NHP Co Pty Ltd v Nguyen
[2020] VCC 477
•27 April 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-19-05584
| NHP CO PTY LTD (as trustee for the NHP Trust) (ACN 163 185 760) | First Plaintiff/ First Defendant by counterclaim |
| and | |
| NIGHIA PHAM | Second Plaintiff/ Second Defendant by counterclaim |
| v | |
| TAY TAN NGUYEN | Defendant/ Plaintiff by counterclaim |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2 and 3 March 2020 | |
DATE OF JUDGMENT: | 27 April 2020 | |
CASE MAY BE CITED AS: | NHP Co Pty Ltd & Anor v Nguyen | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 477 | |
REASONS FOR JUDGMENT
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Subject:APPLICATION TO ENFORCE EXPERT DETERMINATION – COUNTERCLAIM TO SET DETERMINATION ASIDE
Catchwords: Contract providing for conclusive expert determination binding between parties – application to enforce determination; counterclaim seeking to set aside – available grounds to set aside – whether obligation on expert to determine according to law rendered determination defeasible for any errors of law – allegations expert treated arguments and pleadings as evidence – alleged error of law as to when fee to be regarded as paid; when mutual obligations to be off set
Cases Cited:Legal and General Life of Australia Limited v A Hudson Pty Ltd (1985) 1 NSWLR 314; AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd & Anor [2006] VSCA 173; Holt v Cox (1997) 23 ACSR 590; Shoalhaven City Council v Fairdam Civil Engineering Pty Limited (2011) 244 CLR 305; Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2013) 41 VR 636; Australian Vintage Limited v Belvino Investments (No 2) Pty Ltd (2015) 90 NSWLR 367; Adnow Pty Ltd v Greenwells Wollert Pty Ltd [2016] VSCA 282; The Gull Lexington Group Pty Ltd v Laguna Bay (Banongill) Agricultural Pty Ltd [2018] VSCA 85; Trampoline Enterprises Pty Ltd & Ors v Fresh Retailing Pty Ltd & Anor [2019] VSCA 74; Seaton & Ors v Mosman Municipal Council and The Bathers Pavilion Pty Ltd [1998] NSWSC 75; Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 576; Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd (2005) 218 CLR 471; Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; Houghton v Arms (2006) 225 CLR 553; Little v Law Institute of Victoria (No 3) [1990] VR 257; Pertzel v Qld Poulownia Forests Ltd [2008] 2 Qd R 526; Dual Homes Victoria Pty Ltd & Ors v Moores Legal Pty Ltd & Anor (2016) 50 VR 129; Goddard Elliott (a firm) v Fritsch [2012] VSC 87
Judgment: The parties, within 14 days, to bring in short Minutes to give effect to these reasons.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J McKay | Mills Oakley |
| For the Defendant | Mr R Peters | HWL Ebsworth |
HIS HONOUR:
Background
1 In 2015, the first plaintiff, NHP Co Pty Ltd (“NHP”), which acts as trustee for the NHP Trust, was the registered owner of land at 46 Newton Street, Reservoir. (Court Book (“CB”) 6, paragraph 4, and CB 20)
2 The defendant, Mr Nguyen, was the registered owner of the adjacent property at number 44. (ibid, CB 23)
3 Mr Pham, the second plaintiff, is the director of NHP. (CB 5, paragraph 1). NHP and Mr Nguyen executed an agreement on 23 November 2015 styled “Development Management Deed” (“the Deed”) to govern the terms on which the joint development of the two parcels of land would proceed. (CB 26-59)
4 The two allotments were situated on the northern side of Newton Street, with number 46 to the west and number 44 to the east. (CB 57)
5 The Deed designated NHP as the “Developer” and Mr Nguyen as the “Owner”.
6 Clause 4 obliged NHP as the developer to carry out the development project and to raise a “Debt Facility”, “to fund some or all of the Project Costs”. (CB 35-36)
7 The Project was defined to mean “the development of the Property [viz number 44] and 46 Newton Street, Reservoir and subsequent sale of the Residential Units in accordance with the Project Plan”. (CB 31, clause 1.1)
8 The annexed plans and price list depicted some six units. (CB 54-59)
9 The Deed referred to a concept of Project Profit which was defined to mean “Project Receipts less Project Costs”. (CB 32, clause 1.1)
10 The phrase “Project Receipts” was defined as follows:
“Project Receipts means the sum of:
(a) the total sale price received under any completed Contract of Sale for a Residential Unit;
(b) any interest earned by the Owner as vendor under a Contract of Sale;
(c) any deemed amount pursuant to clause 12.4.”
(CB 32)
11 Clause 12 of the Deed dealt with “Completion”. Clause 12.3 empowered the Owner [viz Mr Nguyen] to “retain” one or more residential units. (CB 39). In the event this power were exercised, clause 12.4(c) made provision for “deemed Project Receipts”. The sub-clause provided:
“(c) the Project Receipts will be deemed to include:
(i)in the case of an Early Election or an Unsold Unit an amount equal to the price as stated in the Price List, less any Project Costs that would have been incurred if the Residential Unit were to be sold, rather than retained by the Owner, such as agent's commissions and GST,
(ii)in the case of a Proposed Sale, an amount equal to the market value of the Residential Unit (as at the date of practical completion).”
(CB 40)
12 Clause 2.2 entitled NHP to payment of the Development Fee in consideration for its provision of development services. (CB 34). The phrase “Development Fee” was defined in clause 1.1 of the Deed to mean “the fee payable to the Developer, calculated as $120,000 plus 50% of the Project Profit”.
13 Clause 9.1, dealing with the “Treatment of Project Receipts” turned out to be of crucial significance. I set it out in full below:
“9.1 Treatment of Project Receipts
The parties agree that every Project Receipt that the Owner receives or is entitled to receive will be dealt with in the following manner:
(a)firstly, to repay the Debt Facility (until fully repaid);
(b)secondly, to reimburse the Developer for the Developer Funded Costs and/or Developer's Contribution (until fully reimbursed plus any interest payable);
(c)thirdly, pay to the Developer $120,000 as part of the Development Fee equally (by the Developer and the Owner);
(d)fourthly, retained by the Owner the difference between the amount of the mortgage of the Developer less the amount of the mortgage of the Owner as at the date of commencement of the Debt Facility (for the avoidance of doubt if the mortgage of the Developer at the commencement of the Debt Facility is $500,000 and the mortgage of the Owner is $200,000 then the Owner will receive $300,000); and
(e)fifthly, the Project Profit (up to a maximum sum calculated as the Developer's reasonable estimate of the Project Profit, which may vary from time to time) paid to the Developer and the Owner equally.”
