Chen v Feng

F Zhou (Applicant) First Respondent (Sef-represented) File Number(s): GEN 19/24796 Publication restriction: Nil

Introduction

1. This is an application by Yilin Chen (the consumer) an order pursuant to section 79N of the Fair Trading Act 1987 (FT Act) that would require Callum Forbes and Jeffrey Feng (the traders) to pay her a total of $26,139.95 in compensation for several items of damage and loss she contends that she has suffered due to the traders' misleading and deceptive and unconscionable conduct in relation to a Rental Guarantee and Agency Agreement that subsisted between her and And Chill Property Management Pty Ltd (in liquidation) (ACPM). Mr Feng was the director and licensee of ACPM at the material time for this dispute. Mr Forbes was the director and Chief Executive Officer of And Chill Pty Ltd (in liquidation) (AC) which was a holding company for a company group which included ACPM at the material time for this dispute. This application was made to the Tribunal on 28 May 2019 (the application).
2. For the reasons set out following the Tribunal is comfortably satisfied that Mr Feng was involved in unconscionable conduct as the licensee of ACPM in failing to ensure that payments ACPM caused to be deducted from the consumer's trust monies for Brisbane City Council rates and utility charges in the total amount of $577.30 were remitted to those vendors, and in making an unauthorised deduction from the consumer's trust funds for house-keeping in the amount of $260.00. This amounted to a misappropriation and intermingling of trust monies with ACPM's other monies contrary to the duty imposed upon Mr Feng by section 32 of the Property, Stock and Business Agents Act 2002 (PSBA Act), which may be taken to be an industry code for the purposes of sections 21 and 22 of the ACL. The application has otherwise been dismissed. While it is clear that ACPM breached its contractual obligations to the consumer, the evidence does not establish that this was the result of misleading and deceptive or unconscionable conduct in which Mr Feng and Mr Forbes were relevantly involved.

Procedural history

1. The application was first listed before the Tribunal in a Group List for Conciliation and hearing on 6 June 2019. Ms Fei Zhou, solicitor, attended the hearing on behalf of the consumer. Mr Forbes attended the hearing in person. There was no appearance by Mr Feng. In accordance with the Tribunal's usual practice where both parties are present in person at the first listing of an application, Ms Zhou and Mr Forbes were provided with the opportunity to attempt to resolve the dispute cooperatively with the assistance of a Tribunal conciliator. Those efforts were not successful. As a consequence, when Ms Zhou and Mr Forbes returned to the hearing room the Tribunal adjourned the application to a Special Fixture Hearing and issued directions to the parties for the filing and exchange of the documentary evidence that they intended to rely upon at that hearing. The Tribunal also granted the consumer leave for Ms Zhou to represent her in the whole of the proceedings for reasons given at that time.

Evidence

1. The Tribunal is satisfied that the consumer complied with the Tribunal's directions for the filing and exchange of her evidence for the reasons stated below. Her bundle, which was in two volumes, was marked Exhibit A1. It included a statement made by Ms Chen, dated 20 June 2019, and a statement of a witness, Ms Chenyang Wan, dated 20 June 2019. Neither trader submitted any evidence in response to the Tribunal's directions.
2. Ms Zhou attended the hearing on behalf of the consumer. Mr Forbes attended the hearing in person and gave evidence under a solemn promise to tell the truth. There was no appearance by Mr Feng. Ms Zhou and Mr Forbes had the opportunity to present their respective cases and make submissions to the Tribunal. Ms Zhou had the opportunity to question Mr Forbes.
3. At the end of the hearing, the parties were provided with the opportunity to file and exchange any further submissions they wished to make in relation to the application. That direction was given in response to Mr Forbes' complaints in the course of the hearing that he had not had a reasonable opportunity to consider the consumer's documentary evidence (as to which see following). Mr Forbes made such a submission but did not serve it on the consumer, which required the intervention of the Tribunal to direct that the Divisional Registrar do so. The consumer subsequently filed submissions in response.

