Pathways Psychology Institute Pty Ltd v RTO Experts Pty Ltd

NCAT Appeal Panel|2017-02-20

Overview

By this appeal, the appellant (Pathways) seeks to set aside the decision of the Tribunal below dismissing its claim, following the discharge of a contract, for a partial refund of money paid as the whole of the contractual price for consulting services relating to registration as a supplier of vocational education and training.
Some errors of fact and law, as outlined below, were made by the Tribunal.
A basis for a refund under the common law was not referred to by Pathways (it was unrepresented) and was not in terms addressed by the Tribunal. This was a claim in restitution for a refund of part of the contract price following the discharge of the contract even though some of the work had been performed. Such a claim was available where it could be shown that the agreed return for a severable component of the contract price had failed.
On the facts, we uphold such claim. We have been able to quantify a large part of the amount of the refund because there is no dispute between the parties that various work to which a price was attributed was never performed. However, the question whether any additional amount should be refunded in respect of two items of work will need to be determined by the Tribunal at first instance because there is a dispute as to whether any work in relation to these items was performed. In addition, the Tribunal will need to determine Pathways' claim for the return of various books provided by it to the respondent (RTO).
Other claims were made by Pathways based on alleged breaches of statutory guarantees in relation to the supply of services to a consumer in the relevant Australian Consumer Law (NSW) (the ACL, NSW). These claims fail because Pathways was not a consumer and, hence, did not have the benefit of these guarantees - a point that was not addressed in the proceedings at first instance.
Our reasons for these conclusions are set out below.

The nature of Pathways' claim - a claim for a refund of part of the contract price

In its application to the Tribunal, Pathways' claim was a claim for a refund of part (albeit a large part) of the full contract price that it paid for the work under the contract. The claim was not couched in legal language. It referred to what it claimed was RTO's breach, the step it took in March 2016 to inform RTO that they needed to dissolve their relationship and to the areas where there had been no work commenced by RTO and where some work had been performed but not completed. There was no claim for damages said to result from a breach of contract or breach of statutory guarantees contained within the ACL, NSW.
When we refer to the ACL,NSW we mean that law as part of the law of New South Wales by reason of s 28(1) of the Fair Trading Act 1987 (NSW). This is so despite the choice of law clause referred to below, which cannot operate to exclude the operation of that law. The Tribunal only has jurisdiction in respect of claims under the ACL,NSW as part of the law of New South Wales, not as part of the law of the Commonwealth: Herbert v American Express Australia Ltd & Ors [2016] NSWCATAP 47 at [46(11)].
At the hearing, whilst Pathways quantified the refund allegedly due to it as totalling $44,021.00 (see Breakdown of Claim document), it necessarily confined its claim to the monetary limit of the Tribunal's jurisdiction of $40,000. 00. The claim excluded payment of GST.
Pathways also made a claim for the return of text books it provided to RTO: see at the end of its document headed Breakdown of Claim and at pages 14 to 15 of the transcript of the hearing on 27 September 2016.
Before the Tribunal at first instance, Pathways contended that there had been a breach that amounted to a "major failure". It associated the allegation of a "major failure" with a claim under cl 7.1(b) of the contract between it and RTO (see further below). Consistently with Pathways' submission, the Tribunal dealt with the major failure allegation as a claim in contract: [36]. It was not, however, recognised that the statutory cause of action under s 269(3)(a) of the ACL, NSW underlay that provision of the contract. In this connection, the Tribunal erred in its view that the provisions of the ACL, NSW that refer to "major failure" are provisions that apply to the supply of goods and do not apply to the supply of services: [36]. It was also not recognised that cl 7.1 of the contract was not relevant. The "guarantees" and "major failure" provisions of the ACL, NSW to which the clause referred were not applicable because Pathways was not a consumer within the meaning of those provisions and these provisions did not cover the transaction in issue, as provided for in the opening words of the clause.
Separately from the claim under the contract of a "major failure", Pathways also contended that RTO had breached various statutory guarantees under the ACL, NSW. It contended that there had been breaches of the guarantee that the services would be rendered with due care and skill (s 60), the guarantee that the services would be reasonably fit for the purpose made known to the supplier (s 61) and the guarantee that the services would be supplied within a reasonable time (s 62). No point was taken or recognised that Pathways was not a consumer within the meaning of these sections (see s 3 of the ACL, NSW). In this regard, Pathways had paid more than $40,000.00 for the services and was acquiring the services for business purposes and not for personal or domestic use.
This meaning of consumer in the ACL,NSW is to be distinguished from the broader meaning of consumer to be applied for the purpose of the question whether a claim is a consumer claim and, hence, whether the Tribunal has jurisdiction to determine the claim under s 79D and s 79E of the Fair Trading Act 1987 (NSW). The Tribunal found it had such jurisdiction: [18].
In the reasons for decision, the Tribunal found that no party had terminated the contract. It found that the contract was mutually abandoned by the parties: [67]. This meant that a claim for a refund arose in the context of the discharge of a contract by agreement: see Mason & Carter's, Restitution Law in Australia, 3rd ed at [1206].
In its notice of appeal, Pathways based its appeal on the correctness of the conclusion that the contract had come to an end by mutual abandonment. It contended that in those circumstances RTO had been paid more than it should have received and it should receive a refund. It contended that a clause in the contract (cl 9.4) concerning Pathways' liability for the total amount of the contract price did not stand in the way of recovery of a refund. It did not identify the cause of action that supported its claim.