(CB 38)
14 Clause 10.1 required NHP “within 30 days after the end of the Term” to calculate the Development Fee. The word “Term” was defined to mean the period from the Commencement date until Completion or early termination pursuant to clause 3. (CB 33)
15 Clause 10.3 provided as follows:
“Interest on Development Fee
To the extent that the Owner does not pay the Development Fee to the Developer in accordance with clause 10.2, the Owner must pay interest at the Interest Rate monthly in arrears on any outstanding part of the Development Fee until the date that the outstanding part of the Development Fee plus any then accrued interest has been fully paid.”
(CB 38)
16 The Interest Rate was defined to mean 18 per cent per annum. (CB 31)
17 Clause 4.5 headed “Accounts” provided, inter alia:
“(c) At the end of the Term:
(i)the Developer will prepare a general account in order for the Project Profits to be determined;
(ii)either party may request an audit of the accounts. If an audit is requested, it must be completed within 30 Business Days of the end of the Term.”
(CB 36)
18 Two other concepts relevant to the application of clause 9.1 were the phrases “Developer’s Contribution” and “Developer Funded Costs”, which were defined in the Deed as follows:
“Developer's Contribution means any amount contributed to the Project by the Developer less any amount repaid 10 the Developer by the Owner.
Developer Funded Costs means the amount, but only to the extent that they are funded by the Developer (rather than the Debt Facility) towards the Project Costs.”
(CB 31)
19 Mr Nguyen, as the “Owner”, was required to pay interest at the rate of 5.5 per cent per annum to NHP from the time of its outlay of either of these amounts until its repayment. (Clause 11(d), CB 39)
20 Units 2 and 4 were sold for $636,364 and $716,364 exclusive of GST respectively. (CB 8, paragraph 12) The parties then fell into dispute when the sale of the remaining allotments was delayed.
21 With the parties in dispute, matters went to mediation in accordance with clause 20.4 of the Deed (CB 44-5), with the mediation occurring 15 December 2017. (CB 9, paragraph 13). The mediation reached an apparent resolution of the dispute, which was documented in a letter from Mr Nguyen’s solicitors, HWL Ebsworth, to NHP’s solicitors, Mills Oakley, dated 8 February 2018 which was subscribed to by both parties. (CB 65-67). The Mediation Agreement entailed Mr Nguyen retaining units 5 and 6 “at current market value” and NHP retaining units 1 and 3.
22 It was common ground that upon registration of Sub-Division 808633F on 13 December 2017, NHP became registered proprietor of units 1 and 3, and Mr Nguyen became registered proprietor units 5 and 6. (CB 1550-1, paragraph 10 and CB 1532, paragraph 10)
23 The Mediation Agreement further provided for the appointment of Charter Keck Kramer to value the relevant townhouses, with each party bearing half the cost. There were detailed provisions as to the treatment of various expenses and interest outlays. Clause 10 of the agreement provided:
“The project receipts will be calculated in accordance with clause 9.1 of the Development Management Deed with the interest payment payable by each party to be adjusted in accordance with clause 6.3 of the Development Management Deed.”
(CB 66, paragraph 10)
24 The agreement failed to resolve the dispute and the matter was referred for Expert Determination pursuant to clause 20.6 of the Deed. (CB 10, paragraph 15)
25 The Expert, a member of the Victorian Bar, sent a letter to the solicitors for the parties dated 20 September 2018 advising of his appointment and scheduling a preliminary conference to be held at his chambers. The letter covered a number of attachments, including a draft agenda for the preliminary conference, a request for payment of a security deposit, and a document styled “Expert Determination Appointment Agreement”. (CB 69-70)
26 The appointment agreement was expressed to be made between Mr Nguyen and NHP and the Expert. Clause 5 empowered the Expert “to adopt any appropriate procedure for the Expert Determination …”. (CB 74)
27 The determination was said to be “final and binding on the parties”. (CB 76, paragraph 13). “Expert Determination” provided that:
“9. The Expert will:
(a)consider any or all of the material (oral or written) put before him in the course of the expert determination;
(b)not be expected or required to obtain or refer to any other documents, information or material but may do so if the Expert so desires;
(c)proceed in such manner he thinks fit without being bound to observe the rules of natural justice or the rules of evidence;
(d)make the Determination on the basis of information received from the parties and the Expert's own expertise, including interpretation and construction, and in accordance with the law;
(e)make the Determination as expeditiously as possible after receiving the parties' submissions; and
(f)record the Determination in writing.”
(CB 75)
28 Paragraph 10 on the same page required the Expert to give reasons for the Determination.
29 Clause 6 of the agreement provided:
“There will be no examination or cross-examination of witnesses. Parties will submit to the Expert and to each other written submissions setting out their respective positions in relation to the dispute together with any supporting documents and will have the right to submit further written submissions with any supporting documents to the Expert and each other setting out their responses. All written submissions and documents will be submitted by the dates set out in the Schedule or otherwise as directed by the Expert after consultation with the parties.”
(CB 75)
30 Clause 7 empowered the Expert to seek oral submissions but imposed no obligation upon him to do so. In fact, no oral hearing was conducted.
31 In the course of the disputation leading up to the appointment of the Expert, presumably in pursuance of NHP’s obligations to prepare a “general account” at the end of the Term of the Development, NHP’s solicitor sent an email on 4 March 2018 to Mr Nguyen’s solicitor stating as follows:
“Please find attached drafts of the following;
1. Project profit calculation
2. Loan payment calculation
3. Loan statement
4. Final adjustment
In essence, our client owes your client $11,591.00. This is subject to each party paying out half of the current mortgage. The current mortgage is about $665,413.00.
Please confirm that the above is acceptable to your client.
On settlement my client will provide withdrawal of caveats.” (Emphases in the original).”
(CB 428-9)
32 The reference to caveats was to a power in the Development Management Deed bestowed on NHP in pursuance of the charge over his real estate interest given by Mr Nguyen to secure his obligations to pay fees to NHP. (CB 663)
33 The following evening, Mr Nguyen’s solicitors responded, seeking Excel spreadsheets for a number of calculations and an extensive list of additional documents. (CB 662-3)
34 On the evening of 8 March 2018, NHP’s solicitors responded:
“My client believes your client has been provided with all the information that it needs. This continual delay by your client just ends up costing more money for both our clients.
The main thing to do is pay out the senior debt as my client has detailed and let our clients sit down following settlement to go through the figures.”
(CB 581-2)
35 Mr Nguyen’s solicitors responded the following day asserting that NHP was obliged under the terms of the Deed to provide “all the relevant information”. (CB 660-661). They raised issues relative to the keys to Mr Nguyen’s unit and so forth.
36 By an email of 13 March 2018, Mr Nguyen’s solicitors agreed to his paying out half of the debt facility mortgage to a lender referred to as “Latrobe” and calling for keys and title documents relative to units 5 and 6. (CB 660)
37 Following a further exchange of emails on 20 March 2018, NHP’s solicitors advised Mr Nguyen’s solicitors as to the availability of keys to the units, et cetera, stating:
“A cheque for $10,585 made payable to your client. Was available for collection. This is in full and final settlement of the DMA [that is, Development Management Agreement].”
