Graham Kennedy Welsh v Knighthill Security Pty Ltd
[2022] VCC 1927
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-22-01140
| GRAHAM KENNEDY WELSH | Plaintiff |
| v | |
| KNIGHTHILL SECURITY PTY LTD | Defendant |
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JUDICIAL OFFICER: | Judicial Registrar Muller | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 and 9 September 2022 | |
DATE OF RULING: | 15 November 2022 | |
CASE MAY BE CITED AS: | GRAHAM KENNEDY WELSH V KNIGHTHILL SECURITY PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 1927 | |
Trial Assessment
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Subject:Trial assessment
Catchwords: Adequacy of pleadings, causation, quantum
Legislation Cited: Australian Consumer Law
Cases Cited:I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109, Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, Brown v Jam Factory Pty Ltd (1981) 53 FLR 340
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Peter Caillard | Harry Szmerling |
| For the Defendant | Anthony Schlicht | Dale Curtis |
Introduction
On 30 May 2022, an interlocutory judgment in default of defence was entered in favour of the plaintiff with damages to be assessed.
On 8 June 2022, Judicial Registrar Bennett made orders listing the trial assessment for hearing on 2 September 2022. On that day, the trial assessment commenced before me. Subsequently, I adjourned the hearing of the trial assessment to 9 September 2022 to allow for the cross-examination of the plaintiff (in circumstances where, despite an order having been made for the service of a notice of intention to cross-examine, no such notice had been served) and it proceeded before me on 9 September 2022 with both plaintiff and defendant represented by counsel.
On 2 September 2022 (and again in written submissions dated 8 September 2022), the plaintiff’s counsel put the plaintiff’s claim in misleading or deceptive conduct as a ‘no transaction case’. Which, the plaintiff says, simply and naturally flows from the plaintiff’s evidence that if the representations relied on had not been made, he would not have entered the contract. In opening on 9 September 2022, the plaintiff’s counsel essentially restricted the plaintiff’s claim to this ground and did not press for an assessment on alternative claims in breach of contract or negligence.
At the resumption of the trial assessment, the plaintiff relied on two affidavits made by him dated 22 August 2022 and 7 September 2022. The plaintiff was cross-examined. I return to that cross-examination below. Counsel for the plaintiff did not seek to read or rely on any other affidavits previously filed. Written submissions were also filed on the plaintiff’s behalf.
The defendant relied on an affidavit of its sole director and secretary, Aaron Mark Hillier, sworn 6 September 2022 and written submissions filed on its behalf. The evidence given in that affidavit was directed towards two matters. First, whether the agreement was between the defendant and the plaintiff or the defendant and the Welsh Agco Trust, and second, whether agents of the plaintiff directed the defendant to make invoices out to Goldfields Run Land Pty Ltd (another entity owned and controlled by the plaintiff) to take advantage of rebates available for primary producers.
Framework
This application is a trial assessment arising from an interlocutory judgment being entered in default of a defence being filed. I am to take from that that the judgment is final insofar as it determines liability. Here, that means I am to take that the defendant has engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the Australian Consumer Law (ACL). Breaking that down further, it means that I must take as established, by the statement of claim attached to the writ dated 30 March 2022, that:
(a)by an agreement made on or about 11 April 2018, the plaintiff agreed to buy, and the defendant agreed to design and sell a security system to be installed by the defendant for use at the Property: SoC [4];
(b)the plaintiff paid the sum of $155,239.70 to the defendant for the Security System: SoC [5];
(c)at the time of making the agreement, the plaintiff expressly made known to the defendant that the particular purpose for which it [sic] required the goods was to provide a suitable and reliable security solution for use at the Property: SoC [6];
(d)the defendant represented to the plaintiff that:
(i) the Security System would contain the ‘best quality parts’;
(ii) it would use ‘highly experienced technicians’ to install the Security System; and
(iii) it was committed to after-sales support;
(the Representations): SoC [13].
(e)in reliance upon the Representations, the plaintiff entered into the Agreement: SoC [16];
(f)the Representations were false and misleading: SoC [17].
