Collection House Limited v Taylor
[2004] VSC 49
•3 March 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 6657 of 2003
| COLLECTION HOUSE LIMITED | Appellant |
| v | |
| LEIGH-ANNE TAYLOR | Respondent |
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JUDGE: | NETTLE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 February 2004 | |
DATE OF JUDGMENT: | 3 March 2004 | |
CASE MAY BE CITED AS: | Collection House Limited v Taylor | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 49 | Revisions 16 March 2004 |
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Administrative Law – Appeal from Tribunal – Victorian Civil and Administrative Tribunal – Procedural fairness – Whether member's conduct amounted to a refusal of adjournment - Whether refusal of adjournment a denial of natural justice – Victorian Civil and Administrative Tribunal Act 1998, ss 98(1) and 148.
Trade Practices – Misleading and deceptive conduct – Unconscionable conduct – Failure of creditor to inform debtor that the debt was statute barred – Whether misleading or deceptive conduct or unconscionable conduct – Fair Trading Act 1999, ss 7 and 9.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr P.W. Almond QC with Mr J.D. Pizer | Minter Ellison |
| For the Respondent | Mr C.D. Johnson | Consumer Credit Legal Service |
HIS HONOUR:
This is an appeal pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 from a decision of the Tribunal that the appellant pay the sum of $5,000 to the respondent. Leave to appeal was granted by the Master on 6 August 2003.
The facts
The appellant is a licensed commercial agent operating in all States and Territories of Australia. It generates at least part of its income by purchasing aged debts at a discount and then pursuing the debtors concerned for payment of at least some part of the face value of each debt.
At relevant times the respondent was unemployed and for some time before that she had only worked on a part time basis. She was living in a domestic relationship in rented premises and she had a 16 year old deaf dependent child. She did not receive any government support for her child, because he had reached the age of 16 years, and her only assets were furniture which she estimated to be worth $500 and jewellery which she estimated to be worth $200.
Years before, in 1992, she had borrowed money from AGC Ltd to purchase a motor car and she had defaulted in her payments. AGC Ltd then repossessed and sold the car but the amount recovered was insufficient to discharge all of the loan debt. I infer that the amount of the shortfall was not large. But 10 years later, by the time of the events in issue, it had grown with interest to an amount of $10,870.00.
In or about 2000, AGC Ltd sold to the appellant a tranche of aged debts that included the respondent’s debt.
On 23 April 2001 a man by the name of Peter Hempenstall telephoned the respondent at her home at approximately 6.30 in the evening and said to her that he was “calling from ALR Lawyers, phoning on behalf of our client Collection House” and that “our client has purchased a ledger of debts from AGC, one of which is in your name”. The respondent asked Mr Hempenstall the amount of the debt and he answered that it was $10,870.00 and that it appeared to be related to a motor vehicle loan. Mr Hempenstall asked her if she were familiar with the debt, and she acknowledged that she was. He then said to her words to the effect that the preferred option of “our client” was payment in full but that if satisfactory payment could not be reached legal action may be an option. Mr Hempenstall asked her whether she was in a position to pay the debt in full and, when she said that she was not, he asked her a series of questions about her personal and financial circumstances and her ability to raise funds with which to pay the debt. Ultimately he put to her or she put to him a proposal to settle the debt for $5,000, and when she signified that she might be prepared to do that he said to her that he would refer the proposal to “our client”.
At approximately 7.00 pm Mr Hempenstall telephoned the respondent again and said that the proposal had been approved and that “our client” would accept $5,000. The respondent replied that she would pay $4,500 of it on her credit card, immediately, and she gave the details and authorisation to Mr Hempenstall which enabled him to debit her card immediately, and that she would arrange a $500 increase in her credit card limit in order to pay the balance, and that she thought that she should be able to make that arrangement by 30 April 2001.
The next day, the respondent sought advice from Good Shepherd and the Citizens Advice Bureau and on the basis of the advice she came to the view that the debt was statute barred. Thereupon she telephoned Mr Hempenstall and complained that he should have told her that the debt was statute barred. Mr Hempenstall responded with the words: “The statute of limitations does not prevent ALR Lawyers from pursuing the debt on behalf of our client.”
In November 2002 the respondent instituted a proceeding in the Tribunal, alleging that the appellant through Mr Hempenstall had engaged in unconscionable conduct in breach of s 7 of the Fair Trading Act 1999 and misleading and deceptive conduct in breach of s 9 of the Act, and claiming an order against the appellant for payment of the sum of $5,000.