(CB 658)
38 The somewhat reduced payout to Mr Nguyen in comparison to the figure quoted in the email of 4 March 2018 seems to have been the result of a further accrual of interest payable to registered first mortgagee, Latrobe.
39 The Expert convened a preliminary conference at his chambers on 30 October 2018. The Minutes or record of that conference state that certain matters were “agreed and confirmed”, including that the determination was to be made in accordance with the law of Victoria and that the Resolution Institute Determination Rules 2016 were to be applied. (CB 292). The issues in dispute were to be identified by the filing of points of claim, defence and cross claim without the need for “a separate terms of reference”. The Expert directed the filing first by Mr Nguyen of:
“A detailed statement of the nature of the dispute, the legal and factual issues involved, the contentions in relation to those issues, the quantum of the claim, including how the quantum is calculated.”
(CB 293).
40 Then, similar material on behalf of NHP, including any cross claim. In each case, the parties were also directed to file “All documents and other evidentiary material on which [that party] relies, including all documents in support of how the quantum is calculated.” (ibid)
41 In the event, the primary submissions were exchanged on 17 June 2019 rather than filed sequentially, as the Expert’s original directions supposed they would be. (CB 156, 191). Likewise, the reply submissions were exchanged on 5 July 2019. (CB 198, 205)
42 The Resolution Institute’s Rules included a number of significant matters. Rule 5(1) obliged the Expert to determine the dispute “according to law”. Rule 5(3) required the Expert to “adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay and expense, so as to provide an expeditious cost-effective and fair means of determining the Dispute”. Rule 5(4) required the Expert to give each party a “reasonable opportunity” to be heard in submissions. (CB 297). Rule 9(2) gave the Expert wide procedural powers, including the power to give rulings and directions as to pleadings, provision of documents et cetera “and any other evidentiary material relied upon by the parties”. (CB 299)
43 Following the filing of material in accordance with the directions and on the dates already identified, the Expert published his substantive determination dated 23 August 2019 as to Mr Nguyen’s claim and NHP’s counterclaim. He determined that a net sum of $267,370.85 was payable by Mr Nguyen to NHP. (CB 207-8). He published his reasons concurrently. (CB 209-246). On 28 August 2019, he published a determination as to costs (CB 248-250), directing that Mr Nguyen bear the costs of the Expert’s Determination. The determination as to costs seems to have proceeded according to the principle that costs follow the event.
44 In November 2019, with the amount awarded by the Expert to NHP apparently remaining unpaid, solicitors acting for NHP and its director, Mr Pham, filed an Originating Motion seeking to enforce the Expert’s Determination.
45 Solicitors for Mr Nguyen filed a Defence and Counterclaim seeking a determination that the Expert’s Determinations were not binding upon the parties. Alternatively, they sought findings that NHP (presumably through its counsel who prepared the submissions filed with the Expert) had engaged in misleading or deceptive conduct contrary to s18 of the Australian Consumer Law. As a result it was said, the Expert’s Determinations were void and should be set aside or that NHP should be restrained from enforcing them. (CB 1565)
The hearing in this Court
46 When the matter came on for hearing before me, neither party adduced any viva voce evidence. The parties filed a two-volume court book consisting of an affidavit sworn by Mr Pham exhibiting the documents referred to in the foregoing narrative and an affidavit of Mr Crawford, Mr Nguyen’s solicitor, placing certain other documents into evidence. The court book also included a number of other pieces of documentary material.
47 Counsel were agreed that Mr Peters, counsel for Mr Nguyen, should make his presentation first. This agreement would seem to proceed from the fact that Mr Nguyen’s case at trial seemed to be based solely upon his counterclaim which entailed an attack upon the validity of the Expert Determination and allegations of breach of contract and misleading or deceptive conduct. No other matter was urged in opposition to the plaintiffs’ case under their Originating Motion.
Attack on Expert’s Determination
Contentions on behalf of Mr Nguyen
48 On behalf of Mr Nguyen, Mr Peters of counsel conceded that:
“The basic principle is that in the absence of fraud or collusion a Court will only set aside an expert determination if the determination has not been made in accordance with the contract.”
(Submissions [59])
49 He referred to Legal and General Life of Australia Limited v A Hudson Pty Ltd (1985) 1 NSWLR 314, 336; AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd & Anor [2006] VSCA 173; [51]-[54]; Holt v Cox (1997) 23 ACSR 590, 596-7; Shoalhaven City Council v Fairdam Civil Engineering Pty Limited (2011) 244 CLR 305 [26]-[27]; Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (2013) 41 VR 636 [15]-[22]; Australian Vintage Limited v Belvino Investments (No 2) Pty Ltd (2015) 90 NSWLR 367; Adnow Pty Ltd v Greenwells Wollert Pty Ltd [2016] VSCA 282 [40]; The Gull Lexington Group Pty Ltd v Laguna Bay (Banongill) Agricultural Pty Ltd [2018] VSCA 85 [82]-[84]; Trampoline Enterprises Pty Ltd & Ors v Fresh Retailing Pty Ltd & Anor [2019] VSCA 74 [156]-[157].
50 Mr Peters quoted a passage at [51] of the decision in the AGL Case, where Nettle JA (as he then was) stated:
“… a mistake may still be of such a nature that the resultant determination is beyond the realm of contractual contemplation – beyond anything which the parties may be supposed to have intended to be final and binding – and therefore susceptible to review.”
51 He then referred to a later passage in his Honour’s judgment where he said that an error involving objective facts or mechanical or arithmetical exercises was more likely to be such as would be capable of review than an error involved in the exercise of “a judgment, opinion or discretion entrusted to an expert”. [53]
52 What was within or without the parties’ contemplation needed to be “determined objectively both from the terms of the contract, bearing in mind the context in which it was created”, said Mr Peters, relying on Nettle JA in AGL’s Case. [54]
53 He referred to the formulation by the Court of Appeal in the Gull Case, where the Court stated:
“Whether a valuation is binding upon the parties is to be determined by reference to whether the parties would have objectively intended to be bound by the valuation, having regard to the terms of the contract appointing the valuer and bearing in mind the context in which that contract was created. Thus, the starting point is the contract itself.” [119]
54 Mr Peters said the provision in the contract making the Expert’s Determination “final and binding” applied only to a determination made in accordance with the contract.
55 According to Mr Peters, the Expert had erred in treating the points of claim, points of defence and points of reply (referred to as “pleadings”) as evidence, that the parties had agreed that they were evidence, and that the parties’ submissions could be treated as evidence.
