Mrjana v Imagine Education Australia Pty Ltd [2016] NSWCATAP 232 | Case summary

Consideration

The issue raised for determination in this appeal is whether or not the contract between the parties was formed in New South Wales or in Queensland. This is a question of law for which the appellant has a right of appeal pursuant to s 80(2)(b) of the Civil and Administrative Tribunal Act, 2013 (NCAT Act).
As stated above, jurisdiction is granted to the Tribunal to hear and determine a Consumer Claim provided that the provisions of s 79K of the FT Act are satisfied. This section is in the following terms: 79K Supply or agreement made, or supply intended to be made, in New South Wales (cf CC Act 1998, s 7 (2) and (3)) (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). (2) The Tribunal has such jurisdiction whether or not: (a) a contract or other agreement to which the claim relates confers jurisdiction on any other court or tribunal (whether in New South Wales or elsewhere), or (b) the rules of private international law require a law other than the law of New South Wales to be applied to the hearing or determination of the claim.
There is no dispute that there was a contract between the parties for a supply of goods and services within the meaning of the FT Act. There is also no dispute that the goods and services, the subject of the contract were supplied and/or were contemplated to be supplied in Queensland, where the respondent operated its business.
The only issues for determination was whether or not the contract was made in New South Wales as provided by s 79K(1)(c) of the FT Act.
For the reasons which follow, in our view the Tribunal was correct to conclude that the contract was not made in New South Wales and therefore the Tribunal did not have jurisdiction to hear and determine a Consumer Claim under the FT Act. Consequently, the Tribunal was correct to dismiss the appellant's application and this appeal should be dismissed.
As stated above, s 79K(1)(c) of the FT Act requires that the contract be made in New South Wales.
The question is when is a contract "made" or to put it another way, when is the process of formation of the contract completed.
In Tallerman and Co Pty Ltd v Nathan's Merchadise (Vic) Pty Ltd [1957] HCA 10; [1957] 98 CLR 933, Dixon CJ and Fullagar J said at [20]: ... The general rule is that a contract is not completed until acceptance of an offer is actually communicated to the offeror, and a finding that a contract is completed by the posting of a letter of acceptance cannot be justified unless it is to be inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act.
In Entores Limited v Miles Far East Corporation [1955] EWCA Civ 3; (1955) 2 QB 327 Denning LJ (as he then was) said at 334: The contract is only complete when the acceptance is received by the offeror: and the contract is made at the place where the acceptance is received.
The case of Entores involved acceptance which was communicated by telex. Similar views that acceptance is at the place where the electronic communication is received have also been taken in New South Wales in relation to: 1. Telexes: see for example Mendelson-Zeller Co Inc v T & C Providores Pty Ltd [1981] 1 NSWLR 366 at [369]; 2. Facsimiles: see for example Reese Brothers Plastics Limited v Hamon-Sobelco Australia Pty Ltd [1988] 5 BPR 97352; and 3. Telephones: see for example Aviet v Smith and Searls Pty Ltd (1956) 73 WN (NSW) 274.
In this regard as Rogers J (as he then was) said in Mendelson-Zeller: As to the principle which is to determine place of making of contracts, arrived at by means of use of telex machines, the law is now clear. In Entores Limited v Miles Far East Corporation [1955] 2 QB 327, the Court of Appeal established that where a contract is made by instantaneous communication the contract is complete only when the acceptance is received by the offeror. Communication by telex is virtually instantaneous and, accordingly, that principle enjoys full acceptance.
As indicated in the appellant's submissions there is some debate concerning whether or not email communications are instantaneous or virtually instantaneous or whether the postal acceptance rule should apply in the case of acceptance by email.
In our view, while emails might be relayed through various servers prior to their delivery for access at the computer of the recipient, and in some circumstances receipt of the email might be delayed, there is no basis to conclude that delivery by email should be considered other than a virtually instantaneous form of communication which must be received by the offeror in order to complete the formation of the contract. It is not appropriate nor necessary for the purpose of certainty to impose what has been termed the "postal acceptance rule" or the "postal rule" a matter described as a "blatant fiction" by Campbell JA in Wardle v Agricultural and Rural Finance Pty Ltd; Agricultural Finance Pty Ltd (Brakatsellos) [2012] NSWCA 107 at [136].