By letter dated 19 December 2002 the appellant requested the Tribunal to list the matter for directions “to ensure that the parties are afforded natural justice in the hearing of the matter” and, in particular, so that “all parties and the presiding Member are fully informed of the issues to be determined in the hearing”. For reasons which are not apparent, the Tribunal declined to list the matter for directions.
On 7 January 2003 the appellant wrote to the respondent’s solicitor that the appellant intended to file and serve in advance of the hearing the material upon which the appellant intended to rely, and it requested that the respondent file and serve in advance of the hearing any written material upon which she intended to rely. On 23 April 2003 the appellant also filed in the Tribunal Registry and served on the respondent’s solicitor a statutory declaration of Mr Hempenstall deposing to his version of events. The respondent did not file or serve any written material other than her application.
The hearing took place on the afternoon of 29 April 2003 before a Member of the Tribunal. The appellant was represented by one of its employees, Mr Easy, who was not a lawyer, and the respondent represented herself. I have been told by counsel that each party may also have had a solicitor present as a McKenzie friend. There is, however, no evidence to that effect and there is nothing to show whether the solicitors were present for the whole or even for critical parts of the hearing or what advice they may have given during the hearing.
The hearing began with the respondent’s evidence, which was in the form of answers on oath to questions put by the Member. That was followed by Mr Easy’s opening statement and by Mr Hempenstall’s evidence, which consisted of Mr Hempenstall reading out on oath the contents of his statutory declaration and the Member asking Mr Hempenstall a number of questions, effectively by way of cross examination.
Several of those questions were directed to Mr Hempenstall’s evidence that at the time of the events in issue he had been an employee of the appellant seconded to ALR Lawyers. Others appear as having been calculated to extract admissions, which were not made, that it was misleading not to have mentioned to the respondent on 23 April 2001 that the debt was statute barred and misleading to say on 24 April 2001 that the statute did not prevent ALR taking legal action.
There then followed a lengthy exchange between the Member and Mr Easy as to whether Mr Hempenstall’s statement that legal action was an option was misleading, and that culminated with the Member asking whether either party wanted to say anything further or to provide any further evidence on any aspect of the matter. Mr Easy responded:
“If it would be of assistance to you, I can’t provide it today, but if it would be of some assistance to know more about the ALR arrangement and particular in terms of just the secondment arrangements of Peter and that, I can put that in motion to obtain that for you, but obviously I can’t do that today, so if that would give you any further assistance in understanding the relationship and the arrangements that were in place at that time.”
The Member replied that on the basis of the evidence which he had heard to that point he was not satisfied that the arrangements were such that Mr Hempenstall could legitimately have claimed to be in the office of ALR Lawyers but that he was loathe to adjourn because people would have to come back on another day:
“MEMBER: But on the evidence that I have heard, I’m certainly not satisfied that that arrangement is what I would regard as a position where legally an officer of the company can claim to be in the office of ALR Lawyers. On the evidence I’ve heard that just isn’t a statement which I think is a true reflection of the relationship and I certainly take your point it is a significant part of the facts that I’ve been concerned with today. I’m loathe like (sic) to adjourn it because that just means people have to come back again another day.
MR EASY: I understand that completely.
MEMBER: I think it’s important to deal with it.”
After another brief exchange, the Member announced his decision.
“MR EASY: The only other point that I would make on that basis is that [Mr Hempenstall] was legitimately employed by Collection House and seconded legitimately to ALR Lawyers. During his tenure with ALR Lawyers he was not able and permitted to perform any action as a Collection House collector separate to his functions as an ALR Lawyer, within that as the law clerks/paralegal.
MEMBER: When you say that, what changes do you say occurred with (h)is authority from the moment he was seconded to ALR Lawyers?
MR EASY: He was not nor did not, and [Mr Hempenstall] will confirm this, issue any letters or any matters as a Collection House employee for Collection House letters, only as an employee of ALR Lawyers.
MEMBER: You use the term employee of ALR Lawyers and I believe that is a correct use of the word, that is that if he’s representing himself to be working for ALR Lawyers that he is an employee of ALR Lawyers.
MR EASY: Yes.
MEMBER: Now there are many tests of the relationship employer/employee and some of the issues that I found significant I put and they related to who paid the salary, who gave him directions as to how he should conduct himself, were there separate offices, was he seen to be independent from the client, that he suggests it was, and my view is that there was a failure of all of those tests to demonstrate to me he was in fact an employee of ALR Lawyer as against being an employee of Collection House.
So in that sense I have to say I do make the finding that on the evidence available to me, the witness wasn’t an employee of Collection House, I acknowledge to you that that is of some significance to me in making my determination and if there is no more evidence I will rule on the matter.
