Klaus v Wallace

The appeal

1. The appeal by Mr Klaus does not seek to challenge the Tribunal's findings in relation to breaches of the guarantees in the ACL or that there was a major failure entitling Mr Wallace to a refund of the purchase price. Mr Klaus appeals from the decision of the Tribunal on the following grounds: 1. The Tribunal did not apply the correct test in considering whether to join Mr Klaus as a respondent or in making an order that he pay Mr Wallace a refund under the provisions of the ACL as the Member did not consider whether Mr Klaus was a "supplier" within the meaning of the ACL. 2. The Tribunal erred in making orders against Mr Klaus as he was not a "supplier" within the meaning of the ACL. 3. The Tribunal denied Mr Klaus procedural fairness by refusing him an adjournment to file evidence in circumstances where he had not previously been joined as a party or directed to file evidence. 4. The Tribunal denied Mr Klaus procedural fairness by refusing to permit him to give evidence in circumstances where he had not previously been given the opportunity to file or otherwise adduce evidence in response to the amended application.

Legal principles - internal appeals

1. Section 80(2) of the Civil and Administrative Tribunal Act 2013 (CAT Act) provides that internal appeals other than on a question of law require the leave of the Appeal Panel.
2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [13], the Appeal Panel said that the following are errors of law: 1. whether the Tribunal provided adequate reasons; 2. whether the Tribunal identified the wrong issue or asked the wrong question; 3. whether it applied a wrong principle of law; 4. whether there was a failure to afford procedural fairness; 5. whether the Tribunal failed to take into account a relevant (that is, a mandatory) consideration; 6. whether it took into account an irrelevant consideration; 7. whether there was no evidence to support a finding of fact; and 8. whether the decision is so unreasonable that no reasonable decision-maker would make it.
3. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act.
4. In this matter the Appellant submits that the Tribunal made errors of law in its construction of the provisions of the Australian Consumer Law and denied the appellant procedural fairness. Leave to appeal is therefore not required.
5. For the reasons which appear below we are satisfied that the Tribunal made an error of law with respect to its decision to join Mr Klaus as a respondent, although on a different basis to that submitted by Mr Klaus, and it also denied him procedural fairness.

The parties to the appeal

1. The Notice of Appeal identified Mr Klaus as the sole respondent to the appeal. Despite Highline having been a party to the Tribunal proceedings and having had orders made against it along with Mr Klaus, a copy of the Notice of Appeal had not been served on Highline. When the matter first came before us for hearing, we raised the issue that Highline, as it had not been served, and despite s 29 of the CAT Act (which provides that parties to the Tribunal proceedings are automatically parties to an internal appeal) was not named as a party to the internal appeal, should be given an opportunity. That was particularly so given that any orders which may be made removing Mr Klaus as a respondent would have an effect upon Highline.
2. Prior to the resumed hearing Highline advised that it did not wish to participate in the proceedings.

Factual background

1. Before proceeding to set out the Tribunal's decision and the Member's reasoning, we note that the following information was before the Member during the Tribunal proceedings:

• Highline was the manufacturer and owner of the caravan;
• Mr Wallace stated that he spoke with Mr Klaus at a caravan display site which displayed signage and brochures for Highline Caravans, although the site seems to have been operated by WOW Campers and Trailers;
• Mr Klaus gave Mr Wallace a business card which identified him as the Sales Manager for Highline Caravans;
• during negotiations on the price for the caravan Mr Klaus stated he would need to get approval from his boss and made a number of phone calls during the negotiations;
• Mr Wallace stated that at no stage did Mr Klaus indicate he had an interest in the caravan;
• the contract for the sale of the caravan named Highline Caravans as the owner with Mr Wallace as the buyer;
• Mr Klaus signed the contract in two places, the first being in a space provided for "Dealer's Signature" and the second being "Management Authorisation";
• no dealer's name or licence number is contained on the contract;
• Mr Wallace paid a deposit of $6,500 by EFTPOS at the caravan show and the receipt he was given showed "Brewed Addictions", Paradise Point Queensland as the merchant;
• Mr Klaus directed Mr Wallace to pay the balance of the purchase price into a Suncorp Metway account in the name of Klaus Investments;
• when Mr Wallace queried why payments were made to these entities Mr Klaus told him that he had possession of the caravan but had to pay the money to Highline; he also told Mr WallaceKlaus that he owned a dealership in Queensland called Viking Caravans;
• At the hearing before the Tribunal Member Mr Klaus had an authority to represent Highline;
• Mr Klaus communicated with Mr Wallace from two email addresses, one being XXX@highlinecaravans.com.au and the other XXX@vikingcaravans.com.au;
• Mr Klaus told the Member that Highline had offered to repair the caravan at its factory.