Service of the consumer's evidence on Mr Forbes

1. At the hearing, and in his subsequent submissions, Mr Forbes complained that the proceedings were procedurally unfair to him as he had not received a copy of the consumer's evidence because it had been sent to the address of ACPM and AC and was therefore in the possession of those companies' Administrator. This complaint was to the effect that the proceedings should be stayed or adjourned until Mr Forbes was provided with a copy of the consumer's evidence.
2. However, it emerged in argument that the consumer served Mr Forbes at the company addresses because he failed to provide her with an alternative address for service of documents on him despite specific requests to him from the consumer's solicitor that he did so. Additionally, Mr Forbes had attended the first listing of the application and therefore had notice of the Tribunal's directions for the filing and exchange of evidence. He cannot reasonably complain that the exchange of evidence took him by surprise. Mr Forbes did not contend that he had made any attempt to contact the Administrator to obtain the documents the consumer had served on him, and there is no evidence of this in any event.
3. A party cannot avoid an application by refusing or failing to provide the other party with a current address for service particularly when it is clear that they are on notice as to the application.
4. Rule 13(2)(b) of the Civil and Administrative Tribunal Rules 2014 (NCAT Rules) provides that if a person does not have an address for service, a document may be served on that party by posting the document to the person's last known business address. That is what the consumer has done in this case. Mr Forbes had therefore been served with the consumer's evidence according to law and the fact that he did not have it in his possession was entirely due to his own conduct. There is no procedural unfairness to him in these circumstances. The Tribunal therefore declined to stay the proceedings or adjourn the hearing to a later date on this basis.
5. In order to mitigate Mr Forbes' practical disadvantage in not having the consumer's evidence with him at the hearing, the Tribunal provided him with its copy, which he returned at the end of the hearing. As noted above, the Tribunal also made directions enabling the parties to make final submissions after the hearing in a further effort to mitigate Mr Forbes' disadvantage in the conduct of his case at the hearing.

Access to documents necessary for Mr Forbes' response to the application

1. Mr Forbes also complained at the hearing and in his subsequent submissions that the proceedings were procedurally unfair to him because he had been deprived of the opportunity to file evidence in response to the application as all of the relevant documents were in the custody and under the control of the Administrator and he did not have access to them. Again, the thrust of this complaint appeared to be that the proceedings should be stayed or adjourned because it was unjust to proceed in circumstances where Mr Forbes could not defend himself.
2. Mr Forbes did not provide any evidence of any attempt to contact the Administrator to obtain the documents necessary for his response to the claim or any evidence of a refusal by the Administrator to cooperate with him in this respect. In any event, it was open to Mr Forbes to use the compulsory processes of the Tribunal to obtain these documents if there was such a refusal. He could have issued the Administrator with a summons to produce these documents pursuant to section 46 of the Civil and Administrative Tribunal Act 2013 (NCAT Act). He did not do so. Prior to the hearing he had not requested an extension of time in which to file evidence, nor had he requested an adjournment of the hearing to provide him with further time to obtain evidence.
3. Section 38(5)(c) of the NCAT Act imposes a duty on the Tribunal to take such measures as are reasonably practicable to ensure parties have a reasonable opportunity to be heard and have their submissions considered. However, that obligation is not unlimited. It must be interpreted and applied having regard to the guiding principle set out in section 36 of that Act, which is the just, quick and cheap resolution of the real issues in a proceeding: Wall v Barham [2017] NSWACTAP 61 at [31]; Mesiha v Murrell [2017] NSWCATAP 1 at [29 -60].
4. In this case Mr Forbes had been afforded a reasonable opportunity to file documentary evidence in response to the application by the procedural directions made on 6 June 2019. He had failed to take reasonable, indeed any, steps to do so. He was thus in a predicament entirely of his own making.
5. A party cannot avoid an application by failing to take reasonable steps to obtain evidence necessary for its case. Consequently, although there was a clear disadvantage to Mr Forbes in attempting to respond to the application at the hearing without the documents he contended were necessary for him to do so, this did not result in any injustice to him. It was a predicament of his own making. The Tribunal therefore declined to stay the proceedings or adjourn the hearing to a later date on this basis.