Having heard all the evidence, having considered the issues, having particularly read the legal submissions of Collection House and particularly considering the detail of the conversations and as to how those conversations I believe would have been regarded by a layperson, and ordinary reasonable layperson, I have come to the conclusion that there is a breach of the Fair Trading Act in possibly three respects.
The first is in relation to the unconscionability of the conduct. Secondly I regard the way the approach and the whole concept of the discussions and conversation, as being misleading and deceptive. I also believe that under s 12 there were false representations made in relations to goods and services. Having found that I say that I find for the applicant and require that Collection House does repay the full amount of $5,000 which was paid by the applicant to Collection House. So in the circumstances my order is that the respondent will pay to the applicant the sum of 5,000.”
Upon request the Member later produced written reasons for his decision. In those reasons he stated:
“8.There were two components of the [CHL’s] conduct which raise issues for my consideration. The first relates to the initial telephone call by Mr Hempenstall, an employee of the Respondent, in which he stated that he was ‘calling from ALR Lawyers, phoning on behalf of (his) client, Collection House’.
9.The second issue surrounds two statements in which Mr Hempenstall in separate telephone conversations advised the Applicant, in the first telephone call, that if satisfactory arrangements could not be made regarding payment, legal action to recover the debt for his client was an option. In the second telephone conversation, which took place after the Applicant had paid $4,500 but had not yet paid the balance of $500, and after the Applicant had indicated that she had obtained advice that she did not have to pay the debt because of the Statute of Limitations, Mr Hempenstall had stated that ‘(t)he Statute of Limitations doesn’t prevent ALR Lawyers pursuing the debt on behalf of our client’.
10.In considering the first component, there was evidence before me that at the relevant times Mr Hempenstall was employed by [CHL]. He claimed that he was entitled to state that he was calling from ALR Lawyers on behalf of his client because at that time he was seconded to ALR Lawyers as a law clerk… On questioning it became apparent that Mr Hempenstall was being paid as an employee of the Respondent, that he did not receive any direction from any solicitor from ALR Lawyers, that his office was in the office premises of the Respondent which were separate from those of ALR Lawyers (although ALR Lawyers were in the same building but with separate premises which were on a different floor), that from his office computer he generated correspondence on both the Respondent’s and ALR Lawyer’s letterhead…[CHL] did not produce any documentary evidence of the supposed secondment, although Mr Easy stated that such evidence did exist (Emphasis added).
11.It is first appropriate for me to consider whether such an arrangement in fact represented a secondment although this is only one element in my determination as to whether the conduct of the Respondent can be said to be unconscionable, misleading or deceptive…. it may be that the arrangement as outlined in the evidence could be regarded as a version of a secondment arrangement, however in my opinion this is not the correct view particularly because Mr Hempenstall’s only direction as to how to conduct himself during his period of ‘secondment’ was provided by his manager at Collection House and not from any lawyers or others at ALR Lawyers… (Emphasis added)
12.In relation to the second aspect of its conduct, the Respondent acknowledged that it had no realistic prospect of recovering the debt if legal action had been commenced….
…
16.In order to obtain relief as a consequence of unconscionable conduct the Applicant needs to establish first that she was in a position of special disadvantage and secondly that [CHL] took advantage of that position by unfair or unconscionable means…
…
18.I find that the Applicant in this case was at such a special disadvantage because of her lack of knowledge of matters at issue, and that [CHL] as the stronger party wrongfully exploited this position of special disadvantage. [CHL] was therefore in breach of section 7 of the Fair Trading Act.
19.Section 9 of the Act deals with misleading and deceptive conduct…
…
21.…I have found in this case that the words used and the overall conduct was designed intentionally to enable the Respondent to claim, as it has done, that it said nothing that was untrue, however the words were also crafted in a way which would convey to a reasonable listener of a class to who they were directed a belief which was different from the technical understanding of those words which a trained person may appreciate. It cannot therefore be said that the misconception or error is attributable to the audience.
…
23.I find on the evidence before me that the conduct taken as a whole based on an objective test was misleading or deceptive, and was also likely to mislead or deceive.”
The grounds of appeal
The appellant advances four grounds of appeal:
1) That the Tribunal failed to afford the appellant natural justice by refusing to allow the appellant time to provide additional evidence to the Tribunal concerning the nature and terms of the secondment.
2) That the Tribunal erred in law in holding that Mr Hempenstall’s conduct taken as a whole was likely to mislead or deceive.
3) That the Tribunal erred in law in holding that the statement about the effect of the limitation period that was made by Mr Hempenstall during the telephone conversation of 24 April 2001 was causative of any loss.