1. The Member also had before him company details for Highline, Viking Caravans and Klaus Investments. ASIC records show that Highline Caravans Pty Ltd is a proprietary company registered in Victoria whose sole director is Alexsander Vitanov. Viking Caravans & Campers Australia Pty Ltd is a proprietary company also registered in Victoria whose sole director is Daniel Klaus. Klaus Investments Pty Ltd is a proprietary company registered in Queensland whose sole director is Daniel Robert Klaus.

Procedure prior to the Tribunal hearing

1. As far as we are able to ascertain, the matter came before another Tribunal Member on 8 November 2019 and, when the parties could not settle, directions were made to prepare the matter for hearing. One of these directions was: By consent, the Applicant has leave to amend the claim by 29-Nov-2019 by sending a copy of the amended claim to the Divisional Registrar and the other party, and including: - A list of each item claimed, specifying the monetary amount of each claim. - A copy of all invoices, quotes, statements and other documents which will be relied upon at the hearing.
2. Other directions were made for the filing of documents by both parties. Viking Caravans and Highline were named on the directions as the respondents. Mr Wallace filed an amended application and served a copy upon the other parties. As noted above, on the amended application the respondents were named as Daniel Klaus and Highline.
3. Mr Wallace issued summonses for the production of documents to Highline and to a company called Rural Scene Promotions Pty Ltd. On 16 January 2020 various orders were made in relation to the summonses. Access was granted to both parties to view and copy the documents produced. On the orders the respondents were named as Viking Caravans and Highline.

The decision

1. In his reasons for decision the Member stated: 17 The application as originally filed was against Viking Caravans & Campers Australia Pty Ltd and Highline Caravans Pty Ltd as second respondent. The Tribunal granted leave to the applicant on 8 Nov 2019 to amend the application. The applicant did so by filing and serving in his bundle document entitled "Amended application and summary". That document on its first page (page 7 of the bundle) reflected Highline Caravans as the first respondent and Daniel Klaus as the second respondent. 18 At the hearing, Mr Klaus objected to the amendment substituting himself as a respondent and said he had no notice of this change as page 7 of his copy of the applicant's bundle was missing. 19 It was not contested that when the applicant had paid the purchase price at Mr Klaus's direction, Highline was at that time the owner of the caravan, but Mr Klaus directed payment to a company controlled by him, Klaus Investments Pty Ltd, and issued a receipt by another company or business name, "Brewed Addictions". The company had been deregistered and the business name cancelled well prior to that date. 20 I find that Mr Kraus (sic) is the correct second respondent as the party receiving the payment by directing where it was to be paid, not being to Highline Caravans. He directed that payment be made to a third party Klaus Investments Pty Ltd which was not a contractual party, and issued a first receipt for the deposit of $6500.00 from "Brewed Addiction" either a cancelled business name or a company de-registered in 2017. A second receipt for the balance was issued under the letterhead of Highline Caravans but directed to the bank account of Klaus Investments. 21 Mr Klaus has suffered no prejudice as the applicant's evidence material was all served on him including the amended application. I also do not accept that the front page of the amended application was missing as Mr Klaus had months to examine the material.

