When I sued Coverall NSW, because I did not add Respondent so Tribunal dismissed my application.
3. Tribunal took Respondent's affidavit.
As to what evidence the Tribunal should have given more weight to, the Notice of Appeal stated:
1. Give wrong refund.
2. Signed solvency statement.
3. After I got CTTT order Karen Leigh Jenkinson transferred all asset to another company.
Because Respondent never argued my accusation.
The section of the Notice of Appeal concerning the new evidence relied upon and the reasons why this was not available at the hearing was left blank.
As to questions of law, the Notice of Appeal attached a document headed "Question of Law" which stated:
1. That the learned senior member made an error of law in finding that the tribunal had no jurisdiction to determine the matter.
2. That the learned senior member made an error of law in finding that the tribunal had no jurisdiction on the basis that the applicant was a consumer and the respondent was supplier who supplied service and good and defined under the consumer claim act.
3. That the learned senior member made an error of law in finding that the Respondent did not engaged (sic) in conduct amounting to misleading and deceptive conduct or likely to mislead as defined by section of the competition and consumer act 2010.
4. That the learned senior member made an error of law in finding that the tribunal took Karen Leigh Jenkinson (sole director and 100% shore [sic]) affidavit as evidence.
[6]
Mr Chaw's written submissions
In his oral submissions at the hearing of the Appeal, Mr Chaw came to indicate that his points on appeal were those made in his written submissions of 7 and 27 March 2016. He asked the Appeal Panel to read and determine his appeal based upon those submissions.
We have considered those written submissions. We have done so by reference to the limitations on appeal as set out in the Civil and Administrative Tribunal Act 2013 (NSW) (the Act).
Those limitations are:
1. that the appeal be on a question of law: s 80(2)(b) of the Act.
2. that the Appeal Panel be satisfied that the Appellant has suffered a substantial miscarriage of justice by reason that:
12 Limitation on internal appeals against Division decision
(1)
(a) the decision of the Tribunal under appeal was not fair and equitable; or
(b) the decision of the Tribunal under appeal was against the weight of evidence, or
(c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
Importantly, the only matters referred to in the written submissions that appear to address the central issue as to the Respondents' involvement in misleading conduct are:
1. Karen Leigh Jenkinson affidavit is misleading. Coverall Cleaning Concepts AU Pty is not national franchisor. Coverall Services Pty Ltd is national franchisor. From disclosure document of Coverall NSW Pty 2012.
(Mr Chaw's written submissions of 7 March 2016).
3. Karen Leigh Jenkinson as director are likely to have management responsibilities for State sub-franchisors business operation in relation to the franchise. From disclose document 2012 Coverall NSW Pty.
4. Respondent did not deny breach 236 of Consumer Law from Respondent's submission. Previously. This time I want to see how respondent defend my accusation according to 236 of Consumer Law.
[7]
Involvement in misleading and deceptive conduct - consideration
Mr Chaw contends that Ms Jenkinson's affidavit is misleading. The only matter he points to concerns the question as to who was the national franchisor. He asserts that the Second Respondent was the national franchisor, contrary to what Ms Jenkinson states in paragraph 12 of her affidavit. It is not clear that Ms Jenkinson is incorrect about this. We note that what she says accords with Recital 3 of Mr Chaw's franchise agreement.
Nevertheless, even if Mr Chaw is correct about this, it does not assist to establish the liability of Ms Jenkinson or the Second Respondent as persons involved in the contravention within the meaning s 236 of the ACL.
We have already mentioned that Ms Jenkinson was not cross-examined in the hearing at first instance. As we have said, on appeal, Mr Chaw points only to the one above aspect of her affidavit, which he says was wrong. Accordingly, her unchallenged evidence given in her affidavit included:
1. She was a director of Coverall NSW from 15 February 2007 to 19 December 2012. She was never formally employed by that company. She worked casually in the business in NSW from time to time. Most of her tasks were administrative. The management and general conduct of the business in NSW was carried out by other persons in senior management roles, including Andrew Barker, Polly Wang, Helen Gui and Brent McDonald.
2. A company search shows her to have been a holder of all of the 100 issued, ordinary shares in Coverall NSW, but not the beneficial owner of these shares.
3. Under licence from Coverall Cleaning Concepts Australasia Pty Ltd, Coverall NSW was the master franchisee for Coverall franchisees in NSW. The former company provided all franchise agreements, disclosure documentation and all marketing, operations, administration and training materials for master franchisees.