While the postal acceptance rule may apply to determining when and where a contract comes into existence where a letter accepting an offer is posted: see Campbell JA in Wardle at [140], in our view such a rule has no application in circumstances where acceptance of the offer is communicated by email and the terms of the offer do not otherwise provide for acceptance by merely sending such acceptance by email rather than by the offeror actually receiving the notice of acceptance. That is, no fiction should be imposed and the general law position applies so that it is the point when and where that notice is received that the contract is formed.
This view that emails are analogous to instantaneous communications such as telephone and telex is supported by the decision of Logan J in Olivaylle where he said at [25]: ... I consider that there are analogies to be drawn with the way the law developed in relation to telex communications in an earlier era where what I have termed "the instantaneous communication rule" came to be adopted, perhaps at the expense of scientific precision but not so in relation to common commercial understanding. Thus, by analogy with cases concerning the position with what were, or were treated as, other forms of instantaneous communication, I consider that the contract was made where the acceptance was received...
Further, and in any event, s 13B(1) of the Electronic Transactions Act, 2000 (NSW) (ET Act) provides: 13B Place of dispatch and place of receipt (1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication: (a) the electronic communication is taken to have been dispatched at the place where the originator has its place of business, and (b) the electronic communication is taken to have been received at the place where the addressee has its place of business.
In the present case, the parties had not otherwise agreed that an electronic communication was taken to have been received at a different place to where the respondent has its place of business nor do the terms of the offer permit this.
To the contrary, the application form (respondent's bundle volume 1 tab 20) provides email communication details for the respondent and indicates that the place of business of the respondent is "Main Campus 13 Benowa Road Southport, Queensland 4215". While the application form also provides a postal address, nothing in the form would otherwise amount to an offer which was capable of being accepted merely by sending an email as opposed to the contract being formed upon receipt of the email by the respondent. Similarly, the terms of the written offer do not otherwise provide that formation of the contract occurs on sending notice of acceptance rather than receipt by the offeror (see respondent's bundle volume 1 tab 22).
The view we have formed is consistent with the decision of Edelman J in Valve Corporation (supra). In this regard his Honour said at [78] - [79]: 78. As to (ii), the place of formation of a contract, this must be determined by reference to the characterisation rules of the forum. If it were necessary to determine this point, I would conclude that the place at which the contract was formed was where the consumers' electronic acceptances were received (Washington State) rather than the place from which they were sent (Victoria, Tasmania, and New South Wales). As a matter of basic principle any bilateral contract generally requires the receipt of a communication of acceptance in order to be effective: Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93, 111 (Dixon CJ and Fullagar J). The basis of this general principle is the usual expectation of reasonable persons in the position of contracting parties that they will be told whether an offer has been accepted. The various versions of the SSA contained cl 1 which provided that the SSA (offer) takes effect "as soon as you indicate your acceptance of these terms". 79. The conclusion that the contract was formed where electronic communication is received is consistent with, and (importantly for the principle of coherence) provides coherence with, the provisions in Australian legislation concerning electronic transactions, based upon the United Nations Commission on International Trade Law, UNCITRAL Model Law on Electronic Commerce 1996, which provides for the place of receipt of electronic communications which is generally where the addressee has its place of business: Electronic Transactions Act 1999 (Cth) s 14B; Electronic Transactions Act 2000 (NSW) s 13B;... Electronic Transactions Act (Queensland) 2001 (Qld) s 25(1)(b);…
It follows that in the absence of an offer which could be accepted by sending an email (as opposed to the general law position that receipt of acceptance is required), the contract was made in Queensland and accordingly the Tribunal was correct to conclude it did not have jurisdiction to hear and determine the dispute by reason of s 79K of the FT Act.