Factual background - the contract

On 30 August 2015, Pathways and RTO entered into a written contract for RTO to supply, amongst other things, various assessment and training materials required by Pathways in order to achieve registration by the Australian Skills Quality Authority (ASQA) as an approved provider of vocational training. ASQA is the national regulator for Australia's vocational education and training sector. It regulates courses and training providers to ensure nationally approved quality standards are met.
RTO is an expert in the provision of advice and material needed to achieve such registration.
Pathways provides courses in the psychology field, including those in order to achieve a Diploma of Counselling and a Graduate Diploma of Counselling.
The contract, signed by the parties on 30 August 2015, described the scope of work to be supplied by RTO, all of which was needed in order to obtain registration, under the umbrella task: [T]ake over the initial RTO registration application for [Pathways]." (cl 2.1). Specific tasks were then described as included in the scope of works. At the end of this clause, there was, amongst other matters, a reference to two invoices - one dated 20 August 2015 and another dated 29 August 2015. No-one has placed any reliance upon the latter invoice.
The invoice dated 20 August 2015 (no. 0147) is important to the claim for a refund. This is because it is incorporated by reference into the contract and it specifies dollar amounts for particular tasks, some of which were never carried out - for example, the price of $6,000 is given for "[C]ontextualise RTO Management System", the price of $2,500 is given for "[T]raining workshop delivery" and the price of $3,000 is given for "[S]ite visit - Audit".
With respect to some of the other tasks referred to in the invoice, in its "Breakdown of Claim", Pathways accepts there was some performance by RTO. It gives credits for such work and attributes a dollar amount to the work that was done. For example, in relation to "Development of Assessment Materials - Diploma" (the Diploma of Counselling), for which the contract amount was $12,240.00, Pathways claims $9,351.00 on the basis that "10 of the 17 units for a Diploma (up to Cluster 4) had first drafts completed for the assessor versions. No student assessments were completed. Amount claimed represents the portion of work not completed". In the contract and invoice, there is no further breakdown in respect of this particular task under which dollar amounts are attributed to stages of the work to be carried out.
The scope of works described in cl 2.1 of the contract refers in general terms to performance by the provision of "clusters", but no specific clusters are set out and no dollar amounts are attributed to the provision of any such clusters.
A total amount of $55,737.00 (incl GST) was stated to be the fee for the services and materials: cl 2.2. That fee had to be paid by a commencement deposit of a certain amount followed by four fortnightly payments. These payments were not made referable to the delivery of tasks or stages of the work.
The due date for completion was stated to be "[A]pproximately COB Friday 30 October 2015": cl 2.5. We note here that Pathways' case was that RTO had breached this term by failing to complete all the work by this date. There is no need for us to reach any conclusion about the time for completion provided for in the contract, given our conclusions about the resolution of this appeal. However, when read in the context of the contract as a whole, including RTO's dependence on the provision of instructions and information from Pathways and the standard terms requirement of reasonable endeavours to complete by the due date (cl 1.2), the better view would appear to be that there was no absolute contractual requirement to complete all the work by 30 October 2015.
The terms of the contract included Standard Terms which were set out on pages 5 to 9 of the contract. Those terms included: 1. RTO was obliged to use reasonable endeavours to complete the consulting services by the due date for completion: cl 1.2. 2. Pathways was obliged to accurately provide all instructions, information and material that was reasonably necessary and in a reasonable time so that RTO could carry out its obligations: cl 2.1. 3. In relation to transactions that were "covered by the Australian Consumer Law", it was stated that the client [Pathways] was entitled to a refund for a major failure, amongst other remedies: cl 7.1(b). This was an acknowledgement of Pathways' right in respect of a refund following a "major failure" (as defined in s 268 of the ACL, NSW), as set out in s 269(3) of the ACL,NSW. 4. A termination clause: cl 9. The clause included that in the case of breach, the agreement would terminate if either party gave the other 7 days' notice and, if the breach was remediable, upon failure to remedy with the 7 day notice period: cl 9.1(a). 5. Importantly, cl 9.4 of the termination clause provided: The Client [Pathways] understands that the Consultant [RTO] dedicates personnel and other resources for the duration of the provision of the Consulting Services and agrees that the Client is liable for the total payment for the Services if the Client discontinues the Services for any reason other than default by the Consultant of its obligations under this Agreement." 1. The agreement was governed by the laws of Western Australia and the Commonwealth of Australia: cl 12.6.