4. It was her understanding that Mr McDonald was the primary contact and liaised with Mr Chaw. In this respect, she refers to a Statutory Declaration of Mr Chaw dated 5 June 2012 in which Mr Chaw states that Mr McDonald promised him that he would give him $5,000 cleaning accounts in two months and that more and more cleaning accounts would be given to Mr Chaw week by week. It was her understanding that Mr McDonald conducted all meetings with Mr Chaw and managed Mr Chaw's induction process into Coverall NSW. That is consistent with emails dated 21 June 2011 and 9 August 2011, which she annexed to her affidavit.
5. Mr McDonald was employed by Coverall NSW as full-time General Manager from in or around August 2009. In or around 29 March 2010 Mr McDonald was employed as National Operations Manager by Coverall Cleaning Concepts Australasia Pty Ltd, the umbrella company that held the national franchise rights for the business.
6. She has never met or had any dealings with Mr McDonald.
7. At no point in time did she have any dealings with Mr Chaw.
8. The Second Respondent never had any dealings with Mr Chaw.
9. She referred to various brochures and a disclosure document. She deposed that she had not seen those documents before preparing her affidavit and she did not authorise the production or distribution of those documents.
10. On or around 19 December 2012 she resigned as a director of Coverall NSW. She has had no association or dealing with that company since. Around six months after her resignation, Coverall NSW was placed into administration and then eventually placed into liquidation.
In order to succeed in establishing that the Respondents were involved in misleading and deceptive conduct by Coverall NSW inducing him to acquire the franchise, Mr Chaw needed to establish facts that were contrary to the thrust of this evidence from Ms Jenkinson. This he has failed to do.
In his grounds of appeal and written submissions, Mr Chaw refers to new evidence. These matters (in addition to the above reference to Ms Jenkinson's affidavit being misleading), as framed by Mr Chaw, concern:
1. The "respondent" wanting him to sign a Deed of Release to pay him $20,000 to finish the dispute.
2. Declarations made by the Federal Court that South East Melbourne Cleaning Pty Limited, formerly Coverall Cleaning Concepts South East Melbourne Pty Ltd, engaged in unconscionable conduct and relief obtained against Mr Brett Jones and Astrid Haley in connection with such conduct.
3. Ms Jenkinson giving a wrong refund during a franchising mediation and that she did not deny his accusation that she had done so.
4. Ms Jenkinson signed a solvency statement for the 2012 financial year.
5. Ms Jenkinson as a director was likely to have management responsibilities for the State sub-franchisor's business operations.
6. The "respondent", owner of Coverall NSW, sold the master franchise right for NSW to Coverall Cleaning Concepts North West Sydney Pty Ltd in September 2012.
7. Ms Jenkinson sold her interest and shares in Coverall NSW on 19 December 2012 and took away assets and money from the company.
8. After he obtained his order against Coverall NSW in September 2012, the "Respondent" transferred all assets to Coverall Cleaning Concepts North West Sydney Pty Ltd. Because of that, he could not get his money back.
9. The "Respondent" did not deny breach of s 236 of the Consumer Law from the respondent's previous submissions.
Even if these matters went beyond assertion, were established by evidence and were seen as relevant in some way to Mr Chaw's case, they do not refute the important aspects of Ms Jenkinson's affidavit concerning her lack of dealings with Mr Chaw and lack of knowledge of the dealings by others with him on behalf of Coverall NSW.
In any event, he has not established that such evidence as he refers to was not reasonably available at the time of the hearing below, as required in order to obtain leave to appeal on this basis.
[8]
Procedural fairness - consideration
Mr Chaw raised a point of procedural unfairness based upon the provision to him of the Respondents' written submission on the day of the hearing, before the hearing commenced. This raised a question of law.
In his oral submissions about this, Mr Chaw contended that the Respondents did not follow proper procedures and did not provide the submissions by the designated date, but only about half an hour before the hearing. He said that, as the weaker party, this was not fair to him and did not show the proper respect for the orders of the Court. The Respondents say that what they supplied was a written outline of oral argument and did this at 10.45am on the day of the hearing which was listed to commence at 1.15pm on 1 February 2016. We are not in a position to determine the precise time on the day of the hearing Mr Chaw received these submissions.
A check of the procedural directions for the hearing shows that, initially, the Respondents were required by Order 3 of orders made on 14 October 2015 to provide their submissions (and any evidence in reply) by 18 November 2015. By orders made on 2 December 2015, the time for compliance with this order was extended to 25 January 2016.
Accordingly, the Respondents failed to comply with the order concerning the provision of written submissions before the hearing. We have not been informed of any explanation for this default.
As unsatisfactory as this is, it is, nevertheless, common ground that the hearing was adjourned for some 20 minutes to enable Mr Chaw to have the written submissions translated and considered by him. The hearing then proceeded without any further objection from Mr Chaw.
In these circumstances, we do not accept that there was a breach of the requirements of procedural fairness.