Proceeding in the absence of Mr Feng

1. At the hearing, Mr Forbes complained that it was procedurally unfair to conduct the hearing in Mr Feng's absence because he was the Principal and Licensee of ACPN and had more detailed knowledge of that company's dealings with the consumer. Mr Forbes complained that he would be disadvantaged by Mr Feng's failure to participate in the proceedings.
2. Mr Feng is a respondent party to the proceedings. The evidence establishes that he was served with Notice of the Hearing to his last known business address (being the address of the companies) in accordance with Rule 13 of the NCAT Rules, no other address being known to the applicant or to the Divisional Registrar. That notice has not been returned to the Registrar unopened. The Tribunal's file also indicates that Mr Feng was served with notice of the hearing to a business email address. There is no indication that that email was not delivered. Mr Feng had not indicated to the Divisional Registrar any inability to participate in the hearing and he had not requested an adjournment of the hearing.
3. Rule 35 of the NCAT Rules provides that the Tribunal, when exercising functions allocated to its Consumer and Commercial Division, as it is in this case, may proceed to hear an application in the absence of a party provided it is satisfied that the party has received notice of the hearing. For the reasons set out above Mr Feng is deemed to be on notice of the hearing.
4. To the extent that Mr Forbes relies upon evidence capable of being given by Mr Feng for his own response to the application it was open to Mr Forbes to file a statement by Mr Feng in accordance with the procedural directions made for the filing of evidence on 6 June 2019. If Mr Feng had refused to cooperate in this regard it was open to Mr Forbes to use the compulsory processes of the Tribunal to summons Mr Feng to give that evidence. He has not done so. There can therefore be no procedural unfairness to Mr Forbes arising from Mr Feng's failure to participate in the proceedings. As a party, Mr Feng has been given that opportunity but has failed to take it up, and Mr Forbes could have compelled his attendance as a witness but he did not. The Tribunal therefore declined to stay the proceedings or adjourn the hearing to a later date on this basis.

Request for adjournment of the hearing on the ground of Mr Forbes' mental illness

1. At the hearing, and in his subsequent submissions to the Tribunal, Mr Forbes applied for an adjournment of the hearing, and a further hearing of the application, on the ground that the proceedings were unfair because he was not prepared for the hearing because of his mental illness. In support of this application, he attached to his subsequent submissions two WorkCover NSW Certificates of Capacity dated 22 July 2019 and 4 September 2019 which state that Mr Forbes has been diagnosed with "work-related anxiety and depression" and has "no current capacity for employment" for the periods 27 June 2019 to 15 August 2019 and 16 August 2019 to 16 November 2019. Mr Forbes submits that these certificates establish that he has been "severely restricted in [his] ability to get [his] head around this matter and put together a coherent and thorough response."
2. The medical certificates relied upon by Mr Forbes in support of his adjournment application are of limited probative value. While they establish that he has and is experiencing anxiety and depression, they were prepared for another purpose and do not provide any information as to why this condition would prevent him from attending to his legal obligations as a respondent to this application. For example, they do not state that Mr Forbes is or has been incapable of managing his affairs in the legal sense, or that he has been prescribed any medication that would result in his ongoing sedation, or that he has been admitted to hospital for treatment for an extended period, or at all. In this respect, the certificates do not address the "critical question" of whether, and if so why, the medical condition would prevent him from participating effectively in the proceedings: NAKX v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCA 1559 at [6] per Lindgren J; cited with approval by the NSW Court of Appeal in Bobolas v Waverley Council [2016] NSWCA 139 at [221 to 222].
3. Mr Forbes did not make any application for an adjournment on medical grounds prior to the hearing. It appears that it only occurred to him to do so when he began to appreciate, in the course of the hearing, the strength of the consumer's case and the weaknesses of his attempted responses to it. Had an application for an adjournment of the hearing on medical grounds been made prior to the hearing, and had better evidence of the impact of Mr Forbes' condition on his capacity to conduct his case been presented at that time, it may have been appropriate to allow Mr Forbes further time to prepare his case. However, no such application was made. At the hearing, when the request for an adjournment was first made on this ground, no supporting evidence was tendered to prove Mr Forbes' bare assertions as to his condition.

Application to reopen the case

1. In substance Mr Forbes' further request for an adjournment of the hearing, made in the context of his submissions made after the hearing, is a request to reopen the case. Courts and Tribunal's do have a general discretionary power to reopen a case to admit further evidence after the hearing has concluded but before judgement is delivered: Smith v New South Wales Bar Association [1992] HCA 36 at [27]. The criteria governing the favourable exercise of that discretion were distilled in Reid v Brett [2005] VSC 18 as follows: (a) the further evidence must be so material that the interests of justice require its admission; (b) the further evidence if accepted would most probably affect the result of the case; (c) the further evidence could not with reasonable diligence have been discovered earlier; and (d) no prejudice would ensue to the other party by reason of the later admission of the further evidence.
2. In this case all of the documentary evidence Mr Forbes' seeks to admit into evidence after the hearing could have been discovered with reasonable diligence prior to the hearing and have been filed and exchanged in accordance with the Tribunal's directions of 6 June 2019. If Mr Forbes was prevented or inhibited by his mental illness from exercising reasonable diligence to obtain these documents that fact is not established on the limited medical evidence he has submitted for the reasons stated above. The necessary grounds for the exercise of the discretion to reopen the case have therefore not been established. Mr Forbes application for a rehearing of the application must therefore be refused.

