COMMISSIONER FOR CONSUMER PROTECTION and MOSS GLADES PTY LTD

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: FAIR TRADING ACT 1987 (WA)

CITATION: COMMISSIONER FOR CONSUMER PROTECTION and MOSS GLADES PTY LTD [2010] WASAT 78

MEMBER: MR C RAYMOND (SENIOR MEMBER)

HEARD: 3, 4 AND 6 MAY 2010

DELIVERED : ORAL DECISION DELIVERED ON 6 MAY 2010 AND PUBLISHED ON 1 JUNE 2010

FILE NO/S: CC 1472 of 2009

BETWEEN: COMMISSIONER FOR CONSUMER PROTECTION
Applicant
AND
MOSS GLADES PTY LTD
EION SAMUEL MARTIN
LEONARD WALTER WHYMAN
Respondents

Catchwords:

Fair Trading Act 1987 (WA) - Order sought to observe undertaking together with order for leave to commence criminal prosecution - Standard of proof - Criteria for grant of leave

Legislation:

Fair Trading Act 1987 (WA), s 44, s 45(4), s 45(5), s 46, s 46(3), s 46(4)(a), s 46(5), s 46(6)(a), s 46(7)
State Administrative Tribunal Act 2004 (WA), s 95

Result:

Application partly successful

Category: B

Representation:

Counsel:

Applicant: Mr M Crowley
Respondents : Mr L Margaretic

Solicitors:

Applicant: H Kerr
Respondents : Mr L Margaretic

Case(s) referred to in decision(s):

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant applied for an order under the Fair Trading Act 1987 (WA) that the respondents observe the terms of an undertaking to comply with various provisions of the Code of Fair Practice for Retirement Villages 2006, together with an order granting leave for the applicant to commence a criminal prosecution against the respondents and other related relief.
At the hearing, the respondents withdrew their opposition to the application and consented to the making of the orders sought, save in certain respects which the applicant did not press. Notwithstanding that consent, an issue arose concerning the basis upon which the Tribunal could make such orders. After hearing submissions from the parties, the Tribunal concluded that, having regard to the legislative scheme, the Tribunal had to be satisfied on a balance of probability that the alleged failure to observe the undertaking had occurred and that there had been a consent or connivance in such failure. Once so satisfied, the Tribunal concluded that the criteria to be applied for the grant of leave to commence a criminal prosecution were:
1)whether there is a reasonable likelihood of a prosecution succeeding to the criminal standard of proof beyond reasonable doubt;
2)if so, whether it is in the public interest for a prosecution to be allowed, having regard to the nature of the failure to observe the undertaking and the circumstances in which the failure occurred.
The Tribunal considered the detailed evidence provided by the applicant's witnesses and noted that all witnesses were available for crossexamination (except one who was not required to attend by consent), that the respondents' evidence was lacking in particularity, that the respondents' opposition to the application had been withdrawn and they had consented to the orders sought. In those circumstances, the Tribunal was satisfied on a balance of probability that the allegations persisted in by the applicant were made out. The Tribunal also concluded that leave should be granted to prosecute the respondents and, accordingly, orders were made in accordance with the consent orders furnished by the parties.
This is an edited version of the transcript of oral reasons for decision delivered by the Tribunal on 6 May 2010.

The application

The applicant applied on 22 September 2009 seeking relief for failure to observe an undertaking under s 46(3) of the Fair Trading Act 1987 (WA) (FT Act) and for other related relief. Pursuant to the leave of the Tribunal, the application was subsequently amended to better define the orders sought. Both parties have filed statements of issues, facts and contentions.
The matter was listed for a four-day hearing commencing on 3 May 2010. The hearing did not proceed into the taking of oral evidence or crossexamination of witnesses as the parties had made progress in negotiations to resolve the matter. An agreement has since been reached and is reflected in a draft order, prepared initially by the applicant and then amended by the Tribunal into a form satisfactory to it. That amendment has in turn been further amended following input from the parties. It is common cause, as reflected in the proposed consent order, that the respondents executed a Deed of Undertaking on 3 October 2008 in relation to their future compliance with the Code of Practice for Retirement Villages 2006 (Code). The undertaking was given pursuant to s 44 of the FT Act.
The parties have submitted that, under s 46 of the FT Act, the Tribunal need only be satisfied on a prima facie basis that the respondents have failed to observe an undertaking, or consented or connived in such failure, and that the Tribunal should be so satisfied because the respondents have consented to the orders sought. It is submitted that the legislature could only have intended satisfaction at a prima facie level because s 45(5) of the FT Act empowers the Tribunal to grant leave to the Commissioner to commence a criminal prosecution for failure to observe an undertaking. An order for such leave is sought by the applicant.