56 He referred to paragraphs 15 and 18 of the Expert Determination referred to above and to paragraph 159, where the Expert recorded that in paragraph 8 of the submissions in reply on behalf of NHP, it was asserted that NHP had “not received the Development Fee” and that he accepted that “evidence”.
57 As a result, said Mr Peters, the Expert “did not do what [he] was required by one or both of clause 9(d) of the Expert Agreement or Rule 10(1) of the 2016 rules”. He said the parties could not objectively have intended “to be bound by determination that applied a procedure that was never agreed”.
58 He conceded that the agreed procedure entailed Mr Nguyen agreeing to forego any right to cross-examine, leaving the witnesses limited to documentary evidence.
59 Mr Peters also submitted that the Expert had proceeded on the basis “that there was no discharge of Nguyen’s obligations to pay NHP’s entitlements unless they were actual payments of cash”. This was evident he said by reference to paragraphs 146, 148-159, 172-174, 182-185 and 187 and 201 of the Expert’s reasons. He said that this approach was “erroneous”.
60 According to Mr Peters, the intention evident in the Development Management Agreement was that the units would be sold producing “Project Receipts”. If Mr Nguyen’s units (5 and 6) were sold, the Project Receipts from them would be used to discharge obligations in accordance with clause 9.1, and when the last of the units was settled, reaching what the agreement described as “Completion”, NHP, in accordance with clause 10.1, had 30 days to calculate the Development Fee and the payment obligation under clause 10.2 arose 60 days after the end of the term, depending on whether NHP had been underpaid or overpaid under clause 9.1
61 He said that the parties were empowered to agree on an early termination of the agreement under clause 3.1(b) and that under clause 12.4(b), completion could occur without the units being sold. Settlement could occur under clause 12.4(a) or rather be deemed to have occurred with a mechanism to attribute a sale price to units not sold provided in clause 12.4(c)(i).
62 Finally, he noted the definition of Project Receipts included deemed amounts received pursuant to clause 12.4. Since these distributions were “deemed”, there was no requirement for an actual payment in cash from a deemed Project Receipt.
63 According to Mr Peters, the Mediation Agreement varied the operation of the Development Management Agreement by substituting a valuation made by Charter Keck Kramer for the “list price” referred to in clause 12.4(c)(i) for units retained by the parties. The settlement of the townhouses and therefore “Completion” was agreed to be 1 March 2018. He said insofar as clause 10 of the Mediation Agreement required the Project Receipts to be calculated in accordance with clause 9 of the Development Management Agreement, in context the word “calculated” must mean, he said, “dealt with”, with the parties not intending to pay cash relative to deemed Project Receipts.
64 He said the parties agreed to adjustments to what would otherwise have been Project Receipts or Project Costs in various clauses in the Mediation Agreement. NHP remained under an obligation to make calculations under clause 10.1 of the Development Management Agreement. He said, at [79] of his trial submissions:
“The Expert did not consider, or appropriately consider, the Mediation Agreement and its impact on the DMA, and therefore reached the uncommercial construction that Nguyen was effectively meant to pay cash from deemed receipts, thereby giving clause 10 of the Mediation Agreement no work to do.”
65 He said the Expert’s Determination was not in accordance with law as required by clause 9(d) of the agreement or the Expert Determination. “According to law”, he said, meant in conformity with it. He referred to Seaton & Ors v Mosman Municipal Council and The Bathers Pavilion Pty Ltd [1998] NSWSC 75. He said the parties could not have intended to be bound by determination “that applied a completely erroneous mechanism for calculating the sums owing”.
66 Mr Peters said that in finding that there was no evidence that Mr Nguyen had paid the Development Fee, the Expert had failed to consider evidence in the form of the emails of 4 March and 20 March 2016 referred to above. He said the Expert’s failure to consider those emails “was a breach of clause 9(a) and 9(b) of the Expert Agreement and Rule 10(1) of the 2016 rules, and therefore the Expert did not perform the task which the parties’ contract required”. He said the parties could not have objectively intended to be bound by determination that applied a completely erroneous mechanism for calculating the amounts owing.
67 According to Mr Peters, even if the Expert’s determination were regarded as otherwise correct, the Expert had erred in offsetting the relative liabilities of the parties to one another as at 23 August 2018, as is evidenced from paragraph 220 of his determination. Mr Peters said that clauses 4.5(c)(i) and 10.1 of the Development Management Agreement, and clause 1 of the Mediation Agreement, “required the set off to be conducted as at 1 March 2018, or at least on 30 April 2018”.
68 He noted that, at paragraphs 199-200, the Expert had found that interest on the Development Fee was to be paid from 1 May 2018 because the Development Fee was payable on 30 April 2018. This determination was not in accordance with law and the parties could not objectively have intended to be bound by a determination “that applied a completely erroneous mechanism for calculating the sums owing”.
69 Mr Peters referred me to a recent decision of Hammerschlag J, sitting as a trial judge in the Supreme Court of New South Wales in Lainson Holdings Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 576, but for the purpose only of contending that his Honour’s determination ought not be followed in the present case.
70 In that case, his Honour was dealing with a determination made under the Resolution Institute Expert Determination Rules, which included, as in the present case, an obligation resting upon the expert to make his determination “according to law”. Lainson, the party challenging the validity of the expert determination, submitted that the rule referred to obliged the expert to make his determination “in a manner free from legal error affecting the result”. [46 of the judgment]
71 His Honour rejected that argument [47]. He interpreted the expert’s obligation to make his determination according to law in the following way:
“In the context in which they appear here, however, the words ‘according to law’ mean in the manner which the law requires a person in the position of the Expert to go about the mandated task, so as to give it contractual efficacy; for example, honestly, without bias or collusion, and while not intoxicated. There is no suggestion that the Expert acted in any way not ‘according to law’ in this sense. Significantly, the words appear in that part of the Rules headed ‘The Procedure’.”
72 The effect of Mr Peters’ submission supported the failed contention by the plaintiff in Lainson’s Case and urging rejection of the dismissal of that contention by Hammerschlag J would have the consequence that any legal error would, in the presence of an obligation resting upon an expert to make his determination “according to law”, be a valid ground for seeking to set that determination aside.
Contentions on behalf of NHP and Pham
73 Mr McKay of counsel, on behalf of NHP, and Mr Pham, said the “first area of controversy” was the Expert’s award of interest on the Development Fee at the rate of 18 per cent per annum from 1 May 2018 until the date of his Determination; 1 May 2018 being 60 days after what was agreed between the parties as being “Completion”.
