[2017] VCAT 261
General information, not legal advice.
Victorian Civil and Administrative Tribunal
2017-02-21
Ms J
Original judgment source is linked above.
Unconscionable conduct within the meaning of the unwritten law
(1) A person must not, in trade or commerce, engage in conduct which is unconscionable, within the meaning of the unwritten law, from time to time.
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive.
(1) The Tribunal may order that a person be joined as a party to a proceeding if the Tribunal considers that-
(a) the person ought to be bound by, or have the benefit of, an order of the Tribunal in the proceeding; or
(b) the person's interests are affected by the proceeding; or
(c) for any other reason it is desirable that the person be joined as a party.
(2) The Tribunal may make an order under sub-section (1) on its own initiative or on the application of any person.
To show that there is an open and arguable case against a proposed joined party it is necessary to plead facts and law that support a successful case without proving the facts-to demonstrate a prima facie case. Nevertheless, it is not sufficient merely to assert the facts without demonstrating how those facts are supported.
There can be no dispute that the contract was entered into with Reynson Concepts Pty Ltd...Whilst it may be that the work was not completed within 6 months of commencement, there are no particulars as to how this supports an allegation of misleading and deceptive conduct. Similarly there are no particulars as to the relevance of the incorporation of the builder, or how it was said that the work would be carried out diligently was misleading and deceptive. It is not enough to make bald allegations, they must be supported by relevant particulars, although it is not necessary to set out the evidence.
[details are recited of the written building contract between the applicant and the first respondent]
...Insofar as it was oral, it was comprised by discussions between Mr P Rocca for and on behalf of the Applicant and Mr M Mazza for and on behalf of the First Respondent in or around June 2010...
(a) the First Respondent would complete construction of the units by Christmas 2011 (the Second Representation)
(a) The First Respondent would complete construction of the units within six weeks (the Third Representation).
52-64 [The PPOC recites that the representations were in respect of "future matters" within the meaning of the applicable law, that they were false and misleading and that the applicant relied on them].
CLAIM AGAINST MR MAZZA IN HIS PERSONAL CAPACITY
The law on the personal liability of a director for corporate torts is in an uncertain state. There seem to be at least four views having judicial support.
...it behoves the courts to avoid imposing on the owner of a one man company a personal duty of care which would erode the limited liability and separate identity principles associated with the names of Salomon and Lee. Viewing the issue as one of assumption of a duty of care ... I cannot think it reasonable to say that Mr Ivory assumed a duty of care to the plaintiffs as if he were carrying on business on his own account and not through a company.[30]
An agent is in general personally liable for his own tortious acts: Bowstead on Agency (15th ed, 1985) at p 490. But one cannot from that conclude that whenever a company's liability in tort arises through the act or omission of a director, he, because he must be either an agent or an employee, will be primarily liable, and the company liable only vicariously. In the area of negligence, what must always first be determined is the existence of a duty of care. As is always so in such an inquiry, it is a matter of fact and degree, and a balancing of policy considerations. In the policy area, I find no difficulty in the imposition of personal liability on a director in appropriate circumstances. To make a director liable for his personal negligence does not in my opinion run counter to the purposes and effect of incorporation...