Application for summary dismissal of the application on the ground the tribunal does not have jurisdiction to deal with it

1. In his submissions at the hearing, and in his subsequent written submissions, Mr Forbes argued that the application should be summarily dismissed because the Tribunal did not have jurisdiction to deal with it. This objection to jurisdiction is founded upon section 79K of the FT Act which provides that for the Tribunal to have jurisdiction to hear a consumer claim the dispute must have a relevant connection to NSW.
2. It is convenient to quote Mr Forbes' objections to jurisdiction from his final submissions: The Applicant's claim is a consumer claim for property management services supplied in the state of Queensland. NSW Fair Trading Act s79(k) has that consumer matters be heard only if the services were supplied in New South Wales. This matter should therefore not be heard in NCAT, but in the relevant Queensland based forum. The Applicant engaged And Chill Property Management Pty Ltd to provide property management services for her property located at 22-28 Merivale Street, South Brisbane Qld 4101. All property management services were supplied to this address in South Brisbane. And Chill Property Management Services Pty Ltd and And Chill Pty Ltd operated in Queensland from an office located at 321 Water Street Fortitude Valley QLD 4006. The sales representative that closed the deal with the Applicant is a Queensland resident, Rachael Spencer, who at all times during her employment operated within Queensland. The Agency Agreement which was entered into between the Applicant and And Chill Property Management Pty Ltd was done so under a Queensland Company Real Estate License. The Licensee, Jeffrey Feng, signed the agreement as the authorised Licensee of the Estate License to allow him to act in this capacity. All cleaning, property maintenance, guest management services were sourced and supplied in Queensland. And Chill Property Management Pty Ltd did not employ any staff in NSW. The contract to which this matter relates was not made in NSW. The contract was made by a third party located at 153 Kearny Street, San Francisco, California, U.S. and was signed digitally, which can take place anywhere globally. Given this claim is not related to services supplied in NSW, nor an agreement made in NSW, this falls outside of the jurisdiction of NCAT. …
3. Section 79K(1) is in the following terms: 79K Supply or agreement made, or supply intended to be made, in New South Wales (1) The Tribunal has jurisdiction to hear and determine a consumer claim only if: (a) the goods or services to which the claim relates were supplied in New South Wales, or (b) a contract or other agreement to which the claim relates contemplated that the goods or services would be supplied in New South Wales (whether or not they were so supplied), or (c) a contract or other agreement to which the claim relates was made in New South Wales (whether or not the goods or services were supplied in New South Wales)

Is the Tribunal an inconvenient forum for determination of the dispute?

1. For completeness, I note that Mr Forbes' objection to jurisdiction might also be construed as a submission that NSW is an inconvenient forum for the resolution of the dispute. However, I am not satisfied that this is the case. The consumer submits, citing the plurality of the Court in Vroth v Manildra Floor Mills Pty Ltd [1990] HCA 55 at [30], that she has regularly invoked the jurisdiction of the Tribunal and that she therefore has a prima facie right to insist upon its exercise. I accept that submission. She also submits, and I also accept, that there is no basis upon which it could reasonably be said that the proceedings are oppressive, vexatious or an abuse of process. As will emerge, the consumer has been partially successful in her claim.
2. Nor does the balance of convenience favour a Queensland forum for the resolution of the dispute. Mr Forbes resides in NSW, as does Mr Feng (as least in so far as the ASIC Company Searches indicate). The consumer's solicitor is located in NSW. There are no other witnesses called to give evidence who are located in Queensland. The traders' former companies' registered addresses and principal places of business are in NSW (in so far as that continues to be a relevant consideration).
3. Additionally, the objection to jurisdiction is raised at and after the formal hearing has occurred rather than at an early stage in the proceedings. Acceding to that objection at this late stage would thus require the dispute to be re litigated which would result in significant litigant and public costs thrown away and unnecessarily delay the finalisation of this application for no obvious benefit to any party. Such an outcome would be entirely inconsistent with the guiding principle to be applied in all aspects of the Tribunal's practice and procedure, which as noted above, is the just, quick and cheap resolution of the real issues in dispute. Therefore to the extent that Mr Forbes' objection to jurisdiction is to be understood as a submission that this Tribunal is not a convenient forum for the resolution of the dispute it must also be rejected.