Costs

During the hearing of the appeal, the Appeal Panel noted that the respondent applied for costs in the event that it was successful in the appeal. The respondent accepted that an order for costs could only be made in its favour if the Appeal Panel was satisfied that there were special circumstances.
The respondent sought costs in connection with both the proceedings at first instance and of the appeal. The total amount claimed was set out in Schedule A to the respondent's written submissions. In that schedule the respondent claimed a total of $28,001.98 for legal costs and disbursements. This amount consisted of a claim for $13,314.36 for costs at first instance and $14,698.62 for costs of the appeal. Various charge out rates of $320.00 and $540.00 for solicitor and partner work was claimed.
The respondent asked the Tribunal to assess the costs as claimed and, in the alternative asked costs to be assessed using the usual processes available under the relevant legal profession legislation. The respondent said that if costs were to be assessed in this manner and not by the Tribunal, that the award for costs should be made on an indemnity basis or alternatively on a "standard" basis.
The submissions for costs are found in par [60] - [62] of the respondent's submissions. In short, the respondent claimed that there was special circumstances because: 1. The respondent was disadvantaged within the meaning of s 60(2)(a) of the NCAT Act; 2. The appellant had no tenable basis in fact or law to argue that NCAT had jurisdiction: s 60(3)(c); 3. By reason of the nature and complexity of the proceedings the respondent was required to engage legal representation: s 60(3)(d); and 4. The proceedings were frivolous, misconceived or lacking in substance: s 60(3)(e).
In support of these submissions the respondent said that it had made various open and without prejudice offers to the appellant. These offers were made in correspondence dated 29 March 2016.
In relation to the letter said to be the "open offer", this was identified as the letter from the respondent's solicitors to the Tribunal dated 29 March 2016 (respondent's bundle volume 1 tab 15). In relation to the without prejudice offer, this letter was read out to the Appeal Panel and was subsequently provided by the respondent to the Appeal Panel with consent of the appellant. The second letter has been marked for identification as "MFI 1".
The Appeal Panel also notes that a demand for costs of the proceedings at first instance was made by letter dated 2 August 2016: respondent's bundle volume 1 tab 16. Under the heading "Our Client's demands", having set out some history of the proceedings, the respondent's lawyer said at par [8]: In light of the above, our client is of the view that you are liable to our client in the amount of $11,331.91 which represents the total costs of legal fees incurred by our client for the Application.
The lawyer's letter also provided details of a bank account into which the amount demanded could be paid.
In relation to this demand the Appeal Panel notes that at the time it was made there had been no order for costs made by the Tribunal at first instance in favour of the respondent nor had such an application been made to the Tribunal at first instance. While there is an issue as to the appropriateness of a legal practitioner sending a letter in these terms, it is not necessary to consider this issue for the purpose of resolving the question of costs. It is sufficient to say that the fact such a demand was made is not a reason why the Appeal Panel should now award costs.
The respondent's lawyer on the appeal also made oral submissions in support of the application for costs. The respondent variously submitted that the appeal was extremely weak and had no prospects of success and that the case was complex and required the respondent to engage legal representation. On this second point, the respondent noted that the Appeal Panel had granted leave to the respondent to be legally represented at the call over of the appeal. The respondent also made reference to the conduct of the appellant, in particular that the appellant had commenced and subsequently withdrawn proceedings in the Queensland Civil and Administrative Tribunal (QCAT) and that there were defamation proceedings which had been commenced by the respondent against the appellant in connection with the circumstances surrounding the dispute and the dealings between the parties.
In reply, the appellant said that she did not accept the proposition that the Tribunal "clearly had no jurisdiction". She sought to explain the circumstances in which she commenced and subsequently withdrew an application to QCAT and said that her actions in pursuing the dispute in New South Wales were not unreasonable based on the advice which she had received.
In relation to the offers of compromise which had been made, the appellant said that the only offer was to supply more services, a matter going to the substance of the dispute with the respondent concerning the deficiencies in the training and services which they provided. In this regard she said there has been no determination on the merits.
In relation to the nature and complexity of the dispute, the appellant submitted that the issues were clear.
Finally, the appellant submitted that the respondent could have conducted the case without a lawyer representing it at the hearing, as it did at first instance and the fact that leave had been given for the respondent to be legally represented did not justify the making of an order for costs in the present circumstances.
An award for costs in the proceedings at first instance is regulated by s 60 of the NCAT Act. This section provides: 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following: (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36 (3), (g) any other matter that the Tribunal considers relevant. (4) If costs are to be awarded by the Tribunal, the Tribunal may: (a) determine by whom and to what extent costs are to be paid, and (b) order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (5) In this section: costs includes: (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
Rule 38A of the Rules (which relates to costs of appeals where different cost provisions to s60 of the NCAT Act apply to proceedings at first instance) does not apply. Consequently, costs in relation to the present appeal are also to be determined in accordance with s 60 of the NCAT Act.
As made clear by s 60(2) of the NCAT Act, the respondent must demonstrate special circumstances. Special circumstances are circumstances which are out of the ordinary but not necessarily extraordinary or exceptional: see Megerditchian v Kurmond Homes Pty Ltd [2014] NSWCATAP 120 and the cases following that decision.