Counsel for the Respondents further submits that any breach of the requirements of procedural fairness was of no significance. This is because Mr Chaw has not been able to point to any factual basis sufficient to establish that the Respondents are liable to Mr Chaw as accessories to misleading and the deceptive conduct. Counsel for the Respondents submits, correctly, that Mr Chaw has not referred to any material or argument that he was deprived of the opportunity of presenting to the Tribunal below about the issue of accessorial liability.
We agree with the Respondents' submission in this regard. We do not see how any breach of procedural fairness associated with the provision of these written submissions has deprived Mr Chaw of the possibility of a successful outcome: see Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141at 141.4; Minister for Immigration and Border Protection v WZARH [2015] HCA 40 at [43].
[9]
Other matters on Mr Chaw's questions of law document
We have set out above the questions of law provided by Mr Chaw with his Notice of Appeal.
In our opinion, those numbered 1 and 2 are misconceived because the Tribunal at first instance made no such findings concerning its jurisdiction. The matter before the Tribunal at first instance was a personal claim by Mr Chaw for damages against the Respondents under s 236 of the ACL on the basis that they were said to be involved in misleading and deceptive conduct of Coverall NSW. Correctly, in our opinion, the Tribunal below proceeded to hear and determine that claim on the basis that it had jurisdiction to deal with it.
As to that numbered 3, on the assumption that this addresses the Tribunal's finding of no accessorial liability, we do not agree that any such error of law has been established. We do not discern any error of law in the test that the Tribunal below applied to this issue. Furthermore, in the application of that test, the finding in favour of the Respondents was dictated by the unchallenged evidence of Ms Jenkinson to which we have referred above and the absence of any competing evidence from Mr Chaw.
As to the question numbered 4, we discern no error by the Tribunal at first instance in having regard to and accepting the affidavit evidence from Ms Jenkinson.
[10]
Merger of cause of action in earlier CTTT decision - consideration
In respect of the fair and equitable ground of appeal, Mr Chaw relies on the dismissal of his application because, as he put it, he had not sued the Respondents in his original claim against Coverall NSW.
In the overview, we mentioned two matters in respect of which we disagreed with the Tribunal at first instance. This point was one of them. We pointed out that these did not alter the outcome of the appeal because they concerned reasons for decision that are additional to the main reason for the dismissal of Mr Chaw's application.
Because they do not affect the outcome of the appeal, we deal with them briefly.
Mr Chaw's cause of action in these proceedings was not lost through merger in the judgment in the original proceedings because the causes of action were different: see Halsbury, Laws of Australia at [190-45].
Furthermore, because the Respondents were not parties to the original claim between Mr Chaw and Coverall NSW no findings in that decision were binding as between Mr Chaw and the Respondents. That included the finding that Coverall NSW had engaged in misleading and deceptive conduct.
It may be that what the Tribunal below had in mind was an Anshun estoppel, so called because of the decision of the High Court in Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589.
However, such an estoppel is not based upon merger of a cause of action in a judgment, but rather on unreasonableness in not raising the new claim in the original action. A range of factors needs to be considered. Special circumstances may come into play. In our opinion, it is not plain, to say the least, that such an estoppel would apply to prevent Mr Chaw's claim in these proceedings.
The Tribunal below found that Mr Chaw had received legal advice not to sue the Respondents in the original claim. In our opinion, that would be a relevant, but not decisive, consideration as to whether an Anshun estoppel applied.
[11]
Stay of proceedings - consideration
As we have mentioned, Mr Chaw complained in general terms that the Tribunal below had applied company law to dismiss his claim. One matter he may have had in mind here was the conclusion that the Tribunal appeared to reach that his claim was stayed because Coverall NSW had been placed into administration and, subsequently, into liquidation: at [11] of the reasons.
However, the stay resulting in such circumstances applied to a proceeding against Coverall NSW or in relation to any of its property: s 440D(1) of the Corporations Act 2001 (Cth). Mr Chaw's claim in these proceedings did not fit into either of these categories.
Accordingly, in our opinion, the Tribunal erred in so concluding.
[12]
Orders on Appeal
For the above reasons, in our opinion, the appeal should be dismissed.
The Respondents have foreshadowed that should the appeal be dismissed they wish to be heard on the question of costs. They will need to satisfy us that there are special circumstances warranting an order of costs in their favour : s 60 of the Act.
We will deal with the question of costs on the basis of written submissions.
Accordingly, we direct:
1. The Respondents to provide to the Appeal Unit and to the Appellant their written submissions in support of the making of a costs order in their favour within 10 days of the date of these reasons.
2. The Appellant to provide to the Appeal Unit and to the Respondents his written submissions in reply to those of the Respondents on the question of costs within 10 days of his receipt of the Respondents submissions.
[13]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 27 July 2016