Factual background - performance of the contract

A large quantity of documents was supplied by the parties to the Appeal Panel, including two volumes of documents lodged by Pathways and a statement of Ms Bartlett from RTO containing 208 paragraphs and four volumes of annexures. It is unnecessary for us to do more than refer to the salient facts as set out below.
All of the services and materials to be supplied by RTO under the contract were not delivered by "approximately" 30 October 2015, nor were they delivered by any other date prior to the contract coming to an end.
As we have already indicated, there is no dispute that there was no performance by RTO of a number of tasks within the scope of work required by the contract. In broad terms, Pathways says that only a minor amount of the work was ever performed before termination. It sought to illustrate the large amount of work unperformed by coloured graphs.
Such assessment was disputed by RTO. In an email from RTO dated 24 March 2016 (Exhibit I), RTO quantified the unperformed work in money terms as the amount of $19,960.00, excluding GST. For example, in respect of one of the larger tasks - the development of assessment materials for the Graduate Diploma of Counselling - RTO claimed that 50% of the work had been done. On the other hand, Pathways contended that there was no performance of the work required by this task.
The reason(s) for the delay in performance of the contract and for the quality of work that was produced was the subject of assertion and counter-assertion by the parties. Clearly, there was considerable scope for subjective assessments to differ. The Tribunal found that it was not possible for the Tribunal to determine on the evidence who was responsible for the failure to complete the contract: [67].
Detailed findings concerning the progress with performance of the contract were not made by the Tribunal at first instance. It is apparent that the Tribunal was dissatisfied with the assistance that it received from Pathways in trying to ascertain the facts: [7], [22]. We should note here that, despite the indulgence that it is necessary to give to an unrepresented litigant, the conduct and disposition of the appeal was affected by inadequate assistance to the Appeal Panel from Pathways, particularly due to the absence of written submissions, which Pathways was directed to lodge, which, in a clear and logical way, identified those parts of the reasons of the Tribunal Pathways took issue with, explained why Pathways claimed it was incorrect or otherwise in error and supported that claim with clear and easily found cross references to all evidence relied upon as providing that support.
Pathways had paid the full contractual sum by the end of October 2015. That date passed without Pathways contending that RTO was in breach by failing to complete performance by that date.
Ms Bartlett was the founding director of RTO. Her hospitalisation in early October 2015 and again in November 2015 explained, at least, some of the delay in progressing the work required under the contract (RB [103], [104], [114], [118], [125]). Ms Bartlett contended that other causes of delay were a disagreement between herself and Ms Udy from Pathways about the content of course materials in order to ensure compliance with regulatory requirements, the failure of Pathways to provide necessary course materials (RB [65], [67], [78], [85], [107]), the need to re-work large portions of the course materials as a consequence of changes made by Pathways to the course (RB [100] and regulatory changes in course requirements (RB[114], [122], [124]).
In an email from Ms Bartlett to Ms Udy and Ms Dean from Pathways, dated 22 December 2015, Ms Bartlett said she was grateful for Ms Udy's understanding about her absence through illness, she and her team would be working through most of the Christmas and New Year break on the project and that it was their intention to finalise the project as soon as possible.
However, by 8 January 2016, relations between RTO and Pathways had come to an impasse. Before that date, Ms Udy had criticised the written work supplied by RTO to that point and had complained that it had not contextualised the assessments to Pathways specific course (email from Ms Udy, dated 4 January 2016 at 7:26pm). Also by that time, Ms Bartlett had informed Pathways of regulatory changes concerning the period of time it would take a provider to become a VET fee help provider. Ms Bartlett said in her statement that she considered this meant Pathways could not compete in the current market for the Diploma of Counselling and that it removed the reason for RTO's appointment [RB 133]. Other issues had developed between the parties about the content of the work to be done (RB [146] - [150]).
On 8 January 2016, RTO sent what it described as a formal notice to Pathways (RB [151]). It said that Pathways had two choices. It could either accept RTO's design of the assessment system, follow RTO's directions and acknowledge RTO's expertise or Pathways could proceed on their own using all materials completed by RTO to date and the contract would come to an end. A response was said to be needed by 11 January 2016. Subsequently, Pathways agreed to continue working on the terms set out by RTO in the notice (RB [152]).