4) That the Tribunal erred in law in holding that the respondent suffered from a special disadvantage and thus in holding that the appellant had engaged in unconscionable conduct.
I shall deal with these grounds in order.
First Ground: Failure to accord natural justice
The Tribunal is bound by the rules of natural justice[1] and bound as part of the requirement to afford natural justice to afford each party a reasonable opportunity to present his or her case. Failure to do so is an error of law and possibly also jurisdictional error[2]. But it is not every breach of the rules of natural justice that will render a decision invalid. The court may refuse relief if satisfied that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome[3].
[1]VCAT Act, s. 98(1); Francis-Wright v VCAT (2001) 17 VAR 306 at 313
[2]Kioa v West (1985) 159 CLR 550 at 582-585; Stead v State Government Insurance Commission (1986) 161 CLR 141 145-6; Re Refugee Tribunal; Ex parte Aala (2000) 204 CLR 82, 121, 143 and 153
[3]Stead, ibid
As has already been recorded, Mr Easy made a suggestion late in the hearing that he be given an adjournment to obtain further evidence about the nature of the secondment arrangements. The appellant now contends that Mr Easy’s suggestion constituted a request for an adjournment and that the Member’s response, that he was loathe to grant further time, was tantamount to a refusal. Thus it is said that the appellant was denied an opportunity properly to present its case.
The respondent submits that there are two answers to the appellant’s contention. The first is that the appellant should have anticipated that the secondment arrangements were likely to be a significant issue in the case and had plenty of opportunity in advance of the hearing to prepare its evidence accordingly, and hence that the appellant was given a proper opportunity to present its case. The second is that, regardless of whether the appellant should have anticipated the need for the evidence, Mr Easy’s suggestion that further evidence could be obtained did not amount to a request for an adjournment.
I do not think the respondent’s first answer to be very persuasive. It is not to the point that the appellant might have anticipated the need for evidence on the secondment arrangements. Applications for adjournments are not to be decided on the basis of whether a party could have anticipated the requirement which gives rise to a need for adjournment. It is not an occasion for punishment of a party for its mistake or for its delay in making its application.[4] The paramount consideration is to do justice and thus to enable the parties to present their case as fully as necessary within the limits of the law[5]. Delay of itself is rarely a basis for refusal.
[4]State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 145 at 155; The Warehouse Group (Australia) Pty Ltd v Bevendale Pty Ltd & Ors (2002) 121 VPR 321 at 334
[5]McColl v Lehmann [1987] VR 503 at 506
Here it became apparent in the course of the hearing that the Member regarded the nature and terms of the secondment arrangements as a significant issue. As was later to emerge from the Member’s written reasons for decision, the Member also thought to be significant the fact that the appellant did not provide any documentary evidence of the arrangements. In those circumstances, the refusal of an adjournment to allow the appellant to adduce written evidence was likely to create an appreciable risk of injustice. Yet the only apparent reason for the Member’s reticence to allow more time was the minor inconvenience of delay.
It goes without saying that any decision to allow or to refuse an adjournment was a matter in the Member’s discretion and that it was the sort of exercise of discretion with which an appellate court is hesitant to interfere[6]. But an appellate court will interfere if satisfied that the discretion has been exercised in such a way as to result in an injustice to one of the parties. In this case I think that it was.
[6]Bloch v Bloch (1981) 55 ALJR 701 at 703; McColl v Lehman, ibid
The respondent’s second point is a little more persuasive. Admittedly, Mr Easy’s reference to the possibility of presenting further material was not the most sanguine of applications for adjournment, and the Member did not say in terms that he refused time; simply that he was loathe to grant it. There was also Mr Easy’s statement that he completely understood the reticence of the Member to allow further time. If Mr Easy were a barrister and the Tribunal were a court, one might think that Mr Easy had made a calculated choice to run with his case as it was. The fact of the matter, however, is that Mr Easy was not a barrister; he was not even a lawyer; the Tribunal is not a court; and the sorts of conventions and assumptions which apply to the conduct of litigation by barristers in courts by and large do not apply to the conduct of proceedings by laypersons before the Tribunal. To the contrary, as Byrne J took time to point out in Winn v Blueprint Instant Printing Pty Ltd[7]:
“It (is) accepted that the Tribunal must act fairly and that it (is) bound by the rules of natural justice. But this does not require that its procedures be that of a formal court. Indeed, the Victorian Civil Administrative Tribunal Act 1998 (‘the Act’) makes it clear that the Tribunal is to act in an informal way and that its procedures must be moulded to accommodate the fact that, in most cases, the parties will not be represented by a professional advocate. This necessarily involves the Tribunal taking a more active role and identifying the real issues between the parties and directing them as to the evidence which legally and logically bears on those issues. It may be, too, that in a given case, the Tribunal will itself interrogate witnesses in a manner and to an extent which would not be expected in a court. This said, s 102(1) expressly obliges the Tribunal to afford to the parties a reasonable opportunity to call evidence and to cross-examine witnesses and make submissions…”
[7][2002] VSC 295 at [9]
That is not to say that the Tribunal exists to provide legal advice to parties that appear before it or even that it would be appropriate for the Tribunal to provide legal advice to parties. It does not and it would not be. But there is a difference between providing legal advice and explaining in the course of hearing to unrepresented litigants the nature and effect of the various processes which are being undertaken and as to the steps open for the litigants to take. In that sense, a higher burden of explanation and assistance may fall upon a member of the Tribunal than would fall upon a judge in a curial proceeding in which the parties are represented by counsel.
