Gaskell and Bourke v Northshore Homes Pty Ltd and Nazha

NCAT Consumer and Commercial|2021-02-02

REASONS FOR DECISION

This decision relates to the applicants' ('the 'owners') claim against the second respondent ('the 'director') for misleading and deceptive conduct. There are two representations relied upon by the owners in their submissions, namely the: 1. Website representation; and 2. Engineering representation.
The claim is made pursuant to s18 of the Australian Consumer Law ('ACL'). Section 28 of the Fair Trading Act (NSW) 1987 makes the ACL applicable in New South Wales. Section 74(3) of the Fair Trading Act gives the Tribunal jurisdiction in connection with breaches or contraventions of chapters 2 or 3 of the ACL if the matters complained of arise in connection with another matter the subject of proceedings in the Tribunal.
Section 18(1) of the ACL states: 'A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.'
Section 74(3) of the Fair Trading Act states: 'The Tribunal may decide the matter of whether a person has suffered loss or damage because of the conduct of another person that constitutes a local contravention or a contravention of Chapter 2 or 3 of the ACL if that matter arises in connection with another matter the subject of proceedings in the Tribunal. In deciding the matter of loss or damage, the Tribunal may award such sum, and make such ancillary orders, as it thinks fit.'
I find that s 18 of the ACL is contained in Chapter 2 of the ACL. I also find that the owners misleading and deceptive conduct case against the director arises in connection with another matter the subject of proceedings in the Tribunal, namely the owners case against the first respondent in relation to a building claim as defined by the Home Building Act 1989 (NSW). The Tribunal's jurisdiction to determine the owners building claim is conferred by s 48K and s 48O(1) of the Home Building Act.