74 This debiting of interest represented the “lion’s share” of the turnaround between NHP’s position in March of 2018, where it regarded itself as owing slightly more than $10,000 to Mr Nguyen arising out of the venture, and the situation where, according to the Expert’s Determination, Mr Nguyen owed NHP more than a quarter of a million dollars. The “turnaround” between the two positions also depended, apparently, on more assiduous work on behalf of NHP finding further debits in its favour to be brought to account. (Transcript (“T”) 150, 3 March 2020)
75 Mr McKay said that the contention that Mr Nguyen had made payment of the Development Fee in March 2018 depended on the view that “the mere submission by NHP on 4 March of the accounts in a certain form” constituted such payment. (T127; 3 March 2020)
76 The email covering the accounts, he said, presupposed that the parties were at loggerheads. (ibid, Lines (“L”) 24-31). Those accounts were not accepted by Mr Nguyen. (T128, L1-8, 3 March 2020). Mr McKay conceded that the submission of accepted accounts exhibiting a set off could in theory amount to payment. (ibid, L9-26)
77 In this situation, he said, “certainly there had been no accord to treat any particular set of accounts as the accounts upon which the venture would be finalised”. (T129, L10-12, 3 March 2020). The account or accounts could not therefore have been used as a basis to bring the old common law cause of action based upon an “account stated”. (ibid, L13-24)
78 The submission of the cheque under cover of the email of 20 March 2018 (CB 658) in “full and final settlement” of NHP’s liabilities to Mr Nguyen under the Development Management Agreement indicated there were no agreed accounts between the parties. (T130, L6-15, 3 March 2020)
79 In the circumstances, it could not have been said, for instance, that there was a conventional estoppel operating between the parties, because they had not agreed to conduct their affairs upon any particular basis. (T131, L1-13, 3 March 2020). Nor could any “waiver” be spelled out of these facts. (ibid, L14-26)
80 Mr McKay concluded “so there’s nothing in March that constitutes an agreement or any other legal prohibition on changing position later”. (T132, L2-5, 3 March 2020)
81 The next question, according to Mr Peters, was whether the transfer of the unit to NHP “constituted payment”. According to Mr McKay, paragraph 1 of the Mediation Agreement provided that the value of those properties would be deemed to be included in the Project Receipts. (ibid, L28-30)
82 The effect of the Development Management Agreement, as modified by the agreement reached at mediation, according to Mr McKay, was as follows:
“There is a very clear agreement to treat [the deemed receipt of value upon transfer of properties in specie] it merely as a project receipt, and that left for determination before the expert the quantification of the matters in 9.1(b) and (c).”
(T135, L22-25, 3 March 2020)
83 Mr Peters, in the course of his submissions, referred to the process mandated by clause 9.1 of the Development Management Agreement as “cascading”. This appeared to invoke the metaphor of a waterfall. Mr McKay denied that receipt of the value of the properties transferred in specie Project Receipts automatically led to that value’s cascading down through the provisions of clause 9.1 as if via a waterfall. (T136, 3 March 2020). This process, he said, awaited the Expert Determination. (T137, L3-9, 3 March 2020)
84 There was never an agreement for matters to go beyond the designation of the deemed value represented by the four properties transferred beyond their designation as Project Receipts. (ibid, L10-29). All subsequent matters were “held in suspense”. (T138, L2-10, 3 March 2020)
85 According to Mr McKay, at Completion, clause 9.1 of the Development Management Agreement provided for a single indivisible accounting process with all elements occurring simultaneously. (T140, L15-29, 3 March 2020). This process had not occurred until the Expert’s Determination. (ibid, L30-31)
86 The second issue which arose, according to Mr McKay, was whether the Expert erred in effecting the set off of the parties’ mutual obligations as at the date of his determination of 23 August 2019, rather than in March of 2018 or 1 May 2018. (T116, L29 to T117, L5, 3 March 2020)
87 According to Mr McKay, the reasoning underlying his contention as to the first issue meant that the second issue should be determined in favour of a finding that the Expert had been correct in making the set off as at the date of his determination rather than at an earlier date such as 1 May 2018. (T141, L5-20, 3 March 2020)
88 Clause 10.2(a) of the Development Management Agreement made a limited provision as to set off. (T143, L17-29). In the case of clause 9.1 itself, there was no set-off provision, and the set-off provision already referred to turned out to be irrelevant in the circumstances. (T146, L2-6, 3 March 2020). A reconciliation of the debts as between the parties was for the Expert to deal with. (ibid, L7-10)
89 Further, said Mr McKay, there were no contentions on behalf of Mr Nguyen put before the Expert to the effect that the set off or reconciliation of the rights and obligations owed by the parties was to be backdated. (T147, L7-20, 3 March 2020)
90 Mr McKay took me to submissions on behalf of Mr Nguyen dated 17 June 2018 (CB 155), noting that there were two columns on the right-hand side of that page, one headed “First Respondent’s Entitlement” [viz NHP], and the second “Applicant’s Entitlement” [viz Mr Nguyen].
91 Ultimately, on page 156, there was a figure “total owing to applicant $205,417.90”. According to Mr McKay, this balance was struck as at the date of the submission not as at March or May. Mr McKay said that both parties proceeded on the basis of set offs as at the date of determination or the making of the submissions, and this was because “there was no provision in the deed to make the set off and apply it at completion or any other time”. (T151, L27-29), 3 March 2020)
92 He said this was not a circumstance where it could be said that one claim impeached the other so as to establish an equitable set off. (T152, L2-18, 3 March 2020). Rather, these were separate independent debts.
93 With the case presented to him in this way, it was open to the Expert, according to Mr McKay, to proceed as he did and effect a set off only as at the date of determination. (T153, L3-8, 3 March 2020)
94 He referred to paragraph 210 of the Expert’s Determination, where he said:
“They … [the parties] further agree that, once respective entitlements are determined, the difference between those entitlements becomes a sum due and payable to the party with the greater entitlement.”
(CB 242)
95 The Expert footnoted paragraph 15 of NHP’s points of counterclaim and paragraph 15 of Mr Nguyen’s Reply and Defence to Counterclaim.
96 In its pleading before the expert at paragraph 15, NHP said:
“Once the Applicant and First Respondent's respective entitlements are determined the difference between those entitlements becomes a sum due and payable to the party with the greater entitlement.”
(CB 128)
97 The third issue which, according to Mr McKay, arose is as follows:
“The third question really boils down into two slightly discrete issues. The first is whether or not the expert did in fact treat the pleadings as evidence in the way that’s being alleged, and second of all, whether he purported to do so pursuant to an agreement and thereby erred.”
(T118, L4-9, 3 March 2020)
98 Mr McKay conceded the Expert used the pleadings as evidence. (ibid, L20-21). Mr McKay conceded that there was no distinct agreement between the parties that could be spelled out from the pleading overriding “earlier appointing instruments” on this point. (T120, L23-28, 3 March 2020)
99 However, he said the way the case was conducted with the position adopted by the expert asserted on behalf of NHP and not denied on behalf of Mr Nguyen allied with “the vast scope that they [viz the contract and the rules] afford to the expert to make determinations of procedure” could be regarded as justifying the course which he adopted.