In our view, the present case is not one where special circumstances have been demonstrated nor is it a case in which an order for costs in the amount claimed should be made. Our reasons are as follows.
In respect of the proceedings at first instance, no application for costs was made to the Tribunal at first instance and it is generally inappropriate for the Appeal Panel to embark upon an enquiry about whether special circumstances existed in a case at first instance where no application for costs was originally made.
In any event, we would not make an award of costs in the proceedings at first instance for the following reasons.
The respondent was not represented by a legal practitioner at the hearing of the original proceedings and no leave for legal representation was granted. The appellant represented herself in the proceedings at first instance. Her claim was for $10,000.00.
The claim of more than $13,000.00 now made for legal cost referable to the proceedings at first instance is, in any event, completely disproportionate to the amount in issue. Indeed, a review of the costs claimed reveals considerable time was spent in assembling documents referable to the substantive proceedings and, at least in respect of the item for 1 August 2016, dealing with unrelated proceedings - namely the proceedings commenced in QCAT.
In the proceedings at first instance, the issue of jurisdiction was identified by the Tribunal. There was a factual and legal dispute about where the contract was formed. This required a consideration of the terms of the offer, application form, the email accepting the offer and those legal authorities relating to the location and point in time at which an offer can be accepted by email to determine whether the Tribunal had jurisdiction.
As we indicated above, there seems to be some controversy between various authors of articles concerning whether or not emails are an instantaneous form of communication or whether the postal rule should apply. However, as we have found there is no reason based on established legal principle nor having regard to the ET Act why the postal rule should apply. Rather, on the facts of this case, the place where the contract was made was in Queensland.
Because the Tribunal did not have jurisdiction, there has been no determination of the appellant's claim on its merits. However, at all times it seems to us that the appellant acted reasonably in the conduct of the proceedings having regard to what she understood to be legal rights.
In these circumstances, there is no reason why there should be a departure from the position that each party should pay their own costs of the proceedings at first instance.
Similarly, in relation to the costs of the appeal we see no reason why there should be a departure from the position set out in s60 (1) of the NCAT Act.
As indicated above, the appellant received some legal advice to the effect that the contract was formed in New South Wales: see appellant bundle p21. While this advice turned out to be incorrect, the actions of the appellant, a self-represented person seeking to pursue her rights of appeal, could not be said to be unreasonable. Further, the mere fact of lodging an appeal, pursuing rights under s80 of the NCAT Act and being unsuccessful are not, of themselves indicators of unreasonable conduct.
To the contrary, it is quite usual for parties who are dissatisfied to exercise their rights of appeal and there is nothing "out of the ordinary" with such action. The NCAT Act expressly provided for these rights of appeal and the objects of the Act set out in s3 (including accessibility) and dealing with the real issues in proceedings in a justly, quickly and cheaply also apply to appeals.
This conclusion is fortified by the fact that the appellant, through her submissions, has demonstrated that there are contrary views as to whether or not the postal rule applies to acceptance by email.
The respondent sought to contend that the appeal was complex or alternatively that the appeal was so weak that special circumstances exist having regard to the matters set out in s60(3)(c) or (d) of the NCAT Act. In our view, properly understood the issues were not complex, although we accept that a party who was not a lawyer may be somewhat confronted by the legal issues raised, particularly the postal rule which Campbell JA described as "blatant fiction". On the other hand, the submissions put by the appellant, supported by the articles to which we have referred and the legal advice she received lead us to conclude that there was nothing out of the ordinary in her pursuing her rights of appeal and the case could not be described as having "no tenable basis in fact or law". This is particularly so when one considers that the original reasons for decision, while correct, do not set out any detailed analysis of the legal position about when and where the formation of a contract is concluded.
Finally, there is no basis to conclude that the proceedings were frivolous, vexatious or otherwise misconceived or lacking in substance. Again, as we have said above, the fact that the appellant was unsuccessful does not mean that special circumstances exist or that this appeal was in any way out of the ordinary.
The fact that the respondent sought and was granted leave to be legally represented does not alter this position. A party is always entitled to obtain legal advice and assistance in presenting their case, even if no leave is given for legal representation at a hearing. However, these matters alone are not sufficient to enliven the Tribunal's jurisdiction to award costs pursuant to s60 of the NCAT Act.
Lastly, we do not accept that the so-called offers made by the respondent and the failure of the appellant to accept such offers itself otherwise constitutes special circumstances warranting an award for costs. There has been no determination of the appellant's claim on its merits. The "without prejudice" offer is no more than an offer inviting withdrawal of the proceedings at first instance at threat of a claim for legal costs if not accepted, which offer was made in circumstances where no leave had been granted for legal representation. The failure to accept the offers could not be said to be unreasonable in the circumstances of this case: see eg Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 at [10] and following for considerations relevant to Calderbank Offers and orders for costs where offers are not accepted.
Accordingly, the application for costs is dismissed.

Mrjana v Imagine Education Australia Pty Ltd

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Judgment (6 paragraphs)

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