Plaintiff v First Defendant

Plaintiff v First Defendant - [2010] VSC 425 - VSC 2010 case summary — Zoe

[110]

As a matter of the correct construction of the definition of services, and having regard to the obvious purpose of Part 9 (consumer protection), it is not accurate to describe the giving of a guarantee as a conferral of services under a contract.
The guarantor has not contracted to provide services 'that are, or are to be provided, granted or conferred under a contract'. Agreeing to answer for a 3rd party's debt under a contract of guarantee is not, on any proper legal analysis, the provision of rights, benefits, privileges or facilities that are to be provided, granted or conferred under a contract.
On its proper construction, and having regard to the plain purpose of Part 9, a contract is a contract for services only where the contract requires the supplier to perform its contractual obligation by way of the provision of some service, such as agreeing to provide legal or medical services or by granting occupancy rights over land. In other words, Part 9 is only engaged by a contract which requires one party to perform by the provision of some service. It is, with respect, ridiculous to characterise a binding promise of one person to be contingently answerable for the debt or obligation of another as a service to be performed under a contract of services.
A contract by which a person agrees to pay a sum of money upon a contingency (such as under an indemnity, or under a contract of insurance or under a contract of guarantee) does not involve contractual performance by way of the provision of a service. An insurer is plainly in the business of providing insurance services, but a contract of insurance is not a contract for services. It is an obligation to pay money upon a contingency. Similarly, a bank that offers construction guarantees as part of its banking service does not enter into a contract of services with [sic] when it provides a construction guarantee to a principal. It is an obligation to pay money upon a contingency.
The definition of services in s 3 is inclusive, not exhaustive. It therefore relevantly acts as an extension of what, at common law, might have been viewed to be a contract for services. Black's Law Dictionary (8th ed) relevantly defines service as '5. An intangible commodity in the form of human effort, such as labour, skill, or advice'.
Obviously, the definition in s 3 extends this meaning, but there is nothing in the expanded definition of services in s 3 by which it can be concluded or inferred that the legislature intended Part 9 to regulate an agreement to pay money on a contingency, whether it be by way of a contract of insurance or a contract of guarantee.
This limited construction for the definition of services contended for is supported by the:

[126]

40 I accept that Zeus & Ra Pty Ltd v Nicolau[27] did not deal with the position of "third parties", in the sense of parties other than the landlord and the tenant (in connection with a dispute relating to leased premises). However, parts of the plaintiff's submissions wrongly assume in his own favour that a guarantor of a lease is necessarily a third party in the sense of being neither a "supplier" nor a "purchaser" within the meaning of s 107(1) of the Act. To that extent, of course, the plaintiff's submissions beg the question. A guarantor of a lease will himself, herself or itself be a party to a "consumer and trader dispute" (and not merely a third party in relation to it) if it can properly be said that he, she or it is relevantly a "supplier" or "purchaser" of "services" within the meaning of s 107(1) (as affected by the definitions in s 3). So far as relevant, "supplier" means simply the person who has supplied or is to supply the services and "purchaser" means simply the person to whom the services have been or are to be supplied. As the plaintiff conceded at the hearing, a "purchaser" need not have given any consideration for the supply of the services. On the other hand, it is necessary that the services have been, or are to be, supplied "in trade or commerce".[28] In Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd[29] it was held by the Court of Appeal that the question whether "services" are provided "in trade or commerce" for the purposes of the provisions in question should be considered, at least principally, from the point of view of the supplier. Thus, the Court said, the sale of a purely domestic dwelling by its owner to a developer or trader in real estate might not involve the provision in trade or commerce of rights in relation to real property, whereas if the parties were reversed it almost certainly would. In the present case, the context was entirely commercial on all sides and the plaintiff was the sole director of the tenant. In those circumstances the plaintiff properly conceded at the hearing that if in this case any "services" were supplied by or to him they were supplied "in trade or commerce".