100 He said that his client’s pleadings in this Court denying what was alleged on behalf of Mr Nguyen “was simply that there was no agreement between the parties found by the expert”. (T121, L19-20, 3 March 2020)
101 Mr McKay agreed with my attempt to encapsulate his client’s case on this point:
“The expert, by virtue of express terms of the contract between the parties, was entitled to regulate the procedure as he saw fit and not be bound by the rules of evidence. That entitled him to proceed as he did, and if reinforcement were required for all that, the fact that there doesn’t appear to have been a complaint about that approach when it was advocated expressly in written submissions by you tends to reinforce it all.”
(T122, L14-21, 3 March 2020)
102 The fourth issue which arose, according to Mr McKay, was whether, if any error by the Expert were demonstrated, it was such as would justify the Court in setting aside the Expert Determination in accordance with the standard authorities referred to by Mr Peters in his submissions referred to above.
103 Unsurprisingly, he contended the answer was no, and that by entrusting their dispute to an Expert, the parties took the risk that the Expert may, in the course of determination, make errors which would not invalidate his determination unless what happened stepped right outside the realm of what the parties might think they were risking for themselves. (T123, 3 March 2020)
Conclusions – attack on the validity of the expert report
104 The seminal decision in Australia on the issue of attacks upon expert determination reached in circumstances where disputing parties have commended their dispute to final and binding determination by the expert is the decision of the New South Wales Court of Appeal in Legal and General Life of Australia Limited v A Hudson Pty Ltd (ibid). In particular, the judgment of McHugh JA (as he then was).
105 His Honour noted that an expert determination may be problematic or erroneous to the extent that it may be grounds for a claim for negligence by one of the parties against the expert:
“But as between the parties to the main agreement the valuation [by the expert] can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract.”
(1985) 1 NSWLR 314, 335-6
106 In AGL Victoria Pty Ltd v SPI Networks (Gas) Pty Ltd & Anor (ibid), Nettle JA with whom Maxwell P and Bongiorno AJA concurred, said:
“51.I agree with the judge that the question of whether it is open to review an expert determination on the ground of error is in the first place to be decided according to whether the determination answers the contractual description of what the expert was required to determine. I also agree with the judge that the question of whether an error in determination deprives the determination of compliance with the contractual description of what the expert was required to determine is in the first place to be answered according to whether the error occurred in respect of a task which the contract entrusted to the expert. As Mason, P. explained in Holt v. Cox, although mistake is not itself a ground for vitiation of a final and binding expert determination, a mistake may still be of such a nature that the resultant determination is beyond the realm of contractual contemplation – beyond anything which the parties may be supposed to have intended to be final and binding – and therefore susceptible to review.
52.The situation is analogous to that which faces a court in a (sic) cases of judicial review of administrative error. Just as an administrative decision maker has an area within which he or she may make mistakes without relevant consequence, so too an expert appointed under contract has an area within which the contract contemplates that he or she may make mistakes without relevant consequence. Similarly, just as there are some administrative mistakes which amount to jurisdictional error, and so expose a decision to judicial review, those appointed under contracts to make determinations may make errors which are beyond the area of tolerance which it is to be supposed the contract had in view.
53.Therein lies the distinction drawn in some of the authorities, and observed by the judge in this case, between an error in the exercise of a judgment, opinion or discretion entrusted to an expert, and an error which involves objective facts or a mere mechanical or arithmetical exercise. Subject to the contract in question, it is easier to suppose that parties to a contract contemplate that an error of the former kind be beyond the realm of review than it is to think that they intend to be fixed with errors of objective fact or in processes of mechanical calculation.
54.As this case demonstrates, however, matters are likely to be more complex where error occurs in the course of an exercise which is partly comprised of discretion, judgment or opinion and partly constituted of objective fact or mechanical calculation. In some such cases, the overriding discretionary or judgmental character of the exercise may so inform each step in the determination as to put even those steps which are matters of objective fact or mere mechanical calculation beyond the scope of permissible review. In other instances it may appear that, despite the overall character of the exercise, the various steps in the determination are severable, according to whether they are essentially discretionary or judgmental or simply matters of objective fact or mechanical calculation, and that those steps which are of the latter kind are within the scope of permissible review. The question in each case is what the parties should be presumed to have intended, and that is to be determined objectively from the terms of the contract, bearing in mind the context in which it was created.”
107 In light of these principles, it is difficult to see how the argument put on behalf of the plaintiff in Lainson’s Case could have been adopted. I would respectfully, however, propound a different rationale for its rejection than commended himself to Hammerschlag J in the passage quoted above.
108 There is no reason to consider, as a matter of logic, that the obligations lying on a decision-maker and the extent of potential review of his or her determination, should be regarded as coterminous. Appeal regimes from inferior courts or tribunals may provide scope for appellate review only in the case of errors of law. The fact that review is not available for error of fact is not an indication that magistrates or tribunal members are relieved of their obligation to determine matters before them according to law with respect to issues of fact.
109 Again, in the case of ultimate courts of appeal, no appellate review is available at all. That is not to be taken as relieving the judges or justices of those courts of the obligation resting upon them by their judicial oaths to determine matters before them according to law.
110 I turn first to the issue of the Expert’s use of pleadings. As noted, the Expert said he was prepared to treat the pleadings as “evidence”. In typical disputes where there were numerous contested primary factual issues, this would be a very striking thing indeed. First, it may be that the Expert has gone somewhat beyond what NHP and Mr Pham invited him to do. Their submissions said that the Expert should treat the pleadings as “evidence of the parties’ position” which would be unremarkable. One might think this is the classic role which pleadings perform in court.
111 In the present dispute, what divided the parties was not argumentation about matters of primary fact but rather the inferences to be drawn from primary factual matters which were largely or completely uncontested and then legal effect.
112 Mr Nguyen’s case before the Expert and in this Court was that the email correspondence of March 2018 engaged provisions in the Development Management Agreement with the result that, as between the parties, the Development Fee (inter alia) owing to NHP was to be treated as paid. The occurrence of the email exchanges and their text was not in dispute. Whether the exchanges had the effect contended for by Mr Nguyen or not, in one sense could be regarded as a factual finding viz had payment been made by Mr Nguyen or not. The finding of fact made by the Expert in this respect was the result of his drawing legal inferences.
113 The dispute, as initially framed, had the potential to raise genuine disputes as to primary fact. So, for instance, Mr Nguyen originally made complaint alleging that NHP should be held responsible for the collapse of the unit 6 garage, for plumbing defects, for a failure to engage a suitably qualified estate agent, and failing to market the properties properly. These matters were not ultimately pressed. (See Mr Nguyen’s submissions in reply to the Expert, CB 194-195)
114 Again, whilst there were complaints about unverified, unjustified or undocumented expenses claimed by NHP, such verification or lack thereof would be determined by consideration of documentary evidence. The agreement of the parties to exclude from the resolution process viva voce evidence or cross-examination is testimony to the nature of the dispute which the Expert had to determine.