Application for summary dismissal of the application on the ground that the consumer can apply for compensation from a statutory compensation scheme

1. In his final submissions Mr Forbes submits that the application, at least in part, should be dismissed as there is an alternative form of compensation potentially available to the consumer under a statutory compensation scheme at least in relation to misappropriated trust money. In NSW this is the Property Service Compensation Scheme, established under the Property, Stock and Business Agents Act 2002. That submission is based on the Administrator's statement at section 4:10 of the Administrators' report which reads: Property Owners may claim as unsecured creditors in ACPM, however at this stage it appears unlikely that there will be a return in the external administration Notwithstanding, property owners separately may have the ability to make claims against their respective state based property service compensation funds administered by the state based OFT (office of fair trading)
2. This application is misconceived. The availability or otherwise of a remedy or part remedy from another source in relation to misappropriated trust money has no bearing upon the personal liability of the traders to compensate the consumer for any damage and loss suffered if she is able to prove that this arises from the traders' misleading and deceptive and/or unconscionable conduct. The Property Service Compensation Scheme does not indemnify the traders, as wrongdoers, against a consumer claim. Mr Forbes' application for summary dismissal, or part dismissal, of the application on this basis must therefore be dismissed.

Material facts and contentions of the parties

1. The consumer is a Chinese national who lives in China and who speaks and reads English on a very limited basis. She is the registered proprietor of Lot 11805, Ivy Evergreen, XXX Merivale Street, South Brisbane, which is a one bedroom apartment situated in a residential tower (the property). The consumer completed the purchase of the property in January 2018. The purchase price she paid was $451,000.00. The consumer purchased the property as an investment with a view to it being rented out.
2. The dispute arises from a Rental Guarantee and Agency Agreement dated 6 February 2018 entered into by the consumer with ACPM, which as noted above, is a real estate corporation licensed under the provisions of the Property Stock and Business Acts Act 2002 (NSW)
3. It is necessary to set out the relationship of ACPM to other entities in its company group and Mr Feng's and Mr Forbes' roles within the group. This information is taken principally from the Administrators' report to creditors dated 26 July 2019. ACPM is a subsidiary of AC along with a number of other subsidiaries, being Swiftly Property Services Pty Ltd (Swiftly), And Chill Home Styling Pty Ltd and And Chill Home Cleaning Pty Ltd (the company group). Mr Feng holds a 51% shareholding in AC and Mr Forbes holds the remaining 49% of shares in that entity. Mr Feng was a director of each of these entities until his resignation from these positions on or about 23 June 2019. Mr Feng was also the licensee-in-charge of ACPM until his resignation from that position on or about 23 June 2019. Mr Forbes is a director and was the Chief Executive Officer of AC. Mr Forbes did not hold a real estate agent's license at any material time for this dispute. At a number of points in their report the Administrators state that Mr Forbes was primarily responsible for the day to day operation of ACPM and AC and that Mr Feng had little direct involvement, despite being APCM's licensee. AC and ACPM became subject to external administration on 28 June 2019. In their report to creditors the Administrators state the belief that ACPM and AC failed "due to a variety of factors including operating losses, poor financial controls and an inability to raise further funding".
4. The Administrators state that the company group operated a short-term property rental business. The business model involved managing and listing residential properties on a number of short-term letting platforms including AirBnB, Booking.com and Expedia. ACPM was engaged by homeowners to manage their properties on their behalf pursuant to managing agency agreements. ACPM would then engage AC to undertake listing activities via on-line booking platforms. AC would then engage other entities within the company group to supply services to the homeowners. AC administered the homeowners trust accounts on behalf of ACPM, receiving and crediting funds paid by short-term renters via the on-line platforms, applying various property management charges against these funds (booking fees charged by the letting platforms, repair costs, internet charges etc), and disbursed the net 'profit' to the homeowner. AC was also the company group's employing entity, employing approximately 30 staff at its peak operation.

