Royal Diamonds Pty Ltd v Buttle

Facts

1. It is convenient to refer to the facts giving rise to the decision. Those facts are fully set out in the decision appealed from: see Buttle v Royal Diamonds Pty Ltd. In summary, the respondent wished to purchase an engagement ring. The respondent, which carries on business of selling diamond rings, offered for sale on its website on 8 October 2015 a ring having the following specification: Channel Set Diamond Engagement Ring with 4 Claw Setting SKU: RDR0139 Ring Size: N (UK) Ring Metal: 9k Yellow Gold Diamond Detail Lab: GIA, Shape: Round, Carat: 2.16, Colour: E, Clarity: S 12, Cut: Excellent Stock #: R DD 00 50 - 50
2. The respondent decided to purchase the ring. On 8 October at 12.46:11pm AETD the respondent paid the asking price of $1123 to the appellant by a facility provided by PayPal Australia Pty Ltd ("PayPal"). Within minutes after the order was placed, the order and payment was acknowledged by the appellant together with the shipping details and confirmation of the specification of the ring as set out in the advertisement provided on the appellant's website. A notation appeared at the foot of the acknowledgement: "Please note; in the event that a diamond is unavailable, a diamond of similar or higher grade may be offered, or a refund of the purchase price".
3. Simultaneously, PayPal confirmed receipt of the amount of $1123.
4. Subsequently, later on the same day at 12.52pm AETD a further communication was received by the respondent from the appellant which provided, relevantly, Welcome to Royal Diamonds and Thank [sic] you for placing your order. Please note, unfortunately the diamond which you have selected is no longer available. Was there another stone you had in mind?"
5. The respondent replied on the same day at 2.50pm stating relevantly: "If that diamond is no longer available then I would like one of similar or higher grade as per the note on your website".
6. At 3.40pm the appellant responded: "The price for the specific diamond was not correct, due to a typing error. Usually we would offer a diamond of a similar or higher grade, however in this instance unfortunately it won't apply. If there weren't any other diamonds which you are interested in, we can gladly refund you, via PayPal. Apologies for any inconvenience caused."
7. Thereafter respondent engaged his lawyers to demand delivery of the ring or a ring of similar or higher grade. As his request was not fulfilled, the respondent instituted proceedings in the Tribunal, where his claims for relief were upheld.

The Tribunal's Decision

1. Before the Tribunal, the respondent relied upon the agreement made between the appellant and the respondent by offer and acceptance and the payment of consideration which was confirmed. The sole defence by the appellant relied upon a mistake in the advertisement which the appellant claimed entitled it to rescind the agreement.
2. The Tribunal member referred to the fact that several issues arose which were not raised by the parties, namely the provisions of the Australian Consumer Law (ACL); misleading and deceptive conduct under section 18 of the ACL; misleading representations concerning goods: section 29 ACL and bait advertising contrary to section 35 of the ACL. The Tribunal member observed that in the absence of pleadings and since the parties had essentially relied upon the law of contract, the decision would be confined to this cause of action alone. Having considered various authorities, the Tribunal found that there was an absolute contract of sale made between the parties; that payment for the ring had been accepted as was confirmed by the appellant and that the appellant was unable to avoid the agreement by virtue of its claimed mistake. Accordingly, the relief, as set out above, was granted in favour of the respondent.

Grounds of Appeal

1. The appellant claims that the member failed to consider whether the law of unilateral mistake applied in respect of the facts of the case; whether the member failed to consider whether the decision of the High Court of Australia in Taylor v Johnson (1983) 151 CLR 422 applied; whether the member should have found that it was unconscionable for the respondent to proceed with a purchase online in circumstances where he knew or ought to have known that the that price for the ring he ordered was so low that it could not have been reasonably correct. Further, it is claimed that the member failed to consider whether equity or equitable principles applied. Further, it is submitted that the member should have applied the decision of the High Court of Australia in McRae v Commonwealth Disposal Commission (1951) 84 CLR 377 by finding that equitable relief was available since the contract was entered into by mistake.