[127]

41 I turn to the plaintiff's arguments concerning equitable defences and remedies. I am not persuaded by them. It is true that VCAT, being a creature of statute and not being an ordinary court (much less a superior court), does not have a general equitable jurisdiction.[30] However it is open to Parliament to clothe VCAT, to such extent as Parliament sees fit, with the power, or indeed the duty, to recognise and apply equitable doctrines, defences and remedies or to proceed in accordance with, or by analogy with, equitable principles. Parliament might do this expressly or by implication. Sub-section 89(2) of the Retail Leases Act 1999, which is set out above, is an example of an express conferral of equitable jurisdiction. It provides that in an application for forfeiture or relief against forfeiture VCAT has the same jurisdiction, "including equitable jurisdiction", and powers as the Supreme Court would have. Paragraph 91(1)(c) of that Act empowers VCAT to make an order "rectifying a retail premises lease or other document". The purely equitable doctrine of rectification appears to be imported here by implication. Moreover, turning to the (Fair Trading) Act itself, s 108(2)(h) thereof empowers VCAT, in relation to a consumer and trader dispute, to "order rectification of a contract". A corresponding comment may be made. Other provisions of s 108(2) appear to pick up various other equitable doctrines and remedies. Thus subparagraph 108(2)(b)(iii) empowers VCAT to order the payment of a sum of money by way of "restitution", arguably picking up the principles applicable to restitution in equity. Paragraphs 108(2)(d) and (i) respectively empower VCAT to "declare" that a term of a contract is or is not void and to "declare" that a debt is or is not owing, thereby arguably picking up all those equitable doctrines which might render a contractual term void or a debt owing or not owing, as well as apparently picking up the equitable remedy of the declaration and the equitable principles surrounding it. Paragraph (f) empowers VCAT to make an order "in the nature of an order for specific performance of a contract". Specific performance is, of course, a purely equitable remedy, governed by equitable principles. Paragraph (g) empowers VCAT to "order rescission of a contract". This seems to be a reference to rescission in equity and to the corresponding equitable principles. More generally, it would be a remarkable thing if VCAT could not have regard to trusts (trusts being entirely creatures of equity) or to equitable estates in land.

[164]

"It is said that if such offers constitute supply then it would follow, logically, that in every contract for supply of services or sale of goods the customer supplies a service. He contracts to pay and he pays. It would make 'supply' and 'acquire' interchangeable. It is contended that this could not have been the legislative intention and that the definitions should in some way be read down. No particular formulation is put forward indicating how this might be done.

For the Commission, it is argued that, if the allegations in the amended statement of claim, as pleaded and particularized, were established, the conduct of the first appellant would constitute an offer to supply services to Mr Ahlquist on the consideration that he acquire goods (a Ford truck) from another person (Denmac Ford Pty Ltd). In particular, it is argued that the opportunity to earn income from the first appellant which is specifically particularized as having been offered to Mr Ahlquist was an offer of a 'benefit' or 'privilege' within the meaning of those words as used in the definition of 'services' in s 4 of the Act. In this regard, senior counsel for the Commission placed particular reliance upon the decision of the Court of Appeal in Chaplin v Hicks [1911] 2 KB 786.

There is plainly considerable force in the arguments advanced on behalf of each side of the contest. As a matter of literal construction, the alleged offer, as pleaded and particularized, would, if it were established, prima facie constitute an offer of services - 'benefits', 'privileges' - within the definition of services contained in s 4 of the Act. On the other hand, the repeated use, in the operative sections of the Act, of the words 'goods or services', the content of operative sections of the Act and the ordinary meaning of the word 'services', combine to raise real doubt as to whether it was the legislative intent, to be derived from the statute, that the word should be given the full extended meaning which the definition contained in s 4 of the Act would prima facie ascribe to it.

Sheppard J reached the conclusion that the alleged offer, as pleaded and particularized, would, if established, constitute an offer of services in the defined sense. His Honour considered that what was alleged to have been offered came, prima facie, within the word 'benefits' as used in the definition of 'services' and that there was no warrant for reading down the effect of that definition to the extent necessary to exclude the subject of the alleged offer from the defined meaning of the word.

In the view we take, the sweepingly general provisions of the definition of services contained in s 4 of the Act should not be given an expansive construction. Thus, for example, we would, in the context of the repeated use in the Act of the words 'goods or services', exclude from references to the supply of 'services' in the defined sense, the supply of goods, even though the supply of goods would ordinarily involve the granting of 'rights in relation to, and interests in, ... personal property'. Again, as at present advised, we would exclude from the scope of the words 'supply of services', a simple payment of money even though, in one sense, money might be regarded as coming within the word 'benefits'. Even accepting that the definition of 'services' should not be given an expansive construction, however, we are unable to discern any valid or logical basis on which the definition can properly be constricted so as to exclude the subject matter of the alleged offer in the present case. In our view, the subject matter of the alleged offer constituted 'benefits' or 'privileges' within the meaning of those words as used in the definition of services. It follows that, substantially for the reasons which he gave, we agree with the conclusion of Sheppard J that the point of law which was argued as a preliminary point should be decided adversely to the appellants.