1. In her submissions to the Tribunal the consumer appears to contend that she was paid $11,948.57 in net rent by ACPM for the period 6 March 2018 to 27 April 2019. It is not clear how that figure has been arrived at. It is not the total rent revenue she received, which the evidence establishes was at least $17,917.89 for the first 12 months and at least $20,444.60 for the 13 month period (the complete July 2019 statement not being in evidence). Nor is it the net payment she received after the deduction of expenses, which the evidence establishes was at least $5,913.89 for the first 12 month period and $7,913.50 for the 13 month period (again, the complete July 2019 statement not being in evidence).
2. In any event on 6 March 2019, after the end of the first 12 month rental guarantee period, the consumer wrote to ACPM by email to inquire when the balance owing to her under the rental guarantee for that year would be paid. She received no response to that email.
3. On or about 17 April 2019 the consumer notified ACPM that she terminated the Rental Guarantee and Agency Agreement with immediate effect. By return email sent on that day a representative of AC, Sushant Sharma, whose position title is "Operations Lead" acknowledged and accepted the consumers termination of the agreement and set out the arrangements for the handover of possession of the property to the consumer. Relevantly, Mr Sharma stated that the property would be cleaned on 27 April 2019 after the last booking of short-term renters vacated and that the key handover would take place on 28 April 2019 and that "wear and tear will be repaired as per the agency agreement". Mr Sharma also advised the consumer that ACPM would not charge her a "break fee" in relation to the furniture package, and would impose no charge on her for the termination of the agreement without the required 90 day notice period.
4. The consumer subsequently engaged a different real estate agency to manage the property on her behalf. A representative of that agency collected the keys to the property from AC on 30 April 2019. The consumer contends that when the new agent inspected the property a representative notified her that it was not clean, that one key was missing, that the TV and several homewares were broken, that the internet was not working, that the carpet and sofa were very dirty, and that the fabric of the property was in 'terrible condition'. Additionally, she contends that she was advised that the furniture appeared to be IKEA pieces with a new value of less than $3,000.00.

Jurisdiction

1. Mr Forbes' objection to the Tribunal exercising jurisdiction because the dispute has no relevant connection to NSW has been dealt with as a preliminary issue above and rejected.
2. More generally, the Tribunal has jurisdiction to hear and determine this application as a consumer claim under Part 6A of the FT Act because the claim is for a specified sum of money that arises from the supply of services by a supplier, being ACPM, under a contract for the supply of those services, being the Rental Guarantee and Agency Agreement: see 'meaning of consumer claim' in section 79E(1) of the FT Act. Mr Feng and Mr Forbes did not supply services to the consumer directly, the supplier of the services was ACPM for the purposes of sections 79D and 79G of the FT Act. However, her claim "arises from the supply of those services" because the traders were the directors of companies involved in the supply and her allegation is that they engaged in misleading and deceptive and unconscionable conduct in relation to the supply: Jenkinson v Chaw [2015] NSWCATAP 127 at [28] and [32].
3. There is no issue that the applicant is a consumer entitled to bring this action: section 79H of the FT Act. The claim is less than the monetary limit imposed upon the Tribunal's order making power by section 29S and it has been brought within the time limitation periods specified by section 79L of the FT Act.

Applicable law

1. The Australian Consumer Law (NSW) (ACL) is part of the law of NSW and may be applied in the determination of a consumer claim made under Part 6A of the FT Act: section 28 of the FT Act. Chapter 2 of the ACL contains a number of general protections for consumers in consumer transactions, including in section 18, a prohibition against misleading and deceptive conduct, and in section 21, a prohibition against unconscionable conduct.
2. Section 18 provides that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
3. In Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [10] Gordon J summarised the principles to be applied in determining if conduct is misleading and deceptive for the purposes of section 52 of the former Trade Practices Act 1974. Those principles have equal application to section 18 of the ACL and are stated following (references omitted): A contravention of s 52(1) of the TPA is established by "conduct" which is misleading or deceptive or likely to mislead or deceive. The "conduct", in the circumstances, must lead, or be capable of leading, a person into error and the error or misconception must result from "conduct" of the corporation and not from other circumstances for which the corporation is not responsible. "Conduct" is likely to mislead or deceive if there is a "real or not remote chance or possibility regardless of whether it is less or more than fifty per cent". Section 52(1) is concerned with the effect or likely effect of "conduct" upon the minds of that person or those persons in relation to whom the question of whether the "conduct" is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself. Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests. Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context. "Conduct" can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive. By making a statement of past or present fact, a corporation's state of mind is irrelevant unless the statement involved the state of the corporation's mind. Contravention of s 52(1) does not depend upon the corporation's intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false. Precisely the same principles control the operation of s 52(1) to statements involving the state of mind of the maker when the statement was made (e.g. promises, predictions and opinions). A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind. A statement of opinion will not be misleading or deceptive or likely to mislead or deceive merely because it turns out to be incorrect, misinforms or is likely to do so. An incorrect opinion does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation. An expression of an opinion which is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion however erroneous misrepresents nothing. However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene s 52 of the TPA.