In court counsel are expected to make plain when and if they are seeking an adjournment, and it goes without saying that the way in which a case is presented is a matter for counsel. But that is because of the training of counsel and the etiquette of the court to which they are accustomed. It is different with laypersons before administrative tribunals. It cannot be assumed that they will make their meaning clear. They may have no experience of litigation, and they are likely to be nervous. In such circumstances it falls to the tribunal to clarify what seems obscure.
If counsel ask a judge whether further evidence would be of assistance to the court, counsel may properly be told that the way in which they run their case is a matter for them. But if a layperson asks an administrative tribunal whether further evidence on an issue would be of assistance to the tribunal then, depending on the circumstances, the tribunal will need to say if it could be. Otherwise, there is a risk of causing the person to take a mistaken view of the state of affairs relating to the manner in which they might choose to conduct their case. That in itself would be a denial of natural justice[8].
[8]Re Refugee Tribunal; Ex parte Aala, supra at 117 [84] and 122 [102]
In court it may be assumed that counsel will not lightly be deflected from an application for adjournment. And if a judge says that he or she is loathe to grant the adjournment, counsel may rightly respond with a demonstration of why the justice of the occasion demands the adjournment, if that be the case. But that too is because of the training of counsel and the etiquette of the court to which they are accustomed. It does not apply to unrepresented laypersons appearing before administrative tribunals. Where an unrepresented layperson is told by an apparently authoritative presiding member of an administrative tribunal that the tribunal is loathe to grant an adjournment, the layperson is likely and in my view entitled to treat the member as refusing to adjourn.
For much the same reasons I do not attach much significance to Mr Easy’s concession before the Tribunal that he completely understood the Member’s attitude. No doubt if such a thing were said by counsel to a judge, the judge might take counsel as saying that they had reconsidered their position and withdrew their application. But it is different for a layperson before an administrative tribunal. There, as in everyday society, it is commonplace for a person denied a request to respond with an expression of understanding. It may be no more than good manners to do so. But it does not mean that the person is to be taken as having withdrawn the request or that the person may not be bitterly disappointed. Granted that a layperson might also think it in his or her interests to ingratiate themself to the tribunal, obsequious resignation is hardly reasoned retreat.
All things considered, I am of the view that Mr Easy should be taken to have sought an adjournment and to have been refused it, and to that extent there was a denial of natural justice.
I have mentioned already that not every breach of natural justice will result in a decision being set aside. It will not if it can be seen that the breach could not have made a difference but common sense and high authority suggest that it is never an easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could not have borne on the outcome of an issue of fact. The difficulty is magnified when the issue concerns the acceptance or rejection of the testimony of a witness[9].
[9]Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145-6; Exparte Aala, supra at 153
In this appeal the appellant has tendered an affidavit as to the evidence concerning secondment arrangements which might have been placed before the Tribunal if further time had been allowed. It appears to me that there is a good deal in it which may not have been foreseen by the Tribunal. It includes evidence that Mr Hempenstall’s manager, although an employee of CHL at the time of the events in issue, was also seconded to ALR Lawyers and had been for an extended period at the relevant time.
The content of the extra material may also have had a bearing upon Mr Hempenstall’s credit and in turn upon the acceptance of his evidence that there was nothing in his conversations with the respondent in any way misleading. It is at least possible that the absence of material concerning the secondment arrangements and Mr Hempenstall’s inability to say much about them were taken by the Member as casting doubt upon Mr Hempenstall’s credit.
In the result, I am unable to conclude that the additional evidence could not have influenced the decision of the Tribunal on the question of misleading and deceptive conduct. In my view the refusal of the adjournment deprived the appellant of a reasonable opportunity to present its case upon a significant issue.