The website representations

The owners' claim against the director in connection with representations that they state existed on the first respondent's website. Their evidence is that they had regard to the statements on the website and that they relied upon them by entering into the contract with the first respondent. The owners submit that the representations were false as regards the quality of work delivered by the first respondent in building the residence.
The director was cross examined about his knowledge and involvement in the creation of the website and its content. His evidence was that he was not involved in the construction of the website or anything that was put on it. He stated that a co-director was responsible for the website. In particular the director stated that although he saw the website, he didn't go through it, word for word, but he understood that members of the public would read it. When being cross examined the director acknowledged that housing awards had not been won by the first respondent although that may have been stated on the website.
In Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 employees of a company were found to be personally liable under section 9(1) of the Fair Trading Act 1999 (Vic) notwithstanding that they had been acting in the trade and commerce of the corporation and not themselves. At [35] the High Court stated: 'Mr Arms was engaging in trade and commerce under the name "Australian Cellar Door" and by means of the auscellardoor web site. He enlisted WSA to provide services and advice for the purposes of his business. It was the business of WSA to provide such advice and services. It is not to the point that Mr Houghton and Mr Student themselves were not business proprietors or that their activities were an aspect or element of the trade or commerce of WSA (and of Australian Cellar Door) but not of "their" trade or commerce. Mr Houghton and Mr Student nevertheless engaged in conduct in the course of trade or commerce and were thus within the ambit of the FT Act.'
The relevant aspect of the above passage is that the appellants were found to have been engaged in the relevant conduct which was within trade and commerce. The passage at [40] of the judgement confirms this: 'The appellants are fixed with the findings by the primary judge respecting the conduct in which they engaged, being certain acts and omissions. As indicated earlier in these reasons, these were "in trade or commerce". Why then are the appellants not persons who contravened the prohibition imposed by s 9 of the FT Act? As a general proposition, and as Lord Rodger of Earlsferry stressed in Standard Chartered Bank v Pakistan Shipping Corpn (Nos 2 and 4) in the world of tort the status of an individual as an employee does not divest that person of personal liability for wrongful acts committed while an employee. There is no good reason for treating the text of s 9 any differently and, in particular, for construing the section as if it read "[a] person, as principal, must not ...".'(emphasis added).
The case of CH Real Estate Pty Ltd v Jainran Pty Ltd; Boyana Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 at [102] - [105] is to the same effect in connection with the former s42 of the Fair Trading Act. In these proceedings a director of a vendor of property was found liable for contravention of s 42 on the basis of his own actions in the transaction.
Section 18 of the ACL requires the director to be engaged in conduct relating to the website representations. I find based on the directors evidence in the Tribunal that he was not engaged in the conduct which is said to constitute the website representations.
The owners also raise the issue of the director's omission to change the website as constituting misleading and deceptive conduct. An omission may constitute conduct for the purposes of s 18 of the ACL. Counsel for the owners has referred me to Australian Olympic Committee, Inc. v Telstra Corporation Limited [2016] FCA 857 at [132] where Wigney J. stated: 'The principles relevant to the resolution of this matter may be summarised in simple terms as follows: Section 18 of the Australian Consumer Law is not limited to misleading and deceptive representations. The question is whether the respondent's conduct, which may include acts, omissions, statements or silence, is misleading or likely to mislead or deceive'
It must be borne in mind that it was the second respondent that caused its website to be created and maintained. The cases referred to above establish that a director or an employee may be held liable if his or her conduct was involved in the contravention complained of. In these proceedings the website representations are as referred to at [5] -[6] of the owners Further Amended Points of Claim dated 16 September 2019 and particularised at [70] - [72] of Mr Gaskell's affidavit sworn 16 September 2019 where reference is made to what was stated on the first respondent's website. The owners have not brought a claim against either the first or the second respondent that there was conduct in contravention of s18 of the ACL because of an omission on its or his part. The second respondent was not cross examined about whether or not he omitted to have the website changed.
I find that the owners' pleaded case never raised an assertion that the first or second respondents' conduct was misleading and deceptive because of an omission to change the company website. I further find that the issue of a failure to change the company website was never put to the second respondent. I therefore reject the owners' case against the second respondent based on a failure to change the company website.
The owners also submit that a Jones v Dunkel (1959) 101 CLR 298 inference should be drawn by reason of the director's failure to call as a witness the director who he has stated created the website the subject of the website representation. The precise nature of that inference has not been identified, but must be that the other director's evidence would not assist the director, because the director in fact had a direct involvement in the creation of the website and the information that was placed on it.
In Manly Council v Byrne [2004] NSWCA 123 at [51]- [52] Campbell J. said: '51 Thus, if a witness is not called two different types of result might follow. The first is that the tribunal of fact might infer that the evidence of the absent witness, if called, would not have assisted the party who failed to call that witness. The second is that the tribunal of fact might draw with greater confidence any inference unfavourable to the party who failed to call the witness, if that witness seems to be in a position to cast light on whether that inference should property be drawn. 52 Even though a jury should be directed about the availability of the inferences which are recognised by Jones v Dunkel, it is entirely a matter for the jury whether it actually draws one, or both, of those inferences: Cafe v Australian Portland Cement Co Pty Ltd (1965) 83 WN (NSW) (Pt 1) 280 at 286, 287. Applying this principle to the situation of a trial by judge alone, there is no compulsion on the trial judge to draw either of the Jones v Dunkel inferences.'
At [53] of his judgement in Manly Council v Byrne Campbell J. referred to the decision of Glass JA in Payne v Parker [1976] 1 NSWLR 191 where his honour stated in connection with the drawing of inferences: '(6) Whether the principle can or should be applied depends upon whether the conditions for its operation exist. These conditions are three in number: (a) the missing witness would be expected to be called by one party rather than the other, (b) his evidence would elucidate a particular matter, (c) his absence is unexplained.'
I find that it was not necessary for the director to have called his co-director to give evidence about the company website. The director was at risk of an adverse finding if he did not give an evidentiary account of his conduct in connection with the website representation. In my view once he did that it was not incumbent upon him to call an additional witness to bolster his position, although that was a course that was open to him.
In Gaskell v Denkas Building Services Pty Limited [2008] NSWCA 35 after referring to Manly Council v Byrne and the paragraphs referred to, Bryson AJA stated at [48]: 'In the light of the way in which the appellant's submission was put and of reference made to Campbell J's judgment it should be stated, as is plain from Campbell J's judgment, that the second type of result to which Campbell J. referred in which an unfavourable inference is drawn is available only if evidence otherwise provides a basis on which that unfavourable inference can be drawn; an unfavourable inference cannot be drawn solely on the basis that the witness was not called. There must be a basis elsewhere in evidence to support the inference.'
As to the second type of inference referred to by Campbell J, I find that there is no evidence before me regarding the website representation, other than the director's and the owner's evidence, which provides a basis for the unfavourable inference called for by the owners.
On the basis of what is stated in the authorities to which I have referred, and the findings that I have made regarding the need for the director to have called an additional witness and the lack of evidence that would otherwise support the inferences called for, I find that there is no basis for drawing the inferences called for, and in conformity with the position stated by Campbell J. find that there is no compulsion on me to draw either of the Jones v Dunkel inferences.
I find that despite being a director at the relevant time the director did not engage in conduct which was misleading or deceptive either by act or omission in connection with the website representations.