Submissions

1. Written submissions and oral submissions were received from both parties. It is convenient to observe the appellant's submissions essentially rely upon the grounds of appeal, as expanded. Essentially, the appellant maintains that there was an obvious mistake in the pricing of the ring: that the respondent knew or ought to have known that the price was wrong: that because of such knowledge, the conduct of the respondent in seeking to take advantage of the unilateral mistake is unconscionable. In such circumstances, equitable relief is available to prevent the respondent from relying upon an unfair agreement when the respondent was aware, or ought to have known of the pricing error.
2. The appellant relies upon the fact that when the respondent filed his application for relief in the Tribunal on 12 January 2016, the respondent nominated the value of a similar ring in the amount of $34,279.00.
3. The appellant also relies upon the fact that, at the conclusion of the Tribunal hearing, the Tribunal member inquired of the value of the ring. In response, the respondent tendered a copy of a website screenshot, which was located during a web search of cheapdiamonds.com, a United States business. Such site advertised a ring of 2.15 carats at a price of $US 4,499.99. There is no evidence when that search was conducted by the respondent.
4. The appellant has referred the Appeal Panel to several authorities relating to relief against unconscionable conduct where mistake has arisen, as considered hereunder.
5. The respondent's submissions concentrate upon the lack of any evidence to support the claim that the respondent knew, or ought to have known, of the alleged mistake in pricing the ring and asserts that the decision of the member was correct. The respondent also submits that the appellant claims that the respondent ought to have known of the mistaken price, and acted unconscionably in failing to draw this to the attention of the appellant.

Consideration

1. The Tribunal found that the appellant is a corporation having its registered office and principal place of business at Oatlands, New South Wales and its director and secretary also reside in New South Wales. The Tribunal member was unable to determine whether the location of the ring was in New South Wales or overseas. Further, the Tribunal member found that there had been, as is referred to above, payment made for the advertised ring and acknowledgement of payment. There is no dispute in relation to those facts.
2. No evidence or material was provided for the appellant by any officer of the company resident in Australia. Instead, an unsubscribed Statutory Declaration was provided by Gabriel Babaew of Banis Diamonds Ltd ("Banis") apparently a company based in Israel. There is no evidence of any association between the appellant and Banis Diamonds, but the Appeal Panel is informed by the appellant's solicitor that Banis advertises the diamonds. It appears, but again there is no evidence, that the appellant acts either as an agent of Banis or operates in New South Wales under some form of marketing agreement with Banis.
3. The unsubscribed statutory declaration relevantly states: "By error, we accidentally wrote the discounted price of-41 in the place of the asking price, (price per carat) and we wrote to the actual asking price ($ 6549) in the place of the discount price. When we received an email from Royal Diamonds on the 8.10. 15 pointing this out to us (Banis Diamonds) that the price is incorrect we immediately changed it on the IDEX website, and updated the correct price ($$6549- price per carat) in the right section (asking price, price per carat) and we wrote the discount (-41) price in the place of the discount (rap)."