Second Ground: Misleading and deceptive conduct
The appellant contends that the Tribunal erred by including among the conduct which it assessed to be misleading and deceptive the statement made by Hempenstall to the respondent that the “Statute of Limitations doesn’t prevent ALR Lawyers pursuing the debt on behalf of our client”. The argument is that because that statement was not made until after the respondent made a partial payment of $4,500, and thus the appellant’s rights to payment had been revived by operation of s 24(3) of the Limitation of Actions Act 1958[10], the statement was necessarily true.
[10]Section 24(3) provides that:
“Where-
(a)any right of action has accrued to recover any debt…; and
(b)the person liable or accountable therefor acknowledges the claim or makes any payment in respect thereof -
the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment…”
I do not accept the argument. Even if the part-payment did have the effect of making time begin to run again - and I can conceive of arguments not now necessary to develop contrary to that conclusion - it does not follow that the statement was incapable in all the circumstances of being misleading or deceptive or likely to mislead or deceive. The context in which the words were found to have been spoken was Mr Hempenstall’s answer to the respondent’s charge that he had misled her. In effect she was accusing him of deceiving her, by telling her that legal action was an option when the debt was statue barred. Putting it at its lowest, his answer might be taken to have gone further than a mere exposition of the juridical distinction between a procedural bar and a substantive extinguishment of a right of action.
I do not, however, express a final view upon the matter. The question of misleading and deceptive conduct may have to be re-determined by the Tribunal having regard to further evidence about the secondment arrangements. For the purposes of this appeal it is enough to say that I am not persuaded that it was not open to the Tribunal, on the evidence which was before it, to find that the statement was misleading or deceptive or likely to be so.
Third Ground: Causation
The appellant contends that the Tribunal erred in concluding that Mr Hempenstall’s statement as to the effect of the statute of limitations was causative of any loss. The argument here is that the statement cannot have been causative of the payment of the $4,500, because the statement was not made until the morning after that payment, and it was not open to find that the statement was causative of the further payment of $500, because there was no evidence to support the view that it was. To the contrary, the appellant says, there was evidence that the respondent had taken the advice of the Citizen’s Advice Bureau before the further payment of $500.
The law is clear that a party who is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way or refrained from acting in some way which would have been of greater benefit or less detriment to it than the course in fact adopted[11]. As matters stand, therefore, I agree that it is difficult to see how Mr Hempenstall’s remark on 24 April 2001 about the limitation period could have caused the loss suffered by the respondent upon payment of the $4,500 on 23 April 2001. There is, for example, no evidence or even suggestion that, but for Mr Hempenstall’s observation about the limitation period, the respondent would have been unable to reverse the payment or otherwise rectify her position.
[11]Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 514 [48]; Murphy v Overton Investments Pty Ltd [2004] HCA 3 [42]-[52]
But that having been said, I am not sure that the Member is to be taken as saying that Mr Hempenstall’s remark about limitation periods was causative of any loss. On one possible view of the Member’s reasons, the Member thought that the remark about the limitation period was simply part of the totality of misleading conduct of which at least some parts were causative of loss.
The position about the $500 is also unclear. As the evidence stands, the respondent’s conversation with Mr Hempenstall on the evening of 23 April 2001 was unquestionably a cause of the respondent’s decision to authorise the $500 payment. On the other hand, on her own admission the respondent took some advice and was alerted to the effect of the limitation period before the payment was debited to her credit card.
There is, however, no evidence that the respondent could have countermanded the payment once authorised; and there is very little evidence as to the precision of the advice she received. For all that can be told, she may have remained so uncertain of her position as to be deterred from stopping the payment (assuming that were possible). It must also be borne in mind that it was not necessary for the respondent to establish that the misleading and deceptive conduct was the sole cause of her loss, or even that it was the dominant cause[12].
[12]Hanave Pty Ltd v LFOT (1999 FCA 357 [11] and [41–51]; Henville v Walker (2001) 206 CLR 459; I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41 (2002) 76 ALJR 1461
But again I refrain from expressing a final view upon the matter. For the reasons already given, the question of misleading and deceptive conduct may need to be redetermined on the basis of additional evidence about the secondment arrangements. The question of causation will fall for reconsideration with it. To that extent the question of whether causation was established by the existing evidence is possibly academic. The evidence on which the matter comes finally to be decided may be different to the way it stands now.
For the present, I say no more than that while the Member's reasons appear to me to be deficient, in that they do not disclose the process of reasoning that led to the conclusion that Mr Hempenstall’s observation about the limitation period was causative of the $500 loss, I am not persuaded that there was no evidential basis sufficient to support that conclusion.