After this time, Ms Bartlett only contacted Ms Udy to inform her when information and materials were ready (RB [154]). Periods elapsed without any delivery of work by RTO. Pathways pressed RTO for stages of the work to be supplied. In response, instalments of work were uploaded on to the shared dropbox by RTO. Apparently, this work had references to work that needed to be done by Pathways in order for stages to be finalised and in order to move on to subsequent stages (for example, see emails between Pathways and RTO dated 28 January 2016).
By email dated 16 February 2016, Ms Udy invited Ms Bartlett to propose a reasonable schedule for completion bearing in mind the 30 October 2015 date in the contract. No such schedule for completion seems to have been supplied prior to Pathways' letter dated 10 March 2016, referred to below.
In an email dated 18 February 2016, Ms Udy expressed her deep concern at the timing with which documents were being provided and that they could no longer afford the luxury of the backwards and forwards of detailed interaction with RTO. She asked Ms Bartlett to re-organise her plans for their assessment documentation so as to "get this job done now". Ms Fulcher of RTO responded in an email that day. She said she would be meeting with the course development team early next week and would be able to notify Pathways after that meeting of an approximate time for completion. That notification does not seem to have been provided.
According to a letter from Pathways to RTO dated 10 March 2016, Pathways had heard nothing from RTO and received no further course materials since 18 February 2016. By the letter, Pathways informed RTO that "[D]ue to the failure of RTO Doctor to fulfil their part of our contract we need to dissolve our relationship". The letter required a refund of monies by 24 March 2016 for all items not yet delivered or completed. A breakdown of a refund totalling $47,542.00 was set out in the letter, along with a request for return of books sent to RTO.
Later on 10 March 2016, Ms Fulcher of RTO replied by email. She apologised. She said that Cluster 3 was now ready to be uploaded, Cluster 4 was on track to be ready by the end of the following week, at which point they were going to allocate several more staff so as to finalise a number of other clusters by 8 April 2016. She suggested that RTO finalise the Diploma and Pathways decide if it wants RTO to complete the Graduate Diploma. She said that RTO could guarantee to have the 6 clusters for the Graduate Diploma all finalised by 6 May 2016. There was no reference in this letter to being unable to complete the project because of a lack of feedback or materials from Pathways.
Pathways replied by letter dated 17 March 2016. It accepted the proposal to complete the Diploma assessment resources. It said that this led to a reduced refund due and payable of $39,622.00. It indicated it did not want RTO to complete the work for the Graduate Diploma.
Ms Fulcher of RTO replied by email dated 24 March 2016 (Exhibit I). She said that whilst RTO accepted Pathways' "request" to end the contract it was suggested that RTO continue to complete the Graduate Diploma. She responded to the claim for a refund. Some items were accepted as refunds. These totalled $19,960, excluding GST. That sum was made up of contextualisation of RTO's management system ($6,000), delivery of the training and workshop ($2,500), the site audit visit ($3,000), 50% of the work on the Graduate Diploma ($3,960) and the RPL kit for the Graduate Diploma ($4,500).
In none of this correspondence between the parties about ending the contract did either party refer to relevant terms of the contract, such as the termination provision in the standard terms or the clause concerning Pathways' liability for a total payment, or any other aspects of the law concerning termination of the contract.
Pathways replied to the 24 March 2016 email by letter dated 31 March 2016. It took issue with many aspects of RTO's argument for the refund to be confined to $19,960. The letter made it clear it would not be taking up RTO's suggestion that it carry out the work on the Graduate Diploma and said that it had already commenced making arrangements with other writers to carry out this work. Pathways complained that it had not yet received any money by way of refund. It imposed time limits for the additional work on the Diploma that had not yet been received. It asked for an immediate payment of $36,747, with more to be paid if the balance of the work was not completed by 8 April 2016.
By email of 6 April 2016, RTO informed Pathways that there would be a delay in finalising the remaining clusters until 25 April 2016 because one of their staff had been unwell. In reply by email of 7 April 2016, Pathways reminded RTO of its commitment to allocate extra staff to the task and to complete by 8 April 2016.
On 19 April 2016, Pathways commenced proceedings in NCAT seeking an order for a refund.