Consideration

1. Having regard to the consumer's cause of action, the material facts and contentions of the parties, and the applicable law, the questions the Tribunal must pose and answer in order to determine the outcome of this application may be stated as follows: 1. Did the traders engage in either or both misleading and deceptive or unconscionable conduct with respect to any of the following: 1. The rental guarantee 2. The furniture supply 3. The payment of strata fees, council rates and electricity accounts 4. Cleaning and maintenance of the property, including the charging of a housekeeping fee 1. If so, did the consumer suffer reasonably foreseeable damage and loss as a result of that misleading and deceptive or unconscionable conduct? 2. If so, what orders are necessary to compensate the consumer for this loss?

Rental Guarantee

1. It is clear, and apparently not in issue, that ACPM through its representative Dean, made a representation to the consumer prior to her entering into the Rental Guarantee and Agency Agreement that she was guaranteed an annual 6% rental return on the purchase price of her property. It would also appear to be uncontroversial that Mr Feng was "involved" in the making of that representation because he was the licensee of the business that made that pitch to its potential customers and he must have known such a pitch would be made. It was a key platform of his agency's business model. It also appears to me uncontroversial that Mr Forbes was involved in the making of that representation because he was the Chief Executive Officer of AC, the employer of staff deployed to ACPM, including Dean, and he had primary conduct of ACPM's affairs despite not holding a license. He must have known such a pitch would be made.
2. However, that representation is reflected in the terms of the Rental Guarantee and Agency Agreement set out 54 and 55 above. Under the terms of that Agreement the consumer was guaranteed a rental income of $27,060.00 being 6% of $451,000,000 which was the purchase price she paid for her property. To this extent the representation that Dean made was not misleading or deceptive. It was, in fact, a term of the contract the consumer entered into with ACPM.
3. The consumer appears to contend that the representation was misleading and deceptive and unconscionable on two bases. First, because she did not achieve a rental return equivalent to 6% and ACPM did not honour the rental guarantee when she requested it to do so in accordance with the terms of the Rental Guarantee. Second, because ACPM deducted various expenses from the gross rental she received contrary to the representations Dean made to her which were that no agency fee would be charged, that ACPM would cover the insurance, that tenants would pay for cleaning and provide a bond which would be used to meet the costs of rectification of any tenant damage, and that apart from the cost of the furniture package, she only be responsible for the payment of council rates, strata levies, and water and electricity charges which he estimated would be not more than $3,000.00 per year.
4. The consumer has not proved on her evidence for the reasons stated at paragraph 57 what her rental return was for the period the Rental Guarantee and Agency Agreement subsisted. However, it appears reasonable to assume that it fell short of $27,060.00. Accordingly, the consumer had a contractual right, enforceable against ACPM, for the payment of the shortfall amount in accordance with the rental guarantee. That contractual right cannot be enforced because ACPM is in administration.

Furniture contract

1. The consumer contends that Dean represented to her prior to her entry into the Rental Guarantee and Agency Agreement, in effect, that the "furniture package" she was required to purchase would be personal property which would be a depreciable asset for taxation purposes. She also contends that Dean represented to her that the furniture would be "quality" Temple and Webster furniture and not "cheap" furniture sourced from IKEA (for example). She contends that in fact the furniture package was not personal property and that her apartment was in fact furnished with "cheap" IKEA furniture. She claims as compensation the difference in value between the Temple and Webster furniture she was promised and the value of the furniture package actually provided. She also claims the cost of replacement of damaged furniture and home wares.
2. There are a number of difficulties for the consumer in relation to this element of her claim. First, the evidence does not establish to my satisfaction that Dean represented to the consumer that the furniture would be personal property. In this respect, I am not prepared to accept the informal English translation to this effect of the wechat conversation between Dean and the consumer in which this representation is alleged to have been made for the reasons I have stated at paragraph 101.
3. Additionally, there is objective and surrounding evidence that has a strong tendency to negate that interpretation of what Dean communicated to the consumer. In this respect, the terms of the Rental Guarantee and Agency Agreement make it clear in section 4 that property in the furniture remains with ACPM for the first 24 months at the end of which period property in the furniture would vest in the consumer. In her affidavit, Ms Wan deposes to this exact arrangement being explained to her by Dean prior to her entering into her own Rental Guarantee and Agency Agreement. Ms Wan also deposes in her affidavit at paragraph 14, in effect, to having communicated this information to the consumer.
4. I am satisfied that what the consumer purchased by the "furniture package" was a chose in action, being a service to furnish her property ready for rental on the short-term rental market and maintain it in furnished condition over the course of the Agreement. I cannot see any reason why this expenditure would not be a deductable expense for taxation purposes, and in any event, the consumer has submitted no evidence to the effect that such a tax deduction could not be made in relation to this expense. I am thus not satisfied that the consumer was misled or deceived by Dean into thinking that the furniture would be her personal property from the outset. It follows that Mr Feng and Mr Forbes could not have been involved in any act of deception of this nature.