It must be stressed that the views we have expressed are based on the assumption, inherent in an argument on a preliminary point of law, that what is relevant is an offer to the precise effect of the offer pleaded and particularized. In this regard, it should be mentioned that no criticism was advanced, on the appeal, of the meaning which Sheppard J gave to the word 'work' as used in the statement of claim. Ultimately, it may be established on the trial that there was an offer which, by reason of differences in terms or the effect of context, varies from the offer pleaded and particularized to an extent which would make inapplicable the conclusions which we have stated. The desirability of giving an immediate decision and the range of possible findings of fact within the general area of the amended statement of claim have led us, however, to conclude that, as this appeal involves a preliminary question of law only, we should not endeavour to state or develop broad principles or guidelines which would cover variations from the precise offer which has been pleaded and particularized.

In the result, the appeals should be dismissed with costs."

[166]

68 However, in the end, Queensland Aggregates does not assist the plaintiff sufficiently. Read in its context, the Full Court's remark does not imply that the provision of a guarantee stands outside the concept of a supply of services, as defined. I think that the Full Court was moved by aspects of the submission made to it and recorded by it to the effect that if offers of the kind in question constituted supply then it would follow, logically, that in every contract for the supply of services or sale of goods the customer supplies a service. As the submission (as recorded) put it: "He contracts to pay and he pays. It would make 'supply' and 'acquire' interchangeable". It seems to me that the Court accepted that the definition must have been intended to be read down to avoid such a result. Accordingly, and taking into account the repeated use in the Act of the words "goods or services", the Full Court said that it would exclude from references to the supply of "services" in the defined sense, the supply of goods,[68] even though the supply of goods would ordinarily involve the granting of "rights in relation to, and interests in ... personal property". It was immediately thereafter that the Full Court added that it would exclude "a simple payment of money" even though, in one sense, money might be regarded as coming within the word "benefits". In my view the Full Court did not mean to exclude from the definition of "services" the granting of every right that might eventually be satisfied by the payment of money or the assumption of every obligation that might eventually be discharged by the payment of money. The Full Court could hardly have meant that, because the definition of "services" in the TPA expressly included rights under contracts of insurance. (Similarly, the abovementioned implicit inclusion of contracts of insurance as potential subjects of "consumer and trader disputes" under Part 9 of the (Fair Trading) Act means that the Victorian Act cannot be read in the suggested manner either.) Rather, it seems to me that in the critical sentence the Full Court meant to convey only that a person did not himself or herself become a supplier of services merely because he or she had come under an obligation to pay money for some service supplied or to be supplied to him or her. Reading the critical sentence together with what the Full Court had said immediately before, and having regard to the judgment as a whole, I consider that the Full Court was intending to convey, overall, that a simple payment of money as quid pro quo for goods or services supplied is not itself a service. That appears to be the way in which Queensland Aggregates was understood in Yang v American International Assurance Company (Australia) Ltd,[69] being, as far as I am aware, the only case in which the proposition that a simple payment of money does not itself comprise a supply of services under the TPA has actually been applied. In Yang, the subject matter was remuneration for the provision of insurance agency services on contract. With respect, I think that this is a completely logical and understandable way in which to read the legislation. Unfortunately for the plaintiff, it does not take him far enough. When he gave the guarantee, he did not thereby become obliged to pay money as quid pro quo for the supply to him of some good or service. In fact, he would only become liable at all if the specified contingency (default on the part of the tenant) eventuated.[70] Similarly, he would only become liable under the indemnity provisions of the guarantee and indemnity if and when the landlord suffered a relevant loss. There is no need for me to consider or express a view on the question whether Queensland Aggregates might also be distinguishable on the basis that the reference to a "simple payment of money" was intended to be confined to payment of a debt or liquidated demand. A claim under a guarantee might be for a debt or for a liquidated demand or for unliquidated damages, depending on the terms of the particular guarantee and the circumstances.[71] As it happens, it may be that the landlord's principal claim against the plaintiff in the present case would properly be characterised as a claim for unliquidated damages. But, on any view, the giving of the guarantee and indemnity in this case is not taken outside the scope of the definition of "services" in the (Fair Trading) Act on the basis that it simply created an obligation to pay money on a contingency, ie on the basis that it involved "a simple payment of money" in the sense in which that expression was used in Queensland Aggregates.

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