Chaplin v Birdogan

SUPREME COURT OF VICTORIA

CAUSES JURISDICTION

Not Restricted

No. 4457 of 1998

IN THE MATTER of an appeal under section 109
of the Magistrates' Court Act 1989

BETWEEN:

ANN HARVEY CHAPLIN	Appellant
v
HILMI BIRDOGAN	Respondent

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JUDGE:	Ashley, J.
WHERE HELD:	Melbourne
DATE OF HEARING:	3 August 1998
DATE OF JUDGMENT:	4 August 1998
MEDIA NEUTRAL CITATION:	[1998] VSC 28

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CATCHWORDS: Trade Practices - Loan by employee to employer - Employee working without contemporaneous payment of wages - Actions allegedly induced by conduct of employer in breach of s.52(1), Trade Practices Act 1974 (Cth) - Conduct constituted by promises of repayment of loan and later payment of wages - Whether conduct could be "in trade or commerce" - Effect of s.51A - Whether the director who actually made the promises could be liable under s.75B - Appeal by employee from decision of Magistrates Court allowed - Matter remitted for re-trial.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	MR R. JOHNSTONE	Ms E. Gorenstein
For the Defendant	MR C. O'GRADY	Michael J. Doyle and Associates

ASHLEY J:

According to amended particulars of claim ('the particulars'), Ann Chaplin was employed by Gunesh Pty Ltd as a manager/receptionist at a medical clinic at Cheltenham. Her employment commenced in October 1995. It ended on 31 August 1996. On 1 March 1996, she lent Gunesh money to pay its bills. Between 1 March and 31 August, Gunesh failed to pay her wages. She was induced to lend the money, and to work without being paid her wages contemporaneously by reason of various oral representations made by Hilmi Birdogan, a director of the company. She would have got a job elsewhere, (according to her evidence below, a job was available at a comparable wage), had she not believed the promises made by Mr Birdogan. All the promises were misleading and deceptive under s.52 of the Trade Practices Act 1974 ('the Act'), and were made by the defendant - now respondent - as a director of Gunesh. He, according to the particulars, is therefore responsible to the plaintiff for damages under s.82 of the Act.
When the matter came on for hearing before the Magistrates' Court at Frankston on 23 January 1998, the appellant - that is, the plaintiff - was unrepresented; not so the respondent. His solicitor, Mr Doyle, made a submission at the outset that the proceeding should be dismissed as disclosing no cause of action against his client. That was presumably a pleading point. The magistrate is said to have "refused to rule on (the) application without hearing the plaintiff's evidence". Then the plaintiff went into evidence. When she and her witnesses had completed their evidence, the respondent's solicitor made a no case submission, the respondent not being put to his election. The relevant thrust of the submission, according to Mr Doyle's affidavit sworn 25 May 1998, was that the appellant had no cause of action under the Act.
According to notes taken by Mr Johnstone of counsel, who was present at the Magistrates' Court when the matter was heard, the substance of what the learned magistrate said at the conclusion of the hearing was this:
"2. ... The Magistrate then said: 'This is an action that has been brought against Mr Birdogan in his personal capacity re non payment of wages and payment re electrical and window expenses. The fact is these obligations were obligations of Gunesh Pty Ltd. If Gunesh was before the court I would have no difficulty in finding that the amounts have to be paid. There were previous proceedings against Gunesh. She must show that there is a personal obligation by Mr Birdogan to pay and guarantee payment on his own assets. I am satisfied all of those promises were being made on behalf of Gunesh Pty Ltd. Also, there is some evidence of some cheques paid to the Complainant for apparently wages. Nothing to show Mr Birdogan would make payments from his own assets. I cannot see how Mr Birdogan can be personally liable. S 52 and S 11 only refer to aiding abetting counselling or procuring an offence. Misleading conduct can be an offence under the Trade Practices Act. Advertising products can constitute an offence. We are not dealing with any criminal act here, not any contravention of any Act. None of these provisions have any such application here. Action dismissed with costs of $3,823, stay of 1 month."
Mr Doyle has deposed, however, that:
"In paragraph two of the notes taken by Raymond Johnstone of the Magistrates words, he says in paragraph two '...She must show that there is a personal obligation by Mr. Birdogan to pay and guarantee payment on his own assets. I am satisfied all of those promises were being made on behalf of Gunesh Pty Ltd...'. This is not correct as the Magistrate made no finding on the facts. The Plaintiff's claim was dismissed on a point of law namely that she disclosed no cause of action."