Strata fees, council rates and electricity charges

1. The evidence discussed at paragraphs 64 and 67 above does not provide a foundation for the Tribunal to conclude that there was any unconscionable misappropriation of the consumers' trust money or intermingling of her trust monies with ACPM's monies in relation to the payment of strata levies. It appears to establish that ACPM failed to pay the consumer's June 2018 strata levies for which she incurred late payment fees in the amount of $80.10. ACPM's failure to pay the consumer's strata levies when they fell due was a breach of contract by ACPM, but there is no evidence that this was the result of misleading and deceptive or unconscionable conduct by ACPM in which Mr Feng and Mr Forbes were involved.
2. The evidence discussed at paragraphs 68 and 69 above does establish that ACPM withheld (deducted) $168.10 for electricity charges from the trust funds it received on behalf of the consumer in March 2019 but that it failed to remit that amount to the electricity supplier. This constituted a misappropriation of trust funds or in the alternative or additionally an intermingling of the consumers' trust monies with ACPM money in contravention of the Mr Feng's obligations as director and licensee of ACPM as prescribed by section 32 of the PSBA Act. That evidence does not establish any other breach of contract or misleading and deceptive or unconscionable conduct by ACPM in which Mr Feng and Mr Forbes were involved in relation to electricity accounts.
3. The evidence discussed at paragraph 70 above also establishes that ACPM withheld (deducted) $398.70 for council rates from the trust funds it received on behalf of the consumer in February 2019 but that it failed to remit that amount to Brisbane City Council. The consumer incurred late payment fees as a result of that failure in the amount of $10.66. ACPM's failure to remit to Brisbane City Council the money it deducted from the consumers trust funds constituted a misappropriation of trust funds or in the alternative or additionally an intermingling of the consumer's trust monies with ACPM money in contravention of the Mr Feng's obligations as director and licensee of ACPM as prescribed by section 32 of the PSBA Act.
4. The PSBA Act is consumer protection legislation that imposes strict duties on real estate corporations and licensees with respect to the management of their clients' trust monies. I am satisfied that this legislative regime is to be considered an industry code of practice for the purposes of section 21 and 22 of the ACL. Having regard to that industry code, I am satisfied it was unconscionable for ACPM to cause or permit the misappropriation of the consumer's trust funds or the intermingling of those funds with ACPM's monies. It was dishonest and outside societal norms of acceptable commercial behaviour for it to allow this to occur. Mr Feng was clearly involved in this unconscionable conduct because he was the licensee of ACPM and section 32 of the PSBA Act reposed in him the duty to ensure that his agency and its employees and agents complied with the requirements of the PSBA Acts. He failed to do so.

Cleaning and maintenance and housekeeping fee

1. The consumer is critical of the state of cleanliness and maintenance of the property on the date she recovered possession which she contends was in breach of ACPM's obligations to maintain the property in clean condition and good repair. However, she does not pursue any specific head of damage and loss in relation to these alleged breaches (other than in relation to furniture and home wares which has been dealt with above). It is thus unnecessary to deal with these criticisms in detail. Suffice to say that the consumer has submitted no evidence that is capable of proving to the requisite standard of proof what the condition of the property was when she recovered possession. The deficiencies with the property manager's email have already been stated and there is no other objective evidence bearing upon this issue.
2. The consumer seeks to recover from the traders a 'housekeeping fee' in the amount of $260.00 which was deducted from her trust funds in March 2019. She contends that ACPM incurred this expenditure without her approval, and further, that no service was provided in respect of that deduction.
3. Whether or not any service was actually provided in relation to this expenditure it was clearly not authorised by the terms of the Rental Guarantee and Agency Agreement or otherwise authorised by the consumer. It thus constituted a misappropriation of the consumer's trust money by ACPM. This was unconscionable conduct by ACPM in which Mr Feng must be taken to have been involved as director and licensee of ACPM, but not Mr Forbes, for the reasons stated above. The consumer is thus entitled to an order that will require Mr Feng to compensate her for this loss.

Conclusion

1. For the foregoing reasons, Mr Feng must pay the consumer the sum of $837.30 immediately. The application is otherwise dismissed.

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: 17 March 2022