The statutory provisions

45.Register of Undertakings
…
(4)A person shall observe undertakings given by him in a deed executed under section 44.
Penalty: $10 000.

(5)A prosecution for an offence under subsection (4) shall not be instituted except by the Commissioner with leave of the State Administrative Tribunal given when making an order in accordance with section 46(3).
…

46.Order by State Administrative Tribunal relating to code of practice
[(1)repealed]
(2)…
(3)Where, on the application of the Commissioner, the State Administrative Tribunal is satisfied that a person has failed to observe an undertaking given by the person under section 44, the State Administrative Tribunal may make an order under subsection (4) against the person.
(4)The State Administrative Tribunal may order the person
(a)to observe the undertaking; and
(b)in the case of an undertaking to rectify the consequence of a contravention of a code of practice to observe the undertaking within a time specified by the State Administrative Tribunal in the order.

(5)If
(a)the failure on which an application under subsection (2) or (3) is based is a failure by a body corporate; and
(b)the State Administrative Tribunal is satisfied that the failure occurred with the consent or connivance of a person who, at the time of the failure, was a director of the body corporate or a person concerned in its management,

the State Administrative Tribunal may, in addition to any other order, make an order under subsection (6).
(6)The State Administrative Tribunal may make an order prohibiting the person from
(a)continuing to consent to, or connive at, the failure; or
(b)consenting to, or conniving at, a like failure by any other body corporate of which the person is a director or in the management of which the person is concerned,

and the person to whom the order relates shall comply with the order.
Penalty:$10 000.

(7)An order under this section may be made subject to such conditions (whether as to the duration of the order or otherwise) as the State Administrative Tribunal thinks fit including
(a)conditions as to the future conduct of the person affected; and
(b)conditions specifying the action to be taken by the person to rectify the consequences of the failure the subject of the application under this section.
…