At paragraph 21 of the SoC the plaintiff pleaded that “in consequence, the plaintiff has suffered the following loss and damage” which was itemised as:
(i) price paid to the defendant for the Security System: $155,239.70;
(ii) preparation of the Audit Report: $21,166.37;
(iii) repairs and maintenance costs: $10,6410.34.
Damages are sought pursuant to section 236 of the ACL.
Section 236 of the ACL provides that:
If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
The three key components that must be addressed are:
(a)causation: there must be a causal connexion between the breach and the loss of damage for which the plaintiff sought compensation.[1] Or, using the language of the section: was the plaintiff’s loss because of the conduct of the defendant?
(b)remoteness: the plaintiff is entitled to recover all loss directly flowing from the contravention of the Act;[2]
(c)quantum: what is the sum necessary to put the plaintiff in the same position, so far as money can that he would have been had the breach of the Act not occurred.[3]
[1] I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109.
[2] Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.
[3] Brown v Jam Factory Pty Ltd (1981) 53 FLR 340.
No issues around remoteness were raised.
Other issues were raised by the defendant’s counsel which went to the question of liability (such as whether the plaintiff was the contracting party with the defendant). Those issues are not for determination here and I have put them to one side.
Issue 1: Causation
The plaintiff gave evidence that:
I relied on those representations in deciding to purchase the security system from Knighthill.
Had I known those representations were false, then I would never have engaged Knighthill or purchased the security system. It has been a nightmare.
and
… I would never have agreed to purchase the equipment if it was not for the assurances and representations made to me by Knighthill. [4]
[4] Affidavit of Graham Welsh affirmed 7 September 2022 (Second Welsh Affidavit) at [5], [6] and [10].
In cross-examination he was not challenged on this evidence.
Whilst I make an allowance for the self-serving nature of the evidence, I accept the evidence given by the plaintiff on the question of reliance on the representations. It accords with the plaintiff’s overall purpose in purchasing a security system that he wanted a custom designed security system to be installed at his property and was prepared to pay $100,000 to $200,000 to achieve this.[5] In fact, he paid Knighthill a total of $168,923.70 in relation to the security system they installed at his property.[6] It follows that if the Representations (which I am to take to be false or misleading) were not made, the plaintiff would not have entered into the Agreement with the defendant but would have looked elsewhere for a security system.
[5] Second Welsh Affidavit at [3].
[6] Affidavit of Graham Welsh affirmed 22 August 2022 (First Welsh Affidavit) at [7].
As I noted above, counsel for the plaintiff opened on the basis that the plaintiff’s claim was a no transaction case – that is, but for the representations, the plaintiff would not have entered into the agreement and would not have paid the contract price to the defendant. Counsel submitted that this is clear from paragraph 16 of the statement of claim which pleads: In reliance upon the Representations, the Plaintiff entered into the Agreement. Nothing would be added, it was submitted, from the addition of a further plea that: but for the Representations, the Plaintiff would not have entered into the Agreement. Counsel maintained that consequently there was no need to apply to amend the pleadings.
Counsel for the defendant submitted that there is no pleading in the statement of claim of a no transaction case. Rather, it was submitted, it is a claim for damages to be assessed, which are not quantified by anyone.[7] In oral submissions, counsel for the defendant submitted that there was no application to amend, that it would be unfair to allow an amendment now as the case was put on a defect basis and it prevented “a number of other issues from being pursued”. None of those issues were identified.
[7] Defendant’s opening submissions [19].
I do not accept that submission. I accept the plaintiff’s submission that nothing would be added, in this case, from the addition of the further plea. In my view the counterfactual flows from the ordinary use of the words used in paragraph 16 of the SoC coupled with paragraph 21 of the SoC. Further, the adjournment, to enable the defendant to cross-examine the plaintiff, was granted after the plaintiff’s counsel had stated in Court that he put the case as a no transaction case. The defendant had a week to prepare for and address the case on that basis and took advantage of that time to put on evidence on other matters. However, despite this, the plaintiff was not challenged on this critical point.