Findings

1. The evidence before the Tribunal established unilateral mistake on the part of the appellant. The Appeal Panel notes, however, that no evidence was submitted by the appellant of the actual value of the ring which it sold to the appellant, other than what was included in the unsworn statutory declaration. Such statements do not indicate the value of the ring.
2. It was argued before the Tribunal that the appellant had made a mistake in its pricing, and for this reason it should be relieved of its agreement. It does not appear that any equitable doctrine of relief was argued. This is unsurprising, considering that neither party was legally represented at the Tribunal hearing.
3. The basis of the appellant's claim of the respondent's unconscionability is unclear. It could be suggesting that there was a deliberate omission by the respondent to notify the appellant of its claimed error; alternatively, the appellant may be asserting that the respondent took active steps to ensure that the appellant did not discover its mistake. Irrespective, there is no evidence whatsoever to support either of such assertions.
4. The Tribunal member did not consider the basis of any equitable relief in favour of the appellant, obviously because it was never raised before him. In his consideration of the applicable law the tribunal member considered the provisions of the Sale of Goods Act 1923 (NSW) to find that there was an enforceable agreement for sale of the ring. The Tribunal member then referred to the entitlement of the vendee to be supplied with an article answering the description of that which he had purchased and referred to the authority of Gurney v Womersley [1854] 119 ER 51.
5. Accordingly, the Appeal Panel, for the first time, is now required to consider a defence which was not raised at the hearing. The Appeal Panel has broad powers on appeal: it may refer the matter back to the decision maker for consideration of this issue. Alternatively, the Appeal Panel may make its own determination on the facts available to it. The issue which will weigh in the balance is whether the interest of justice require that the matter be referred back to the Tribunal for consideration of the issue of whether there has been conduct sufficient to give rise to the equitable doctrine of relief.
6. There is no evidence whatsoever before the Tribunal nor before the Appeal Panel which indicates or establishes that the respondent knew that there had been a mistake in the pricing of the ring, nor that he had any knowledge of the values of such items. The only finding relating to the respondent was that he was a consumer within the meaning of the Fair Trading Act 1987 (NSW), and that by occupation, the respondent was a mathematician. The Tribunal found that there was no evidence that the respondent "was in the diamond trade or had any knowledge of diamonds or their comparative quality or value". There is no evidence to suggest that the respondent, because of his occupation, was aware of the mistake alleged by the appellant in the pricing of the ring.
7. The Appeal Panel has been referred to several authorities which establish that if a party who has entered into a written contract does so under a serious mistake concerning its contents in relation to a fundamental term, that party will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension concerning the content or the subject matter of the term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension: see the observations of Mason ACJ, Murphy and Deane JJ in Taylor v Johnson (1983) 151 CLR 422 at 432 - 433. There the High Court considered the scope of relief in equity where one party knows that the other party is labouring under a mistake of fact or misapprehension.
8. Essentially the same principle was followed in Smith v Smith [2004] NSWSC 663 per Barrett J at [59], [66]: unreported; Tutt v Doyle (1997) 42 NSWLR 10 per Handley JA; Chwee Kin Keong v Digilandmall.com Pte Ltd - [2005] SGCA 2 (13 January 2005) (a decision of the Court of Appeal of Singapore), and Hawcroft v Hawcroft General Trading Co Pty Ltd [2016] NSWSC 555.
9. Such principle has also been referred to in Fox Entertainment Precinct Pty Ltd v Centennial Park and Moore Park Trust [2004] NSWSC 214 [20] to [30], and in the current edition of Meagher, Gummow and Lehane, Equity Doctrines and Remedies (fifth edition, 2015 at [27-135]. It is necessary to establish a factual basis for the operation of such principle, namely that the other party to the agreement knew, or must have known strongly or suspected that there was a mistake.
10. In this appeal there is simply no evidence to support the application of such principles. The only matters relied upon by the appellant as justifying a finding that the respondent knew or must have known of the mistake lies in the fact that he was a mathematician; that he conducted a web search at some unspecified time and located the ring on the cheapdiamonds.com website which advertised a 2.15 carat ring for the price of $US4,499.99; and in his Application to the Tribunal, the respondent stated that the value of a similar ring is $34,429. The Appeal Panel finds it such matters do not satisfy the requisite test of actual or imputed knowledge: as was stated by Barrett J in Smith at [50], it is essential that the other party to the contract (in this case the respondent) be aware of circumstances existing which indicate that the appellant entered into the contract for the sale of the ring under a serious mistake concerning a fundamental term of the contract and, significantly that the second party (the respondent) "deliberately sets out to ensure that the first party does not become aware of the existence of the mistake, either by positive acts or omitting to bring it to their attention". The Appeal Panel concludes that neither requirement has been satisfied.
11. The Appeal Panel observes that Handley JA in Tutt v Doyle referred to the decision of the High Court in Taylor v Johnson, stating relevantly (at 14): "However the majority also endorsed wider principles which entitle a court of equity to grant relief for unilateral mistake in cases not covered by this principle. They approved (at 431) the statement by James LJ in Torrance v Bolton (1872) LR 8 Ch App 118 at 124, that the power to set aside a contract for unilateral mistake was based on the ordinary jurisdiction of equity to deal with any instrument or other transaction "in which the court is of the opinion that it is unconscientious for a person to avail himself of the legal advantage which he has obtained". They also approved the decisions in Riverlate Properties Ltd v Paul [1975] Ch 133 at 145 and Thomas Bates & Son Limited v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 at 514 - 516; [1981] 1 All ER 1077 at 1085 - 1086 where rectification, and not rescission, was granted on this ground. They noted (at 432) that in the United States and Canada: "… The rule that relief from contractual obligations on the ground of unilateral mistake will be granted where enforcement of the contract would be unconscionable is well established." In those jurisdictions relief is available where one party "knows that the other party… might well be mistaken" or "had reason to know of" the other parties mistake (at 432)."