There is a rule of practice that, where there exists a material conflict between the parties' affidavits as to the evidence or other proceedings in the court below, the version which supports the decision appealed from will be accepted, absent any fair and practicable method of resolving the conflict: see Williams, Civil Procedure Victoria, paragraph 58.06.140. In the present case, I doubt that any conflict is material. Mr Doyle does not depose, as I understand it, that the learned magistrate did not characterise the way in which the plaintiff could make out her claim against the respondent in the manner noted by Mr Johnstone. Further, if the learned magistrate did make the finding of fact attributed to him, it was not contrary to, but was rather consistent with, the respondent's case.
The appellant's claim, then, was dismissed by order made on 23 January 1998. Under s.109 of the Magistrates' Court Act, an appeal lies from such an order on a question of law. An appeal must be brought in accordance with the rules of this court. If a prima facie case for relief is shown by the appellant to a master, the latter, "shall by order (a) state each question of law that the appellant shows to be raised by the appeal".
In the present case, the master set out the following questions for decision:
"(i) Whether the representations made by the Respondent (on behalf
of Gunesh Pty Ltd) to the Appellant to the effect that:
(a) if she lent money to the Company she would be repaid;
(b) she would be repaid the $6,237.00 she had lent to the Company;
(c) she would be paid her wages;
were representations in trade or commerce within the meaning of
Section 52 of the Trade Practices Act?
(ii) Whether having regard to Section 75B in making such representations the Respondent aided and abetted the Company in breaching Section 52."
The learned magistrate either decided, as if on a strikeout application - as to which see, query, rule 1.14 of the Magistrates' Court Civil Procedure Rules 1989 - that the appellant must assuredly fail; or he decided that, assessing the quality of the evidence called by the plaintiff, and drawing any inferences available in her favour, there was no evidence that ought reasonably satisfy him that the facts sought to be proved had been established: Williams, supra, paragraph 49.01.210-49.01.215. In either case, he had to direct himself correctly as to what the appellant had to establish. In the second case, he had to consider the evidence called by the appellant within that framework.
The appellant's real complaint, as it emerged at the hearing before me, was that the learned magistrate had misdirected himself as to the meaning of sections 52(1) and 74B(1)(a) and (c) of the Act; and that the outcome of any consideration he had given to the evidence in determining that there was no case for the respondent to answer was wholly untenable. The first, and probably the second, aspects of the real complaint would raise questions of law.
The questions framed by the learned master are, in the circumstances described, infelicitously phrased. They might be thought to invite this court to reach its own conclusions on the evidence. Alternatively, they might be thought to suggest that the evidence - though only the appellant went into evidence and the respondent was not called upon to elect - compelled a conclusion favourable to the appellant upon the merits of the case. This court could not accept the invitation first referred to; and could not resolve the appellant's claim finally in her favour.
A separate problem arises in connection with question (ii). Its language picks up part of s.75B(1)(a) of the Act. It was really common ground that the appellant had, in relying upon that section, relied upon both subparagraphs (a) and (c). The likely explanation for the form of the question is that the learned magistrate referred only to the language of subparagraph (a) in his reasons.
In the event, the parties treated the questions the subject of the master's order as raising for my consideration the two matters to which I have referred. I shall approach the appeal on that footing. There is authority for the proposition that I may take this course: Williams, supra, paragraph 58.06.150. It appears to me to be proper in the circumstances of this matter that I do so.
The plaintiff's claim was relevantly one for damages under section 82(1) of the Act, which provides that:
"A person who suffers loss or damage by conduct of another person that was done in contravention of the provision of .. Part V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention."