The Tribunal's reasons

We have already referred to some aspects of the reasons of the Tribunal at first instance. In view of our analysis of the issues, it is unnecessary for us to set out in any detail the reasons of the Tribunal. For present purposes, other pertinent aspects of those reasons were: 1. Incorrectly, the Tribunal found that the total contract price was $76,824.00, of which Pathways had paid $55,737: [3], [34]. Incorrectly, the Tribunal found that, whilst some services were not supplied, there was no basis on the evidence for Pathways to seek reimbursement of any money paid because it had not paid RTO the full price of the contract: [39]. 2. Pathways' dissatisfaction with the work could not amount to a major failure. A disagreement about the relevance of some work that RTO determined was needed was not a major failure of the contract: [38]. Pathways had failed to establish that RTO had not complied with the terms of the contract: [39], [58], [61]. 3. It was difficult for the Tribunal to determine from the material provided and the evidence given, the weight that the Tribunal should give to the statements made by both parties in relation to whether the work had or had not been done, the standard of the work completed and who is responsible for any work not being completed. These raised matters for specialised knowledge and the parties had not provided any expert evidence to assist the Tribunal in matters that were relevant to the issues raised by Pathways in this regard: [41]. 4. As to an alleged failure to deliver in time, by failure to deliver by 30 October 2015, the Tribunal noted that this was an approximate date and found that it was not satisfied that 30 October 2015 was the date of completion: [59] - [60]. 5. As to the consumer guarantees in the ACL, NSW, the Tribunal was not satisfied on the evidence that the services were not rendered with due care and skill and were not fit for purpose: [66]. 6. The documentary evidence showed that the parties stopped working on the project - there was no clear termination of the contract by either party. The Tribunal found that the parties mutually abandoned the contract in early 2016: [67]. 7. It was not possible for the Tribunal to determine on the evidence who was responsible for the failure to complete the contract. The Tribunal had not been able to determine the veracity of the assertion and counter assertion that Pathways did not provide the relevant expertise it was required to provide under the contract: [67]. 8. The Tribunal was not satisfied that there had been a breach of the statutory guarantee in s 62 of the ACL, NSW in relation to services to be supplied within a reasonable period of time [68]. 9. Even if the Tribunal was wrong in its conclusion that Pathways had not established a breach of contract or a breach of the ACL,NSW, it had failed to establish what, if any, loss resulted from any such breach: [69] - [72].