Consideration

The respondents have expressly made no formal admission of conduct which would constitute a failure to observe the undertaking or which amounts to a consent or connivance in such failure in the respects alleged by the applicant. That is understandable, given the spectre of a prosecution on the same facts. However, having regard to the scheme of the legislation, I am not able to accept that satisfaction is to be found at a prima facie level.
If that were intended, it would have been an easy matter to provide expressly in those terms, but Parliament has not done so. The power to order that a party observe an undertaking is expressed in an entirely separate manner from the leave provision. The obligations flowing from such an order may be onerous and may well arise simply from a different but bona fide interpretation of the Code or the undertaking. In such cases, it may not be appropriate to grant leave to prosecute.
That may also be the case where the facts are in dispute but, once established, demonstrate that the failure arises from the conduct of a servant or agent without the knowledge of or authority of the person who gave the undertaking.
The requirement of s 46(3) and s 46(5) of the FT Act is that the Tribunal be satisfied that there has been a failure to observe the undertaking or a consent or connivance therein.
It is the applicant who seeks to satisfy the Tribunal and who therefore has the practical burden of proof. The proceedings under s 46(3) and s 46(5) of the FT Act are civil in nature and therefore the civil burden of proof is on a balance of probabilities. Section 45(5) of the FT Act, dealing with the grant of leave, assumes the Tribunal has been satisfied to the requisite civil standard proof that the undertaking has not been observed.
The purpose of leave is to screen what cases are suitable for prosecution. The legislation gives no guidance as to the criteria to be applied. In my view, the criteria to be generally applied should be:
1)is there a reasonable likelihood of a prosecution succeeding to the criminal standard of proof of beyond reasonable doubt; and
2)if so, is it in the public interest for a prosecution to be allowed, having regard to the nature of the failure to observe the undertaking and the circumstances in which the failure occurred.
I observe that this mechanism is, as both counsel submitted, a somewhat clumsy process. There is, in my view, a good case to be made out for this procedure to be reconsidered by the legislature.
I am aware that the Tribunal was provided an opportunity to comment on some of the recommendations made by the Parliamentary Committee which conducted an enquiry relating to this retirement village, and then observed that this entire mechanism for provision of undertakings and the obtaining of orders that undertakings be observed was cumbersome. Consideration might be given to the usual regime for determination of disputes by the Tribunal under a range of enabling Acts where, if there is a complaint about a breach, it can be referred to the Tribunal. If the Tribunal finds there had been a breach, an order for compliance can be made; that order, if not complied with, may have a criminal sanction under s 95 of the State Administrative Tribunal Act 2004 (WA). A procedure of that nature may be more practical and effective.
In any event, I foreshadowed during the hearing of submissions that the possibility of my concluding that the standard of proof and criteria for leave might be as I have found. Counsel for the respondents indicated that the matter could then be approached on the basis that the respondents effectively withdrew their opposition and that the uncontested evidence of the applicant would be sufficient to satisfy the Tribunal in the manner required by s 46(3) and s 46(5) of the FT Act.
At that time, the applicant, in accordance with the Tribunal's directions, had filed comprehensive witness statements and a bundle of the documents relied upon. The respondents had, as far as I was then aware, failed to file any witness statements or any documents on which they wished to rely.
I subsequently became aware that the respondents filed witness statements sometime during the first day allocated to the hearing. They are the statements of the second named and third named respondents. It is to be noted that they do not descend into particularity and adopt the technique of 'accepting the contents' of the respondents' statement of issues, facts and contentions (see para 14 of both Mr Martin's and Mr Whyman's respective statements).
I have considered all of the applicant's witness statements. The following is to be noted:
a)the applicant's witnesses have provided detailed evidence on all issues;
b)that, with one exception, the applicant's witnesses were available for cross-examination and, in the case of the exception, Mr Taylor, the respondents had agreed he was not required to attend for that purpose;
(c) the lack of particularity in the respondents' evidence particularly, as in many respects, the statement of issues, facts and contentions constituted no more than a bare denial of particular allegations; and
(d)that the respondents' opposition is withdrawn, and they consent to the orders sought.
In these circumstances, I am satisfied, on the balance of probability, that the respondents have failed to observe the undertaking or have consented or connived in such failure as set out in allegations 1, 2, 4, 6, 8, 9, 10 and 11 of the applicant's amended statement of issues, facts and contentions filed on 15 February 2010. The applicant does not pursue the allegations in respect of the allegations numbered 3, 5 and 7.
In relation to the question of leave and applying the above criteria, there were two allegations which caused me difficulty, but I was otherwise satisfied, without requiring submissions, that leave should be granted in all other respects. The two allegations are allegations 8 and 9, which relate respectively to the failure to give timely notice of the annual budget meeting and the failure to call a meeting of residents within the permitted time frame following receipt of a requisition for the meeting.
If these were standalone allegations, I would decline leave, but I accept the applicant's submission that they form part of a number of more significant claims, and I therefore conclude that it would be artificial and serve no purpose to exclude those allegations from the leave granted. Leave will accordingly be granted as sought and expressed in the terms of the consent order as amended in the respect to which I have referred.