If I am wrong about there not being a need to amend, then I would have permitted the plaintiff to amend (as I undoubtedly have the power to do) for the following reasons:
(a)it would enable the determination of the real issues in dispute;
(b)it would align the pleadings with the evidence given by the plaintiff;
(c)the defendant was on notice, for at least a week, that the plaintiff put his case on that basis and had the opportunity to cross-examine the plaintiff on the issue. As noted above, I do not accept that there was any unfairness to the defendant; and
(d)it must be remembered that pleadings are the servant of justice not its overlord to be slavishly followed. The purpose of pleadings is to allow the other party adequate notice of the case being put against them. That was done here, both in the pleadings and by the plaintiff in opening.
Issue 2: Quantum
Three issues were raised in respect of the quantum of loss.
(i) Did the plaintiff suffer loss or was the loss suffered by some other entity?
(ii) On the evidence, what is the quantum of loss suffered?
(iii) Was all of the loss because of the conduct of the defendant?
Under cross-examination, Mr Welsh gave evidence that:
(a)if he received an invoice, he paid it (by which I infer he meant it was paid) from the bank account of whatever entity it was addressed to;
(b)if personal invoices were paid out of the corporate entities’ bank accounts they would be later allocated to his loan account;
(c)he did not make payments personally – that is they were made by his staff – but he did authorise invoices before they were paid;
(d)he did not know why invoices were addressed to Goldfields.
When asked whether he knew why invoices were changed to Goldfields and whether it was because he made no distinction between himself and his companies, Mr Welsh said he did not know why invoices were addressed to Goldfields but that it was not a primary producer and so would have been unable to claim a primary producer rebate.
I accept Mr Welsh’s evidence that he did not know why the invoices were changed to Goldfields. Counsel for the defendant submitted that I should infer from the plaintiff’s failure to put on evidence from Mr Diaz (the plaintiff’s then accounts payable manager) that any evidence given by Mr Diaz would not have assisted the party. Even if I accepted this submission, I am left with the evidence given by Mr Welsh that payments made from the bank account of a company for his benefit were allocated to him via loan accounts prepared by the bookkeeper. Extracts from those loan accounts were exhibited to the Second Welsh Affidavit.
Therefore, I conclude that on the balance of probabilities, the payments were ultimately made by Mr Welsh and the loss ultimately suffered by him.
In respect of quantum, there is evidence in the First Welsh Affidavit of the amounts paid ultimately by him to:
(a)the defendant for the security system in the sum of $155,239.70;
(b)preparation of the audit report in the sum of $21,166.37; and
(c)repairs and maintenance costs in the sum of $10,641.34.
The quantum of these amounts was not challenged in cross-examination. I accept those figures.
The final issue is whether all of the loss was because of the conduct of the defendant. The defendant submitted that the evidence was that Mr Welsh continued to pay ‘monitoring costs’ and ‘maintenance costs’ even though he knew that the security system did not work and Mr Welsh was cross-examined on this. Much of the cross-examination was directed towards the improbability of Mr Welsh continuing to pay for a security system that was not working. Properly, that is a question of liability and not relevant to the assessment of damages.
However, I do accept from the evidence that Mr Welsh continued to pay the monitoring costs and maintenance costs for his own reasons independent of the failure of the system. Accordingly, it is appropriate to reduce the quantum of damages by $1,650 (the Workforce costs) and $1,122.31 (the MGR maintenance costs).
Therefore, there will be judgment for the plaintiff in the sum of $184,275.10.
The plaintiff is entitled to interest on the judgment amount from 3 March 2022 to the date of judgment being 15 November 2022, being 258 days. At the penalty rate of 10 percent per annum that equals $13025.47.
Unless there is a reason unknown to me, the defendant should pay the plaintiff’s costs of the trial assessment on a standard basis. If there is a reason, the party seeking a different costs order is to file submissions of no more than 5 pages by Monday 21 November 2022 at 12 noon and any submission in reply of no more than 5 pages by Monday 28 November 2022 at 12 noon and I will determine the question on the papers.
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