Was Mr Klaus denied procedural fairness?

1. When Mr Wallace filed his amended application, he did not name Viking Caravans as a respondent and instead named Mr Klaus as a respondent along with Highline. No order was formally sought removing Viking Caravans as a respondent or joining Mr Klaus and no action was taken by the Tribunal in response to the amended claim.
2. When the matter came before the Member for hearing on 20 February 2020, the Member referred to the amended application and the directions made on 8 November 2019 giving leave for an amended application to be filed. He noted that the direction permitting the amended application was by consent. The Member appeared to assume that Mr Klaus was therefore on notice that he was to be named personally as a respondent. Mr Klaus objected to being named as a respondent and indicated that he was unaware both from the directions hearing and, because his copy of the amended claim was missing the page on which the parties were named, that he was named as a respondent in the amended application.
3. We note that the directions made by the Member on 8 November 2019 do not refer to any amendment to the identity of respondents to the application. They simply refer to the items claimed and to quantum. It is clear that the amended application sought a refund and not simply repairs or replacement as did the original application. Mr Wallace was not questioned at the hearing about whether the change of name had been raised at the directions hearing.
4. Mr Klaus did not attend the return of summons hearing and states he was not notified of the hearing nor that access had been granted to view and copy the documents produced. He therefore did not have access to this material for the purposes of the hearing. This is not surprising as, at the time the summonses were issued and returnable, Mr Klaus was not named as a party. There is also email communication between Mr Klaus and Mr Wallace on 13 February 2020 in which Mr Klaus asks, seemingly on behalf of Viking Caravans, for copies of the summonses as he had not received them.
5. During the course of the hearing on 20 February 2020 the Member stated that he intended to allow the amendment but did not make any orders removing Viking Caravans as a respondent or joining Mr Klaus. He appears to have simply substituted one name for the other. Despite the Member's conclusion that Mr Klaus was on notice that he was named as a party, it is clear from the transcript of the hearing that Mr Klaus was unaware that he faced the prospect of being named as a party and of having orders made against him personally. The Member's statement that Mr Klaus had suffered no prejudice ais the applicant's evidence was all served on him is disingenuous. That material was served on Viking Caravans and Highline and not on Mr Klaus personally. Mr Klaus was not provided with any opportunity to file documents on his own behalf or to raise arguments as to why he should not be joined as a respondent or that orders should not be made against him personally. This was a clear denial of procedural fairness and on this basis alone the appeal must be allowed.