Orders

For the above reasons, I am prepared to make the orders to which the parties consented, and I ordered as follows, leaving over for later consideration the question of costs.
1.Pursuant to s 46(4)(a) of the Fair Trading Act 1987 (WA) (FT Act), the respondents be ordered to observe the Deed of Undertaking executed between the applicant and the respondents on 3 October 2008 (Undertaking) in respect of each of the belowmentioned clauses of the Code of Fair Practice for Retirement Villages 2006, and by necessary implication, the corresponding clauses of any current Code of Fair Practice for Retirement Villages (Code) in the following respects:
(i)Clause 5.2 of the Code read with cl 3 of the Undertaking:
(a)with respect to the appointment of a manager with sufficient authority to act to ensure compliance with the respondents' obligations under the Code;
(b)with respect to the appointment of a manager on terms concerning the provisions of services to residents sufficient to meet the reasonable needs of residents and to enable the manager to discharge its obligations under (a) above;
(c)by ensuring that no restriction is placed upon the manager's provision of information to residents, to which residents are entitled;
(ii)Clause 5.2 of the Code:
(a)with respect to the provision of efficient management concerning the response to maintenance requests from residents;
(b)with respect to complying with any request under cl 5.2(3) of the Code, by complying with the request within 10 working days, or by providing reasons in the event of any refusal or inability to comply;
(iii)Clause 5.3 of the Code with respect to the provision of operating budgets in a consistent format;
(iv)Clause 5.5 of the Code with respect to the provision of a clear written presentation of the operating financial position of the retirement village as at the end of each financial year;
(v)Clause 5.11 of the Code:
(a)with respect to the proper giving of notice of annual budget meetings;
(b)with respect to the holding of meetings of residents within 20 days of a request (unless otherwise agreed) where the meeting is requested by the requisite number of residents;
the Tribunal being satisfied that the respondents have failed to observe the Undertaking in those respects.
2.Pursuant to s 46(6)(a) of the FT Act, the second named and third named respondents be prohibited from continuing to consent to or connive at, the failure of the first named respondent to observe the Undertaking in relation to each of the provisions of the Code and the Undertaking in the respect described in Order 1 above.
3.Pursuant to s 45(4) of the FT Act, the applicant be granted leave to prosecute the first named, second named and third named respondents for failing to observe the Undertaking given with respect to the clauses of the Code referred to in Order 1 consistent with the substance of the allegations numbered 1, 2, 4, 6, 8, 9, 10 and 11 as set out and particularised in the applicant's amended statement of issues, facts and contentions filed with the Tribunal on 15 February 2010.
4.Pursuant to s 46(7) of the FT Act the observation of the Undertaking as detailed in Order 1 shall be conditioned upon the first named respondent:
(a)(i)causing the second named respondent (who expressly agrees to do so) to enter into a directors and shareholders agreement whereby he agrees:
(aa)not to involve himself with residents or with complaints from residents of the Karrinyup Lakes Lifestyle Village (Village);
(bb)not to participate in or vote on as a director relating to any matter involving residents' rights, management issues at the Village or the Village manager's contract;
(cc)not to interfere in any way with the Village manager's management of the Village;
(ii)establishing and publishing within 30 days to all the Village residents a dispute resolution procedure to apply as between Moss Glades, the first named respondent, its agents or servant and residents (but not as between residents) which shall include the following three steps:
(aa)a resident (or residents) shall raise any matter or concern in the first instance with the Village manager in writing;
(bb)if any matter or concern raised in accordance with (aa) above is not resolved within 14 days, the matter or concern shall be referred to a Disputes Resolution Committee consisting of the Village manager, a representative of the first named respondent (but not the second named respondent);
(cc)if the matter or concern is not resolved by the Disputes Resolution Committee within 14 days of the matter being referred to it, the matter shall be referred to an independent arbitrator appointed jointly by the parties, and if the parties cannot agree on the arbitrator, then by an arbitrator appointed by the President of the Law Society for final determination. The disputes resolution procedure shall reflect that the parties agree that the arbitration shall be conducted with the minimum of formality and as expeditiously as possible and that, knowing that the arbitrator has a discretion in relation to costs, the parties record their desire that each party should bear their own costs;
(iii)acting expeditiously to ensure that at all times a competent, qualified manager is appointed to manage the Village;
(iv)in the event that, at any time, there is not a competent manager appointed to manage the Village, the first named respondent must, as soon as practicable, notify the applicant of that fact and provide its reasons;
(b)In relation to the flooding problems:
(i)by commissioning, within 21 days of the date of this order, an independent expert's report into the causes of the flooding;
(ii)upon receipt of the independent expert's report, by immediately submitting the same to the City of Stirling, together with any necessary building application, for requisite Council approval;
(iii)by taking whatever steps are necessary within 21 days of Council approval to commence and thereafter without delay permanently rectify the causes of the stormwater flooding at the expense of the first named respondent.
5.The applicant's application for costs is reserved for determination at the hearing listed on 26 May 2010 at 10 am.
6.The application is otherwise dismissed.

I certify that this and the preceding [23] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER

[2010] WASAT 78

1 June 2010