Essentially, I think the test is, or at least includes, whether there has been an assumption of responsibility, actual or imputed. That is an appropriate test for the personal liability of both a director and an employee. It was the basis upon which the director was held liable in Fairline Shipping Corporation v Adamson [1975] QB 180, (see p 189), where the assumption of responsibility was virtually express. It may lie behind the finding of liability in Centrepac Partnership v Foreign Currency Consultants Ltd [1989] NZHC 54; (1989) 4 NZCLC 64,940. Assumption of responsibility may well arise or be imputed where the director or employee exercises particular control or control over a particular operation or activity, as in Adler v Dickson [1954] EWCA Civ 3; [1955] 1 QB 158 (although there the issue did not arise, as it was a pre-trial decision on a different point of law). Yuille v B & B Fisheries (Leigh) Ltd [1958] 2 Lloyd's Rep 596 is another illustration. This is perhaps more likely to arise within a large company where there are clear allocations of responsibility, than in a small one. It arose however in the case of a small company in Morton v Douglas Homes Ltd [1984] 2 NZLR 548, 593ff; but not in a case to which I made some reference in my judgment in Morton, namely Callaghan v Robert Ronayne Ltd (Auckland, A 1112/76, 17 September 1979), a judgment of Speight J. It may be that in the present case there would have been a sufficient assumption of responsibility had Mr Ivory undertaken to do the spraying himself, but it is not necessary to consider that possibility (emphasis added).[31]
Both in Australia and in England a director is in no different position to an agent, who whilst binding their principal may also be liable for their tortious acts. The defendant's submission that Mr and Mrs Secchi cannot be held liable for their conduct as directors because their acts are those of those of the corporation, expressed in such absolute terms, must be rejected. This does not mean that directors become personally liable merely because they are directors. Unless they procure or direct the tortious conduct the law does not impose upon them liability for the acts of other agents or employees, whether they are directors of large corporations or what is described as "one man" companies [emphasis added by applicant].
...Notwithstanding those decisions which invite a different conclusion the 'direct and procure" test has not been shown to be unsound and it remains the standard for determination of a director's liability. The level of involvement and degree of control which a director exercises will determine whether it can be said that the acts have been directed or procured by the director [again, emphasis added by applicant].
The [level of] involvement [and degree of control, in the Johnson Matthey sense] of Mr Mazza is absolute. He is the person who made the representations, he had full knowledge of the things necessary to get construction started, he should have known how long it would take to get the house demolished and a building permit issued and he should have known how long it would take to build the units. And he should have known what information, plans and specifications the builder had to have before entering into a Major Domestic Building Contract and the obligations with regard to including a set construction period in the contract.[35]
However, it was Mr Mazza, with a close relationship of mutual trust between him and Mr Rocca, who filled out the contract, omitting crucial parts, including the construction period or completion date. It was Mr Mazza personally who had the knowledge that a building surveyor needed to be appointed and a building permit had to be obtained. Mr Mazza also knew the existing house had to be demolished. Mr Rocca's evidence was that Mr Mazza agreed to arrange the demolition, engage the building survey and apply for the building permit. Whist Mr Mazza denies this, again this is a question to be determined at the hearing.
Notably also, Mr Mazza knew, when he attended on the Roccas to have the contract executed and a deposit paid, he was intending to travel overseas shortly after. It was not the company that flew off to Italy-it was Mr Mazza personally, although it would be reasonable to assume that the funds for the trip may well have come from the deposit paid by [Mr Rocca].
The applicant maintains that by virtue of the close relationship between Mr Mazza and Mr Rocca, Mr Mazza ought to be found liable personally for the misleading and deceptive conduct comprising promises made by him with full knowledge that the Roccas wanted to be able to occupy the first unit for the Christmas holidays. Mr Mazza repeated the personal assurance to Mr Rocca that he would see that the construction was completed within certain timeframes, but on each such occasion due largely to his own personal conduct the construction is never completed by the respondent.[36]
CLAIM AGAINST MR MAZZA UNDER THE ACCESSORIAL LIABILITY PROVISIONS OF THE TPA AND THE ACL.
(i) aided and abetted the first respondent's contravention;
(ii) has been directly or indirectly knowingly concerned in and party to the first respondent's contravention[40]
involved [means]: a person is involved , in a contravention of a provision of this Schedule or in conduct that constitutes a contravention, if the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b) has induced, whether by threats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention (emphasis added).
[2] By paragraph 15 of the Applicant's Amended Points of Claim dated 24 June 2015.
[3] See paragraph 13(e) of the Defence and Counterclaim dated 14 September 2015.
[4] Paragraph 4(f) of the PPOC. It is difficult to see how the breach of this alleged term gives rise to an entitlement to claim for alleged delay from 1 January 2011 in respect of all 3 units.
[5] See paragraph [45] of the PPOC. I note that the alleged content of the oral term of the building contract on the one hand, and the alleged content of the first representation on the other hand, are at odds with each other.