Section 82(1) is within Part VI of the Act. Section 75B(1) provides that a reference in Part VI to a person involved in the contravention of Part V shall be read as a reference to a person who:
"(a) has aided, abetted, counselled or procured the contravention ...
(c) has been in any way, directly or indirectly,knowingly concerned
in, or party to, the contravention."
Now I should go to section 52(1) which reads:
"A corporation shall not, in trade or commerce, engage in conduct
that is misleading or is likely to mislead or deceive."
I should also set out section 51A(1) and (2), thus:
"(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of sub-section (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation."
Section 51A is part of Division 1 of Part V of the Act. Section 52(1) is within that Division, but section 75B is not.
Section 52(1) is simply expressed. The difficulties it has created for lawyers and judges are out of all proportion to that simplicity of expression. Both before the learned magistrate and before me, a number of difficulties possibly arising in the present case were not debated. As the matter was argued, the plaintiff was put to establish the following matters:
First, that Gunesh had engaged, vis-a-vis the appellant, in certain conduct "in trade or commerce".
Second, that the conduct was "misleading or deceptive" or "likely to mislead or deceive".
Third, that the respondent had, by virtue of section 75B(1)(a) or (c), also contravened section 52(1).
Fourth, that the appellant had suffered loss or damage by the contravening conduct.
According to the argument for the respondent before me - which was very capably advanced by Mr O'Grady of counsel - the appellant's case was fatally flawed. He made these submissions:
First, the conduct, by which was meant the representations made by the company by its director, the respondent, was conduct engaged in by the company with an employee. It was not conduct "in trade or commerce (my emphasis): Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 604 per Mason CJ and Deane, Dawson and Gaudron JJ; and compare Barto v GPR Management Services Pty Ltd and Anor (1991) 105 ALR 339 at 345 and Mulcahy and Ors v Hydro-Electric Commission (1998) 605 FCA at 47.
Second, the effect of Yorke and Anor v Lucas (1985) 158 CLR 661 is that a person will only be guilty of a contravention of s.75B(1)(a) if he has intentionally aided, abetted, counselled or procured a contravention. The necessary intent requires knowledge of the essential matters which make up the contravention, whether or not they are known to amount to a contravention: see at 667 and 669 per Mason ACJ and Wilson, Deane and Dawson JJ. Further, a person will only be guilty of a contravention of subparagraph (c) if he is an intentional participant, the necessary intent being upon knowledge of the essential elements constituting the contravention: see at 670 in the joint judgment.
Third, in this case the impugned conduct of the company was the making of representations as to future matters. The appellant must show that, when the promises were made, the company did not intend to perform them or that they were made without any, or any adequate, foundation; and that such lack of intent or absence of foundation was known to the respondent at the time. The opening words of s.51A of the Act show that the section could only bear upon the circumstances of the company. The section would not directly assist in proof that the respondent engaged in conduct impugned by s.75B. The appellant had neither pleaded, nor established by evidence, a case that the respondent had breached any part of that section.
Mr O'Grady did not attempt to support the learned magistrate's reported reasons for decision. Rather, he sought to support the order made on grounds available to the respondent at the time when the order was made. In my opinion, that course was rightly taken. No doubt because of the pressure of a heavy workload and the problem of an unrepresented litigant in a proceeding which relied upon legislation perhaps not often encountered in the Magistrates' Court, the learned magistrate did misdirect himself in respect of the claim brought under the Trade Practices Act. The nature of the misdirection will appear in what I must say concerning Mr O'Grady's submissions. I turn to the first of them.
According to the majority judgment in Concrete Constructions at 604, s.52(1): ".. the section is concerned with .. the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character."
Their Honours also said this, at 604-605:
".. to drive a truck with a competitor's name upon it in order to mislead the customer or to conceal a defect in a building for the purpose of deceiving the building owner may well constitute misleading or deceptive conduct 'in trade or commerce' for the purposes of s. 52. On the other hand, the mere driving of a truck or construction of a building is not, without more, trade or commerce and to engage in conduct in the course of those activities which is divorced from any relevant actual or potential trading or commercial relationship or dealing will not, of itself, constitute conduct 'in trade or commerce' for the purposes of that section. That being so, the giving of a misleading handsignal by the driver of one of its trucks is not, in the relevant sense, conduct by a corporation 'in trade or commerce'. Nor, without more, is a misleading statement by one of a building company's own employees to another employee in the course of their ordinary activities. The position might well be different if the misleading statement was made in the course of, or for the purposes of, some trading or commercial dealing between the corporation and the particular employee.
The alleged misleading or deceptive conduct of the Company's foreman in the present case consisted of an internal communication by one employee to another employee in the course of their ordinary activities in and about the construction of a building. It follows from what has been said above that that conduct was not, for relevant purposes, conduct 'in trade or commerce'.
The mere fact that impugned conduct is the conduct of an employer towards its employee does not necessarily mean, then, that the conduct will not be "in trade or commerce"; but that will sometimes be the case.
Here, the alleged representations were, in short:
* That the company would swiftly repay the appellant if she loaned it money to pay certain of its operating and other expenses.
* That the company, by various suggested means, would eventually pay the appellant wages falling due to her if, in the interim, she carried on with her duties.
* That the company, if the appellant continued to work for it, would definitely repay the amount of the loan (implicitly this representation was made at times when the appellant was not in fact being paid for her work).
I do not doubt that it would be open to conclude that the first and third representations were conduct in trade or commerce, notwithstanding that they were made by an employer to its employee. The third representation is slightly more complicated, in that (if made) it bore upon both the loan moneys and the appellant working without contemporaneous payment of wages. Nonetheless, in respect of the conduct constituted by those two representations, a strike out application should not have succeeded on the footing that this alleged conduct could not constitute conduct "in trade or commerce". Nor could the respondent hope to have succeeded in a no case submission if, as it appears, evidence was led consistently with the allegations made by the particulars. Mr O'Grady submitted that the particular conduct was not 'in trade or commerce', that the arrangement was an informal one - this being evidenced by the parties to the agreement making no provision for payment of interest. That circumstance might possibly have some bearing on the final resolution of the issue at trial, but I express no concluded opinion upon the point. Clearly, the circumstance is, for present purposes, irrelevant.
Whether the conduct constituted by the second representation could be conduct 'in trade or commerce' is less clear. If the learned magistrate resolved the matter as on a pleading summons, I doubt that he should have concluded that the plaintiff's case was so clearly untenable as to justify striking out the particulars. Barto was, I think, a more difficult case for the representee, yet Wilcox J would not strike out the claim. Moreover, His Honour's analysis of the authorities, at 105 ALR 343-345, is, I consider, persuasive. Concrete Constructions was a very different case from the present on the facts. The internal communication said to constitute the relevant conduct was made by one worker to another in the course of their daily work. Mulcahy was a case with some resemblance to the present case. The representees failed at trial after all the evidence had been adduced. In none of those three cases was there a representation such as the third representation here alleged - a representation linking the loan transaction and work without present payment of wages.
In the event, whether the learned magistrate resolved the subject matter of the second representation as on a pleadings summons, or upon there being, colloquially, "no evidence" to support the appellant's case, I consider that he erred in law. That conclusion, I need hardly add, gives no indication of the way in which so much of the appellant's claim as depends upon the particular conduct should be disposed of after all pertinent evidence has been adduced and final submissions made.