Engineering representations

There is no dispute that the director made the engineering representation, namely that he had the right to terminate the engagement of the owners' engineer Mr Yu.
The director's solicitor submits that the engineering representation was not misleading or deceptive and that the owners have not suffered loss by reason of relying on it.
The director's solicitor asserts that the director had the right to terminate the owners' engineer pursuant to regulation 35 of the Work Health and Safety Regulation 2017 which states: 'A duty holder, in managing risks to health and safety, must - (a) eliminate risks to health and safety so far as is reasonably practicable, and (b) if it is not reasonably practicable to eliminate risks to health and safety - minimise those risks so far as is reasonably practicable.'
I find that regulation 35 of the Work Health and Safety Regulation did not authorise the director to state to the owners: 'As a principal contractor I have the right to hire or fire any 'subcontractor, engineer, certifier etc'
As a result I find that the director's statement was misleading and deceptive because it led the owners into error by them forming the view that they had no choice other than to allow the director to terminate the engagement of Mr Yu to provide engineering services.
The director's submission also state that the owners have not suffered loss or damage because of the representation. It is stated that Mr Yu's plans remained in place and were not altered by the new engineer engaged by the first respondent.
The damages claimed by the owners, $211,344.00 relate to defective work carried out by the first respondent. This defective work had a connection with engineering practice because the engineer that the first respondent engaged certified engineering work carried out by the first respondent when the work should not have been certified.
Mr Gaskell's affidavit of 16 September 2019 provides the evidence in support of the engineering representation. He states that the engineer engaged by the first respondent has not properly inspected the work or provided adequate certification. Importantly, at [8] he states that before Mr Yu's engagement was terminated, he carried one engineering inspection which was dated 12 April 2017. The building contract between the parties at clause 19 stated, among other things : 'The contractor must allow the owner, any person authorised by the owner ………..access to the site to view and inspect the work in progress.'
Given the fact that the contract allowed for an engineer engaged by the owners to view and inspect the work in progress, that the owners had engaged Mr Yu to do that and that Mr Yu had after a site inspection informed the first respondent on 12 April 2017 of what was required to be done as regards the footing excavations and reinforcement issues, I infer that the owners would have continued to engage Mr Yu to inspect the work in progress on an ongoing basis, at least in connection with engineering issues.
I also infer that had Mr Yu remained engaged and carried out his inspections of the work in progress the defective building work would have been inspected and addressed at the relevant time, by way of cost efficient rectification, with a high likelihood that the cost of $221,344.00 now associated with the rectification of the work that was improperly certified would have been avoided.