Fourth Ground: Unconscionable conduct
In dealing with the question of unconscionable conduct, the Member said:
“16.In order to obtain relief as a consequence of unconscionable conduct the Applicant needs to establish first that she was in a position of special disadvantage and secondly that [CHL] took advantage of that position by unfair or unconscionable means. Mason J in the High Court in the leading case of The Commercial Bank of Australia Ltd. v Amadio 46 ALR 402 at 413 stated that the Court had equitable jurisdiction to set aside as unconscionable, a transaction where ‘…one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created.’ Again, his Honour (413) in defining the requirement that the disadvantage be special characterised this as requiring ‘…that the disabling condition or circumstance [must be] one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party’.
17.The special disadvantage, although not comprehensively classified may, according to Dr Hardingham QC in his paper Unconscionable Dealing (Published in Finn’s Essays in Equity 1 at 3) include such cases as illness, lack of education, ignorance, mistake as to matter relevant to the extent of the other party’s liability and others.
I find that the Applicant in this case was at such a special disadvantage because of her lack of knowledge of the matters at issue, and that [CHL] as the stronger party wrongfully exploited this position of special disadvantage. [CHL] was therefore in breach of section 7 of the Fair Trading Act.”
The appellant contends that there is error in that reasoning. It says that although the Tribunal found that the respondent lacked “knowledge of the matters in issue”, and that is a finding with which the appellant does not take issue, the Tribunal did not expressly find that the “lack of knowledge” meant that the respondent was unable to make a judgment as to what was in her own best interests. In the appellant’s contention there was no evidence before the Tribunal on the basis of which it could have been found that the respondent was disabled by her lack of knowledge from making a decision in her best interests. To the contrary, it is said, the respondent demonstrated by her actions in later obtaining advice from the Citizens’ Advice Bureau that she was a person who knew that she could and should use external resources to provide her with advice to assist her. In the appellant’s submission, the respondent was not under any pressure to make a decision on the evening of 23 April 2001. Rather, it is said, she made a reasoned decision to put an end to the matter instead of taking it further. In any event, in the appellant’s contention, the idea that “lack of knowledge” is sufficient by itself to constitute a “special disadvantage” is misplaced, and the appellant says that if information imbalance of the kind that was involved were not tolerated, the result would constitute a substantial threat to the security of transactions.
I do not consider that the Member’s reasoning on this point was erroneous. The case was dealt with below on the basis that the debt was statute barred. It was not suggested that the debt was under seal. It was also accepted that the respondent did not know that the debt was statute barred until the day after she had agreed to pay $5,000 to settle the debt and had allowed $4,500 of that amount to be debited to her credit card. As well as that, Mr Hempenstall knew or had reason to believe that the respondent was in very difficult personal and financial circumstances. In evidence before the Tribunal he deposed that:
“Although I’m not sure I may have said something like, ‘If the satisfactory payment can’t be reached legal action may be an option but only as a last resort and our client prefers to avoid that and that’s why I ring people or the account may be referred to legal action, that is an option for our client’. I believe that Ms Taylor then said words to the effect that she could not afford to pay the full amount of the debt. I believe I then said something like, ‘OK, can we have a look at your financial position?’. I don’t remember what Ms Taylor told me about her financial position but my notes record that Ms Taylor said she was presently unemployed. Prior to becoming unemployed she’d been working for a girlfriend but only on a part time basis. All of her assets were in her partner’s name. She was renting at 19 Sidot Street… in Victoria. She had a 16 year old dependent child who was deaf. She did not receive any government support for the child because the child was 16. Her only assets were furniture which she estimated to be worth $500 and jewellery which she estimated to be worth $200…”
The jurisdiction in equity to set aside catching and unconscientious bargains is clear. It is raised whenever one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances that affect his or her ability to conserve his or her own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands[13]. Among the other circumstances in which special disadvantage may be found to exist are age, sex, imperfect English and lack of assistance or explanation where assistance or explanation is necessary[14].
[13]Blomley v Ryan (1956) 99 CLR 362 at 415 per Kitto J; Meagher Gummow & Lehane’s Equity, Doctrines and Remedies 4th Ed at [16—005]
[14]Blomley v Ryan, ibid at 405, per Fullagar J; Carello v Jordan [1935] St R Qd 294; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462; Bridgewater v Leahy (1998) 194 CLR 457 at 478 – 9 [75]
There is also a subsidiary principle which relates to the onus of proof, that wherever a purchase (or other benefit) is obtained from a poor and ignorant person at a considerable undervalue, and the person does not have the benefit of independent advice, the onus is thrown upon the recipient of the benefit, when the transaction is impeached, of establishing that it was fair just and reasonable[15]. There is authority too that, for this purpose, “poor” may be taken to mean a member of the lower income group and “ignorant” to mean less highly educated[16].