Appeal right

This is an appeal from a decision of the Consumer and Commercial Division of the Tribunal. Under s 80(2)(b) of the Civil and Administrative Tribunal Act 2013, Pathways has a right of appeal on a question of law and otherwise by leave in the circumstances described in cl 12 of Schedule 4 of that Act, as follows: 12 Limitations on internal appeals against Division decisions (1) An Appeal Panel may grant leave under section 80(2)(b) of this Act for an internal appeal against a Division decision only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: (a) the decision of the Tribunal under appeal was not fair and equitable, or (b) the decision of the Tribunal under appeal was against the weight of evidence, or (c) significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).

Grounds of appeal - consideration

In its Notice of Appeal lodged on 5 December 2016, Pathways lists four grounds of appeal. The first two grounds of appeal (numbered 2 and 3) refer to the Tribunal's error concerning the total contract price. This was an error of fact. On its own, the error would not warrant the grant of leave to appeal. However, as described below, in the section concerning the claim in restitution, it led the Tribunal into error in refusing the claim for a refund.
Ground 4 of the appeal proceeds from the premise that the Tribunal was correct in finding that the contract was terminated by mutual abandonment before completion. Under this ground it is said that if that is correct then "a calculation of the amount [RTO] had been paid should be less and a reimbursement/refund should ensue".
For the reasons set out below, in respect of the claim in restitution, we uphold this ground of appeal.
The point advanced by Ground 5 of the appeal is unclear. It refers to detailed notes that were supplied by Pathways as to the work that was not completed and as to services that were not fit for purpose and to coloured charts now provided showing the work never done and the work that was supplied but which was incomplete. It also refers to an assertion made at an earlier directions hearing in this matter about Pathways' failure to particularise its claim and that the Tribunal on that occasion did not have any time to allow discussion of the matter.
In view of our decision on this appeal, it is unnecessary for us to say anything more about this ground of appeal.
Although not listed under Grounds of Appeal, it is apparent from matters referred to in other sections of the Notice of Appeal that additional grounds of appeal are advanced. These concern the conclusions of the Tribunal below about breach of the statutory guarantees. Because of our conclusion that the statutory guarantees were not applicable, it is not necessary for us to deal with these additional grounds.