Insurance payout

The director's solicitor has also raised the issue that if an order was made in the owner's favour in the above amount, the owners would be over compensated, given that the amount ordered in favour of the owners was $481,445.00 and they have received $340,000.00 as an insurance payout from the home owner warranty insurer. It is said by the owners that the amount of $340,000.00 is inclusive of costs and (in Reply) that their costs are in the region of $325,000.00, leaving them only $15,000.00 to apply to the rectification of defective work.
There is no evidence about the basis of the insurer's payout as actually made for me to make any findings as to its precise nature. Section 99 of the Home Building Act suggests that the amount paid by the owners' insurer was in relation to damages for breach of the statutory warranties in respect of the defective work carried out by the first respondent. That section states so far as is relevant: '99(1) A contract of insurance in relation to residential building work required by section 92 must insure - (a) a person on whose behalf the work is being done against the risk of loss resulting from non-completion of the work because of the insolvency, death or disappearance of the contractor, and (b) a person on whose behalf the work is being done and the person's successors in title against the risk of being unable, because of the insolvency, death or disappearance of the contractor - (i) to have the contractor rectify a breach of a statutory warranty in respect of the work, or (ii) to recover compensation from the contractor for any such breach.'
However Regulation 40 of the Home Building Regulation 2014 states that the indemnity provided under an insurance policy issued pursuant to s92 of the Home Building Act must indemnify the owners against a number of types of loss including: 'any legal or other reasonable costs incurred by a beneficiary in seeking to recover compensation from the contractor for the loss or damage or in taking action to rectify the loss or damage'
So far as the home owners warranty insurers payout is concerned, I find that the owners are free to spend the proceeds as they see fit. However I do not accept that if they spend the proceeds in payment of costs, that leads to a conclusion that the amount they have received should be regarded by me as diminished or effectively extinguished by reason of such payment. In addition as the owners' counsel has stated, an order was also made for a costs application to be made against the first respondent in addition to the order in their favour for $481,445.00. Unfortunately the first respondent was put into liquidation on 17 December 2020 making the recovery of costs against the first respondent subject to leave of the Supreme Court, which I infer has not been applied for. The payout received from the insurers payout was directed in part toward this type of cost by reason of regulation 40.
In considering the amount to be awarded against the director first, I find that the amount of $481,445.00 was awarded to the owners which included the rectification costs required because of the fact that the engineer engaged by the first respondent failed properly to inspect its work in progress and certified work as being acceptable when he should not have. Secondly I find that the amount of rectification costs referred to is the sum of $221,344.00. Thirdly. I find that the owners have received $340,000.00 as compensation for damages for breach of the statutory warranties in respect of the defective work carried out by the first respondent, which includes a costs element. As a result of these findings I can find no reason why the amount to be awarded in the owners favour should be reduced. I find that the payout of $340,000.00 included a costs element to compensate the owners because they had lost the right to pursue the first respondent for costs and that it was a matter for them as to how they applied that payout between rectification work and costs associated with seeking compensation.
I find that the proper amount to be awarded in the owners favour is $221,344.00 and further that the owners will not be over compensated for rectification costs if that amount is awarded.
In addition I will make orders for the filing of submissions in the event that the owners wish to make an application for costs against the director.

Costs

In the event that a party wishes to bring a costs application, the costs application must be lodged in the Tribunal and served on the costs respondent within 14 days of the date of the orders in these proceedings either attaching or referring to the documents relied upon in support of the application.
The costs respondent will have 14 days after the date they or he receives the application to lodge in the Tribunal and serve on the costs applicant his or their submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.
The cost applicant will have 14 days after the date he or they receives the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent their or his submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.
The parties must state in their submissions whether or not they consent to the costs application being determined on the basis of the parties written submissions and attached documents, if any, without the need for a hearing.
Subject to the parties' submissions, the Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal.

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: 16 August 2021

Fair Trading Act 1999(Vic)

Work Health and Safety Regulation 2017(NSW)

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