115 The directions which the Expert gave following a hearing where both parties had the opportunity to make submissions, provided for the final documents and evidentiary material but made no reference to affidavits, statutory declarations or witness statements, which is again characteristic of the nature of the adjudication made by the Expert, as I have described it.
116 As already noted, the lion’s share of the adverse result suffered by Mr Nguyen derives from the Expert’s Determination relative to interest accruing on what he found was the unpaid Development Fee. The arguments urged before the Expert on this point are to be found at paragraphs 141-143 of his Determination. (CB 233)
117 Each of these arguments depends on legal inference on uncontested primary facts and, in the following paragraphs of the Expert’s Determination, they are considered and rejected by the Expert on the same basis. In truth, these crucial findings by the Expert bespeak a use of the pleadings as an assertion of the legal effect of uncontested primary facts rather than their use as evidence to base any finding of primary fact. The general statements of the Expert about the use of pleadings in evidence therefore rather overstate the effect that he ultimately gave them.
118 Mr McKay, correctly as it seems to me, emphasised the plenary powers granted to the Expert to determine the procedure which he desired to follow. Given the nature of the dispute which he had to adjudicate upon, it has not been demonstrated that the procedure which he adopted was inappropriate. Mr McKay drew attention to the fact that the Expert’s plenary procedural powers were expressed to be capable of overriding even the rules of natural justice.
119 The appointment agreement provided in clause 9(e) that the Expert would “proceed in such manner as he thinks fit without being bound to observe the rules of natural justice or the rules of evidence”. As it was, NHP and Mr Pham made submissions as to the use of the pleadings. Having the opportunity to make submissions in reply, Mr Nguyen failed to put on any contention.
120 In light of all these matters, I am not persuaded that, in this respect, the Expert failed to observe the contract between the parties or, to use the language of Nettle JA in the AGL Case, that in this respect, the Expert’s Determination was “beyond the realm of contractual contemplation – beyond anything which the parties may be supposed to have been intended to be final and binding”.
121 If the present proceeding were an appeal from a court determination it would be in accordance with standard procedure to decline to allow the appellant (in this hypothetical, Mr Nguyen) to raise on appeal a matter not argued by that appellant at the trial level. To allow a new point to be taken in such circumstances would be regarded as manifestly unfair to the respondent to the appeal, and one might think to the primary decisionmaker.
122 The present context is of course very different. Nevertheless, it is difficult to see why a similar approach ought not to be followed in this context.
123 This leads in to the related issue of the point at which the parties’ obligations under the Development Management Agreement should have been set off. The first point to note is the criticism of the Expert’s Determination shares the characteristic just commented upon as to the previous one. It was not raised before the Expert.
124 Mr McKay, in submissions summarised above, took me to Mr Nguyen’s submission on this point, which appeared to assume a set off and reconciliation of liabilities as part of the determination and implicitly at the date of the determination rather than on any “backdated” basis. The considerations referred to above as to the unfairness of impeaching a determination based on a point which the applicant party could have raised with the adjudicator but did not, apply with equal force here.
125 In light of what I say below, there may be substantial grounds for concluding that the Expert erred in his treatment of the matter on this point. Nevertheless, since in a sense this type of reconciliation exercise was of the very essence of the dispute which the Expert was called upon to determine, it cannot be said, consistently with the standard authorities already quoted, that the Expert’s Determination on this point was at odds with the contract appointing him or was outside what the parties could reasonably have contemplated would occur.
126 Next, I turn to the attack on the Expert’s Determination based upon the view that he treated the concept of “payment” specifically for the purposes of the Development Fee required the actual exchange of cash.
127 In his submissions summarised above, Mr McKay conceded that a payment could be made without the exchange of actual cash. In my view, that concession was properly made. In Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd (2005) 218 CLR 471, the High Court of Australia considered an appeal by a lender from a determination in favour of borrowers who had raised the relevant loan or alleged loan to enable them to subscribe to a “tax effective” investment which turned out to be a failure.
128 Amongst the matters which had led to the borrowers’ victory in the Queensland Court of Appeal was that the transaction was created by a “round robin” of cheques and debit and credit notes, with the result that no “real money” had been advanced.
129 In a joint judgment, Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ said, of the round robin of transactions, “Each of these transactions was legally effective. None of the transactions that took place on 30 June 1989 could be said to be a sham.” (ibid) at 486 [46]
130 In the present case, it will be recalled that Mr McKay contended that no payments occurred in March of 2018 because, whilst NHP had submitted what one might regard as “Completion” account netting off the parties’ entitlements against one another, leaving a modest balance payable to Mr Nguyen. Mr Nguyen had continued to dissent from the accuracy of this accounting right up to the submission to the Expert for determination the following year. He might also have said that the accounts in March 2018 were submitted as “drafts”.
131 The Expert did not, as I read his determination, reject what was said by the High Court in Equuscorp as to the legal effectiveness of accounting entries as effecting payment. Rather, he found, at [146]:
“Funds held by NPH in the course of the Project are not held beneficially or to its own use, but are subject to clearly expressed uses all associated with delivery of the Project. In addition to express terms of the DMD, NHP has fiduciary obligations in respect of funds held but not beneficially owned by it.”
(CB 233-4)
132 Mr Peters correctly observed that clause 9, dealing with Project Receipts, and clause 10, dealing with the “Development Fee”, are mandatory in their operation. The calculation of the Development Fee by virtue of 10.1 was a mandatory obligation of NHP, not dependent upon agreement or assent by Mr Nguyen. Clause 9.1 by its terms is expressed to operate automatically, referring to Project Receipts, and stating that they “will be dealt with in the following manner”.
133 It might be thought, in light of these considerations, that NHP was not only entitled but contractually obliged to pay itself the Development Fee in March 2018 or, perhaps more accurately, that the terms of the agreement would, by their force, effect the payment without any individual action by either of the parties upon the submission of the “Completion” accounts. This, of course, leaves open the point of uncertainty created by these accounts being expressed to be propounded as “drafts”.
134 In the points of counterclaim filed before the Expert, clause 14 (CB 126-7), it was asserted in effect that the Development Fee remained outstanding and unpaid. (CB 133, paragraph 38). The response on behalf of Mr Nguyen was that, as to these matters, “The Applicant further says that the Developer controlled all proceeds from the development and paid the development fee at the time settlement was effected on 19 March 2016”. (Reply and Defence to Counterclaim filed with Expert, clause 14(f), CB 141).