12. As can be seen from the above observations, a party, to place reliance on such principle, must still establish that there are grounds for unconscionability: that is that the other party to the contract had knowledge of the mistake and refrained from informing the other party before entering into the contract. As has been already noted, there is simply no evidence sufficient to justify the conclusion that the respondent possessed such knowledge, and in the absence of such evidence, a claim for equitable relief must fail.
13. The Appeal Panel now refers to further submissions raised by the appellant. Reliance is placed upon the decision in McRae v Commonwealth Disposal Commission (1951) 84 CLR 377. In that decision the High Court considered an agreement relating to the sale of a wrecked tanker which was believed to have been on an island. In fact, neither the island nor the tanker existed and both parties were therefore labouring under a misapprehension as to its existence. Both parties were mistaken. However, that is not the circumstances prevailing in this appeal. If the appellant was mistaken as to its price, it is a case of unilateral mistake on its part. There was no mistake by the respondent who merely wished to acquire the advertised ring at the advertised price.
14. Having considered the submissions of the appellant we find that there is no merit in them. We also observe that, even if the contractual grounds upon which the respondent relied failed, the Tribunal could have applied the provisions of the Australian Consumer Law (ACL), which applies as a law of New South Wales pursuant to s 28 of the Fair Trading Act 1987 (NSW). The ACL (Sch 2 of Competition and Consumer Act 2010 (Cth)), s 18 relevantly provides that a person (which includes a corporation) must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
15. The word "misleading" has been given a wide interpretation and has extended to conduct which, in trade or commerce, is unfair: see R v Credit Tribunal (SA); Ex-parte GMAC [1977] HCA 34; (1977) 137 CLR 545; 51 ALJR 612. Misleading or deceptive conduct is a question of fact; and it is not limited to representations. Whether a party intended to mislead another party is irrelevant: see Hornsby Building Information Centre Pty Ltd V Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216; 18 ALR 639; see also Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191; 56 ALJR 715; 42 ALR 1.
16. Applications come before the Tribunal without pleadings. Where the facts disclose one or more two causes of action, and where the parties to the proceedings are not legally qualified, the Tribunal is obliged to apply relevant legal principles in determining the matter before it. In this instance the Tribunal Member correctly observed that in the matter before the Tribunal, the provisions of the ACL had application, but found it unnecessary to resort to such statutory regime since the claim arose directly from a contract.
17. At the hearing of this appeal, the Appeal Panel requested the parties to provide submissions concerning the applicability and operation of the ACL. Those submissions have been received from the appellant and have been considered. The appellant refers to Yorke v Lucas (1985) 61 ALR 307 at 309, where the High Court referred to the circumstance that if a corporation merely passed on wrong information, it was not liable under s 52. However, there is no evidence which makes it plain that the appellant was mistaken: rather, there are only assertions from Banis that the price was incorrect. The respondent, however, submits that the appellant's conduct constitutes "bait advertising", which is prohibited by s 35 of Schedule 2 of the ACL.
18. The Appeal Panel finds it unnecessary to make a decision in respect of the application of the ACL, since it is satisfied that the decision of the Tribunal member is correct in his finding that the contract is enforceable.
19. The Appeal Panel has considered whether, based upon the matters known to it, it should determine the proceedings on this appeal or refer the matter back to the Tribunal for further consideration. The Appeal Panel finds that the appellant has chosen to conduct its proceedings before the Tribunal without raising the issue of unconscionability. In accordance with the principles established in AON Risk Services Australia Ltd V Australian National University (2009) 239 CLR 175, the appellant is bound by its conduct in the way it pursued its litigation. Accordingly, the Appeal Panel, having considered the issue of unconscionability which the appellant sought to raise, finds it would be a waste of resources for the proceedings to be reheard by the Tribunal.
20. There are three participants in what appears to have been a series of interlinked transactions: the appellant, the respondent and Banis, which from the unsubscribed statutory declaration appears to have operated the website on which the incorrect price was advertised. The proceedings between the appellant and the respondent involve only dealings between those two parties, and it remains a matter for the appellant as to whether it wishes to pursue any rights which it believes it have as against Banis arising out of these events.
21. For the above reasons the Appeal Panel dismisses this appeal. In doing so, the Appeal Panel notes that the appeal was brought within time that is, within 28 days of notification of the decision under appeal: see Part 6 of the Civil and Administrative Tribunal Rules, r. 23(3). The notice of appeal referred to the date of receipt of the reasons as 20 May 2016. The solicitor for the appellant has now provided affidavit evidence that in fact such date is in error and that the reasons were received later with the consequence that the appeal is brought within time and a grant of leave to bring appeal as provided by section 80(2)(b) of Part 6 of Schedule 4 to the Civil and Administrative Tribunal Act 2013 is unnecessary.
22. The respondent applies for costs of the appeal. Part 9, r 38A of the Civil and Administrative Appeal Tribunal Rules 2014 (NSW) (the Rules) empowers the Tribunal to award costs in internal appeals, relevantly on the basis of the first instance costs provisions, see r 38A(2). Usually, costs are not awarded in first instance proceedings unless there are special circumstances to warrant a different order (see s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) and see r 3 of the Rules). But if the amount in dispute exceeds $10,000 but is less than $30,000 and the Tribunal has made an order under Cl 10(2) of Sch 4 to the Act (conduct of needlessly incurring costs); or if the amount in dispute exceeds $30,000, the Tribunal in its Consumer and Commercial Division may award costs as it sees fit.
23. The Appeal Panel has considered all the circumstances. The Appeal Panel notes the submission of the respondent that he only obtained legal representation after the appellant obtained leave for legal representation. The Appeal Panel notes that the amount in dispute appears to exceed $30,000. In these circumstances the usual rule should apply, namely that costs follow the event and accordingly the appellant is ordered to pay the costs of the respondent of the appeal.
24. The Appeal Panel orders: 1. The appeal be dismissed; 2. The orders made by the Tribunal on 16 May 2016 are confirmed; 3. The appellant pay the costs of the respondent of the appeal. 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

Amendments 01 December 2016 - [33] - revised to clarify reference to, and application of, the Australian Consumer Law 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: 01 December 2016