I turn to Mr O'Grady's second submission. I need only say that it was clearly correct.
I pass on to his third submission. I agree that the representations relied upon were representations as to future matters. I also agree that s.51A would not directly assist the appellant in proof that the respondent engaged in conduct impugned by s.75B. It could assist the appellant to make out a case that the company contravened s.52(1) - such a contravention being a necessary precondition for accessory liability of the respondent. I do not agree with Mr O'Grady's submission that the appellant neither alleged nor gave evidence of conduct by the respondent which, in the circumstances, could fall within one or other of section 75B(1)(a) or (c).
In the present case, the promises allegedly made should be considered to have conveyed that the company, speaking through the respondent, had a certain state of mind; and that there was a basis for that state of mind. So, promises to repay the loan, or to pay wages in time, implied that the promisor then intended to make such payments; and that the promisor had a rational basis for believing that its intention was capable of being realised. If the meaning conveyed by the promises in some way was false, then the company's conduct, subject to the application of s.52(1) otherwise, breached that section. The same would be true, I think, if the promises were made with reckless disregard whether the intention conveyed thereby was capable of being realised.
The particulars recite the many promises alleged to have been made by the respondent as a director of the company. Paragraph 9 alleges that:
"All the promises of the defendant were misleading or deceptive or were likely to mislead or deceive under s.52 of the Trade Practices Act 1974 and were made by him as a director of Gunesh Pty Ltd and he is therefore responsible to the plaintiff for damages under s.82 ..."
There is, no doubt, some compression of expression in paragraph 9. But it appears to me that it attempts to allege that:
* The relevant conduct was constituted by representations as to future matters;
* The representations were in contravention of s.52(1) - that is, on one or more of the bases to which I referred a moment ago;
* The company had engaged in the conduct - the respondent having made the representations as a director;
* So had the respondent as an individual; and
* The respondent personally was liable to pay damages under s.82 of the Act.
Although paragraph 9 does not refer specifically to s.75B, I doubt that its potential relevance is concealed by that paragraph. I doubt also that the paragraph fails to disclose that the allegation of falsity of the representations is directed to the respondent as well as to the company. That is, I think, the more so when the particulars of claim are read in their entirety. It is made clear that the respondent was the voice of the company over a considerable period. He was a director of the company, and might reasonably be thought to have known something of its circumstances. He made, it is said, a considerable number of promises. The very description of some of them invites consideration of the intention and belief of their author.
There is no doubt that, at trial, the appellant attempted to rely upon s.75B of the Act. She cited Yorke and Anor v Lucas. The particulars had, as I have said, been drawn by the appellant personally. If amendment of the particulars seemed necessary having regard to the way in which the appellant sought to prove her case at trial, that amendment should have been facilitated so the true matters in issue could be decided.
So far, I have not dealt with the evidence called by the appellant. It is briefly described in her affidavits sworn 18 February and 5 March 1998, and in exhibit B to the first of those affidavits. The evidence appears to have disclosed the respondent's role in running the Cheltenham and other clinics in a group, the fact that the respondent was a director of the appellant's employer, and the fact that the many promises to pay made by him were promises unaccompanied by performance. The evidence also referred to the later liquidation of the employer. It appears to me to have been an available inference, in all the circumstances described, that in making the various promises the respondent acted in a manner proscribed by s.75B(1)(a) or (c). The mere fact that the promises were never fulfilled, and the mere fact of the employer's later liquidation, would not have themselves enabled such an inference to be drawn. But that is not to say that such matters could not form part of the factual matrix which would entitle the drawing of such an inference.
It follows from what I have said that the appeal succeeds. Subject to one matter, the proper course is that the proceeding should be remitted to the Magistrate's Court, differently constituted, for retrial in accordance with my reasons. The one matter is this: the appeal was concerned with the claim founded on the Trade Practices Act. The same facts were said also to give rise to a remedy under the Fair Trading Act. Subject to anything that counsel may wish to submit, I consider that what should be remitted for retrial is the claim raised by paragraphs 1-9 of the particulars. Those paragraphs raise the claims made under both the Commonwealth and the State Acts. The remedy, if that portion of the plaintiff's claim succeeds in whole or in part, lies in damages. Paragraph 10 is beside the point. So also are the "particulars of all special damage of the plaintiff".
The orders that I propose are as follows:
Order that:
1. The appeal from the final order made by the Magistrates' Court at Frankston on 23 January 1998 be allowed.
2. The order made by the Magistrates' Court at Frankston on 23 January 1998 be set aside.
3. The appellant's claim founded upon paragraphs 1-9 of the amended particulars of claim be remitted for rehearing by the Magistrates' Court, differently constituted, in accordance with the reasons of this Court.
4. The costs of and incidental to the hearing in the Magistrates' Court on 23 January 1998 be costs in the cause.
5. The respondent pay the costs of the appeal.
If the respondent applied for a certificate under the provisions of the Appeal Costs Act, I would grant that application.

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[1998] VSC 28

4 August 1998