135 This issue was joined and determined by the Expert. It is difficult to see therefore that it went beyond what was contemplated by the parties or that in making the determination that he did, the Expert acted beyond or in breach of the contractual arrangements appointing him. The contrary conclusion could only be reached first, if one regarded the Expert’s Determination as being incorrect and, secondly, if one concluded that his obligation to determine the question “according to law” carried with it the consequence that any material legal error which might be identified in the determination could be a ground for setting aside in light of the Expert’s obligation to make his determination “according to law”. This was the very proposition rejected by Hammerschlag J in Lainson’s Case. I respectfully agree with his Honour’s decision on this point.
136 It follows that, even if I were persuaded that the Expert had erred on this point, I would not regard the error as justifying a finding that his determination was of no legal effect. It is therefore unnecessary and, perhaps, inappropriate, for me to express a view as to whether or not the Expert’s analysis on the point was correct.
Misleading or deceptive conduct
Contentions on behalf of Mr Nguyen
137 According to paragraph 71 of Mr Nguyen’s Defence and Amended Counterclaim (CB 1564), “each of the Developer Contribution representation and the development fee representation was misleading”. The Developer Contribution representation was explained in paragraph 32 of the Amended Counterclaim (CB 1556) as being a representation that Mr Nguyen had not paid any Developer Contributions or Developer Funded Costs to NHP.
138 Paragraph 38 of the points of counterclaim filed with the Expert (CB 133) asserted that those amounts had not been paid. Paragraph 33 of the Amended Counterclaim in this Court defined the Development Fee Representation as being the representation that Mr Nguyen had not paid the Development Fee. This was asserted in paragraph 42 of the points of defence and counterclaim filed with the Expert. (CB 134)
139 These representations were said, by paragraph 71 of the Amended Counterclaim, to be misleading and, according to paragraph 72, “NHP engaged in conduct in trade or commerce”. This was said to be contrary to s18 of the Australian Consumer Law, causing loss and damage to Mr Nguyen, in that it caused the Expert to make the findings leading to his adverse determination.
140 Mr Peters conceded that a crucial and contentious element in considering whether this cause of action was made out was consideration of whether what was alleged to have been done was done “in trade or commerce”. He said “conduct answers that description if the conduct is an aspect or element of activities or transactions being a trading or commercial character. (Respondents’ submissions paragraph 111). He referred to ConcreteConstructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 603-4 and Houghton v Arms (2006) 225 CLR 553.
141 According to Mr Peters, a finding of representations in trade or commerce may be made “even though the representor may not be engaged in trade or commerce, still apply if the representee is so engaged”. He referred to Houghton v Arms (ibid) at 565 [34]. He said that the Expert could be regarded as engaged in trade or commerce.
142 Mr Peters conceded that statements made to a court during the course of litigation were not to be regarded as in trade or commerce. He referred to Little v Law Institute of Victoria (No 3) [1990] VR 257, 273, 292. Likewise, in the case of “Statements made in a statutorily ordained process with a pre-condition to commencing litigation”. He referred to Pertzel v Qld Poulownia Forests Ltd [2008] 2 Qd R 526.
143 Mr Peters then referred to the well-known principles as to causation in the context of the statutory cause of action for misleading or deceptive conduct.
144 The giving of legal advice could be conduct in trade or commerce. Mr Peters referred to the decision of John Dixon J in Dual Homes Victoria Pty Ltd & Ors v Moores Legal Pty Ltd & Anor (2016) 50 VR 129 and Goddard Elliott (a firm) v Fritsch [2012] VSC 87.
Contentions on behalf of NHP
145 Mr McKay contended that what was alleged against NHP did not occur in trade or commerce. He said that authorities such as Little v Law Institute of Victoria (No 3) (ibid) showed that statements made in the course of a dispute-solving process were not to be regarded as in trade or commerce. When, in that case, Ormiston J (as he then was) excluded from the concept of trade and commerce statements made “for the purpose of persuading a judge of this or any other superior court to exercise his judicial functions in making an order in favour of a litigant” (ibid at 292), his Honour was framing his language by reference to the facts before the Court rather than implying that a statement made to persuade a judge, for instance of this Court, not being a superior court, should be regarded in any different way from the statements that were before him and which he held not to have been made in trade or commerce.
146 The statements in Little’s Case said to have been misleading or deceptive conduct in trade or commerce, Kaye and Beach JJ in Little’s Case, framed their statement of principle rather more widely, where they said “A statement made to a court during the course of litigation is not a statement made in connection with or as part of a commercial arrangement”. (ibid at 273)
147 Mr McKay stressed that a person advocating his case before a court or in some alternative dispute resolution regime, such as arbitration or expert determination, is not purporting to give a comprehensive or impartial account of events or a comprehensive or impartial assessment of the legal situation merely advancing his side of the argument. It was well established, he said, that counsel did not have to believe a submission to be well-founded but merely arguable.
Conclusion
148 Whilst I was not taken to any authority covering the situation of advocacy and pleading in the course of an Expert Determination process, it seems to me that the analogy with court processes is so close that the same result should be obtained viz that the statements should not be regarded as conduct in trade or commerce, even if one could regard the Expert as engaged in trade or commerce. The same analysis should apply to any dispute resolution process.
149 If I were wrong in that, I am not persuaded that the representations were misleading or deceptive. They did not purport to be impartial merely to be an arguable view of events which NHP was advocating in its own commercial interest. Moreover, as noted earlier, these representations were made for the purposes of resolving a dispute where the primary underlying facts were uncontested. What the parties were arguing about, and what the Expert had to determine, was what the correct legal consequence of those primary facts was. This stands in contrast to a clear mis-statement of a primary fact.
150 The allegation of misleading or deceptive conduct therefore fails.
Breach of contract
151 The Amended Counterclaim included an allegation that NHP had breached the agreement appointing the Expert by breaching its obligation to assist the Expert and to disclose to him the “Undisclosed Matters”. It was not clear to me whether this alleged cause of action was abandoned. It was not mentioned by Mr Peters in the course of his oral presentation. However one characterises the obligation of a litigant in court or a disputant before an expert in the course of alternative dispute resolution process, it is clear that it would be wrong for such a person to affirmatively mislead the judge, mediator or other presiding officer. Where an application is brought to court ex parte, it is well established that it is incumbent upon the plaintiff or applicant to disclose all relevant matters and draw the court’s attention to matters which the other party might have raised if he, she or it had been present or represented.
152 In the present situation, whether in court or before an expert, so long as in accordance with principles well established in relation to the obligation of legal practitioners, the court or presiding officer is not misled, it cannot be a breach of duty for a litigant not to make points on behalf of his or her opponent when that opponent is present or represented. If in fact relied upon, this cause of action must be rejected.
Disposition
153 The counterclaim must be dismissed. Since no other matter was urged in opposition to the plaintiffs’ application to enforce the Expert’s Determination, the plaintiffs’ claim should succeed.
154 I have heard no submissions on the question of costs and so they must be reserved.
155 I direct the parties within 14 days to bring in short Minutes to give effect to these reasons.
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