The claim in restitution - consideration

We have already referred to the Tribunal's error in concluding at [39]: ….Whilst there are some services that remain outstanding under the contract, the applicant has not paid the full price of the contract and therefore there is no basis on the evidence provided to seek reimbursement of any money paid.
This error was relied upon by Pathways in that section of its Notice of Appeal in which it sought leave to appeal on the ground that the decision was not fair and equitable: paragraph numbered 11. It would seem that it was because of this error that the Tribunal did not proceed to consider the claim in restitution. It erred in not doing so. This involved an error of fact as to the contract price and an error of law in not dealing with the claim in restitution.
Accordingly, leave to appeal is not required. If we be wrong about that, we would grant leave to appeal on the basis that by reason of the error of fact the decision was not fair and equitable and Pathways has suffered a substantial miscarriage of justice by the dismissal of its claim for a refund.
Save for one aspect of the quantification of this claim, we are in as good a position as the Tribunal at first instance to determine this claim. We proceed to do so.
As to relevant aspects of the law concerning such a claim, we refer to the following passages from Mason & Carter : [1206] Contracts discharged by agreement….particularly in cases where agreement is inferred from conduct amounting to an abandonment of the contract, the contract of discharge may leave restitutionary issues unsettled. Accordingly, restitution may be relevant to benefits conferred under the prior contract. (iv) Consequences of discharge without breach [1211] Introduction. As in the case of discharge for breach, the fundamental rule is that the consequences of discharge of a contract depend on the intention of the parties. Default rules are applicable where the contract does not deal with the matter. These do not differ significantly from those applicable where the contract is discharged following breach or repudiation. [1214] Discharge as a basis for restitutionary claims. Discharge without breach - rather than rescission ab initio - is a sufficient basis for considering a restitutionary claim. [1215] Introduction. Where a contract is discharged without breach, and a plaintiff-payer seeks to recover money paid to the defendant-payee, the first question is one of construction. In the absence of agreement, the claim is one of restitution which at common law depends upon a total failure of the agreed return. [1221] Cases of partial failure. Total failure of the agreed return is restricted to payments for which no part of the agreed return is received. Unless immaterial or incidental, the receipt of part of the agreed return prevents restitution being ordered…. Putting express or implied agreement to one side, there are at least two exceptions to the requirement of total failure of the agreed return. The first is statute. The second exception is that a severable payment is recoverable on the basis of a partial failure of the agreed return. This exception is of course more apparent than real because the requirement of total failure applies to the payment at issue. Where the contract is severable in the sense that there is a distinct agreed return for each payment, restitution is available if, in relation to the payment, failure of the agreed return is total.[1221] (our emphasis).
This principle can apply where a payment is a separate and distinct component of the overall price and there has been a failure of a distinct and severable part of the consideration for an overall payment: Roxburgh v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516; Mason & Carter at pages 510 to 511.
Where there is a failure of an agreed return for a severable payment there is no conflict with the general refusal of the common law to apportion payments independently of the intention of the parties or with the limited ability of the common law to make an order by way of adjustment for the value of a benefit conferred, so as to achieve restitutio in integrum: Mason & Carter at [918] and [1217].
Restitution based on the failure of agreed return will not be available if a provision of the contract excludes the concept: Mason & Carter at [1224].
Applying these principles to the contract and events in this case, in our opinion, Pathways is entitled to a refund in respect of those items listed in the invoice dated 20 August 2015 in respect of which it was established, by RTO's admission, that no work had been performed. Those items total $16,000, and are made up of the following amounts, excluding GST: 1. Contextualise RTO management system $6,000. 2. Training workshop delivery $2,500. 3. Site visit - Audit $3,000. 4. RPL Kit for the Graduate Diploma $4,500.
As we have already mentioned, the contract incorporates by reference the invoice dated 20 August 2015. This invoice makes it clear that there are several and distinct components of the total payment in respect of these four items. In respect of each of these items there is an agreed return which has failed.
No findings were made by the Tribunal below as to the dispute whether any work had been performed in relation to the items Development of Assessment Materials Graduate Diploma of Relationship Counselling $7,920 and Project time $5,000. These questions will be remitted to the Tribunal at first instance for determination. Pathways is entitled to a refund in respect of either or both of these items if it be found that no work has been performed in respect of them. There is no basis for a finding that there were severable payments for distinct components within these two items of work.
As with our remarks below in respect of the claim for return of books, one would hope that, in the light of the above clarification of the law concerning the claim in restitution and the amounts involved, the parties would be able to resolve these remaining issues of quantum without the need for another hearing in the Tribunal.
In respect of all other items of work, Pathways accepts that some work was performed by RTO. There is no basis for a finding that there were severable payments for distinct components of work within these items. Hence, applying the principles we have referred to, no refund is available in respect of these items.
As to clause 9.4 of the contract, we agree with Pathways' submission that this does not apply so as to exclude recovery of a refund. This is because there was a discharge of the contract by mutual abandonment. It was not a situation to which cl 9.4 applies where Pathways "discontinues the Services…". Clause 9.4 is applicable to a unilateral breach by the client in refusing to accept the services. In so construing cl 9.2, we take account of the principle that there would need to be a clear agreement to overcome the presumption in favour of common law rights: Mason & Carter, at [1224], footnote 153. In our opinion, cl 9.4 does not achieve that result in the circumstances of this case.