Further ground of appeal

1. Mr Klaus's primary ground of appeal relates to the making of orders against him under the ACL. The argument put by him is that in determining he was liable for breach of the consumer guarantees in the ACL, the Tribunal Member either did not consider whether he was a "supplier" within the meaning of that term in s 259 of the ACL or applied the wrong test in finding that he was a "supplier".
2. Section 259 of the ACL provides: 259 Action against suppliers of goods (1) A consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, goods to the consumer; and (b) a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than sections 58 and 59(1)) is not complied with.
3. Supply is defined in s 2 of the ACL as: "supply", when used as a verb, includes: (a) in relation to goods - supply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and (b) in relation to services - provide, grant or confer; and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings.
4. The Member correctly identified at [25] of his reasons that the Tribunal's jurisdiction to hear and determine the claim arose under the Fair Trading Act 1987. The Tribunal has jurisdiction under that Act to determine a "consumer claim". Division 2 of Part 3 of the Fair Trading Act applies the ACL as a law of NSW. However, for the provisions of the ACL to apply in the exercise of the Tribunal's jurisdiction under the Fair Trading Act, the claim must also fall within the ACL's provisions. In general, the consumer claim jurisdiction under the ACL is narrower than that which pertains under Part 6A of the Fair Trading Act.
5. In our view, the reasons cited above do not disclose that the Member considered whether Mr Klaus was a "supplier" who supplied the goods (the caravan) to Mr Wallace within the meaning of the ACL or whether he was otherwise liable under the provisions of the Fair Trading Act. Indeed, the Member does not address at all the legislative basis upon which he finds Mr Klaus liable.
6. The meaning of a "supplier" under the ACL is arguably narrower than the definition in the Fair Trading Act. Section 79E of the Fair Trading Act provides: 79E Meaning of "consumer claim" (1) For the purposes of this Part, a consumer claim means a claim by a consumer, for one or more of the following remedies, that arises from a supply of goods or services by a supplier to the consumer (whether or not under a contract) or that arises under a contract that is collateral to a contract for the supply of goods or services - (a) the payment of a specified sum of money, (b) the supply of specified services, (c) relief from payment of a specified sum of money, (d) the delivery, return or replacement of specified goods or goods of a specified description. (2) For the avoidance of doubt, a reference in this Part to a consumer claim includes a reference to a claim by a consumer against a supplier (for example, a manufacturer or wholesaler) who is not the direct supplier of goods or services to the consumer if the claim arises from or in connection with the supply of those goods or services by the direct supplier to the consumer.
7. Section 79D defines a supplier to mean "a person who, in the course of carrying on (or purporting to carry on) a business, supplies goods or services".
8. The provisions of the Fair Trading Act are almost identical to provisions contained in the Consumer Claims Act 1998 (the 1998 Act) and its predecessor the Consumer Claims Act 1974 (the 1974 Act). In Fairey Australasia Pty Ltd v Joyce (1981) 2 NSWLR 314 Yeldham J held in relation to the relevant provisions in the 1974 Act that a consumer claim was not confined to a claim by one party to a consumer supply contract against another party to that contract. At the time the legislation defined a consumer claim as one "arising out of" a contract. Yeldham J held that the 1974 Act was sufficiently wide to include a claim against a person who is not a party to the contract, so long as there is a contract between the consumer and a supplier out of which the claim arises.
9. In Jenkinson v Chaw [2015] NSWCATAP 127 the Appeal Panel held in relation to the 1998 Act that the definitions of a consumer claim under that Act were in fact wider than the definitions under the 1974 Act and held that a consumer claim is not limited to one made against the supplier but includes a claim against a person other than the supplier who was involved in the supply of goods or services by the supplier. The Appeal Panel noted at [28] that a consumer claim is defined by reference to the nature of the relief sought by the consumer and a causative relationship between the claim and the supply. A consumer claim is not defined by reference to the identity of the party sued. The Appeal Ppanel went on to say that the "causative relationship is expressed in words of broad import, namely that the claim 'arises from' a relevant supply".
10. Section 79E of the Fair Trading Act includes as a consumer claim a claim against a person "who is not the direct supplier of goods or services to the consumer if the claim arises from or in connection with the supply of those goods or services by the direct supplier to the consumer". Whether the required relationship between the claim and the supply exists in order for a claim to be within the Tribunal's jurisdiction must be determined by an analysis of the factual circumstances involving the person against whom the claim is brought.
11. Mr Wallace states that Mr Klaus was acting in a personal capacity when he signed the sale contract as "dealer" and when he directed payment of the money to two companies controlled by him. The Member has accepted this characterisation of Mr Klaus's role and in his reasons refers to him as the "dealer" and, as can be seen from the extract above, finds him liable on the basis that the deposit and balance of the purchase price were directed to entities associated with him.
12. During the hearing before the Member, Mr Klaus made reference to certain offers made to Mr Wallace and commented on the condition of the caravan. In those circumstances, it is clear that he was speaking on behalf of Viking Caravans and Highline. Mr Klaus was not questioned by the Member about his role in the sale or his relationship to Viking Caravans or Highline. Mr Klaus has stated in material filed in the appeal that neither he nor Viking Caravans holds a NSW dealers license. It is unclear why he signed the sales contract as dealer. We also note that he signed the contract on behalf of the owner of the caravan which is likely consistent with his role as Sales Manager for Highline. In addition, there was evidence that Mr Klaus was required to consult with someone else during negotiations about the purchase price, again likely consistent with his role as Sales Manager for Highline.
13. In his reasons the Member concludes that the fact monies had been paid to entities associated with Mr Klaus was determinative of the question whether he was liable for defects in the caravan. The Member seems to conclude that, although payment was directed to a third party, Mr Klaus in fact was the party receiving the payment. If indeed the Member was of the view that the party receiving payment was a correct respondent, that party was Klaus Investments. The Member made no inquiries as to why payment was made to this company and there was evidence before him that Mr Klaus told Mr Wallace that he had to pay the money to Highline.
14. The matter before the Member proceeded as a claim under the ACL for a refund of the purchase price on the basis there had been non-compliance with the consumer guarantees under the ACL which amounted to a major defect. In order to have found Mr Klaus liable, the Member needed to have addressed whether he was in fact a supplier. The mere fact that Mr Wallace was directed to pay the purchase price into a bank account which was not in the name of Highline and appeared to be associated with Mr Klaus, though the account was not in his name, is not sufficient, without more, to identify him as a supplier.
15. Even if the remedy sought by Mr Wallace could be characterised as one under the Fair Trading Act irrespective of the provisions of the ACL, we do not consider that the Member addressed any such alternate basis in deciding that Mr Klaus was a proper respondent. As was stated by Yeldham J in Fairey Australasia, the person against whom an order is made must be one who has a legal liability to the consumer.
16. It is difficult to understand how the Member reached the conclusion that Mr Klaus was personally liable to Mr Wallace in relation to the defects in the caravan. The state of the evidence before the Member was partial to say the least and in certain respects contradictory. In our view, the Member failed to make the necessary findings to arrive at the conclusion that Mr Klaus was a supplier as defined in the Fair Trading Act. The mere fact that monies were paid in the first instance to an entity other than Highline did not warrant a conclusion that Mr Klaus was a correct respondent to a consumer claim under the Fair Trading Act.
17. In our view the Member's reasons do not adequately explain how he reached the conclusion that Mr Klaus was a proper respondent to a consumer claim. This is an error of law.