[15]Fry v Lane (1888) 40 Ch 312 at 322; Commercial Bank of Australia Ltd v Amadio, supra at 460, per Gibbs CJ
[16]Cresswell v Potter [1978] 1 WLR 255 at 257, Amadio, ibid.
In this case both principles appear to me to apply. It is true, as the appellant argues, that inequality of bargaining power is not in itself sufficient to attract the jurisdiction. As Gleeson CJ made clear in ACCC v Berbatis[17]:
“[11]One thing is clear, and is illustrated by the decision in Samton Holdings itself. A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests.”
[17](2003) 197 ALR 153 at 157 [11]
It is, however, equally important to observe that the context in which Gleeson CJ made that point was one in which, as his Honour said, “All the people involved in the transaction were business people, concerned to advance or protect their own financial interests” and in which “(i)n truth, there was no lack of ability on their part to make a judgment about anything. Rather, there was a lack of ability to get their own way”.
It is also true, as the appellant argues, that a special disadvantage is nothing to the point unless it seriously affects the person’s availability to make a judgment as to what is in their own best interests and so poverty or ignorance are not of themselves reasons for equity’s intervention. But I do not accept that the fact that the respondent next day sought advice shows her to have been the sort of person well able to act in her best interests despite her ignorance of the effect of limitation of actions legislation on the enforceablity of the debt. Common sense and human experience point strongly in favour of the conclusion that her ignorance of the limitation period was something which did deprive her of the ability to make a decision in her own best interests. That conclusion is reinforced by the way in which she reacted once she learned that she could have resisted making payment.
In argument before the Tribunal there was a good deal said as to whether Mr Hempenstall knew at the relevant time that the debt was statute barred. Some of the proposed additional evidence is also directed to that issue. But for present purposes I do not think it matters. Whether or not Mr Hempenstall knew or suspected that the debt was statute barred, the appellant plainly did know that it was barred and through Mr Hempenstall the appellant must be taken to have known or at least to have suspected that the respondent was not aware that it was.
I reject the suggestion that the respondent had the ability to seek advice before the deal was done and chose to proceed regardless. Certainly, there was evidence that she spoke to her domestic partner about the matter in the brief interval that separated the first and second calls from Mr Hempenstall on the evening of 23 April 2001. But it was not suggested that her partner was a lawyer or that he knew anything more about the limitation of actions than did the respondent, and it could not seriously be supposed that the brief period which elapsed between the two calls, between about 6.30 pm and 7.00 pm, was an opportunity to obtain independent legal advice[18].
[18]Bridgewater v Leahy (1998) 194 CLR 457 at 485
I also reject the suggestion that there was no evidence that the respondent was pressured to make the decision to pay. In my opinion the fact of someone from a firm of lawyers “cold-calling” a woman of the respondent’s socio-economic standing at home at 6.30 in the evening, and interrogating her as to her personal and financial circumstances while insinuating that in the absence of her agreement to pay legal proceedings may be instituted, is capable of constituting pressure of a very high order. The fact that she bore the burden of a deaf dependent child can only have exacerbated her predicament.[19]
[19]cf ACCC v Berbatis, supra at [93], per Kirby J, in diss.
In my view the fact that any impoverished debtor is willing to pay $5,000 in settlement of a 10 year old statute barred finance company debt of $11,000 is probably sufficient without more to raise in the mind of a reasonable person the possibility that the debtor does not know of the limitation period and might not have agreed to pay it if they had known. In any event, the facts would be sufficient to cast upon the beneficiary of the transaction the burden of establishing that the transaction was fair, just and reasonable; and in this case it was not. Once one adds to the equation the impecuniosity and ignorance and perhaps also emotional difficulties of the kind from which the respondent was known or believed to suffer, the case becomes a clear one.
Conclusion
For the reasons given, I consider that the Tribunal erred in the way alleged in the appellant’s first ground of appeal, and that it may have erred in the ways alleged in the second and third grounds of appeal, but that it did not err in the way alleged in the fourth ground of appeal.
I shall hear counsel on the form of orders.
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CERTIFICATE
I certify that this and the 20 preceding pages are a true copy of the reasons for judgment of Nettle J of the Supreme Court of Victoria delivered on 3 March 2004.
DATED this 3rd day of March 2004.
__________________________
K.M. Wriedt
Associate to Justice Nettle
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