[6] Given that the building contract was entered into in June 2010, the misleading and deceptive conduct complained of is that proscribed by section 9 of the Fair Trading Act 1999 (Vic) in the case of representations said to have been made by the proposed fifth respondent, and section 52 of the TPA in respect of representations said to have been made by the first respondent.
[7] Item 1 of Schedule 1 to the building contract (page 6 of the building contract).
[8] Item 9 of Schedule 1 to the building contract (page 8 of the building contract).
[9] See particulars to paragraph 22 of the PPOC.
[10] See particulars to paragraph 37 of the PPOC.
[11] See particulars to paragraph 43 of the PPOC.
[13] Any such application is to await the outcome of a compulsory conference, presently set down for 22 February 2017.
[14] See "Chronological Sequence of Events" and accompanying copy documents filed by the third respondent on 15 December 2016, such material perhaps not having reached the hands of the first respondent when it made its joinder application on 24 November 2016.
[15] See paragraphs [68]-[69] PPOC.
[16] See; Zervos v Perpetual Nominees Limited [2005] VSC 380; applied in Perry v Binios [2006] VCAT 1604; Watson v Richwall [2014] VCAT 1127 at [28].
[18] [2009] VCAT 890 at [8].
[21] See Perry v Binios supra at fn 16, at [14] and [16]; Luo & Anor v Reynson Concepts Pty Ltd supra fn 18, at [ ].
[22] I note that the email relied on here is a document with the letterhead "Timetrex Builders", also describing Mr Mazza as a director of the first respondent, and which is signed by "Mario Mazza of Timetrex Builders".
[23] See paragraphs [65] and [67] PPOC. Damages are also claimed under the TPA, but it would seem to be inapplicable.
[24] Salomon v Saloman [1897] AC 92.
[25] See Young Investments Group Pty Ltd v Mann [2012] FCAFC 107 at [58].
[26] See paragraph 30 of the applicant's submissions dated 16 December 2016.
[29] [1992] 2 NZLR 517. Summary taken from Korfiatis v Tremaine Developments Pty Ltd [2008] VCAT 403 per SM Walker at [29]-[30].
[32] (2003-2004) 9 VR 171. The summary that follows is also taken from Korfiatis v Tremaine Developments Pty Ltd [2008] VCAT 403 per SM Walker at [23].
[33] I was referred by the applicant's counsel to Pioneer Electronics Australia Pty Ltd v Lee 92001) [2000] FCA 1926; 108 FCR 216; Johnson Matthey (Aust) Pty Ltd v Dascorp Pty Ltd & Ors (2003-2004) 9 VR 171; Korfiatis v Tremain Develpments Pty Ltd and Ors [2008] VCAT 403; Kierce v Morris Architects Pty Ltd and Ors [2010] VCAT 1740;Young Investments Group Pty Ltd v Mann [2012] FCAFC 107 and JR Consulting & Drafting Pty Limited v Cummings [2016] FCAFC 20.
[34] See Perry v Binios [2006] VCAT 1604 and Luo & Anor v Reynson [2009] VCAT 890 at [13].
[35] Applicant's submissions dated 16 December 2016 at [42].
[36] Applicant's reply Submissions dated 17 January 2017.
[37] See paragraph [68(a)] of PPOC. No allegation is made that the first respondent is liable under the provisions of 51AA TPA (unconscionable conduct) or section 20 ACL (unconscionable conduct) on account of the conduct of Mr Mazza.
[41] See also section 75B TPA and section 145 FTA.
[43] See section 4 ACL; section 4 FTA; section 51A TPA.
[44] See Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 667-668; Quinlivan v ACCC [2004] FCAFC 175; (2004) ATPR 42-010. See also Accessorial Liability for Misleading and Deceptive Conduct by Michael Pearce QC (2006) 80 ALJ 104.
[46] See Accessorial Liability under the Trade Practices Act by Conor Bannon (2009) 83 ALJ 407 at 420-422.
G Rocca Pty Ltd
Timetrex Pty Ltd
(2001) 108 FCR 216
(1991) 100 ALR 358
(1996) 142 ALR 111
(1996) 136 ALR 327
(1942) 66 CLR 18
(1985) 84 FLR 101
(1998) 41 IPR 443
(1985) 158 CLR 661