Disposition of the appeal

1. We have identified two errors on the part of the Tribunal in making its decision to make orders personally against Mr Klaus. There are many unanswered questions in relation to Mr Klaus's role with respect to the sale of the caravan. The current state of the evidence does not permit a finding to be made one way or another as to whether a consumer claim can in fact be brought against Mr Klaus under the Fair Trading Act. In ordinary circumstances the matter would be remitted to the Tribunal for reconsideration with further evidence allowed.
2. After the hearing of the appeal we were advised that Mr Wallace had received payment from Highline of the full amount ordered by the Tribunal and the caravan had been returned to Highline. Despite this, Mr Klaus did not wish to withdraw the appeal and Mr Wallace was not willing to consent to an order removing Mr Klaus as a respondent as a way of disposing of the appeal.
3. In determining an internal appeal, the Appeal Panel may make such orders as it considers appropriate in light of its decision on the appeal (s 81 CAT Act). There is little utility in remitting the matter to the Tribunal. While the issue of whether Mr Klaus is a proper respondent could be determined in light of any further evidence adduced by all parties, it is unclear what further order could be made by the Tribunal as Mr Wallace has achieved the remedy he sought in the original proceedings. To put the parties to the expense of a further hearing would not be in conformity with the guiding principle set out in s 36 of the CAT Act. In these circumstances, while we allow the appeal, the matter will not be remitted and Mr Klaus will be removed as a respondent.

Orders

1. We make the following orders: 1. Appeal allowed. 2. Order 1 made on 20 February 2020 is amended to remove Daniel Klaus as a respondent.

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            I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.

Registrar 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: 22 November 2021