The claim of breach of the statutory guarantees - consideration

On the appeal, Pathways criticised a number of aspects of the decision of the Tribunal at first instance concerning the claim of a breach of statutory guarantees in ss 60, 61 and 62 of the ACL, NSW.
However, as already mentioned, the short answer to all those claims was that the statutory guarantees were inapplicable because Pathways was not a consumer and did not have the benefit of these guarantees.
The relevant provisions of the ACL,NSW are: 3 Meaning of consumer Acquiring services as a consumer (3) A person is taken to have acquired particular services as a consumer if, and only if: (a) the amount paid or payable for the services, as worked out under subsections (4) to (9), did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of subsection (1)(a) - that greater amount; or (b) the services were of a kind ordinarily acquired for personal, domestic or household use or consumption…. (12) In this Schedule, a reference to a supply of goods or services to a consumer is a reference to a supply of goods or services to a person who is taken to have acquired them as a consumer. 60 Guarantee as to due care and skill If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill. 61 Guarantees as to fitness for a particular purpose etc. (1) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer, expressly or by implication, makes known to the supplier any particular purpose for which the services are being acquired by the consumer; there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose…. 62 Guarantee as to reasonable time for supply If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the time within which the services are to be supplied: (i) is not fixed by the contract for the supply of the services; or (ii) is not to be determined in a manner agreed to by the consumer and supplier; there is a guarantee that the services will be supplied within a reasonable time.
Pathways was not a consumer within the meaning of ss 60, 61 and 62 because the contract price for the services exceeded $40,000.00 and the services were not of a kind ordinarily acquired for personal, domestic or household use or consumption.

Return of text books

This claim was not dealt with by the Tribunal at first instance. It erred in not doing so. Presumably, it was a claim in bailment for the return of the books. It is difficult to see any justification for RTO retaining these books, but in the absence of findings from the Tribunal about this issue and as to the specific books in question we are not in a position to determine this part of the claim. One would hope that it would be a claim that could be resolved by the parties without occupying any more Tribunal time on the issue.

Orders on appeal

For the above reasons, we make the following orders: 1. Leave to appeal is granted. 2. The appeal is upheld. 3. The decision of the Tribunal at first instance is set aside. 4. Order that the respondent pay the appellant the sum of $16,000.00 within 14 days of the date of these orders. 5. Order that the question whether any additional payment should be ordered to be paid by the respondent to the appellant by way of refund in respect of the two items referred to in the invoice dated 20 August 2015 as "Project time" in the sum of $5,000.00 and "Graduate Diploma of Relationship Counselling (11 Units)" in the sum of $7,920.00 be remitted to the Tribunal at first instance for determination by General Member Eftimiou. 6. Order that the question whether the respondent should be ordered to return to the appellant various text books provided to it by the appellant be remitted to the Tribunal at first instance for determination by General Member Eftimiou.

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: 28 March 2017

At a glance

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Judgment (12 paragraphs)

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Legislation Cited (1)

Cases Cited (3)

Cited By (2)